TREATY OF COMMERCE AND CONSULAR RIGHTS WITH GERMANY. TUESDAY, FEBRUARY 12, 1924. UNITED STATES SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, D. C. The committee met, pursuant to call, at 10.30 o'clock a. m. in the committee room, Capitol, Senator Henry Cabot Lodge presiding. Present: Senators Lodge (chairman), Brandegee, Moses, Pepper, Swanson, and Shipstead. Also Senators Fletcher and Ransdell. STATEMENT OF HON. DUNCAN U. FLETCHER, A SENATOR FROM THE STATE OF FLORIDA. Senator FLETCHER. Mr. Chairman, this treaty contains the usual clauses regarding equal treatment of merchant ships which have stood in the way of any legislation by the United States making any preferential provisions respecting American ships. Other treaties or conventions are pending containing the same clauses. I should like to protest against these provisions. Our experience should teach us that they are unwise and decidedly against the interest of the United States. In the tariff act of 1913 we undertook to provide preferential duties on goods imported in American bottoms. When we attempted to enforce that act it was held that the provision mentioned contravened a number of treaties or conventions, some of them, as I recall, 50 years old, and therefore were void. According to a report made by the Acting Secretary of State in 1919, preferential rates, such as we could adopt if these treaties and conventions were not in the way, would affect 27 treaties and conventions made with 25 countries. All of these treaties and conventions except seven specifically provide they may be denounced upon notice, some within 6 months, others within 12 months. The seven nations which do not have these provisions are Argentina, China, Congo, Costa Rica, Liberia, Panama, Tripoli, and Great Britain. None of these, save Great Britain, are maritime nations; and the treaty with the British Empire, as I am advised, relates only to direct trade between the United States and that country. By the merchant marine act 1920, section 34, Congress declared that in its judgment the provisions of all treaties and conventions preventing discrimination in customs duties on imports carried in foreign vessels and American vessels, and in tonnage dues as between foreign and American vessels, should be denounced, and authorized and directed the President to give the necessary notices to the foreign governments within 90 days. This law was approved by the President. No such notice as provided in this section has been served either by Presidents Wilson, Harding, or Coolidge. The reason given for not complying with the section has been that such a course might complicate our foreign relations. It seems to me Congress should be the judge of that; and I can not conceive, in view of the provisions of these conventions as mentioned, how there could be any complication or difficulty. It looks very much like the State Department is overcautious, and is not inclined to undertake the work of negotiating new treaties. However, we ought to avoid getting into any such situation further, or again; and I therefore urge that any such provisions in these pending treaties and conventions be stricken out, so as to leave us free to do as we like, and as we otherwise would have the right to do, respecting preferential duties or discriminatory tonnage dues, or anything else that we may feel is necessary to accomplish what undoubtedly is a vital matter, essential to our national life-the establishment and maintenance of an adequate American merchant marine, not only to take care of our overseas trade and commerce, but to provide for our national defense. The CHAIRMAN. Senator Fletcher, if it will not interrupt you, do you mean to include in that what are known as port dues—I mean, lighthouse fees and everything of that sort? Senator FLETCHER. Yes; I should include that, too. The CHAIRMAN. Those are not strictly tariff dues, of course. The CHAIRMAN. They are simply port charges. Senator FLETCHER. But in this matter I have reference to what is mentioned in section 34 of the merchant marine act 1920 described as tonnage dues and preferential duties. The CHAIRMAN. Of course the tonnage dues are a duty on the ship itself. That is, it is a tonnage due which is paid for the right to use the port. Senator FLETCHER. Yes. The CHAIRMAN. And that comes clearly within what we are aiming at. Senator FLETCHER. Yes. The CHAIRMAN. But there are what are known as port dues, which involve pilotage dues and things of that sort, which I do not think we have ever attempted to regulate. Senator FLETCHER. We have not attempted to regulate that (I mean the act of 1913 has no reference to anything except the tariff duties), but I think we ought to be free to do whatever we feel we ought to do to establish our merchant marine. It appears that it is the judgment of a large number of our people acquainted with shipping that the one great need to induce American capital to go earnestly