TEE ON SHIPPING AND SHIPBUILDING. REPORTS OF THK DEPARTMENTS COMMITTEE APPOINTED BY THK BOARD OF TUADE THE POSITION OF THE SHIPPING & SHIPBUILDING INDUSTRIES AFTER THE WAR. Presented to Parliament by Command of His Majesty. LONDON: PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE. To be purchased through, any Bookseller or directly fiom H.M. STATIONERY OFFICE at the following addressi luPEHiAt Hoi "ox, W.C.2, and 28, Abingi S.W.I; .Chester; 1. St. Andkkw's ( rdiff; PONSONBY, Ltd., 116, 1918. [Cd. DOCUMENT* DEPT. t*i% ^s ^^ ?•*?/** l0(o " ™ DEPARTMENTAL COMMITTEE ON SHIPPING AND SHIPBUILDING. REPORTS OF THE DEPARTMENTAL COMMITTEE APPOINTED BY THE BOARD OF TRADE TO CONSIDER THE POSITION OP THE SHIPPING & SHIPBUILDING INDUSTRIES AFTER THE WAR. Presented to Parliament bv Command of His Iflajcsty. LONDON: PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE. To be purchased through any Bookseller or directly from ', .' .' '• ' ' ■ H.M. STATIONERY OFFICE at the following addresses: ' Imperial House, Kingsway, London, W.C.2, and 28, Abingdon Street, Lohio^, S.W.I; 37, Peter Street, Manchester.- 1, St. Andrew's Crescent, CardifP; • - 23. Forth Street, Edinburgh; or from E. PONSONBY, Ltd., 116, Grafton Street, Dublin. 1918. [Cd. 9092.] Price Is. 3d. Net. CONTENTS. ^V- PAGE. MINUTES OF APPOINTMENT 2 FIRST REPORT— The German Control Stations and the Atlantic Emigrant Traffic (November, 1916)... 3 SECOND REPORT— Shipbuilding and Marine Engineering (July, 1917) FINAL REPORT— (March, 1918) Part I. — The Reconstruction of the Mercantile Marine Part II. — International Competition and Navigation Policy Part III. — Summary of Parts I. and II. [.Vo/e. — Each of the above Reports is preceded by a detailed Contents Table. 19 47 52 70 122 ] MINUTES OF APPOINTMENT. At the Council Chamber, Whitehall, This twenty-seventh day of March, 1916. Present : The Right Honourable Walter Runciman, M.P. The Board of Trade are pleased to appoint the following gentlemen, namely : — Sir Alfred A. Booth, Bart. {Chairman), Professor Westcott S. Abell, Sir Archibald Denny, Bart., Sir Edward Hain, Captain H. B. Hooper, Mr. James Readhead, and Mr. Oswald Sanderson, to be a Committee to consider the position of the Shipping and Shipbuilding Industries after the War, especially in relation to International Competition, and to report what measures, if any, are necessary or desirable in order to safeguard that position. The Board of Trade are pleased to appoint Mr. Percy Ashley to be Secretary to the Committee. (Signed) WALTER RUNCIMAN. The following gentlemen were subsequently appointed to the Committee : — On the 18th April, 1916 — Mr. Summers Hunter. „ „ ., — Sir Joseph P. Maclay, Bart. • On the 17th July, 1916— Mr. James Brown. On the 5th December, 1916 — Mr. George Smith Clark.* On the 29th November, 1917— Mr. J. A. Roxburgh. Mr. E. H. S. Marker was further appointed to be Secretary to the Committee in succession ' to Mr. Pewy Afchley on the 18th April, 1916. Sir Joseph Maclay resigned from the Committee on being appointed Shipping Controller. Sir Edward Hain died on the 20th September, 1917. Now Sir George S. Clark^Bart. BOARD OF TRADE. DEPARTMENTAL COMMITTEE ON SHIPPING AND SHIPBUILDING. FIRST REPORT. \ THE GERMAN CONTROL STATIONS AND THE ATLANTIC EMIGRANT TRAFFIC. (LLfc (17602—14.) Wt. 8251—52. 5,000. 6/18. D & 3. Q. 4. A 2 diiOQdll FIRST REPORT-THE GERMAN CONTROL STATIONS AND THE ATLANTIC EMIGRANT TRAFFIC. TABLE OF CONTENTS. Page. Report 5 I. — Emigration before the War 5 The United States 5 Canada ... ... ... 5 Argentina ... ... ... ... ... ... ... ... ... ... ... ... ... ••• 6 Brazil ... ■ ... ... ... 6 II.— The "Continental" Emigrant Traffic 6 III. — The Control Stations 8 (A.) — Action of the German Government ... ... 8 (B.) — Action of the German Steamship Lines ... 9 IV. — The Emigration Policy of certain Foreign Countries 10 Scandinavia ... 11 France ... ... ... ... ... ... ... ... ... ... ... ... ••• ••• 11 Russia and the near East 11 Greece 12 Italy 12 V —Conclusion ' 12 Appendix I. — Average annual immigration into the U.S.A. from various countries during the years 1825-1914 14 Appendix II. — Number of Continental third class passengers carried to the U.S.A. and Canada by certain Steamship Lines in each of the years 1911, 1912 and 1913, with certain further particulars for 1913 15 Appendix III. — Atlantic Pooling Arrangements 15 Appendix IV. — Illustrations of the treatment of passengers at the Control Stations 16 Appendix V. — Proposed new Regulations relating to Emigration Traffic from Russia 18 BOARD OF TRADE. DEPARTMENTAL COMMITTEE ON SHIPPING AND SHIPBUILDING. FIRST REPORT-THE GERMAN CONTROL STATIONS AND THE ATLANTIC EMIGRANT TRAFFIC. To the Right Honourable Walter Runciman, M.P., President of the Board of Trade. Sir, We have the honour to refer to your minute of the 27th March, 1916, by virtue of which this Committee was appointed to consider the position of the Shipping and Shipbuilding Industries after the War, especially in relation to International Competition, and to report what measures, if any, are necessary or desirable, in order to safeguard that position. Our attention was specifically called by the Board of Trade to the disabilities suffered by British steamship lines in regard to the carriage of emigrants between European and American ports, and especially to the influence exerted on this traffic by the German system of Control Stations. We have taken evidence from the principal interests concerned and we now desire to submit our Report on this part of our Enquiry. 1. The emigrant traffic is of vital importance to a large section of British shipping which is engaged in the passenger business, and which has borne the brunt of German competition in the past ; the fast Atlantic services could not exist without the passenger business, of which the emigrant traffic has been the foundation. 2. The handicaps from which the British lines have suffered may be classified under two heads : — (1) The abuse of the system of control stations by the Central Powers; (2) The tendency manifest throughout Continental Europe to reserve the carriage of passengers more and more to national lines with a view to fostering national merchant fleets (the control stations were only an extreme case of this tendency) ; 3. Each of the above considerations will be developed in turn, but in the first instance it may be well to give some account of the general trend of emigration up to the outbreak of war and a more detailed statement with regard to the particular traffic across the North Atlantic which was affected by the Control Stations. I.— EMIGRATION BEFORE THE WAR. 4. For about a century there has been a flow of emigration from Europe westwards, which has gradually increased in volume. The bulk of this movement of population has been directed to the United States of America, but Canada, Brazil and Argentina have obtained a growing share. In the early days of the traffic, a large part of the movement originated in the United Kingdom (especially Ireland), Germany and Scandinavia. British ports were on the whole favourably situated for dealing with the traffic, and it is therefore not surprising to find that the business was carried on to a preponderating degree under the British flag. 5. The United States. — Appended is a Statement (Appendix I.), which has been compiled from statistics published by the United States Immigration Bureau, showing the average annual immigration into the United States of America over decennial periods from the United Kingdom, Germany, Scandinavia, Italy, Austria-Hungary, Russia and the Balkan States. It will be seen that up to the period of the American Civil War about 50 per cent., more or less, of the immi- grants into the United States originated from the United Kingdom ; but that from the period of the Civil War there has set in not so much an actual as a relative decline in the immigration from this country, until in the decade before the war it averaged only 10 per cent, of the total immigration into the United States. The flow of emigration from Scandinavia has never been large, whilst that from Germany declined sharply in the twenty years before the war. On the other hand there was an enormous increase in emigration from Italy, Austria- Hungary and Russia and this tendency appeared to be extending to Greece, Roumania and Turkey. In the years 1905-1914, the annual immigration into the United States of America averaged over one million persons, 65 per cent, of whom came from Italy, Austria-Hungary and Russia. In 1914 the numbers contributed by the three countries in question amounted to no less than 820,000 out of a total immigration into the United States of America of 1,220,000. It is evident, therefore, that the centres of origin of the migration have passed more and more in directions where this country is geographically at a disadvantage. 6. Canada. — Immigration into Canada rose from 128,000 in 1903 to 402,000 in 1913. In the latter year 139,000 immigrants came from the United States of America and should therefore be neglected for the purpose of any estimate of the extent of the sea-borne traffic. 17602 A 3 6 Of the balance, 151,000 (or 57 per cent.) were British (United Kingdom), 43,000* Austrians and Russians, and 17,000 Italians. 7. Argentina. — The number of immigrantst who arrived by sea in the Argentine Republic increased from 75,000 in 1903 to 323,000 in 1912. In the latter year 166,000 (or 51 per cent.) were Spanish and 81,000 (or 25 per cent.) were Italian. 8. Brazil.— Immigration into Brazil rose from 34,000 in 1903 to 180,000 in 1912. In the latter year 77,000 (or 43 per cent.) were Portuguese, 35,000 (or 19 per cent.) were Spanish, and 32,000 (or 18 per cent.) were Italian. 9. The general trend, as regards both origin and direction, of the westward flow of population is summarised in the following statement, which is based on information published by the Board of Trade in the " Emigration and Immigration " Return for 1914 (No. 295) : — Number of Immigrants into Various Countries in 1912-3. Into Country whence arrived. United Kingdom. t, Austria- Russia. 1 TT | Hungary. Italy. Spain. Other Countries. Total. U.S.A. (year ended 30th June, 1913) Canada (year ended 31st March, 1913) Argentina ) (year ended 31st Brazil J December, 1912) 88,000 151,000 / 3,000 \ 1,000 291,000 21,000 N.8.D. N.S.D. 255,000 22,000 7,000 N.S.D. 266,000 17,000 81,000 32,000 N.S.D. N.S.D. 166,000 §112,000 298,000 52,000 66,000 35,000 1,198,000 11263.000 323,000 180,000 Total 243,000 (12°/ ) 312,000 ! 284,000 | 396,000 (16°/J : (15°/ ) . (20°/ o ) §278,000 (I*'/. 452,000 (23°/J 111,964,000 (100*/.) N.S.D. Not separately distinguished and included under the head of other countries. § This figure includes 77,000 Portuguese. || This figure does not include 139,000 immigrants of U.S. nationality. 10. It will be seen that in the above period, nearly 2,000,000 persons emigrated to the U.S.A., Canada, Argentina and Brazil, most of them from Europe. It is probable that emigrants from Russia, Austria-Hungary and the Balkans did not fall far short of 800,000, whilst Italy, Spain and Portugal contributed about 700,000. The number of persons who emigrated westwards from the United Kingdom was about 250,000, mostly to British North America. II.— THE "CONTINENTAL" EMIGRANT TRAFFIC. 11. Appended to this Report (Appendix II.) is a statement showing the number of third-class passengers coming from Russia (excluding Finland), Germany, Austria-Hungary, Switzerland, Holland, Belgium, France, Serbia, Montenegro, Bulgaria and Roumania who were carried by various steamship lines from Northern Continental ports to the United States of America and Canada in the year 1913, with comparative figures for 1911 and 1912. The statement is based on information supplied by the British North Atlantic Passenger Conference to the Board of Trade in 1914. Emigrants coming from the above named countries were commonly called " Continental " passengers, and all except the small numbers coming from Holland, Belgium, France and Switzerland had either to pass through or evade the Control Stations. We do not give any similar figures on the one hand as to emigrants from Norway, Sweden, Denmark or Finland! who embarked at Scandinavian or Finnish ports, or on the other hand as to emigrants from Italy, Greece and Turkey, as the competition of the steamships lines was not affected in either case by the Control Station system. 