to the development of foreign and coastwise trade and the provision of postal service; (2) a loan fund was authorized to give financial encouragement to the building of approved types of ships; (3) American-built vessels of approved types were granted partial exemption from excess and war profits taxes; (4) provision was made for the extension of our coastwise laws to all our insular possessions when adequate American steamship service to them should be established; (5) as far as practicable, all United States mails were to be carried on ships of American registry; (6) preferential railway rates on imports or exports were to be limited to goods carried in American ships, provided suitable American shipping facilities to and from the points involved were available; (7) the President was directed to give notice of the termination of such articles or provisions of existing treaties as restricted the imposition of discriminating customs duties on imports brought in foreign ships and of discriminating tonnage duties on foreign ships entering our ports; (8) and provisions were enacted in regard to ship mortgages, marine insurance, and classification of vessels owned by the government - all of which are calculated to encourage investment in American shipping.

The outstanding characteristic of this law is its emphasis upon indirect aid and upon discrimination as means of conserving and upbuilding the merchant marine, though the free hand given the Shipping Board and the Postmaster General in the matter of mail contracts implies also the possibility of postal subvention.

Proposed Legislation of 1922. It soon became apparent that the law of 1920 would not bring the government-owned fleet promptly into the hands of private owners nor assure to American registry a merchant marine carrying the desired percentage of American foreign trade. Upon the urgent recommendation of the Shipping Board and of President Harding, a supplementary measure was introduced simultaneously

in both houses of Congress which is popularly known as the Ship Subsidy Bill of 1922. This is, however, an inadequate designation, since the bill is concerned in large part with the strengthening of the indirect-aid features of the merchant marine law. But a distinctive feature was the provision for a general navigation bounty to vessels conforming to certain requirements, securing approval of the Shipping Board, and entering into contracts with that Board for a period not exceeding ten years. To be entitled to such compensation, vessels were to have a specified minimum gross tonnage and the highest classification by the American Bureau of Shipping, must be of American registry and ownership and be manned by crews two thirds of whom are American citizens, and, as a rule, be American built. Payment was to be based on a combination of speed, tonnage, and distance covered in our foreign trade or in certain lines of trade with the more distant possessions of the United States. The minimum

was

rate one half cent per gross ton per hundred miles fixed for ships with a speed of less than thirteen knots; the general maximum, two and one tenth cents per gross ton per hundred miles, for those having a speed of twenty-three knots or over. The fund for meeting these payments was to be derived from the following sources: (1) one tenth of the customs duties on all imports; (2) the total tonnage dues collected in American ports on all vessels American and foreign; and (3) one half the amount by which the net earnings of bounty-receiving vessels should exceed ten per cent per annum of the capital invested.

After protracted debate, this bill failed to pass the Sixtyseventh Congress, and the Sixty-eighth is expected to regard similar proposals with even less favor.

Pros and Cons of Government Aid to American Shipping. The formulation of a post-war shipping policy for the United States has been complicated by a number of factors, and es

pecially by the existence of a large government-owned fleet extemporized as a part of the war program and by the fact of a world surplus of shipping. But the basic considerations have not been essentially changed by war experience or by recent tendencies in our foreign trade.

The arguments for and against government aid to shipping are much the same as those used by advocates and opponents of the general policy of protection. As a general principle of economics, if protection to manufactures and agriculture can be justified, the right of navigation to equal consideration can hardly be denied. It is not, however, a theory or a principle as much as it is a condition which must be faced. As regards the practicality of navigation protection, no universal rule can apply. The question is whether, all things considered, such protection conduces to the permanent maintenance and development of the efficiency of the national shipping and, if it does, whether a national gain results which outweighs the cost involved.

