any port or place, except in vessels of the United States, or in such foreign vessels as truly and wholly belong to the citizens or subjects of that country of which the goods are the growth, production or manufacture, or from which such goods, wares, or merchandise can only be or most usually are, first shipped for transportation.1

The penalty for violation of this provision is forfeiture of vessel, cargo, tackle, etc. This law like the preceding is subject to the usual exemptions by treaty or special acts of Congress. The provision is of no practical importance, but is interesting as a survival of the spirit of the Navigation

Acts.

The American merchant marine continued to be an important factor in the world trade up to the time of the Civil War. Certain contemporaneous changes in the building and operation of ocean vessels2 were slowly undermining the strength of American shipping, at least that part of it engaged in international trade. From the close of the Civil War till after the outbreak of the World War the merchant marine of the United States was a relatively insignificant influence in international commerce. Before 1914, however, there was a marked revival of interest in this country in shipping, with many proposals for encouraging its development. In the Tariff Act of 1913 there was in addition to the usual provision for a 10 per cent increase of duties over normal rates on articles imported in foreign vessels another clause granting a discount of 5 per cent "on such goods, wares and merchandise as shall be imported in vessels admitted to registration under the laws of the United

1 Acts of Oct. 1, 1890, sec. 18; Aug. 27, 1894, sec. 15; July 24, 1897, sec. 23; Aug. 5, 1909, sec. 16; Oct. 3, 1913, sec. 4J, subsection 2.

2 These changes were concerned with the substitution of iron and later steel for wood in the construction of ships and steamships for sailing vessels.

States" accompanied with the usual proviso in regard to treaties.1 While no discounts under this clause have been granted to imported articles carried in American vessels,2 the insertion of this subsection in the Act of 1913 is some indication of the rising influence of shipping interests.

3

The World War gave a great impetus to the growth of the American mercantile marine. From June, 1914 to June, 1919, according to Lloyd's Register of Shipping, it increased from about 5,500,000 gross tons to 13,091,amounted to 16,049,289 gross tons. 773 gross tons, and in June, 1920, Most of this great development has taken place in that part of our shipping The engaged in foreign commerce. movement to conserve this growth and maintain on the high seas the position attained during the war resulted in Marine Act. Among its several prothe passage in 1920 of the Merchant visions for the development and maintenance of American shipping is the following:

Sec. 34. That in the judgment of Congress, articles or provisions in treaties or 1 Act of Oct. 3, 1913, sec. 4J, subsections 1 and 7.

2 The question arose whether or not a 5 per cent discount should not be allowable on all goods carried in American vessels and vessels of foreign countries with which we had reciprocal treaties. It was held by the Supreme Court of the United States that the provision was operative only when goods came in vessels of countries with which the United States had no agreement. 243 U. S. 97 of 1917.

3 Lloyd's Register of Shipping, 1914-1915, II, pp. 960, 961 and 1919-1920, II, p. 960. The figures for 1914 in Lloyd are 4,330,078 gross tons steam, and 1,038,116 net tons sail. Adding the gross tons of steam vessels and the estimated gross tons for sailing ships the total would be approximately 5,500,000 gross tons. This figure does not include a considerable tonnage of river craft, barges, motor boats and certain wooden vessels on the Great Lakes. These are added in the published figures of the reports of the Commissioner of Navigation, whose total for 1914 is 7,928,688 gross tons instead of 5,500,000.

conventions to which the United States is a party, which restrict the right of the United States to impose discriminating customs duties on imports entering the United States in foreign vessels and in vessels of the United States, and which also restrict the right of the United States to impose discriminatory tonnage dues on foreign vessels and on vessels of the United States entering the United States should be terminated, and the President is hereby authorized and directed within ninety days after that act becomes law to give notice to the several Governments, respectively, parties to such treaties or conventions, that so much thereof as impose any restriction on the United States will terminate on the expiration of such periods as may be required for the giving of such notice by the provisions of such treaties or conventions.

This act, and especially the provision quoted, has excited a great deal of

attention abroad, and the announcement of its passage has been followed by threats of retaliation. It is reported that no action has yet (December, 1920) been taken with a view to terminating existing treaties, but such action is anticipated and provided for in the law.

The expediency of reverting to this discriminatory practice may be briefly considered with reference, first, to the protection of the mercantile marine of

the United States so rapidly developed

during the war, and second, to the advisability of resorting to such means in order to attain the end sought.

and ocean carrier have become more differentiated than formerly. While large manufacturing and trading companies often own the vessels which transport their goods, this combination of functions is now largely confined to companies producing bulky commodities in large quantities, which find that by owning and operating their own vessels they avoid much loss of time and uncertainties with reference to proper space and service. Neither is the association of government and carrying trade so close as formerly. The commodities shipped by the merchants of one country are now often carried safely and expeditiously in vessels flying the flag of another.

The government of the world, howwhen foreign commerce is discussed ever, is carried on by nations, and people think of it in terms of national units. A large merchant fleet flying and in foreign ports does exert some the flag of a country on the high seas psychological influence. It advertises the country.

With these considerations in view we see the United States at the close of a world crisis possessed of a greatly enlarged merchant marine. Has this transformation been in accord with the economic conditions of the country or temporary, development, due to a is it merely an artificial, and therefore great world emergency? This question has been discussed elsewhere by the writer1 and just a few observations will be made here.