12. It will be seen from the statement in Appendix II. that a large number of British and foreign steamship companies were interested in the carriage of " Continental " emigrants in the years immediately preceding the outbreak of war. The ports of embarkation were Libau, Hamburg, Bremen, Rotterdam, Antwerp, Havre and Cherbourg in the North, and Trieste and Fiume in the South. 13. Taking the figures for 1913 as a basis for comparison, the two great German lines, the North German Lloyd and the Hamburg-Amerika, were the largest carriers, accounting together for 41 per cent, of the total traffic. Their services from Bremen and Hamburg respectively were confined to United States ports : the German service to Canada was provided by the Canada (N.D.L.V.) Line, run by the two German Lines in association with the Holland-American and Red Star Lines but predominantly controlled by the Germans. 14. The Holland-American Line from Rotterdam was independent in its management although one quarter of its share capital was owned by the two German companiesH and another • Poles and Hebrews are not included. f Persons other than those who travelled first class. _ ' ± The traffic from Sweden, Norway, Denmark and Finland is generally referred to as " Scandinavian. f It is understood that this holding has been sold to Dutch interests since the outbreak of war. quarter by the International Mercantile Marine Company of New jersey (U.S. A). The Red Star line from Antwerp was, and is, entirely owned by the above named American company. The services of the Holland-American and Red Star Lines were confined to the United States, except for their interest in the Canada (N.D.L.V.) Line mentioned above. 15. The Austro- Americana Line from Trieste was also very largely controlled by the two German companies, and served tbe United States up to the year 1913, when they inaugurated a service to Canada in addition. 16. The Russian-American Line and tbe Compagnie Generale Trans-Atlantique were both nationally owned and nationally managed ; they ran to United States ports from Libau and Havre respectively, but on certain voyages landed passengers at Canadian ports. 17. The only other foreign company concerned, the American Line, is owned, like the Red Star Line, by the International Mercantile Marine Company, but its management in England was in practically the same hands as that of the White Star Line whose share capital is also owned by the International Mercantile Marine Company. The American Line had services from Southampton, calling at Cherbourg to New Tork, and other services from Liverpool to United States ports. 18. The Cunard Line ran steamers from Liverpool and Fiume to the United States, and from Southampton to Canada. The Anchor Line (controlled by the Cunard Line) ran from Glasgow to New York only. The Canadian Pacific Railway had steamers running from Liverpool, Antwerp, and Trieste to Canada, while the Allan Line (controlled by the C.P.R.) had services from London, calling at Havre, from Glasgow and from Liverpool, which were all practically confined to Canadian business. The Canadian Northern Railway Steamers (Royal Line)* sailed from Bristol to Canada, the Donaldson Line* from Glasgow to Canada and the Uranium Line* from Rotterdam to Halifax and New Tork. 19. It will be observed that the lines were divided into two main groups, viz., (a) lines which sailed from United Kingdom ports and had to bring their Continental passengers from Continental ports to the United Kingdom for transhipment to the transatlantic steamers (except in so far as they could pick them up direct by calling at a French port after leaving their British port, as in the case of the Allan, White Star and American Lines), and (b) lines which sailed from Continental ports and always embarked their Continental passengers direct without having to incur the expense and inconvenience of transhipment. 20. Of the seven lines sailing from United Kingdom ports, only one — the American Line — flew a foreign flag; on the other hand, three out of the eleven lines sailing from Continental ports were British. 21. The following statement shows the mimber of third-class Continental passengers carried by the United Kingdom and Continental services of various Steamship Lines during 1913, and the percentage in each case of the total number carried by all Lines : — A. — From United Kingdom ports by transhipment or by subsequent call at a French port : — British Lines American Line ... Total B. — From Continental ports by direct services: — British Lines Enemy Lines Other Lines ' ... Total Total (all Lines) 22. It will be observed that the services from the United Kingdom accounted for only 12 per cent, of the total traffic, and that the total carryings of the British Lines by all services comprised only 20 per cent, of the whole, as against 50 per cent, credited to the Enemy Lines. t 23. Of the 101,000 passengers carried by the steamship services between the United Kingdom and the United States of America and Canada, 30,000 were brought through Libau, 18,000 through German ports, 11,000 through Dutch and Belgian ports, and 42,000 through or from French ports. 24. As the development of pooling arrangements in connexion with the Continental emigra- tion traffic has some bearing on the Control Station question, we have appended to this Report (Appendix III.) a brief statement of the various arrangements obtaining from time to time among the Atlantic Lines with regard to this traffic. 25. The German Atlantic lines sailing from Hamburg and Bremen had a clear geographical advantage in securing the new and growing emigrant traffic from Russia and Austria-Hungary — a traffic which at the outbreak of war, as has been seen, had grown to dimensions far exceeding the largest movement ever recorded from the more Western countries; and to the exploitation of this geographical r.Jvantage is due the great expansion of German shipping on the North Atlantic during me last 30 years. In addition to this advantage, geographical position Number. Per cent. 78,000 23,000 9 3 101,000 12 91,000 417,000t 220,000 11 50t 27 728,000 88 829,000 100 17602 * These three lines have recently become associated with the Cunard Line. f There are included 48,000 passengers carried by the Canada (N.D.L.V.) Line. A 4 8 has enabled the German lines not only to keep to themselves the growing volume of first- class travel between the United States and Germany, but also, by offering equal facilities, to compete with the British lines for first-class passenger business between the United States and England or France. No doubt the British lines have enjoyed natural advantages in other directions, and there is certainly no ground for objection to the legitimate exploitation of a natural advantage. III.— THE CONTROL STATIONS. 26. Control Stations were first established by the German Authorities in 1894, after the out- break of a cholera epidemic in Russia, with a view ostensibly to preventing the spread of the disease in Germany by emigrants travelling from Russia through that country. At the outset the Stations were limited to a few on the Russian frontier, and all emigrants travelling westwards through these Stations were required to submit to medical examination, disinfection of persons and baggage and so forth. Whatever may have been the original ground of their establishment, there is no doubt whatever that the Control Stations came to be used by the German Steamship Companies for confining the growing stream of Eastern emigration to their own Lines, and eventually as a weapon in their struggle with the British Lines for supremacy on the Atlantic. This policy was given effect to (a) dir.ectly, by the German Government, who limited the scope of the licences 'issued to British Lines, and (6) indirectly, by the German Lines, who made it as difficult as possible for persons not travelling by those Lines to pass the Control Stations. (A). — The Action of the German Government. 27. By an Order of 1894 the erection and management of the Control Stations was vested in the Hamburg- A merika and the North German Lloyd Companies, who were required to bear all expenses incidental thereto. A representative of the companies at the Stations was placed in charge of their working with the assistance of the local police authorities. Shortly after the issue of the above Order, steamship lines were prohibited from carrying emigrants from Germany without a licence from the German Government. The Cunard and White Star Lines, among others, applied for and received licences in 1898, which allowed them to exercise the business of conveying emigiauts via Hamburg and Bremen with transhipment in England to the United States of America. The British licensed lines were required each to pay a deposit of 100,000 marks to guarantee, inter alia, the ultimate removal of their passengers from German soil. Among the special conditions attaching to Ihese licences were the following: — (1) The conveyance from Germany to Great Britain of passengers booked in Germany had to take place either from Bremen to London w Hull by the vessels of the Argo Company, or from Hamburg to Grimsby by the vessels of the Great Central Railway Company; and (2) The German regulations respecting emigrant ships were to apply as from July 1st, 1899, to conveyance by vessels bound for Great Britain. The companies were not allowed : — (1) To carry emigrants to Canada (their licences applied only to the United States of America) ; or (2) To carry emigrants from ports other than Bremen and Hamburg — though Antwerp, Rotterdam and Havre were much more convenient for the purpose. 28. There is no doubt that the limitation of emigrant services between German and English ports to two steamship lines (one of them controlled directly by the North German Lloyd) and the application of the emigrant ship regulations to the short sea route were intended to make tran- shipment in the United Kingdom expensive and thus indirectly to take traffic away from the British lines. 29. In view of the fact that that part of the business (i.e., the "cash" business*), for which a licence was necessary, accounted for over 70 per cent, of the whole, so far as the United Kingdom services were concerned, both the Cunard and the White Star Lines made repeated efforts to secure the extension of their licences to cover non-German ports, but the German Government could never be induced to modify their decision. In practice, the Holland- American and Red Star Lines were allowed to pass their "cash" passengers through Antwerp and Rotterdam, even though the licence of the Red Star Line was identical with those held by the British lines whilst the Holland- American Line held no licence at all. It is probable that the two German lines who managed the Control Stations were given a certain discretionary power to transfer their own passengers to vessels of other lines. Nevertheless on one occasion the German Lines themselves admitted that their action in forwarding passengers for shipment by the Red Star and Holland -American Lines was in contravention of German Law, and they * The emigration business before the war fell under two heads, viz. (a) cash, and (6) prepaid. As regards (a), the emigrant paid for bis ticket himself at the port of embarkation, or at some time before or during his journey thither. Over 70 per cent, of the emigrants transhipped in the United Kingdom booked on a cash basis. If an emigrant had not done so before reaching Germany, he would be deemed to " book in Germany," and would thus come within the scope of the German Emigration Law as a person emigrating from Germany even though not of German nationality. Prepaid passengers (6) had their tickets prepaid generally by friends or relatives in America and accordingly did not fall within the scope of the German Law. Nevertheless the distinction, such as it does not seem to have been very clear and the German Lines in fact often interfered wu'.-. " prepaid " passengers. Technically, however, "prepaid" emigrants could travel freely through Germany for embarkation at any port by any line, whereas passengers booked in Germany (i.e.. a large number of "cash" passengers) could not. The tendency of the German Governirent was apparently to apply their Emigration Law to an emigrant of any nationality who passed through Germany. 