Discriminatory Ocean Freight Rates the Balance of Payments
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277go" DISCRIMINATORY OCEAN FREIGHT RATES AND THE BALANCE OF PAYMENTS HEARINGS BEFORE THE SUBCOMMITTEE ON FEDERAL PROCUREMENT AND REGULATION OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-NINTH CONGRESS FIRST SESSION PART 2 MAY 27, 1965 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 48-03 0 WASHINGTON: 1965 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C., 20402 -Price 30 cents JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) WRIGHT PATMAN, Texas, Chairman PAUL H. DOUGLAS, Illinois, Vice Chairman HOUSE OF REPRESENTATIVES SENATE RICHARD BOLLING, Missouri JOHN SPARKMAN, Alabama HALE BOGGS, Louisiana J. W. FULBRIGHT, Arkansas HENRY S. REUSS, Wisconsin WILLIAM PROXMIRE, Wisconsin MARTHA W. GRIFFITHS, Michigan HERMAN E. TALMADGE, Georgia THOMAS B. CURTIS, Missouri JACOB K. JAVITS, New York WILLIAM B. WIDNALL, New Jersey JACK MILLER, Iowa ROBERT F. ELLSWORTH, Kansas LEN B. JORDAN, Idaho JAMES W. KNOWLES, Executive Director JOHN R. STAnK, Deputy Director MARIAN T. TRACY, Financial Clerk HAMILTON D. GEwEHE, Administrative Clerk ECONOMISTS WILLIAM H. MooaE NELSON D. MCCLUNG GERALD-A. POLLACK DONALD A. WEBSTER (Minority) SUBCOMMITTEE ON FEDERAL PROCUREMENT AND REGULATION PAUL H. DOUGLAS, Illinois, Chairman JOHN SPARKMAN, Alabama WRIGHT PATMAN, Texas WILLIAM PROXMIRE, Wisconsin MARTHA W. GRIFFITHS, Michigan LEN B. JORDAN, Idaho THOMAS B. CURTIS, Missouri WILLIAM B. WIDNALL, New Jersey THOMAS H. BOGGS, Jr., Consultant II CONTENTS WITNESSES Rear Adm. John HarIlee, U.S. Navy (retired) Chairman accompanied by James E. Mazure, special assistant to the Chairman; Tiimothy J. May, Managing Director; and James L. Pimper, General Counsel, Federal Page Maritime Commission -352 EXHIBITS A. Rate studies and investigations - - 387 B. Carrier and rate data in foreign-to-foreign trade - - 388 C. Informal complaints by shippers - -389 I. Informal complaints filed (table) -389 II. Beef rates ---- __- 390 III. Surcharges - 391 IV. Surveillance over Government rates - 391 D. Status report of factfinding investigation No. 6, May 22, 1965 -- 392 E. Earnings of principal water carriers (1959-64) - -393 Tables: Operating results and earnings of American water carriers in U.S. commerce, 1959-64 - - 395 Vessel operating profit of foreign-flag carriers in U.S. commerce, 1959-63 ---------------------------------------------------- 397 Voyage profits of some liner and cargo-liner companies, 1960-63- 398 Voyage profits of some cargo companies, 1960-63 ---------- 398 Letter: Response from Hon. John T. Connor, Secretary of the Department of Commerce, to Chairman Douglas' invitation to testify at hearings 399 STATEMENT Hon. Paul H. Douglas, relative to publication of shipping information provided by European nations -400 Hon. John Sparkman, individual statement -402 TESTIMONY Rear Adm. John Harllee, U.S. Navy (retired), Chairman; accompanied by James E. Mazure, special assistant to the Chairman; Timothy J. May, Managing Director; and James L. Pimper, General Counsel, Federal Maritime Commission -404 List of members of the two conferences serving the trade between the U.S. North Atlantic and the United Kingdom - 405 Tables: North Atlantic-United Kingdom Freight Conference: Major moving commodities -407 North Atlantic-United Kingdom Freight Conference: Selected commodities -_-------------------------------- 407 North Atlantic Westbound Freight Association: Major moving commodities --------------------------------- 407 North Atlantic Westbound Freight Association: Selected com- modities ----------------------------- 408 Trade: U.S. North Atlantic to Belgium Holland, and Germany 412 Trade: U.S. North Atlantic to United Kingdom and Eire -412 Trade: U.S. North Atlantic to ports on the west coast of Italy, Sicilian and Adriatic ports - -413 Trade: U.S. North Atlantic to French Atlantic ports -413 Trade: U.S. North Atlantic to Swedish ports ------- 413 Trade: U.S. Pacific coast to Japan -413 Trade: U.S. Atlantic and gulf to Japan -413 Trade: U.S. west coast to continental Europe --- 414 m IV CONTENTS TESTIMONY-Continued Rear Adm. John Harllee, etc.