COMMODITY REPORT: EUROPEAN RECOVERY PROGRAM

CHAPTER I. INLAND TRANSPORT

I. GENERAL SUMMARY AND BACKGROUND

In the field of European inland transport the goal of the participating countries is to improve facilities in order that current demands and prospective increases of traffic can be met. To accomplish this goal additional serviceable equipment and also a better utilization of existing rail, road, and water facilities are required.

If transportation is not be be an obstacle to recovery, sufficient capacity must always be available to insure the expedious movement of production. Inadequate transportation not only restricts distribution of current production but also acts as a brake on increases in output.

Since 1945, the transportation system of western Europe has had difficulty in handling the relatively low volume of traffic resulting from the subnormal levels of production. The situation in western Germany has been even worse. Imports of railway and highway equipment from the United States and acquisition of United States war surplus have been of great assistance in preventing serious transport break-downs. All of the participating countries have imported United States trucks, and Belgium and France have imported substantial amounts of railway equipment. Even with these imports, the transport situation was critical during the winter of 1946-47 and it will probably face another crisis this winter if the weather is severe.

Western European countries are operating their transportation systems with a large proportion of overage equipment, which would normally have been scrapped some time ago. Much equipment is idle because of repair difficulties. In addition to the problems caused by shortages and the poor condition of available equipment, the western European countries have been hampered by their inability, for various reasons, to reestablish normal international transportation arrangements, such as, for example, agreements regulating car exchange throughout the area. An uneconomic use of available equipment has resulted. A major obstacle to a return to normal practices has been created by the failure to reach agreement on the difficult issue of the return to certain countries of their cars in Germany and of the return of German cars by these countries.

Conditions in Germany and Austria have aggravated all transport problems in western Europe. Difficulties at the borders have been greater than usual and special problems of a financial character have hindered transportation to and across Germany and Austria. Exchange problems have made it difficult to obtain needed parts and equipment for the German and Austrian railways, although in some cases manufacturers in western Europe were in a position to supply the required items. For such reasons, minor shortages have sometimes led to major transportation difficulties.

The outstanding example of insufficient use of existing facilities is the failure, to date, to reestablish normal operations on the Rhine waterway. Some imports which normally would have entered Germany through Rotterdam and Antwerp have instead gone through north German ports. At the same time, there has been idle Dutch and Belgian tug and barge capacity which could have been used to haul Ruhr coal and thus to relieve the load on the overburdened railways. It has been estimated that an additional 7,000,000 tons of Ruhr coal per year could be moved into export trade and an additional 3,000,000 tons into internal distribution if use were made of existing facilities for Rhine transportation.

The worst transportation situation in western Europe is found, of course, in Germany, where it is not possible to haul away even the present low output of coal in the Ruhr, despite the fact that the German rail system has been thrown out of balance in an attempt to give high priority to the movement of this coal. Other essential civilian traffic in western Germany is subject to long delays, or in some instances, has not been carried at all. Substantial quantities of badly needed perishable foods have spoiled because of transport problems. Thus, inland transport inadequacies are already having a powerful deterrent effect on the revival of western Germany and the other countries of western Europe. Increased use of waterways would contribute to a solution of the problem, but would probably not be sufficient to meet even the current deficiency. As recovery proceeds and output increases, expansion of rail, road, and water capacity will be necessary to handle a rising volume of traffic.

1 This report is the result of the first phase of analysis of the European recovery program and may be subject to revision.

A. Railway equipment

II. PRESENT SUPPLY SITUATION

1. Freight cars.-(a) United States: Freight cars are the critical item in the inland transport situation in every country. Car shortages are hampering production and distribution in the United States even though car loadings are at an all-time peak. Efforts are being made to increase production of freight cars in the United States to more than 10,000 per month, but to date output has not exceeded 9,000 cars per month. If American manufacturers could obtain adequate supplies of materials, an output of well over 10,000 cars per month would be possible. At this level cars could be made available for export without interfering with essential domestic needs. In addition, if materials were available, some manufacturers could produce car components for assembly in Europe, without dislocating United States production schedules.2

The CEEC estimate of the dollar value of imports of freight cars from the United States is based on a price of about $3,500 per unit. This appears to be somewhat high for open-top cars, although it is probably not far out of line for boxcars. In this report, it has been assumed that the average price of United States exports of cars of both types will be $3,000 per unit. However, if the participating countries compete in the American market for cars, considerably higher unit prices might result.