9 actually appealed to certain of the British lines not to press the matter. We have no means of judging whether the alleged contravention of German Law was a real contravention or whether (as appears on the whole more probable) some technical illegality was made the basis of an appeal which was in reality a veiled threat. In either case the German lines attained their object. 30. In order to avoid the Control barrier the British lines were forced to bring their passengers by the sea route from Libau, a route which could not compete with the overland route except for passengers coming from a comparatively limited area, or by a circuitous route south of Germany, particularly via Basle through Havre, Antwerp or Rotterdam. To meet this development the German lines, in 1910-11, set up a new Control Station at St. Ludwig and threatened to erect another at Luxemburg. Had the war not broken out, it is probable that the same system would also have been applied to Austria-Hungary. It would certainly seSm that the two German lines were exerting themselves to secure more complete control of the Austro-Hungarian traffic and the Austrian Authorities contemplated the erection of Control Stations at Czernowicz, Stanislav, Tarnopol, Lemberg, Przemysl, Tarnow, Cracow, Vienna, Eger, Passau, Cormons and other places, which would have closed completely every route except that via Libau. 31. As regards the question of emigration from German ports to Canada, the German autho- rities proved hardly less obdurate. At any rate, the licences of the British lines were not extended, but the North German Lloyd appear towards the end of 1908 to have received an exten- sion of their licence enabling them " to carry non-German emigrants to the United States of America and to Canada, also to transfer these emigrants to other ships in Great Britain." The value of the concession depended essentially on the good-will of the German Company. (B). — The Action of the German Steamship Lines. 32. We have now to indicate the manner in which the German lines abused their position and gradually created to the detriment of their British competitors a system which it is difficult to believe could have existed anywhere under modern conditions. 33. The requirements of the German Emigrant Regulations, so far as the emigrants were concerned, were roughly three: — (1) That they should be in good health; (2) That they should be furnished with a proper Contract ticket for some steamship line, as well as with a railway ticket to the port of embarkation ; and (3) That they should be in possession of the sum of 400 marks. 34. The last regulation was particularly vexatious. The emigrants were poor people who rarely had 400 marks over and above their fare, and, if they had not that amount, they could not pass through Germany unless the German lines were willing to accept responsibility for their leaving German soil, which they might be willing to do for persons travelling by their own lines; but when intending emigrants held tickets for other lines, no guarantee sufficed. When representations were made by His Majesty's Government to the German Government in 1911, a reduction in the sum in question was asked for, but the proposals put forward were unfavourably received.* 35. Moreover, passengers by British steamship lines were subjected to every kind of inconvenience designed to make them change their route and travel by the German lines. Their tickets were often forcibly taken from them and not returned to them for days, whilst in the interval these poor people were left to incur expenses at the control stations which they could ill-afford, and were often forced to return home. Meanwhile, the agents of the German lines sought to cajole them into buying tickets for the German lines, generally by threatening to have them sent back to their homes if they did not comply. The emigrants were, of course, left to recover from the British lines the money paid on their original tickets, and the British lines, in the circumstances, could not but refund it. Details of two characteristic cases furnished by the Cunard Line are appended to this report, as well as a translation of an extract from the " Maritime and Commercial Monitor " of Antwerp for the 11th September, 1913, to which attention was called by the White Star Line.f In a letter to the Foreign Office of the 5th November, 1913, certain of the British lines wrote as follows : — "The arbitrary action of the agents of the German lines has taken the form in the past of compulsorily separating friends and relations at the control stations, those holding prepaid tickets for our steamers being allowed to travel through, the others being forced to book by one of the German companies ; instances of forcible change of route and destination have also occurred in regard to passengers for other lines perhaps more than ourselves. . . ." 36. The cases quoted above are characteristic, but it must be remembered that only a few passengers by British lines succeeded in avoiding the control system and so telling their tale. There is in our minds no doubt that the policy of intimidation practised by the German companies was deliberately meant to discredit their British competitors among an ignorant popiilation. * His Majesty's Government made the following proposals to tbe German Government : — (1) A reduction in the sum of money required by the emigrant ; (2) Emigrant licences to be given to British Lines on payment of a deposit ; (3) British Licensed Companies to be allowed to pass their emigrants through any Continental port f See Appendix IV. 10 37. It has been seen how the Control Stations were used, both directly and indirectly, as a weapon in the struggle for German supremacy on the Atlantic. Ultimately the control of Continental emigration was in the hands of the German lines, and that fact enabled them to take advantage of a certain weakness in the ranks of their competitors, which resulted inevitably from divergent interests. We are satisfied that it was the deliberate policy of the German lines to treat the other Continental lines liberally in order that, in the event of a rate war, they might present a united front to the lines serving the United Kingdom. The latter would in any case be handicapped by the Continental interests of some of them and by the knowledge that, in the event of a fight, the Control Stations would be closed entirely, both to them and to any of the lines from Continental ports who might co-operate with them.* 38. In the circumstances we consider it of great importance to the future of British shipping on the Atlantic that the control barrier should definitely be broken down. Unless the question is settled as a condition of peace it will never be settled at all. It is idle to suppose that Germany would willingly give up an instrument which can be used to such advantage in the support of the most influential element of her mercantile marine. It is true that the German Government infringed the letter of no treaty with this country, and His Majesty's Government would certainly not deny to any Sovereign State the right to refuse admission to settlers or even to visitors on any grounds considered proper in the national interest. But the refusal of the right of transit, except on sanitary grounds, to persons desiring merely to pass through Germany on their way to a third country was a breach of what should be regarded as an elementary international right in time of peace. We, therefore, consider that the Allied Governments should insist that Germany and Austria-Hungary should guarantee to the citizens of all countries, the right of free transit, subject only to refusal on sufficient grounds by the proper sanitary authorities, all vexatious restrictions, such as the requirement that passengers should be in possession of a sum of at least 400 marks, being withdrawn. 39. In short, we make the following recommendations: — (1) Control Stations in Germany and Austria-Hungary should be abolished, except for the purely sanitary inspection maintained in other countries. It should be insisted that this work must be managed by a public authority entirely independent of the German Shipping Lines, that any foreign shipping company who are prepared to give the necessary guarantee and pay the proper charges shall be entitled to have an agent in attendance at the station to look after their passengers, and that the representatives of the foreign Powers concerned shall have the right to inspect the work of the station at any time in order to assure themselves that the international agreement is being faithfully carried out. (2) It should also be stipulated that any person not rejected on sanitary grounds should be allowed to pass freely through Germany and Austria-Hungary, so long as a steamship company guarantee his or her removal from German soil. It is not unreasonable that in the case of emigrants some guarantee should be given that the individual who is allowed to enter should in fact also leave the country, and that the expense of sanitary inspection should be paid to the authorities concerned. The evidence we have received shows that the British lines are prepared to agree to both these conditions. (3) We consider it essential that in any conditions laid down there should be a penal clause, which might be to the effect that (without prejudice to action of a more general character that it may be decided to take in regard to enemy shipping) the Allied Governments reserve the right to discriminate against German and Austrian ships in the event of an infringement of the Agreement. Exclusion from Allied ports of German and Austrian passenger steamers would probably be an effective means of enforcing the Agreement, as these steamers would thus lose more than they would gain.t IV.— THE EMIGRATION POLICY OF CERTAIN FOREIGN COUNTRIES. 40. We have hitherto considered only the Continental traffic as affected by the Control Stations. Our Report would not be complete without a brief examination of certain further questions allied with that with which we have just dealt and hardly less important We refer to the growing tendency in Continental countries to restrict emigration to national lines and the influence which, unless checked, that tendency is likely to exert on British interests in the future, particularly in the Mediterranean and to a less extent in Scandinavia. 41. The war has demonstrated so clearly the importance of a powerful mercantile marine that after its conclusion we may expect a strong movement in foreign countries for the development of their own shipping. A tendency in that direction was already manifest betore the war; and it would be foolish to ignore its possible results. Nevertheless our own maritime position and our relations with our Allies are factors which should enable us to safeguard our chief interests without in any way prejudicing their legitimate aspirations, provided tne situation is handled frankly and firmly with a view to securing a settlement based on mutual interests. t For the P final"form of our recommendations see pars. 320-2 and also pare. 286-9 of our Final Report. 11 42. Whilst an extensive " tramp " and cargo service is evidence of natural strength at sea, weaker maritime nations tend in the first place to develop artificially those liner services of which passenger traffic is an essential basis. This was, no doubt, the reason for the species of discrimination in respect of the passenger business which before the war was experienced by- British steamship lines in France, Italy and Russia. The point is probably not safeguarded by our Commercial Treaties. Most of these prohibit discrimination (whether by differential flag duties or otherwise) against British vessels and cargoes in the ports of the countries concerned, but only the Treaties with Japan and Portugal allude to the carriage of passengers in this con- nexion. In other words, even if British ships receive national treatment in Allied ports as regards their cargoes, it would seem that they are liable to differential treatment when engaged in the passenger traffic. It is desirable that the provisions, which already occur in our Treaties with Japan and Portugal, should be extended, especially to those with Russia, Italy and Greece. 43. It will be convenient to consider the problems involved, on which we have received evidence, under the heads of the various countries. 