-Continued Study of inbound-outbound traffic statistics and freight rate structure in the trade between U.S. North Atlantic ports and United Kingdom Page ports - -414 Tables: U.S. North Atlantic-United Kingdom trade-liner carryings, 1963 ----- -415 U.S. North Atlantic-United Kingdom trade-tramp carryings, 1963 --- 16 U.S. North Atlantic-United Kingdom trade-nonconference liner competition, 1963 - - 417 Charts: I. (Tariffs.) Cumulative percentage of rates by $1 rate blocks between U.S. North Atlantic ports and ports in Great Britain and Ireland - 419 II. (Tariffs.) Percentage of rates in each $5 rate block be- tween U.S. North Atlantic ports and ports in Great Britain and Ireland -421 III. (Outbound tariff.) Number and percentage of rates in each 25-cent rate block between U.S. North Atlantic ports and ports in Great Britain and Ireland -423 IV. (Inbound tariff.) Number and percentage of rates in each 25-cent rate block between U.S. North. Atlantic ports and ports in Great Britain and Ireland -425 V. (Manifests.) Cumulative percentage of rates by $1 rate blocks between U.S. North Atlantic ports and ports in Great Britain and Ireland -427 VI. (Manifests.) Percentage of rates in each $5 rate block between U.S. North Atlantic ports and ports in Great Britain and Ireland - 428 VII. (Outbound [eastbound] manifest.) Number and per- centage of rates in each 25-cent block between U.S. North Atlantic ports and ports in Great Britain and Ireland -429 VIII. (Inbound [westbound] manifest.) Number and percentage of rates in each 25-cent rate block between U.S. North Atlantic ports and ports in Great Britain and Ireland 430 Comments of British Government - -432 Letter: Douglas MacArthur II, Assistant Secretary for Congressional Relations to Chairman Douglas - -432 Note from British Embassy accompanying British Government comments - -432 Response of Federal Maritime Commission to British Government com- ments --------- 437 DISCRIMINATORY OCEAN FREIGHT RATES AND THE BALANCE OF PAYMENTS THURSDAY, MAY 27, 1965 CONGRESS OF THE UNITED STATES, SUIBCOMMrTrEE ON FEDERAL PROCUREMENT AND REGULATION OF THE JOINT ECONOMIC CoMMITTEE, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room AE-1, the Capitol Building, Hon. H. Paul Douglas (chairman of the sub- committee) presiding. Present: Senator Douglas. Also present: Thomas H. Boggs, Jr., consultant; James W. Knowles, executive director; John R. Stark, deputy director; and Hamilton D. Gewehr, administrative clerk. Chairman DOUGLAS. The subcommittee will come to order. Today we resume our hearings on the subject of discriminatory ocean freight rates and the balance of payments. Last year, the Joint Economic Committee set forth in a report ' eight specific findings on the subject of discrimination in ocean shipping and recommended steps to be taken by the executive branch to counteract the discriminatory practices. In essence, we found that U.S. exporters are forced to pay con- siderably more for shipping to Europe and Japan than do Europeans or Japanese in shipping to the United States. Moreover, it is a dis- parity that according to our findings is warranted neither by volume, value, nor any other economic factor. Similarly, it costs more per ton-mile for U.S. exporters to ship to the new and growing markets of the world, such as South Africa and India, than it costs our lead- ing competitors in Europe and Japan to ship comparable competitive products from their ports to these markets, even where distances are greater. Earlier this year, we focused attention on one element in this gen- eral pattern of discrimination; namely, the rates paid by the U.S. Government under the cargo preference laws. Government and indus- try witnesses were examined on this subject and, from information ad- duced, it appears that in some cases the United States is paying very high freight charges for the shipment of Government-sponsored car- goes. It is equally apparent, moreover that the rates on Government cargoes exert inflationary pressures on the general outbound rate struc- ture to the detriment of our exports and, inasmuch as U.S.-flag ship- ' Printed as S. Rept. 1; 89th Cong., 1st sess. 351 352 DISCRIMINATORY OCEAN FREIGHT RATES ping space is taken up for the most part with Government cargoes, our commercial cargo largely is in the hands of foreign-flag steamship lines. We also heard last month 2 from a new steamship operator who testified that, through the adoption of the most modern and economi- cal methods of freight handling, he was able to offer the Defense Department a reduction of 50 percent in the shipping rate on house- hold effects, and substantial reductions in the rates on general cargo, with the result that members of the steamship conference reduced their rates, at least temporarily. Because he underbid established rates, the witness testified that he has been subjected to threats, pressure, and harassment. In the course of your testimony, Admiral, this sub- committee will be very much interested in your views on this infor- mation and the responses made by Mr. Lyle Bull of the American Steamship Traffic Executive Committee. A tentative conclusion pointed up by our inquiry to date is that there is a considerable need for coordination and modernization of our cargo preference laws requiring, among other things, reorganiza- tion of the present administrative