(b) Other nonparticipating countries: Czechoslovakia is producing from 1,500 to 2,000 cars monthly and is ready to initiate substantial exports to the bizonal area of Germany.

Canada has exported small quantities of freight cars to Europe since the war, but the present supply and demand situation in Canada makes it unlikely that substantial exports to Europe will be possible during the next 18 months.

(Production and requirements in the participating countries are discussed in sec. III below.)

2. Passenger cars.-United States producers have orders on their books for more than 2,400 railway passenger cars at the present time. As current output is running at an annual rate of 500 cars, there is little prospect of deliveries to Europe in the near future. For this reason and because of the low priority given passenger service in Europe under present conditions, no allowance has been made in the executive branch estimates for exports of passenger cars to the participating countries.

3. Locomotives.-Capacity within the participating countries for the production of locomotives is large enough to meet requirements. No allowance has been made for exports of locomotives to the participating countries under the recovery program.

B. Highway equipment

Since 1945 there have been substantial exports of trucks and other highway equipment to Europe from the United States. Although the CEEC technical committees did not analyze requirements for trucks, it is recognized that imports would help to mitigate the serious inland transport problem. Production capacity in the United States is large enough to meet the essential imports requirements of the participating countries, which are analyzed in part III below.

C. Waterway and port equipment

Production of waterway and port equipment in the participating countries will be adequate to meet their own needs and even to permit some exports.

III. IMPORT REQUIREMENTS

The information now available does not allow an accurate appraisal of European inland transport needs over the whole recovery period. The CEEC report was not complete and although conversations with CEEC representatives have provided additional information, it has not yet been possible for the participating countries to supply all the data requested by the executive branch, Enough material is at hand, however, to permit a satisfactory evaluation of needs through June 30, 1949, and preliminary estimation of needs for the three following years. The estimates for the entire period will be reviewed and revised as necessary when full information has been obtained.

It should be pointed out that the continental freight car is considerably lighter than the United States car. Roughly, a European-type car can be produced with approximately half of the labor and material required for an American car.

A. The CEEC program

The CEEC report lists the following import requirements for railway equipment for the participating countries, including western Germany:

This represents items destined for Greece. No further consideration is given to this item in this report, as it has been taken into account in estimates of "other imports" into Greece.

The following table, submitted by the CEEC, summarizes the data upon which the estimated import requirements for freight cars were based:

It will be noted that the bulk of the requirements is concentrated in the first 2 years.

In the above compilation, "productive capacity" represents the maximum amount of production that might be obtained given a satisfactory labor supply and an adequate and uninterrupted flow of materials, parts, and equipment. Even on this assumption, the participating countries believe that it is optimistic to expect that capacity production will actually be obtained. The gap between actual production and stated requirements is, therefore, probably understated. The CEEC report indicates that western Germany has the largest freight car deficit in western Europe. In conversations with the CEEC representatives, it was agreed that at present the German situation warrants priority. However, the governments of the participating countries believe that it is undesirable for Germany to obtain new cars while the other countries of western Europe retain their stock of old units and suggest that arrangements should be made whereby they would acquire new cars and in turn transfer old cars to Germany.

In addition to the requirements for freight and passenger cars, the CEEC report indicates that the import of 5,120,000 cubic meters of ties, valued at $204,000,000, is needed for the restoration of the railway systems. This requirement is analyzed in section C below, but imports of ties are included under timber products and treated in chapter K of the commodity reports.