44. Scandinavia. — The traffic from Norway, Sweden, Denmark and Finland has generally been known in the shipping industry as " Scandinavian," and the British lines with their indirect services competed with the direct services from Scandinavian countries. Although the number of persons actually carried Westwards from Norway and Sweden was small when compared with the volume of Continental Emigration, the traffic was important in view of the considerable East-bound business occasioned by persons returning temporarily or permanently to their original homes. The direct services from Sweden and Norway to America have been strengthened during the war and there has, we understand, been some talk of imposing restrictions on foreign lines. The position is more uncertain in Sweden than in Norway, but it is doubtful whether in either country measures could easily be carried which were designed to restrict a highly intelligent people in their freedom of travel. 45. In the notes exchanged in 1905 between the Norwegian and Swedish Governments and His Majesty's Government, there occur the words "although the dissolution of the Union between Sweden and Norway undoubtedly affords His Majesty's Government the right to examine, de novo, the Treaty engagements by which Great Britain was bound to the Dual Monarchy, they gladly take note of your intimation of the desire of the Norwegian (Swedish) Government that these engagements should remain in force pending a further study of the subject." In the event of fresh Treaties being negotiated with either country at a future date, His Majesty's Government will no doubt, in accordance with their present practice, take steps to safeguard the passenger traffic. 46. France. — Although emigration from France itself is negligible and French passengers generally prefer to travel by their own lines, a number of emigrants from Russia and the Near East are always likely to pass through France for embarkation to North and South America. It should be noted that in this connexion the passenger interests of British 'lines to South America are of considerable importance. Without prejudice, therefore, to the principle of national treatment for British ships in French ports, the French Government should be asked to recognise the right of free transit through France for persons of foreign nationality. 47. Russia and the Near East. — Before the outbreak of war the Russian Government, as the Board are aware, contemplated the enactment of a law which would have enabled emigrants leaving Russia for a country outside Europe in a direct steamer under the Russian flag to obtain their passports on very favourable terms as compared with emigrants proceeding overland or by transhipment in the United Kingdom. The points of the measure are set out admirably in a memorandum submitted to the Board of Trade shortly before the war by the British North Atlantic Passenger Conference, and we take leave to append an extract therefrom to this Report.* The passage of the measure would have imposed a further serious handicap on the British lines, who would have been excluded from Libau, to the direct advantage of the German lines, who could still have brought their passengers freely to Bremen and Hamburg. In the case of many important Russian districts, the German ports are more accessible than Libau, whilst the restriction of emigration over a land frontier, usually a difficult process, was peculiarly difficult on the Russo-German frontier in view not only of the general conditions prevalent, but of a specific practice of the population on the Russian side to cross the border for the harvest. 48. It is possible that the Russian Government were influenced by the competition of the British lines with the Russian-American line at Libau, the home port of the latter line, and that they overlooked the probable consequences of this proposal, as indicated above. The total number of persons who emigrated from Russia to North America in 1913 was about 300,000; yet in that year there shipped from Libau to North America only 61,200 third-class passengers, of whom 31,700 travelled direct by the Russian-American line, and only 29,500 indirectly vid the United Kingdom. 49. Russian emigration through the Mediterranean has in the past been negligible, but, if Constantinople should become a Russian port, it may not only stimulate emigration from Southern Russia, the Balkans, and Asiatic Turkey, but may absorb some of the traffic that • See Appendix V. 12 previously found its way to other ports; the question of safeguarding British interests, therefore, becomes the more urgent. 50. We hope to report further on the general question of the development of transport facilities between this country and Eussia for the furtherance of Anglo-Russian trade after the war, but we may at once point out that if restrictive measures directed against British shipping, such as that outlined above, are put into force, it may prove almost impossible to develop rapid land and sea communication on economic lines between British ports and Russian ports in the Baltic. It is universally true that the most rapid and frequent facilities for cargo traffic by sea are found where passenger traffic is greatest, and that a fast service cannot subsist on cargo business alone. We recommend that this consideration should be strongly pressed on the Russian Government. 51. Whilst it is impossible to forecast the general policy as regards emigration which, in view of the wastage of war, the Russian Government may feel compelled to adopt after the termina- tion of hostilities, it is improbable that the stream can be checked for any great length of time. The volume of the Russian traffic before the war, its importance to the German lines, and lastly, the political changes that may occur in the Near East render it, in our opinion, most desirable for His Majesty's Government to take an early opportunity of negotiating an Agree- ment which will secure to British ships in Russian ports full national treatment in respect of passengers. 52. It is important for the Allies that any policy adopted by Russia as regards emigration or shipping should not play into the hands of the enemy. If the Russian Government could divert the stream of emigration from its course over the land frontiers to Russian ports in the north and in the south, both the Russian and the British lines would benefit. It must be remembered that the Russian lines will not for a long time be able to cope with anything like the whole traffic, and that any discriminatory action against foreign shipping in respect of passengers will serve only to increase the land-borne traffic through Germany and Austria- Hungary. 53. Greece has in practice granted full national treatment to all flags, but she may adopt restrictive measures unless steps are taken to ensure for British shipping the maintenance of the former position. Similar .considerations apply to the other Balkan States, but only Constanti- nople and Salonica are likely to be of importance in the immediate future. 54. Italy, while nominally granting national treatment to the British flag with regard to passengers, really favours the national lines, which before the war were largely under German influence. No emigrants can be carried to or from Italy except in a licensed ship ; but exception can hardly be taken to the principle that ships carrying emigrants to and from Italy should comply with such regulations as the Italian Government think fit to adopt, if applied to all ships alike. Nevertheless the actual administration of the licensing system is, in our opinion, open fo grave objection. Under the present rules a vessel more than three years old, not previously employed in the Italian service, will be refused a licence unless her speed is at least 18 knots. If for any reason a British licensed ship has to be withdrawn from the service, the licence she carried may be permanently lost unless immediate steps are taken to fill her place. There is good reason to fear that a continuation of this policy will drive the British flag out of this business altogether. It is most desirable, therefore, that His Majesty's Government should take steps to secure real national treatment for British shipping in Italy with regard to passengers. A licence should be granted to any British ship which complies with the conditions of equipment and speed imposed upon Italian vessels actually engaged in the business. 55. If Trieste and possibly Fiume become Italian ports after the war, a serious situation may easily arise. Regular passenger services were carried on by British lines from these ports before the war, but they could not be resumed under the Italian law as it now stands. Yet both ports are natural outlets for a large part of the hinterland. We therefore consider it of great importance that their acquisition by Italy should be accompanied by some guarantee for the free transit of passengers of foreign nationality through them. The right of transit of passengers coming from another country to embark on a British ship should in any case be safeguarded throughout Italy. V.— CONCLUSION. 56. Our recommendations are as followst : — (1) The right of free transit for persons of foreign nationality through Germany and Austria-Hungary should be safeguarded as a condition of peace. Our recommenda- tions under this head are set out fully in paragraph 39. (2) His Majesty's Government should insist on full national treatment in respect of passengers as a general principle in all commercial Treaties, and should not in any f But Bee also paras. 320-2 and 286-9 of our Final Report. 13 case allow the right of transit, under proper safeguards, of non-nationals who desire to embark on British ships to be interfered with. Attention is specifically drawn to the importance of national treatment in Russia, the Scandinavian countries, Italy and Greece, and to the importance of the right of transit through Trance, Italy and Constantinople. We have the honour to be, Sir, Tour obedient Servants, (Signed) ALFRED BOOTH (Chairman), W. S. ABELL, JAMES BROWN, ARCHIBALD DENNY, EDWARD HAIN, H. B. HOOPER, SUMMERS HUNTER, JOSEPH PATON MACLAY, JAMES READHEAD, OSWALD SANDERSON. E. H. MARKER, Secretary. 0. K. HOBSON, Assistant Secretary. November Utk, 1916. 14 APPENDIX I. AVERAGE ANNUAL IMMIGRATION INTO THE U.S.A. FROM VARIOUS COUNTRIES DURING THE YEARS 1825-1914. - {Based on figures published by the U.S. Immigration Bureau.) Average Annual Emmigration from Percentage contributed by ! Greece, a T3 el - b be •Period.; All Countries. United Kingdom. Germany. Scandin- avia. Italy. Austria- Hungary. Russia. Roumania. Turkey, and Portugal. be c .a 1 a 1 > off 1 1 c a kX i 3 to S Greece, mania, Tu and Portu - O x < N (1) 1825-1914 No. No. No. No. No. No. No. No. Per Per Per Per Per Per Per (Decennial cent. cent. cent. cent. cent. cent. cen t. Periods). 1825-34 ... 32,000 14,000 4,000 — — — — — 44 12 — - — — — 1835-44 ... 71,000 41,000 19,000 — — — — — 58 27 — — — — 1845-54 ... 294,000 168,000 95,000' 2,000 — — — . — -.,' 32 1 — — — 1855-64 ... 150,000 79:0OO 49,000 2,000 1,000 — — — 53 33 2 1 _ — . — 1865-74 ... 334,000 134,000 113,000 22,000 3,000 3,000 2,000 — 1 40 33 7 1 1 1 — 1875-84 ... 389,000 103,000 109,000 ! 45,000 13,000 17,000 10,000 — 26 28 12 3 4 3 — 1885-94 ... 453,000 119,000 98,000 ! 56,000 47,000 48,000 38,000 — 26 22 12 10 11 8 — 1895-04 ... 463,000 56,000 28,000 38,000 114,000 102,000 77,000 18,000 12 6 8 25 22 17 4 1905-14 ... 1,012,000 96,000 34,000 41,000 220,000 235,000 199,000 57,000 10 3 4 28 23 20 6 (2) 1895-1914 (Quinquennial Periods). 1895-99 ... 275,000 53,000 24,000 25,000 60,000 47,000 41,000 5,000 19 9 9 22 17 15 2 1900-04 ... 651,000 59,000 31,000 52,000 168,000 157,000 113,000 31,000 9 5 8 26 24 17 5 1905-09 ... 989,000 104,000 35,000 45,000 218,000 244,000 187,000 46,000 11 4 5 22 25 19 5 1910-14 ... 1,035,000 89,000 32,000 36,000 221,000 226,000 211,000 69,000 ! 9 3 3 21 22 L*0 7 15 APPENDIX II. {From particulars supplied by the British North Atlantic Passenger Conference.) NUMBER OF CONTINENTAL THIRD CLASS PASSENGERS CARRIED TO THE U.S.A. AND CANADA BY CERTAIN STEAMSHIP LINES IN EACH OF THE YEARS 1911, 1912, AND 1913, WITH CERTAIN FURTHER PARTICULARS FOR 1913. i a 13 -~ 3 Number of passengers 2tj • Ports from or via which carried $ carried in rried to Ci (include g column) in 1913. 01 O - u Name of Line and Flag. Bre- Bel- Remarks. 1911. 1912. 