The decline of American shipping after 1860 is connected with the intro

1 See a fine statement of this side in Referendum No. 29 on Report of Committee on Ocean Transportation Regarding Government-Owned Merchant Ships-Arguments in the Negative, Chamber of Commerce of United States of America.

duction of iron and later steel vessels

and the substitution of steam for sail

higher cost in this country of iron, steel and coal. Until the late nineties steel plate and structural steel were

1 The American Economic Review, June, 1920, "The War and the World's Mercantile Marine."

higher in price here than in England. For a long time bunker coal at our Atlantic seaboard was also more expensive. Added to these handicaps were greater labor costs both in building and in operating vessels. Before the war broke out these conditions had changed. Steel and coal had become appreciably cheaper, and while labor cost remained high it formed a smaller fraction of the total cost of operation than in earlier years. The recent change from the use of coal to that of oil also favors the operation of vessels by American concerns.2

On the other hand for two generations the United States has been a country whose principal industrial interests have been devoted to land pursuits. As a result the country has a very limited sea-faring population and now lacks the experience which certain European countries have in the conduct of shipping operations on an international scale. We have, therefore, a hiatus between economic position and experience; and it is to bridge this gap that some protection may be temporarily necessary.

2. Is, however, a return to discriminatory import duties the best means of safeguarding our newly acquired position as the second maritime nation of the world? A very common experience with industrial advances, as with political and social reforms, is the occasional reversion to practices which have been outgrown or found out of

1 It is difficult to give any definite percentage of the total cost of operation which is properly attributable to labor engaged directly in the sailing of a vessel. It is, however, smaller than commonly supposed. Ten per cent is a large proportion for coal-burning freight vessels.

2 There is, of course, involved in the statement the question of the exhaustion of oil resources and the possible monopolization of oil in other parts of the world by foreign concerns. For some time the British monopolization of the Mesopotamian and Persian fields was reported, but this has since been denied.

harmony with more highly developed social conditions. Reciprocal freedom of trade was attained only after much struggle with a growing realization that the practice of discriminatory rates invariably led to retaliation. Already measures have been taken by Japan to retaliate if certain provisions in the Merchant Marine Act, including the one quoted above, are carried out,1 and hints of similar reprisals are made in Europe.

Another fact to be considered in this connection is the general character of our export trade and the probable effect of foreign retaliatory measures. In the calendar year 1919 over 33 per cent of our exports consisted of manufactures ready for consumption; about 12 per cent, of manufactures for further use in manufacturing; and over 25 per cent, of foodstuffs partly or wholly manufactured. manufactured. Only about 20 per cent consisted of crude materials for use in manufactures-the bulk of it being raw cotton. In other words about 70 per cent of our exports are manufactured articles, in many lines of which retaliatory measures on the part of foreign governments are likely to undermine the American competitive position. Furthermore, coming at a period when the foreign exchange situation is likely to favor the foreign producer, such a step appears illadvised.

There is, however, a justifiable resort to discriminatory legislation of the character considered above in cases where American vessels are practically excluded from trade by foreign conference lines. To illustrate: The United States imports a large amount of Egyptian cotton. All of this cotton comes to this country in foreign vessels. There are American ships operating in

1 The Economic Review (England), Nov. 19, 1920, p. 29.

2 The Statistical Abstract, 1919.

the eastern Mediterranean, but thus far practically every American vessel leaving Alexandria goes away empty. This loss of freight is ascribed to a powerful British combination which excludes the ships of this country from any participation in its conferences or trade. Similar exclusive combinations exist in other parts of the world. The imposition of discriminatory customs duties against the products carried in the vessels of countries whose shipping organizations or conferences clearly exclude American companies from any participation in trade would be justifiable and probably feasible. Treaties granting reciprocal liberties to the shipping of the contracting parties might be so framed as to provide some protection against discriminatory practices on the part of private combinations.2

While the resort to discriminatory tariff rates as a regular policy is a reversion to an earlier practice that the commercial world has outgrown it does not follow that some aid or pro

1 Hearings before Committee on Commerce, United States Senate, 66th Congress, 1st Session, pp. 299, 300; Testimony of J. H. Rosseter of Emergency Fleet Corporation. The Sunday Star, Washington, D. C., January 2, 1921.

2 It is difficult to suggest anything definite here as conditions vary greatly. In many parts of the world American vessels participate in trade on the same terms as vessels of other countries. The sudden emergence of the United States as a maritime power has excited some concern on the part of other countries and some large shipping combinations are apparently attempting to "swat infant shipping industries."

2

tection should not be rendered to the new shipping. Many suggestions have been made, among which may be cited the establishment of coaling stations abroad along important trade routes,1 assistance to shipping companies in securing experienced agencies in other countries to obtain cargoes, the creation of free ports in Virgin Islands, Porto Rico, Panama and Philippines, temporary subsidies to lines operating between the United States and regions whose future growth promises to pay for the outlay, and the sale of government-owned ships at prices low enough to induce purchasers to invest and the absorption by the government of the difference between such prices and the war cost as a war loss. A noteworthy fact in connection with suggested aids is the almost entire absence of any demand for general ship subsidies.

It is not the purpose of this article to discuss any of these suggestions or others that have been urged. Some of these proposals will, in the judgment of the writer, mean more for the upbuilding of the American merchant marine, if properly carried out, than discriminatory tariff rates against commodities imported in foreign vessels, and will not cause the irritation which discriminatory legislation is bound to incur.

1 Hearings before Committee on Commerce, U. S. Senate, 66th Congress, 1st Session, pp. 425 and 426.

2 Ibid., pp. 421, 422.

3 Ibid., p. 388.

• Ibid., p. 391.

Ibid., pp. 607-609 and 750-754.