IN THE GREAT DAYS of sailing ships we were, next to Great Britain, the greatest maritime nation in the world. Indeed, in the transatlantic trade we more than held our own with the British Empire. The coming of the iron steamship, however, spelled the triumph of Great Britain. Iron for shipbuilding cost more in the United States than in England in those days. We lacked the big iron foundries, the skilled metalworkers that Great Britain had. Britain was the most advanced industrial nation in the world, while we were still a relatively small, backward, industrial nation.

After the Civil War, when we developed our own industries, we were suddenly too busy building transcontinental railroads, developing great factories, opening up rich mines, and settling millions of rural homesteads. We left the carrying of goods by sea largely to Great Britain and other maritime nations of Europe. Around 1800, at the time of the old square-riggers of New England, New York, and Philadelphia, United States ships had carried over 90 percent of all American seagoing commerce. By 1900 only 10 percent of the American overseas trade was- carried in American ships.

What was done about it?

Just at this time, around the turn of the last century, a little push was given to our merchant marine by the annexation of Hawaii and the Philippine Islands. Before that, most of our shipping companies operated almost exclusively up and down the coasts of the Atlantic, Pacific, and Gulf of Mexico, fighting the railroads for the slower-moving freight. These routes were long, the seas were rough and the cargoes heavy. Wear and tear on ships was great. Profits were small. They would have been wiped out altogether if we had allowed cheaply operating foreigners to compete for this traffic. Instead we always protected this coastal and intercoastal shipping from foreign competition by prohibiting foreigners from engaging in those trades. By extending these protective navigation laws to cover the Hawaiian Islands, we encouraged the development of a great steamship company operating from the East Coast and out to Hawaii. Other companies also began to operate in the newly protected area between San Francisco and Honolulu. Soon these companies extended their lines out to the Philippines to take advantage of the American trade opportunities opening there At the outbreak of World War II, about 70 percent of our seagoing merchant marine vas engaged in these more or less domestic operations.

What happened to our foreign trade?

Naturally we could protect American shipping- in waters and between ports which the United States controlled. For our shipping in foreign waters we had to devise other schemes. These schemes have been limited to so-called subsidies, which have been only partially successful in building up an American merchant fleet.

Subsidies have been needed by United States shipping chiefly because foreign nations with lower wage scales, and lower prices in general, could produce and operate ships much more cheaply than our people could. A European ship, for instance, costs little more than half what an American ship of similar type would cost.

American seamen got higher wages than British or other European seamen; American clerks in the shipping offices got higher wages than European clerks. American executives got higher salaries than European executives. Even the very rent of a steamship office and the cost of the manifold details connected with the operation of seagoing vessels were proportionately higher than abroad.

For all these reasons, it was pretty well demonstrated by 1900 that in world competition Americans could not rival Englishmen, Frenchmen, Germans, or Norwegians, let alone peoples with still lower living standards such as Greeks or Japanese.

The only way to keep American vessels operating profitably on international routes, therefore, appeared to be to subsidize them. Though there were earlier subsidy laws, it was not really until some years after World War I that ineffective subsidy program was worked out. This consisted chiefly in granting more and more lucrative mail contracts to ship operators in foreign trade. The effect of these subsidies was to increase American shippers’ share of American foreign trade from 10 percent around 1900 to some 25 to 30 percent in 1936.

In that year, the whole subsidy program was reorganized and a new subsidy base established.

Why subsidize?

The question might well be asked at this point: Why, if American shippers could ship more cheaply in foreign-built, foreign-manned, and foreign-operated ships, did we want to go to the expense of subsidizing our shipping? Why even did we want to close American coastal shipping altogether to cheaper foreign operators?

The answer to this should be pretty obvious today. Where would we have been in the war without ships? In 1941 where would we have been if we had left ocean peacetime commerce to Japan in the Pacific, or Germany or any other European nation in the Atlantic and other waters? The answer is clear enough. We have protected and subsidized our shipping in order to insure ourselves a merchant fleet for national defense in case any emergency might arise, as one did arise on December 7, 1941.

From 1936 to now

This consideration of national defense and American security was one of the major factors motivating the passage of the Merchant Marine Act of 1936.

Under that act, operators of American ships on routes that were designated as essential to American commerce or national defense are given subsidies sufficiently large to make up the difference between the construction costs of their ships and the construction costs of comparable and competing foreign ships.

The law also handled the difference in operating costs in the same way, providing a subsidy to make up the competitive margin foreigners otherwise would have.

This law was much more effective than any previous one. The war came too soon for it to show marked results; but already, by 1940, a number of new ships had been built in newly expanded shipyards and others were on the ways preparatory to taking advantage of the liberal subsidy law.

What about disposal now?

Obviously, therefore, any program of disposal of American war-built ships must take into consideration the difference between our protected and subsidized trades; Such a program must carefully consider the impact of certain prices and policies on foreign-shipping nations whose own shipping policies are so clearly intertwined with those of the United States.

One more thing must be considered before we talk of the alternatives in the disposal picture. That is, surplus shipping is becoming a serious problem only as we have passed the peak in bringing home to the United States the men, women, and supplies we sent overseas. The same is true to a lesser extent of Britishers in the Far East, Frenchmen there and in Africa, and men of many other nationalities all over the world.

Moreover, Europe and the Orient will require huge amounts of supplies for reconstruction, which, shippers, even as well equipped as they are, will be hard pressed t o deliver as rapidly as nations might wish.

The war disrupted normal trade and living conditions on every spot on the globe. A great deal of shipping will he required to return the world’s peoples to the places where they would like to be. A great deal more shipping will be required to get them back into more or less normal economic activity.

There are all sorts of estimates about the length of this reconstruction period. The best authorities agree, however, that shipping space will be in great demand as a result of the war, at least to the beginning of 1947. That is a satisfactory enough date. Our question is, just how much will this delay affect the making of a policy of disposal and the carrying into effect of the policy or policies that ultimately are adopted?

From EM 25: What Shall We Do with Our Merchant Fleet? (1946)