1913. Number cq in 1913 precedin Libau. men and Ham- gian and Dutch French Ports. Trieste and Fiume. bfua S a a 3 burg. Ports. U No. No. No. No. No. No. No. No. No. Per cent. ' Note. — On their westward voyages steamers of the Allan Line touched at Havre and steamers of A. Lines sailing from and tranship- the White Star and ping passengers in the U.K. : — A merican Lines touched Cunard (Br.) 10,600 19,000 29,700 4,100 13,500 4,200 2,600 9.300 — 3-G at Cherbourg for the pur- Anchor (Br.) 1,200 2,700 4,900 — 2,300 400 600 1,600 — 0-6 pose of picking up Con- Canadian Northern (Br.) 900 1,000 1,300 1,300 200 — 1,100 — — 0-1 tinental passengers. Such Donaldson (Br.) 400 1.G00 1,800 — 900 — 900 — — 0-2 passengers, though Allan (Br.) 5,100 7,500 8,500 5,800 2.000 600 1,300 4,600 — 1-0 shipped direct from White Star (Br.) 9,900 18,500 32,200 5,400 5,500 8,400 3,800 14,400 — 3-9 French ports, are inclu- American ( U.S.A.) 10,300 15,200 22,900 — 5,100 4,200 800 12,500 — 2-8 ded in the total number credited to lines under Total 38,400 65,500 101,300 16,600 29,500 17,800 11,100 42,400 — 12-2 Head A. In 1913 pas- sengers so picked up by the Allan Line numbered • 4,500, by the White Star Line 6,300, and by the American Line 4,800. B. Lines sailing direct from Con- tinental ports: — Cunard (Br.) 20,100 31.600 38,900 — — — — — . 38,900 4-7 From Fiume. . Uranium (Br.) Canadian Pacific Ry. (Br.) 12,300 27,200 18,800 9,000 — — 18,800 — — 2-3 From Rotterdam. 18,400 22,400 33,200 33,200 — — 28,500 — 4,700 40 From Antwerp and Trieste. Red Star (Belgian) 33,900 53,000 71,200 — — . — 71,200 — — 8-6 From Antwerp. Holland-American (Dutch) ... 22,700 33,800 47,700 — — — 47,700 — — , 6-8 From Rotterdam. Cie. Gnle. Transatlantique (Fr.) 39,500 49,000 69,300 3,400 — — ■ — 69,300 — 8-4 From Havre. Russian-American (Russian) ... 16,200 27,100 31,700 9,100 31,700 — — . — — 3-8 From Libau. Canada (N.D.L.V.) Line 13,200 20,800 48,300 48,300 — — 48,300 — — 5-8 From Rotterdam. Hamburg- Amerika (German)... 65,900 101,200 147,700 — — 147.700 — — — 17-8 From Hamburg. North German Lloyd (German) 85,900 138,000 195,600 — — 195,600 — — — 23-6 From Bremen. Austro- Americana (Austrian)... 8,000 13,500 25,000 4,000 — — — — 25,000 3-0 From Trieste. Total ' ... 336,100 517,500 727,400 107,000 31,700 343,300 214,500 69,300 68,600 87-8 Total of A & B 374,500 583,000 828,700 123,600 61,200 361,100 225,600 111,700 68,600 43,600 100-0 9-4 11-0 Total British Lines i Head g 28,100 50,800 50,300 81,100 78,400 90,900 16,600 42,200 24,400 13,600 10,300 47,300 29,900 Total Enemy Lines (includ-l ing Canada (N.D.L.V.) V 173,000 273,500 416,6C0 52,300 — 343,300 48,300 — 25,000 50-2 Line). J APPENDIX III. ATLANTIC POOLING ARRANGEMENTS. The history of the Atlantic pooling arrangements may be summarised as follows : — (1) Up to about 1892 there was free competition between British and foreign lines as regards booking passengers both on the Continent and in Scandinavia. (2) In 1892 there was formed the original pool between the Continental Steamship com- panies, viz., the Hamburg-Amerika Line, the North German Lloyd, the Red Star Line (Antwerp) and the Holland-American Line (Rotterdam). This pool divided the Continental traffic on a percentage basis. The pool was commonly known as the N.D.L.V. pool (Nordatlantischer Dampfer Linien Verband), and hence the four lines concerned were frequently described as the N.D.L.V". lines. The percentages allocated to the Red Star and Holland-American Lines were never altered, no attempt being made by the German lines to encroach upon the proportions of the business which theae two companies had secured in the past. The effect of this was that the interests of the four N.D.L.V. Lines were practically identical in all matters relating to the Continental emigration traffic, and efforts of the British lines to secure redress of the Control Station grievance received no sup- port from the Dutch and Belgian lines. (3) In 1894 the British lines made an agreement with the N.D.L.V. lines whereby the latter undertook to withdraw entirely from com- petition for third class business in the United Kingdom and Scandinavia. The British lines for their part undertook to limit their Continental traffic to 6 per cent, of the total Continental emigration carried by themselves and the N.D.L.V. lines, the 6 per cent being divided among the British lines by a subsidiary arrangement. 16 (4) The allotment of a 6 per cent, share to the British lines was not unreasonable, so long as there was no great change in the pro- portion which Continental emigration bore to that coming from the United Kingdom and Scandinavia, but with the rapid development of Eastern emigration and the growing abuse of the Control System, the arrangements were found to be very dis- advantageous to them. A glance at the figures for emigration into the United States of America from various countries in the two periods 1885-1894 and 1895-1904 will show the reason. ( had heen made by the Forgemasters, and informed us that but for this "dumping" they would have increased their plant before the war so as to meet all British requirements. 28 66. We have dealt at considerable length with the British Steel Industry because we recognise that British Shipbuilding and Marine Engineering' cannot in the long run maintain then- premier position in the world unless our Steelmakers can produce the plates, forgings and castings required in those industries as cheaply as the rest of the world. We believe that this result can bs achieved by closer association in the Steel Industry than we have seen in the past, which would aim at specialized production on a large scale. AVe are of opinion that the Steel Industry will be kept very busy during the period immediately following the end of the war. A real danger appears to us to lie in a recurrence of systematic "dumping" on the part of Germany or some other large producer, especially in the case of forgings and castings. 67. We are aware that an anti-dumping duty is by no means easy to work in practice, but consider that an attempt should be made to devise legislation on lines somewhat similar to provisions already in force in the United States and Canada. We think that a duty of this kind would have a deterrent effect, and could be counted on to stop dumping on a large scale. 68. As regards further measures respecting the treatment to be accorded to Iron and Steel manufactures imported into this country, we understand that the Committee appointed to con- sider the position of the Iron and Steel Industries after the war has now reported finally; and we should be glad if we could be afforded an opportunity of considering any specific proposals in regard to the treatment of imported manufactures of Iron and Steel that may be put forward by that Committee in so far as such proposals may affect the Shipbuilding and Marine Engineering Industries. Tariff Treatment of Steel and Iron Materials. 69. Meanwhile we have been invited to express our general views as to the policy which should be adopted with regard to the importation of materials for shipbuilding and marine engineering into this country after the war, in the event of it being decided to protect the Iron and Steel Industry by the imposition of duties on imported iron and steel of all kinds. 70. It is admittedly difficult to deal with a hypothetical case. The'general attitude, how- ever, that would have to be pursued by the Shipbuilding and Marine Engineering Industries is sufficiently indicated in. the foregoing paragraphs; and we can therefore only summarise the principles that should in our view govern the policy of H.M. Government in this matter. (1) Great efforts have been and are being made in foreign countries to develop domestic- shipbuilding industries. In all cases cheap steel is the governing consideration. Germany before the war took care that her shipbuilding industry should be provided with materials at the lowest rates, and to ensure this she admitted foreign materials for shipbuilding free of duty. Holland is developing her shipbuilding resources on a considerable scale, and it is at least possible that supplies of cheap steel may be forthcoming for her yards after the war from the German Steel Industry. In the opinion of the Committee, however, the most formidable com- petition is to be anticipated from the United States, which before the advent of iron and steel for shipbuilding, was a great shipbuilding nation. W T ith the huge output of steel in the United States and the present concentration of attention on shipbuilding, ships may hereafter be built in the United States as cheaply as in this country and on as great a scale. For these reasons it is of paramount importance for the Shipbuilding and Marine Engineer- ing Industries of this country that supplies of materials should be available for them on terms at least as favourable relatively as those obtaining before the war. Any policy not having this result would re-act detrimentally on the industries, which are vital to the existence of the Empire. (2) It has been suggested that, in the event of a general tariff being imposed on Iron and Steel imports, shipbuilding materials might be specifically excluded from the operation of the tariff, as in other countries. It is important to realise that the problems arising in Germany, for instance, and in this country are very different. Whereas Germany produced less than one- fourth of the mercantile tonnage produced in the United Kingdom, her output of steel was two and a half times as great. The free admission of shipbuilding materials into Germany was therefore a matter of relatively small moment to the German Steel Industry, whereas the free admission of shipbuilding materials into this country would be a matter of considerable import- ance to our Steel Industry. It should, however, be pointed out that, notwithstanding the absence of a protective policy in the past, the great bulk of the steel and iron materials used in the construction of ships and engines in this country was British. That will continue to be the case and probably to an increasing extent. Shipbuilding and Marine Engineering can ultimately be carried on in this country on a large scale only so long as there is an adequate Steel Industrv on the spot, which can supply materials at a cost not artificially raised. (3) It has been suggested to us that in order to safeguard the foreign markets of shipbuilding and marine engineering, a drawback might be given in respect of duty paid on foreign material used in the construction of ships built for foreign or possibly even Colonial owners. Such an arrangement would not, however, be satisfactory, since (a) only 20-25 per cent, of the output of British yards has been for foreign account ; (6) the bulk of the materials used in the constructiou even of ships for foreign owners has hitherto been British in origin ; and (c) such a policy would encourage the import of foreign material at low prices for building on foreign account. Either, therefore, the measure would not result in safeguarding the foreign markets of the British shipbui'der or the foreign shipowner might be able to obtain ships from British shipbuilders on more favourable terms than the British shipowner. (4) We have had before us a suggestion that protection might be afforded to the Iron and Steel Industry, whilst safeguarding the interests of Shipbuilding and Marine Engineering, by 29 payment to the latter industries of a bounty in respect of British materials used by them. Such a bounty would be based on the rate of import duty payable on a corresponding amount of foreign material used. We should view such a proposal with extreme disfavour; to be effective it would virtually entail the subsidising of the Steel Industry on a large scale, and we doubt whether such a policy would be wise, either in the interests of the Exchequer or of the industry, whilst it would tend to raise the cost of production all round. British steel works, in view of their close proximity to the shipyards, should be able to hold their own without difficulty against the com- petition of foreign materials. Their failure to do so would be disastrous both for themselves and for the Shipbuilding and Marine Engineering Industries. (5) We have found that in certain exceptional cases the Iron and Steel Industry has suffered severely from foreign competition, particularly in respect of forgings and castings; and we have recommended the enactment of anti-dumping legislation to meet this danger. We have also asked that we should be afforded an opportunity of considering any specific proposals put forward in regard to shipbuilding and marine engineering materials. Measures deemed to be necessary for the security of the Iron and Steel Industry will receive our sympathetic considera- tion ; but, in the absence of specific proposals, we are unable in this Report to recommend the adoption of any policy in regard to materials for shipbuilding and marine engineering other than one which will secure their free admission into this country in the future as in the past. Materials other than Steel and Iron. 71. With regard to materials other than Steel and Iron, we are of opinion that Shipbuilders and Marine Engineers should be left free to make their purchases in the best market. 