Total requirements of steel for rail and ties are also considered in section C below, but imports of steel and steel products, including steel for inland transport, are treated in chapter H of the commodity reports. The CEEC report indicates that total requirements of steel rails and ties amount to 6,840,000 tons, a quantity which is small relative to anticipated total production of finished steel in the participating countries. It has therefore been assumed for the purposes of this report that the essential requirements for inland transport can be met. Failure to meet these requirements would hamper production and repair of equipment and the restoration of the rail systems and would thus impose serious obstacles to the attainment of goals in other fields.

The participating countries plan to undertake the following mutual aid programs to assist in solving their inland transport problem:

1. Improved arrangements for car exchange in order to facilitate adjustment of car supply to traffic needs. The participating countries are believed to be contemplating the early reestablishment of the prewar conventions for the exchange of freight cars. The United States Government should encourage progress along this line.

2. Studies of traffic flows. The CEEC report suggests that the Inland Transport Committee of the Economic Commission for Europe might study the present flow of traffic in Europe as a first step toward a more efficient use of available routes and means of transport.

3. Standardization of freight car design. As the participating countries plan to add more than 450,000 new cars to their stock in the next 4 years, the CEEC report points out that this offers an unusual opportunity to standardize design. The matter has been referred to the International Technical Standards Conference for a report as soon as possible.

B. Estimated freight-car requirements

It

1. April 1, 1948, through June 30, 1949.-The CEEC report estimates net freight car import requirements of the participating countries at 47,000 in 1948. appears that the CEEC assumed that at least some of the western European cars in Germany would be returned to the countries of origin but that these countries would not make a corresponding return of German cars to Germany. If, therefore, car exchange during 1948 is in fact on a car-for-car basis, the participating countries other than Germany will be in a somewhat worse position than the CEEC report indicates and the German deficit will be somewhat smaller than indicated.

Latest reports indicate that there are currently 237,000 serviceable cars in the bizonal area, compared with approximately 335,000 serviceable cars in the same area prewar. During the last 4 months there has been an increase of approximately 25,000 cars in the serviceable figure. This indicates some success in the repair program during the favorable summer weather. However, inability to maintain production in the shattered repair shops during the winter months will result in a decrease in the number of serviceable wagons to about 210,000 by the spring of 1948. Given adequate material and spare parts, the repair program in the summer of 1948 should produce better results than in the summer of 1947. Accordingly, it can be estimated that something in the neighborhood of a net of 40,000 cars might be recovered between the spring of 1948 and the critical fall period of the same year. This would result in about 250,000 cars in serviceable condition by the fall of 1948, if there were no exports or imports.

Bizonal authorities estimate a need for approximately 260,000 cars with coal production at a rate of 240,000 tons per day. They estimate needs at 325,000 cars in the event of an increase to 300,000 tons daily and 385,000 cars with production at 400,000 tons. Current production is close to 300,000 tons per day. A bizonal report as of August 3 gives total requirements for additional cars through 1948, not providing for any restitution except on a car-for-car basis, at over 66,000. The executive branch has placed the goal for imports through June 30, 1949, at 30,000. This should result in a net serviceable park by the close of the year in the neighborhood of 280,000. Under favorable conditions, with some increase in efficiency and with greater utilization of road and water (Rhine) facilities, this amount would be consistent with some increases above current industrial levels and an increase in the distribution of coal.

In addition to the deficit in the bizonal area in Germany, it is believed that imports will be required for Greece in the amount of approximately 1,000 cars; Austria, approximately 1,500; Turkey, approximately 1,000, and Ireland, 300. In addition, the CEEC report indicates that France will require importation of car components, which are here considered as freight car imports.

Within the participating area, Belgium and the United Kingdom can be expected to export freight cars in the first 15 months of the program. In addition, approximately 500 cars each can be expected to be available from Swiss and Swedish exports.

With these supplies from the participating countries themselves, with some exports from Czechoslovakia, and with 20,000 cars from the United States, minimum requirements of the area, including western Germany, through fiscal 1949 should be met. This, it should be stressed, means meeting minimum requirements only. It means careful planning so that imports will actually be available before next winter and so that the most efficient use is made of freight cars in the participating countries.