On economic grounds it is argued that a merchant marine is extremely desirable mainly for two reasons: (1) because it would mean an annual saving of hundreds of millions of dollars otherwise paid in the form of freights to foreign shipowners; and (2) because the assurance of a well-balanced merchant marine would cause an extension of American commerce on the assumption that "trade follows the flag.' For both of these reasons it is contended that there would be an enlargement of the opportunities for American capital and labor." The first of these contentions merits but passing notice; it greatly exaggerates the total freight charges on our imports and exports, assumes that Americans pay the freight both ways, disregards the earnings of American capital invested in shipping under foreign flags, and overlooks the fact that more American capital and labor are not attracted to shipping because they find more effective employment in

other lines. The second certainly is subject to sweeping qualifications, especially in view of the remarkable growth of our trade in the days of our declining merchant marine, the great influence of the tramp steamer seeking cargo when and where it promises largest profits irrespective of nationality, and the large part played by foreign investments in determining the volume and direction of exports. Nevertheless there may well be cases where trade developments of ultimately great national importance hinge upon direct and regular sailings which foreign enterprise fails to provide and to which domestic capital is not attracted as promptly as national interest may dictate. Moreover, America's experience as a neutral during the recent European War served to emphasize the handicap to our trade arising from dependence upon ships of nations which may at any time become involved in hostilities to which our nation is not a party.

The political arguments in favor of a merchant marine for a country like the United States are, on the whole, the most convincing. These stress the importance of assuring communication with our island possessions and of preparing for national defense in the event of war. A national merchant marine may be so developed as to prove a valuable means of training sailors and supplying auxiliary vessels essential to naval efficiency in time of crises. Private initiative cannot be counted upon to provide for such exigencies, because business interest may not dictate the type of construction and the combination of vessels best suited to naval purposes and because the cost of construction and of operation under American registry is somewhat heavier than that of foreign competitors.

If these arguments are to find response in government policy, what forms of aid are preferable? Government ownership seems to have been definitely repudiated. A general bounty system finds little justification either in foreign experi

ence or in the American situation. Discriminatory duties invite retaliation and tend to hamper rather than to facilitate the growth of satisfactory commercial relations. Free ships and duty-free shipbuilding materials appeal to reason, but such negative policies alone are not likely to prove decisive. Monopoly of the coastwise trade, as extended under the act of 1920, may be regarded as assuring colonial communication and contributing to preparedness and to the needs of commerce, but such extension is open to criticism as a perversion of the coastwise idea. All things considered, if positive measures are to be employed, carefully devised subventions hold the greatest promise of success.

BIBLIOGRAPHY

A. For bibliographies, consult: Beman, Ship Subsidies; PHELPS, Selected Articles on the American Merchant Marine, pp. xix-xxxvii; Library of Congress, Lists of references on Mercantile Marine Subsidies, Ship Subsidies, Shipping and Shipbuilding, etc. For recent and current articles, Readers' Guide to Periodical Literature, the Industrial Arts Index, and the Magazine Subject-Index.

B. Cong. Record; Annual reports of Postmaster General, Commissioner of Navigation, and U. S. Shipping Board; Navigation Laws of U. S.; Commerce Reports; The Shipping Act and the Merchant Marine Act of 1920 (published by U. S. Shipping Board); Hearings and Reports of House Committee on Merchant Marine and Fisheries and Senate Committee on Commerce (especially 1916 and 1919-1920), and Joint Hearings before Senate Committee on Commerce and House Committee on Merchant Marine and Fisheries, 1922.

D. DUNMORE, Ship Subsidies; GRUNZEL, Economic Protectionism, 231-250; HURLEY, The New Merchant Marine; JOHNSON AND HUEBNER, Principles of Ocean Transportation; JONES, Navigation Laws: A Comparative Study; JONES, Government Aid to Shipping in the Principal Countries; MARVIN, American Merchant Marine; MEEKER, History of Shipping Subsidies; NATIONAL FOREIGN TRADE COUNCIL, Ocean Shipping; RENNINGER, Government Policy in Aid of American Shipbuilding; SMITH, Influence of the Great War upon Shipping; ZIMMERMAN, Ocean Shipping; MCKEE, The Ship Subsidy Question in U. S. Politics.