72. We recommend that the Government should take steps to promote afforestation on suitable land, in order that British Shipbuilders may ultimately be rendered less dependent upon foreign countries for their supplies of wood. Treatment of Enemy Materials after the War. 73. In response to an enquiry made by this Committee, Shipbuilding and Marine Engineering firms were practically unanimous in advocating the total prohibition of the importation into this country of enemy materials for a period of years after the war. Whilst recognising the intensity of feeling likely to prevail as a result of the methods pursued by the enemy, we are disposed to deprecate the perpetuation for its own sake of an economic conflict after the cessation of hostilities, as likely to retard rather than assist the process of reconstruc- tion. We should prefer to see the most drastic measures enforced as a condition of peace. Thus, all the countries which have been over-run and pillaged by Germany and her Allies should have their plant and tools replaced from commandeered enemy plant and tools. All enemy munition factories should be dismantled and tools taken without payment, and sold to ourselves and our Allies. In this way Germany and her Allies would be effectively dealt with, and their power of production would be restricted during our reconstruction period. Further, if it is found that Germany and her Allies have manufactured during the war stocks of material prepared for " dumping," these should also be seized and sold to the Allies, being stored and freed as needed by them. Germany's power of competition in the international markets would thus be reduced to a minimum. III.— MACHINERY AND PLANT. Supplies of British and Imported Machinery and Tools. 74. In normal times Machinery and Tools have been obtained from foreign countries to a much smaller proportionate extent than shipbuilding materials. By far the greater part is of British origin. The imported plant consists principally of machine tools, some special wood- working machines and electrical apparatus. The principal sources appear to have been the United States and Germany, but plant has been obtained to a smaller extent from other countries also. Some of the machinery imported from America (particularly woodworking machines) was of a special type, said not to have been obtainable at that time in this country, but we were informed that the corresponding producers in the United Kingdom are now able to produce these machines. 75. In other cases foreign machinery has been preferred to British, on account of its being better adapted to the purpose in hand. There appear to be few instances, if any, in which foreign machinery has been purchased on the sole ground of cheapness or more speedy delivery. 76. In view of the purchases made abroad by Shipbuilders and Marine Engineers, evidence was sought as to the character of the British-made article, and particularly as to whether (as has been alleged) British machine tools are more substantial, durable and efficient than foreign machine tools; as to whether they become obsolete before they are worn out, and as to their design and price. There was a considerable volume of opinion to the effect that British-made tools tend to become obsolete before they are worn out, whether owing to technical improvements or because it becomes desirable to introduce machines capable of working at a higher speed or on heavier material than that for which the old machines were designed. Some witnesses expressed the opinion that the durability of British machines resulted in their being used beyond the time at which they should have been replaced by others with modern improvements. 77. In the matter of price, the evidence given suggests that, except for a certain number of specialities, British machine tools are, on the whole, as cheap as those made by German or American firms. One witness, however, expressed the view that American machine tools of .HO a lighter class, such as Universal Milling Machines, Automatic and Grinding Machines, compare very favourably in price with the British make, and are quite as good, if not better, in design. 78. On the whole, the Committee are of opinion that the Machine Tool Industry in this country is in a satisfactory condition, and that no special measures arc necessary in the'interests of Shipbuilding and Marine Engineering to safeguard supplies. Depreciation and Income Ta.r. 79. In connection with the question of the efficiency of machinery and plant, we desire to call attention to the injurious influence of the Income Tax, as at present administered, in dis- couraging the making of sufficient provision for depreciation. AVe fin.! that the depreciation which is allowed to be written off plant, tools and buildings in estimating taxable income is wholly insufficient. Depreciation comes about in two ways — by actual wear and tear and by obsolescence. Except at times such as the present, when pressure of work and shortage of labour make it difficult to keep machinery in repair, the latter is the more important factor of the two. Money for the management of the country must be raised, but it is bad policy to discourage ample depreciation. This has become especially serious at the present time, with the heavy increase in taxation. The usual rates of depreciation allowed by the surveyors vary from 5 to 74 per cent., and in rare cases 10 per cent., on the decreasing value of machinery and plant, with special allowances for electrical machinery; in some cases firms re-value their portable tools every year, and are allowed to keep up the full value out of revenue. Upon buildings it is a general rule to allow no depreciation whatever. We have it in evidence that those who have been most successful have found by long experience that it is necessary to put aside a sum (up to 100 per cent.) in excess of that allowed by the income tax authorities. 80. We recommend that in ordinary peace time not less than 15 per cent, be allowed for depreciation on the decreasing value of machinery and plant, and 7i per cent, on the decreasing value of docks, wharves, and similar fixed structures and buildings. 81. Monies expended in acquiring patents, should he treated a> wasting assets, and appropriate annual depreciation permitted free of tax. 82. The practice of depreciating on the decreasing value of plant is one which is open to criticism. It means that the sum allotted to depreciation at the beginning of the life of a tool is exceedingly heavy, while as the life expires the depreciation hecomes almost negligible. It would be better to fix the life of each class of tool, and to deduct a uniform annual depreciation during that life. IV.— REGULATION OF PRODUCTION. 83. The bad effects of inadequate depreciation and the lack of ample reserves are most apparent during periods of acute depression. The stimulus to improve design, methods of manufacture and management would still be there, even if the severity of conditions during dull times were considerably mitigated.* A fall in the general freight market leads to the withholding of orders, especially for tramp tonnage; established lines, which are able to gauge future requirements with much greater ease and accuracy, place their orders without being so much affected by the fluctuations of the market. This lack of demand is followed by increased competition among builders for such orders as are still obtainable and by a conse- quent fall in the price of new ships. As soon as the demand for shipping space once more overtakes the supply of available shipping, freights begin to rise again and the market is flooded with orders which further accentuate the difference between the high and low points in the curve of ship production. Any action which would tend to reduce the steepness of this curve would clearly be of great benefit to the Shipbuilding Industry itself and to our foreign trade as a whole. The production of ships would, on the average, be cheaper and the operatives concerned would have steadier employment. The speculator who builds ships on a falling rather than on a rising market is thus seen to be performing a very valuable function. Any scheme which would stimulate such speculative building by united action on the part of shipowners, shipbuilders and marine engineers, or all combined, is worthy of careful consideration. The Admiralty and other Government Departments could also assist in this regulation of output with great advantage to all concerned. 84. In this connection attention should be called to the remarks which have already been madet with regard to the indiscriminate faking of orders in times of depression. We are con- vinced that, if British industry is to take its proper share in repairing the enormous wastage caused during- the war to the world's shipping and to maintain its leading position both during and after the period of reconstruction, there will have to be greater co-ordination of effort than iu the past. Individual Shipbuilding and Marine Engineering firms should aim increasingly at specialised production whether, for example, in the direction of passenger liners, intermediate cargo liners, general traders or cross-channel passenger vessels. V.— CO-OPEBATION AMONG SHIPBUILDEBS AXI) MARINE ENGINEEBS 85. Whilst almost all the important materials used by Shipbuilders and Marine Engineers are controlled at the source of supply, whilst Steamship Companies are consolidating their interests, and whilst individual Trade Unions are strongly organised and largely federated, there is as yet no effective combination among Shipbuilders and Marine Engineers. * Set par. 19. t 8» par. 17. HI It is true that Federations of Shipbuilders and Engineers exist, but these are principally concerned with wages and conditions of labour. Agreements were in the past made between the Employers for joint action in observing the conditions arranged with the Trade Unions, but, in the absence of a financial basis, it is not surprising that those agreements were not observed universally. An attempt was made to modify the violent fluctuations which occurred in wages by agreements concluded between Employers and Trade Unions providing that general rises and falls in wages should not take place more frequently than once in six months, and should not exceed 5 per cent, on each occasion. This was, however, of little benefit to the Employers, because when wages were decreasing the fall was discounted in the prices quoted ; and, when trade became brisker and men relatively scarcer, it is regrettable to report that some Employers competed by offering illegitimate advances, in spite of their formal undertakings to work at agreed-upon rates. It is not to be wondered at that the Trade Unions took full advantage of the situation. 86. We found that during a period of severe depression and acute competition, a certain attempt had been made in the direction of closer co-operation and the establishment of some community of financial interest between the Employers, but without success. We think that if the industry is to be successful in the future — and to be so the workmen must be able to recognise that they are dealing with a united body of fair-minded Employers, loyal to one another — a method of co-operation between Employers suitable to the industries must be discovered and adopted. We feel confident that such a course would be a great help in obtaining industrial peace and efficiency, ensuring as it would fair and uniform conditions for the employed and the prosperity of all concerned in the industry. 