and own the boats, but you will be told how to operate them, where you can operate them, and what the rates shall be, and so forth. In other words, you are under restriction all the way through. You will have the ownership, but you will not have anything to say about how they shall be operated.

Mr. MORGAN. We might be permitted to have something to say about it, but we do not think we would have enough. We do not think that the ships that we would buy would be as valuable as they should be because their earning opportunities would be restricted. The CHAIRMAN. Anyone else?

Mr. WELCH. Mr. Morgan, do you believe that a floor should be placed on the sale of our ships?

Mr. MORGAN. I am not sure, Mr. Welch, that I understand the question.

Mr. WELCH. Do you think that by legislative act, and in keeping with the provisions of the bill under consideration, a price should be fixed, a tonnage price, on some of the ships

The CHAIRMAN. It is a ceiling, is it not?

Mr. WELCH. No; a floor below which the ships cannot be sold, either domestic or foreign.

Mr. MORGAN. Mr. Welch, I think that there is some question whether a floor will hold if the market moves away from the floor, If the market stays there and it can be held there, it may work. It is a difficult question.

Mr. JACKSON. Mr. Morgan, if we continue to postpone action on this matter, it will not do much good to place a floor under the prices of ships, right?

Mr. MORGAN. I am not advocating postponing action.

Mr. JACKSON. No; but I mean the longer it is delayed, the possibility of getting newer and more modern vessels constructed in our yards in this country, and possibly foreign countries, will induce shipping operators to buy those ships rather than the ships that have been built during the war.

Mr. MORGAN. I am not sure that that follows, because under the united maritime agreement all of the vessels, or substantially all of them, will be requisitioned for use by the Governments of the United Nations in any event.

The CHAIRMAN. Yes; but if we keep on waiting we will be then just where we are now, will we not?

Mr. MORGAN. Well, sir, we are not recommending waiting.

The CHAIRMAN. I know, but you are not giving us anything by which we can improve it so far. That may not be a fault of yours. I am not saying that critically at all.

Mr. MORGAN. There is a definite feeling that the future is not very clear.

The CHAIRMAN. I agree.

Mr. JACKSON. What is clear in the future right now?

Mr. HERTER. Mr. Morgan, after just hearing the statement read over once, it strikes me that it is very cautiously worded from the point of view of specific recommendations to the committee. I would like to ask one or two questions to see if I can get your purpose a little more definitely.

At the very beginning you say that no data have been developed to justify the proposed prices, and you suggest that further data be available to justify those prices.

Mr. MORGAN. I think we would very much like to know pre-war domestic cost or pre-war foreign cost, as the case may be, is actually the market.

Mr. HERTER. Who can determine the market in wartime?

Mr. MORGAN. I do not know, sir.

Mr. HERTER. How can the committee determine the market?

Mr. MORGAN. Particularly when there is only one seller and he had a great many ships.

Mr. HERTER. Presumably a market is determined by offering something and seeing what somebody will pay for it.

Mr. MORGAN. Yes, sir.

Mr. HERTER. That is what I want to get at. Are you opposing a fixed price formula in the bill, fixed by the Congress?

Mr. MORGAN. No, sir; I am not.

Mr. HERTER. Are you opposing this particular formula, or do you merely think that more data should be advanced?

Mr. MORGAN. I think more data should be advanced so we are in a position to know whether the price is a correct one.

Mr. HERTER. The second point is with regard to the restrictions. Are you advocating that all ships should be sold on the same singleprice formula basis, leaving aside, for the moment, the favored position of the foreigner, on whom restrictions cannot be enforced? Are you favoring a single price on ships that travel on unrestricted routes. and on stipulated and essential routes?

Mr. MORGAN. Perhaps I can answer that best by saying that we are not advocating two prices.

Mr. HERTER. You are advocating a single price, then.

Mr. MORGAN. Yes.

Mr. HERTER. Are you implying it would be better for the future merchant marine altogether to abolish all restrictions?

Mr. MORGAN. Well, I do not want to quarrel with the theory of essential trade routes. If they are in the interest of the American merchant marine, and there has been considerable persuasive testimony to the effect that they are, perhaps operators should be restricted to those routes.

We do think, however, that their undertaking to maintain the routes could be accomplished by a personal covenant between the company and the Government, guaranteed, if need be, by appropriate sureties, but we do think it is unwise to sell subject to conditional limitations on the use of the ships.