and permanently into ships under our flag in foreign trade is the freedom of Congress to provide for discriminating duties, as contemplated by sections 28 and 34 of the merchant marine act, 1920. We can never have a direct subsidy, and there is a strong opinion that private interests will not sufficiently take hold of investment in ships under the American flag without what they call protection by such discriminatory duties and tonnage dues. I do not share in the opinion that American ships can not compete with foreign ships in overseas trade by reason of the higher wages, more costly provisions for officers and crews, better food, and greater expenses in the operation of American vessels. I believe that competition is not even difficult under our laws as they stand; but the contrary has been so promulgated and emphasized that evidently capital is frightened, and we do not find American citizens willing to invest in ships and undertake the operation of a sufficient tonnage under our flag to take care of even a small portion of our commerce; this in spite of the fact that they can obtain ships from the Shipping Board at less than half what the building of such ships would cost them in foreign yards. I am going to stand for preferential duties and preferential tonnage dues, as it seems to be the only solution of our problem in sight at this time, if we are to have a merchant marine owned and operated by private, enterprises. We must have, as the merchant marine act of 1920 expressly declares the policy of the Government, an adequate marchant marine. I am very much afraid we can not have that, except by permanent Government ownership and direct Government operation, unless we are free to deal absolutely as we consider advisable and necessary in this matter of discriminating duties and tonnage dues. The way is clearly blazed by the merchant marine act of 1920. I hope the committee will see to it that, so far as these pending treaties and conventions are concerned, we shall be allowed full scope to invoke sections 28 and 34 of that act. The CHAIRMAN. Senator, I want to bring to your attention what you have undoubtedly thought of, that this question will arise: Of course these things are all reciprocal. If we reserve to ourselves the right to make discriminating duties, both on tonnage and on cargoes, of course the other countries have the same right; and if they put a discriminating duty on American bottoms, it seems to me it leaves us just where we were. Senator FLETCHER. I do not think they can carry out a policy of retaliation to that extent. They will undoubtedly retaliate, I think, in some regards; but they will not be able to do so in a manner that would destroy the benefits that would come to American shipping if we were free to enforce section 34 and section 28. The CHAIRMAN. In the case of Great Britain, which of course is the great shipping power of the world, we have no treaty with Great Britain affecting this subject except the treaty of 1815, and we have been going on under the favored-nation clause with her rather as a matter of comity, as I understand, for many years. As it is now, it leaves her at liberty, for instance, to discriminate against us- as was pointed out here the other day, and I know it myself-in regard to the exports from the Malay States. I mention that because the exports from there to us are extremely important. One is tin, and the other is rubber-what is known as plantation rubber, not taken from wild trees, but taken from plantations which they have developed, and which are doing very well. They made a discrimination there in regard to the plantation rubber grown in the Malay States which has been very serious for our industries, because we have to import rubber. I am not sure whether they have made a discrimination on tin yet or not; but those are very serious things for us, and our opportunity to retaliate there is very limited, because we need the tin and we need the rubber. They are raw materials which we do not produce ourselves at all. Senator PEPPER. I can see, Mr. Chairman, that the policy of which this section in the treaty is the expression is entirely reconcilable with a protective system. That is, we can still maintain our protective system and also agree to what this treaty proposes. The CHAIRMAN. Oh, yes. Senator PEPPER. But I have an unformed and probably an unsound impression that the arguments that are advanced in favor of denying to the United States the right to lay preferential duties are arguments which, if carried to their logical conclusion, would strike at the root of the protective system. In other words, I can not quite see why all the arguments about retaliation, and so on, that can be made by way of objection to discriminatory tonnage duties and the like, might not also be made with respect to the imposition of any duties on goods imported. The CHAIRMAN. Of course, what are called domestic duties, such as