87. We recommend a greater interchange of data and experience which would help the less efficient concerns to increase their stability. They would thus be a souce of sti'ength instead of weakness to the industry. Further, if full community of interests be not attained, Employers should in any case take such financial guarantees from one another that it would not be profitable to break rates. We believe that this would be in the best interests not only of the Employers but also of their Employees, and of Shipowners, as it would lead to a more uniform rate of production. 88. Again, a close accord in the industries themselves would enable them to deal as a united body with other industries, in matters affecting them as a whole. It will, for instance, become important that there should in the future be an understanding between Shipbuilders and Marine Engineers on the one hand and Steelmakers on the oilier, such as there has been in Germany, which would safeguard their common interests. 89. The tendency of the world appears to be in the direction of larger economic organisa- tions, a tendency manifest in Shipping as in Steelmaking, and, unless analogous steps are taken by Shipbuilders and Marine Engineers to meet the new situation, it is to he feared that the industries may suffer needlessly to the detriment of the nation. Whilst individualism has been of inestimable advantage in the past, there is reason to fear that individualism by itself may fail to meet the competition of the future in Shipbuilding and Marine Engineering, o:-' it has failed to meet it in other industries. 90. We are convinced that the future of the nation depends to a large extent on increased co-operation in its great industries severally, whether they be Shipbuilding, Marine Engineering. Shipping, or Steelmaking, and also amongst them collectively: and that the best results cau only follow from an understanding which, whilst recognising the essential needs of each, will make for mutual co-operation, wherever necessary, in the interests of the Empire as a whole. On these grounds we would urge on our colleagues in the industries the paramoxint necessity of taking steps towards a closer organisation than has hitherto existed — an organisation rendered the more immediately pressing by the imminent growth of foreign competition on a large scale. VI.— PRODUCTION AFTER THE WAR, Methods of Stimulating Output. 91. After the war is over, it is essential that everything possible should be done to increase efficiency and stimulate output with a view to replacing tonnage destroyed during the war, and to re-establish British Shipbuilding and Shipping in the position of predominance relatively to other countries which they previously occupied. 92. We are of opinion that it is desirable at the earliest possible moment after the war to release the industry from the existing system of Government control. We do not dispute that some measure of control has been necessary during the war, but hold that it is calculated to discourage enterprise if continued after the war, when the stimulus of patriotism will no longer be so strong. 93. During the war, profits in controlled establishments have been limited; but after the limit was reached, there was little advantage from a purely business point of view to the owner in using up his energy further in increasing production under the difficult conditions in- separable from Government control and a period of rapidly rising prices. Fortunately the spur of patriotism was sufficient, but the conditions were inimical to good and economical management, and should not be contimied; as their continuance would have, inter alio, a hampering effect in our competition with foreign shipbuilders. 94. From statements made by firms in the industries it appears that the productive capacity both of shipyards and marine engine works is likely to be greater after the war than it was in 1914. No doubt some of the machinery has been impaired in its efficiency by the 32 hard work which has been required of it during the war; while, as has already been indicated, even before the war the allowances made by the Income Tax authorities for depreciation were inadequate, and tended to stimulate financial unsoundness. Care should be taken that full allowance is made to shipbuilding and marine engineering firms for the postponement or sus- pension, as a consequence of the war, of renewals or repairs, or for exceptional depreciation or obsolescence of machinery and plant, as provided in Section 40 (3) of Part III of the Finance (JNo. Z) Act, 1915, when the final account of excess profits duty is assessed. In this connection, we would point out that the importance of the Shipbuilding and Marine Engineering industries after the war makes it essential that the relevant provisions should be applied in a broad national spirit and not merely from the point of view of immediate revenue to the exchequer. We submit that this recommendation be impressed in the strongest possible manner on the Treasury. 95. We do not think it would be advisable for the Government to pay bounties to British builders similar to those paid to French and other foreign shipbuilders. * The object of these foreign Powers is, of course, to encourage the establishment of building yards in their own countries, and so long as no large transfer of shipbuilding and marine engineering from this country to these foreign countries occurs, no special steps need be taken to meet this situation Although latterly French bounties have led to some contracts for British owners being placed in France, this has not been common. Should this tendency develop, it would become an urgent question for the consideration of the Government how 'to maintain the Shipbuilding "and Marine Engineering industries. 96. Some acceleration of output might also, in our opinion, be attained by improvements in the following directions : — (1) The design of cargo vessels can be modified to enable the use of multiple punches and similar machines to be extended, in which case a large part of the vessel could be erected without the use of templates or moulds, saving time and expense, and facilitating the greater use of machine riveting. Improved mechanical methods of handling material would also stimulate production and release man power for more skilled purposes. (2) Several witnesses have suggested to us that the output of some shipbuilding yards would be increased, were more care taken to protect men working out of doors against the in- clemencies of the weather. Delay is undoubtedly caused in yards where plant is unsheltered, and further provision of covered berths for certain classes of work might materially stimulate production. We think that the adoption of this suggestion would mean more uniform employ- ment for the workmen under more comfortable conditions, and would allow of a readjustment of rates giving the same or a somewhat better average return for labour while providing at least in part the interest and depreciation on the capital expended. (3) In the shipyards especially, output would be increased were the use of labour-saving tools extended. It appears to us desirable, for example, that pneumatic riveting plant should be more widely employed. We have been informed, however, by several witnesses that journeymen riveters refuse to work with this tool, alleging that it jars unduly ; during apprenticeship, however, they raise no objection to it, and journeymen caulkers frequently decline to revert to hand work when similar pneumatic tools have been supplied to them. Output of Marine Engines. 97. It has been suggested to us that during periods of exceptional shipbuilding activity, the output of new vessels ha9 been hampered rather by difficulty in increasing the production of Marine Engines than by difficulty in the shipyards themselves. The evidence which we have taken, however, convinces us that this was not the case to any considerable extent, if at all, before the war, and that there is no reason to fear that it will be the case in the future. One witness expressed the opinion that any deficiency, which there may have been, has been rather in the labour supply than in the productive plant, since the output could be increased by working continuous night shifts if necessary. 98. Since the outbreak of war rnany marine engine works have been enlarged ; indeed from replies to a Form of Enquiry sent out by us, it appears that more than one-third of the firms anticipate that their productive capacity will be greater at the end of the war than it was before. 99. Other considerations also lead us to the conclusion that Shipbuilding is not likely to be held up after the war by inability of marine engine works to produce the engines required. In so far as naval work is reduced after the war, works which were normally engaged in manu- facturing engines of warships will be able to turn to mercantile work. This applies also to the shipyards, but owing to the smaller horse power of engines required for merchant vessels, the marine engine works will be better able to meet the requirements than they were before the war. 100. Further, it has been brought to our notice that the supply of marine engines may be supplemented by tbe competition of engineers who have not hitherto undertaken marine work. Should geared turbines finally to a large extent replace reciprocating engines in the mercantile marine, which is very probable, marine engine makers may have to meet competition from manu- facturers of land turbines. That this competition is not merely potential is shown by the fact that manufacturers of land turbines have already, especially during the war. begun to produce marine engines. 101. We are therefore of opinion that the marine engine works of this country will be not less able than the shipbuilding yards to meet the demands made upon them after the war, and that there need be no immediate anxiety on this score. 88 VII.— MISCELLANEOUS. 102. We now pass to a number of miscellaneous questions of considerable interest to the industries, which have engaged our close attention. Standardisation of Production. 103. We have made careful enquiries into the question how far it is desirable and feasible to standardise ships and their various component parts, with a view to increasing output and reducing cost of production. The problem of standardisation in normal times is in some measure different from the problem of standardisation in times like the present, since the question of the suitability of a vessel for the particular trade in which it is to be used becomes in war time subordinate to the rapid completion of the largest possible tonnage. 104. During the last few months, special attention has been given by the Shipbuilding Advisory Committee appointed by the Shipping Controller* to the quick and economical pro- duction of new tonnage. Standard vessels and standard engines have been designed, and are being built by a large number of firms ; and the experience gained so far indicates that, under normal conditions, successful results might be achieved on similar lines. It should, however, be borne in mind that after the war efforts at increased standardisation will rest with individual builders and not with the Government. 105. Standardisation had been carried to considerable lengths before the war in details of outfit, and even to the extent of building complete standard designed vessels. Generally, however, standardisation had been carried out works by works, and naturally in ordinary cargo boats alone. 106. As in the case of the hulls of cargo vessels, so with marine engines, a considerable amount of standardisation has been effected within the works of individual firms building marine engines, and we learn from the evidence of one of the witnesses that an effort is being made further to standardise marine engines of the reciprocating type for cargo vessels. Thi-- standardisation has taken the form of a guidance specification, and is being drawn up under the auspices of the North-East Coast Institution of Engineers and Shipbuilders. 107. In any type of engine such as is adopted for the plain cargo boat, where the general design is similar, differences being chiefly of detail, the universal use of such a specification should tend to an increase and cheapening of production. In the case of turbines and oil engines, where design is still in the early stages of development, standardisation is more difficult, but should be attempted. 