Mr. BONNER. On page 3, the third paragraph, do I read that you argue that there is no use at all for subsidies?

Mr. MORGAN. No, sir.

Mr. BONNER. Now you read it over. I just want to get that paragraph clear. The way I read it, you say there is no use at all, that subsidies have not accomplished anything at all. I want to get that clear.

Mr. MORGAN. No; I do not think that is implied in the paragraph at all, sir. It is not the intention.

Mr. BONNER. I just wanted to get your view.

Mr. MANSFIELD. You state that two-thirds of them, however, have not availed themselves of the subsidies.

Mr. MORGAN. No, sir. Two-thirds-this is pre-war-were in the domestic trades and were not eligible.

Mr. MANSFIELD. That was largely tankers?

Mr. MORGAN. No. Tankers are included, but it includes all of the domestic coastal and intercoastal ships, and those engaged in our insular trades.

Mr. BONNER. You still agree that subsidies are to the advantage of the American merchant marine?

Mr. MORGAN. I have seen a great deal of persuasive testimony on the subject in certain of the routes, sir, in some of the essential trade routes.

Mr. BONNER. Tell me, what are the advantages and what are the disadvantages of the subsidized and the unsubsidized? What is the advantage to one and to the other?

Mr. MORGAN. Well, from the point of view of the unsubsidized operators, it is of considerable disadvantage to him who had free and unrestricted ships if he must replace those with ships that have the restrictions. Prior to the war the unsubsidized operator was not very much concerned with subsidies. He did not have them and they did not do him any harm. The subsidized operators considered whether they wanted to apply for them and avail themselves of them. The CHAIRMAN. Are not the only subsidies that we give now, whether construction or operating, to take care of a differential existing with foreign competitors?

Mr. MORGAN. That is my understanding, sir.

The CHAIRMAN. And it is really the parity principle applied to ships, to put us on a parity with foreign countries.

Are there any further questions?

Mr. WEICHEL. Is there a so-called principle of subsidy applied directly to a ship, or is it just paying an operating company generally? Does the subsidy follow the ship?

Mr. MORGAN. I am not sure, sir, about the mechanics. The War Shipping Administration and the Maritime Commission have in preparation, as I understand it, a compilation of the various forms of contracts and agreements that have been entered into. As I understand it, they operate in both ways on different occasions. The CHAIRMAN. The construction subsidy, of course, applies to the ship.

Mr. WEICHEL. I am talking about operation.

The CHAIRMAN. Operation would apply to service on that particular route.

Mr. WEICHEL. It does not follow a particular ship, then.

The CHAIRMAN. If that ship does not continue, they have to supply an equally good or better ship to that route.

Mr. WEICHEL. That is not the question. The question is, Is the subsidy payable on a certain ship?

The CHAIRMAN. No.

Are there any further questions?

Mr. BUCK. Possibly I misunderstood previously, but I would like to ask Mr. Morgan if the Association of American Ship Owners will not be in a position within a reasonable time to give us exact modifications in the bill which they would like to see.

Mr. MORGAN. We have worked on specific amendments, Mr. Buck, and we will try to do that.

Mr. Buck. I mean, if the association cannot do it, how can we be expected to do it?

The CHAIRMAN. In other words, they know better what they want Mr. Buck. I should think so.

Mr. HALE. Mr. Morgan, you suggested the possibility, if I understood you correctly, of the market drifting away from the floor. Is that what you said?

Mr. MORGAN. I spoke of that possibility.

Mr. HALE. Can you suggest any price-fixing formula which would give any promise of the market and the floor staying anywhere near together?

Mr. MORGAN. At the moment I cannot, sir.

Mr. HALE. An unrestricted market would fluctuate, or at least might fluctuate, pretty violently, might it not?

Mr. MORGAN. Yes; it might. Of course, in this instance you have just the one seller, who presumably is in a position to sell or not to sell. Mr. HALE. In your opinion would sales take place under this formula in large number?

Mr. MORGAN. I think there would be considerable reluctance for the present among the unsubsidized operators to buy. I think, too, that that is particularly so of those in the coastwise and intercoastaĺ trades. In those trades the operators were the first to lose their ships for war service. Their trades have all gone. The railroads have all of that business now, and will presumably energetically try to retain the business after the war. Those are considerations that will lead

some to hesitate.