are involved in the whole protective system, apply equally to all the world, to everybody. We give them the same ground. They may put on whatever tariffs they like, of course. It applies to all the world equally. This is a discrimination, necessarily, in its very nature, on shipping alone. There are some countries, of course, with whom we trade, and trade largely, with whom the question of the nationality of the bottom in which things are brought has no effect at all. Senator PEPPER. Still, this system of preferential rates is merely a declaration by the United States in favor of our own ships. The CHAIRMAN. That is all. Senator PEPPER. And it operates against all the world equally. Senator PEPPER. In just the same way in which our declaration that we shall put such and such a duty upon a given import operates against all the world. We are not discriminating in either case against any one particular nation. The CHAIRMAN. Not by name, certainly. Senator PEPPER. Certainly not by name; and I have just been trying to think out in an amateurish way whether the arguments that Mr. Culbertson presented to us at the recent hearing are not arguments which, if carried to their logical conclusion, would lead us to be so apprehensive about retaliation and discrimination against us by other nations as to make us think that the abandonment of protection to our home industries by duty was wise. The CHAIRMAN. I see the force of that point. I ought to say frankly that for many years I was very strongly in favor of returning to the old system of discriminating tonnage duties. It seemed to me the best solution. I was on the commission known as the Gallinger Commission, which went all over the world a good many years agoin 1905, I think and we heard witnesses at all ports and everywhere in regard to it; and, though I think we were all protectionists, the committee was satisfied-there was a dissenting opinion by one your predecessors, Mr. Mallory of Šenator RANSDELL. And two other Democrats, I think." The CHAIRMAN. Yes; they were against it, anyway-but the whole commission became convinced that under present conditions we could get no advantage from putting on discriminating tonnage duties. I think the whole commission came to that conclusion. I read over the report the other day, and I noticed that among the recommendations they made and they made a good many-they did not recommend this. It was not on that point that Senator Mallory dissented. He dissented from what we did recommend. Senator RANSDELL. Subvention. The CHAIRMAN. There were some things that we did recommend that I think the Senator from Louisiana would approve. Senator PEPPER. I have no doubt that on further study and reflection I shall come to the same conclusion; but just at the moment, and as a matter of almost first impression, it does seem as if, by approving the treaty in this form, we were surrendering about the only instrument that is in sight for building up an American merchant marine. We have decided against subsidies; many of us are not in favor of Government ownership and operation; and if those two possibilities are laid aside and we surrender this one I should suppose we would have to reconcile ourselves to a long future in which all our carrying trade is to be in foreign bottoms. That seems to me to be a terrific conclusion to come to. Senator RANSDELL. May I suggest to you, Senator, that the same argument applicable to the protective tariff system, which I think you state very forcefully, would apply also to out coastwise commerce? No foreign vessel can enter our coastwise commerce. a great many years we have absolutely prohibited foreign vessels. from engaging in our coastwise commerce. For The CHAIRMAN. I think that is done by every nation except Great Britain. Senator FLETCHER. I think likely it is done by all but Great Britain. Senator RANSDELL. But it is a matter of protection to our American ships. The CHAIRMAN. Oh, yes; I am in favor of the policy we have adopted in regard to coastwise commerce. Senator FLETCHER. It undoubtedly does protect the coastwise shipping, and that is one reason why we have the coastwise tonnage that we have. Senator RANSDELL. It is the only reason why we have it. The CHAIRMAN. Before Senator Ransdell begins, I want to say this, because I think it is only fair: Our commercial treaties need. revision throughout, without regard to this question. They ought to be revised and put on the proper ground. Therefore, this one that is proposed with Germany is, in a way, a model, and will be followed in other treaties; and the policy to be pursued is one, I think, of complete equality of all countries with us. It is all recip rocal, of course. Senator RANSDELL. May I ask, right there, if you would have that complete equality apply to our coastwise commerce also? The CHAIRMAN. No. Senator RANSDELL. I ask because that has been agitated. There is a lot of agitation in the world about that.. |