Mr. HALE. If you put the unsubsidized buyers out of the market, what fraction of the market would there be left?

Mr. MORGAN. Well, as I tried to point out, two-thirds of the entire merchant marine prior to the war was engaged in the domestic trades. Half of the ships engaged in the foreign trades, or more than half, were unsubsidized, so that it is a sixth that was subsidized and fivesixths that was unsubsidized, of the pre-war merchant marine.

Mr. HALE. Then, if I correctly understand your testimony, fivesixths of the potential buyers would be at least reluctant under this bill?

Mr. MORGAN. Well, there may be companies among the five-sixths that would be quite anxious to buy.

Mr. HALE. I am not holding you to that exact fraction.

Mr. MORGAN. I understand, but I did not want to answer too broadly.

Mr. BUCK. As to those who will not buy, Mr. Morgan, what will they do?

Mr. MORGAN. Some of them hope that they will be able to charter ships and try to reestablish their business. Some of them have a few ships that are left that they hope will be returned to them and that they can use, and see whether it is going to be possible to recover the business they had pre-war.

Mr. Buck. Are they going into a building program?

Mr. MORGAN. I doubt that, sir.

The CHAIRMAN. We did not have any subsidies in 1920 and it was just free and wild and buy as you please, and the merchant marine went down to nothing. We were just put off the seas.

Mr. MORGAN. We hope that will not happen again.

The CHAIRMAN. We do, too. That is what we want to guard against.

Mr. MANSFIELD. Mr. Morgan, why is it that none of the ships you represent applied for the subsidy or availed themselves of it? Čan you tell us why?

Mr. MORGAN. That is a question that I think can be answered better by the individual companies, a number of whom are here to testify. But a good many of them, those in the domestic trades, were not eligible for the subsidies.

Mr. MANSFIELD. But you state they are engaged in both foreign and domestic trade in your statement.

Mr. MORGAN. That is true. Some of those in the foreign trades did not care to apply for the subsidies, and I think they are in a much better position to give you the answer.

Mr. MANSFIELD. I am wondering how they can compete with those lines that did avail themselves of it.

Mr. MORGAN. That, too, I think they can tell you better than I, sir.

Mr. DAUGHTON. Mr. Morgan, briefly, as I understand your statement, you folks do not like this legislation and are rather afraid of it, but you are not prepared at this time to offer any substitute, and do not contemplate offering any substitute in the future, is that correct? Mr. MORGAN. I would not go so far as to say that we do not contemplate offering a substitute. I think we would like very much to offer a substitute, if we can do it. It is a very difficult problem, sir, and we do not have all the information that we think it would be helpful to have.

Mr. DAUGHTON. May I ask this: Is your group working on something that will probably lead to some substitute?

Mr. MORGAN. I hope so. We are working, and I hope it will be productive of helpful results.

The CHAIRMAN. Let us have it as soon as you can, because we are facing a difficulty here. We wish to have the benefit of anything you can give us.

Mr. JACKSON. The construction subsidy did not have much appeal to the nonsubsidized operator when taxes were much lower, is that right? In other words, there was not much inducement for a nonsubsidized operator to go into the subsidy field regarding a construction subsidy when he could set aside a pretty good reserve for his new ships. But since then the picture has changed, right? I mean, taxes have gone up.

Mr. MORGAN. The thought that occurs to me in connection with your question is that, of course, the domestic operators were never entitled to apply for the construction subsidy. That was available only to those operating in the essential trade routes.

Mr. JACKSON. That is right. That is what I say. It did not look too good to a lot of the nonsubsidized operators. They did nto want to go in and take these restrictions because they could set aside pretty good funds.

Mr. MORGAN. Those that did buy under the '36 act, if I am correctly informed, purchased at the full domestic cost, even for operation in the foreign trades, because they preferred not to be restricted.

Mr. MANSFIELD. Did you submit a list of the companies you represent?

(For list, see p. 49.)

Mr. MORGAN. Yes; I did, sir.

Mr. CHURCH. Mr. Morgan, you spoke about a great deal of information being unknown. Have you trouble in getting information from sources that you are trying to get it from in order that you may present to this committee your suggestions for a proper bill?