108. We view any movement towards standardisation with satisfaction, and are of opinion that further effort should be made to secure progressive standardisation in all directions. We are aware of the very valuable work which has been done by the Engineering Standards Committee for the benefit of Shipbuilding and Marine Engineering, in which work Shipbuilders and Engineers have taken a large part, and we therefore recommend that the Government suggest to Shipowners, Shipbuilders, and Marine Engineers the desirability of forming a joint Committee under the Engineering Standards Committee to consider these proposals. 109. Shipbuilders and Marine Engineers who gave evidence before us, considered that the question of increased standardisation of production depended largely upon Shipowners and their Marine Superintendents, and that it had not hitherto been practicable to carry it so far as it could have been, had Shipowners and their technical advisers been prepared to forego insistence on their own ideas in general design and details. It is for this reason that we recommend that Shipowners (or their representatives) be joined with Shipbuilders and Marine Engineers on the above Standards Committee. We recognise, however, that, even so far as cargo carrying vessels are concerned, the extent of standardisation as to dimensions and general design must necessarily be limited in ordinary peace times by difference of the draft of water at various ports, variations in the methods of loading and discharging cargo, the nature of the cargo itself, speed requirements, &c. The Metric System of Weights and Measures. 110. We have taken evidence as to the adoption or non-adoption of the metric system. It has been frequently stated that an increase in our business with foreign clients is prevented by our insular units. In Shipbuilding and Marine Engineering we do not consider that this is the case. A number of witnesses who have given evidence before us, as well as the majority of the firms in replying to the Form of Enquiry addressed to them, expressed themselves in favour of the compulsory adoption of the metric system as tending to simplify calculations and facilitate business with foreign countries. We have reason to think, however, that some of the firms did not clearly distinguish between the metric system and a decimal system which could be applied equally to the English units of weight, measure, or value. The witnesses whom we consulted, while strongly in favour of making calculation in decimals, were divided on the question of introducing the metre as the unit. 111. As regards foreign business, it must be remembered that clients in the British Dominions and the United States all use the British scale of linear measure; while even in other countries there is said to be no difficulty with regard to the use of the foot and the inch. It was pointed out to us that, apart from the inconvenience involved in a change of habit, all existing patterns, dies, jigs, gauges, &c, would be more or less useless both to designers and to the men who work to the designs. The majority of the witnesses were of opinion that this would involve considerable cost. If, in addition, a system of screw threads based on the metre were adopted, this would also include the probable scrapping of change gear wheels of lathes. * Now attached to the Controller's Department of the Admiralty. 17602 c r>4 112. In calculations involved in the design of ships and engines. British units of length, the foot and the inch, and for cost estimates, pounds, shillings and pence are used ; but, when working with a particular unit, that unit is usually decimalised. Inasmuch as specific units exist in this country, confusion does not occur, and such calculations would not be shortened if metrical units were employed. In book keeping and in the payment of wages, calculating machines now in use reduce the inconvenience of our monetary system, if any, to a minimum. In the works, feet, inches and subdivisions of inches, i.e., halves, quarters, eighths, sixteenths, thirty-seconds, are used without inconvenience; and for the finer work, one-hundredths to one- thousandths of an inch are used without difficulty. 113. So far as Shipbuilding and Marine Engineering are concerned, we see no reason for the change. That part of the metric system, involving the decimal subdivision of time and the right-angle is most objectionable, and if adopted would most seriously prejudice the interests of Navigation. 114. The difficulty in general business between this country and countries which have adopted the metric system, arises principally from the fact that the metre does not correspond to any even unit of our measures. Had the metre been 40 inches instead of approximately 39'28, a great deal of the present agitation would lose its force. Broadly, there seems no more reason for this country and the United States of America, the largest manufacturing nations in the world, to adopt the metre, than for the metric nations to alter the metre to 40 inches. Banking Facilities. 115. From written replies made by Shipbuilding and Marine Engineering firms, and from evidence given before us, we are of opinion that the support afforded by financial institutions to British Shipbuilders and Marine Engineers has been fairly good for home business, but a tew cases have been reported to us where foreign banks have given greater facilities to their customers, either with or without the support of their Governments. Thus one witness expressed himself as follows: — " Our" experience is that there is a want of elasticity and lack of enterprise in our British Banks which have hampered us, especially in dealing with foreign customers. We have found that foreign banks are much more helpful to their clients in assisting their enterprises, owing no doubt to Government assistance. I may mention that in one instance where we negotiated a shipbuilding contract with foreign customers, involving about £600,000 to £700,000, the Government in question were prepared to advance money up to 80 per cent, of the debentures issued to meet the cost of the ships." Another witness stated that, when tendering against foreign builders, he had reason to believe that German firms were able to discount their bills at lower rates than he himself was able to do. 116. Although there are exceptions, it appears, generally speaking, that while the majority of shipbuilding firms in this country have given long credits of from one to five years, or even more, to their British customers, they have usually insisted on being paid cash in their foreign business. One witness stated that while foreign shipowners in the past paid cash, for a few years prior to the war they were asking for terms for a small portion of the contract price. Some German builders, supported by their banks, have undoubtedly been willing to take greater risks in promoting their foreign business than British Shipbuilders were prepared to take, and wit- nesses have expressed the view that a British trade bank or banks, formed with Government support to give credit over longer periods than British banks usually do, would greatly assist in maintaining and extending British industries abroad. We entirely concur in this view. 117. We have received a valuable memorandum on the industrial banks of Germany, which is reproduced in Appendix C. 118. We hope that the needs of the situation will be met to a considerable extent by the British Trade Corporation which has now been set up. Company Law. 119. We have considered the question of amending the Companies Ait. so as to prevent foreign interests from obtaining control over industries vital to the National well-being. So far, however, as we are aware, the policy of " peaceful penetration," practised by our enemies before the war in regard to other industries, had not made itself felt in regard to Shipbuilding and Marine Engineering. 120. So far as these industries are concerned, we do not consider that it i s necessary to go beyond a recommendation which has already been made by another Committee, viz.: — That even' limited company should be required to include in its annual return to Somerset House a statement of the amount of its stocks or shares held by or on behalf of aliens, together with a statement of their nationality. The Government would then be in the position of knowing at any time, with regard to toy particular industry, whether further steps were necessary or not. Employment of Aliens, SfO. 121. We find that at the time of the outbreak of war few aliens were employed in Shipyards and Marine Engine shops, though it is common knowledge that the number so employed was at one time fairly large. Works are, moreover, visited from time to time by foreign commercial travellers and representatives (British and foreign) of foreign houses. The question, however. of the measures to be adopted with regard to aliens after the war involves primarily other than commercial considerations, and cannot be considered from the point of view solely of one set of industries, however important. We. therefore, recommend that any measures adopted with regard to aliens in this country after the war. whether general in character or confined to industries of special national importance, should include Shipbuilding and Marine Engineering. do 122. Our general view is that it would be advantageous if all persons, whether British or foreign, representing foreign firms, were obliged to register and take out a licence before being allowed to trade in the United Kingdom; and if, further, all British firms representing foreign firms in this country were similarly obliged to register and take out a licence. The licences would in every case be for a period not exceeding one year, and the fact that persons or firms arc so licensed should be printed on all their business documents. Patent Laic. 123; It is well known that our Patent Law has been used by our enemies to throttle or to prevent the establishment of certain industries in this country, some of them " Key " industries. 124. We understand that the original purpose for which patents were granted was to encourage the individual to confer a benefit on the State, and that there was no intention of creating a form of property (a monopoly) with which the patentee might do as he pleased. 125. The Courts, however, have been used for the creation of monopolies by the employment of procedure through injunction, a dangerous weapon in the hands of a wealthy and unscrupulous litigant, and one which has led to great injustice to the individual and to the State. Under these conditions the longest purse seemed generally to win, while even a doubtful patent might become a valuable property by resort to judicious threats of proceedings against financially weak interests. 126. We recommend that steps be taken to stop the granting of injunctions in cases of alleged infringement of patent rights. German interests before the war abused their oppor- tunities in this country by obtaining " blocking patents " ; and it is alleged that German patents were exceedingly difficult to obtain by British citizens when a really valuable invention was in question, in face of the arbitrary methods adopted by the German patent authorities. While we do not know whether it will be possible to secure any improvement in German procedure, we recommend that special steps be taken in regard to the rights of Germans in patents in this country, especially as to what is known as " blocking patents." There should be mean's of compelling the " blockers " to grant licences when it is shown to be in the public interest. 127. Every effort should be made to introduce a system of Imperial Patents at reasonable fees ; the expense at present is far too great. 128. Further, we recommend that the grading of the annual fees be such that, after the first payment and the sealing of the patent, seven years be granted for exploitation at purely nominal annual fees, and that for the final seven years the fees be graded rapidly upwards, the total in amount being equal to the present total fees. It would, however, be highly desirable to reduce the total fees if possible. Commercial Agents. 129. The majority of the witnesses who gave evidence before this Committee are of opinion that in their foreign business German were, on the whole, superior to British agents. It was suggested that German agents possessed a considerable advantage in their knowledge of languages, and in the willingness of their principals to modify their products to meet the wishes and needs of prospective customers. They appear also to have been helped by the fact that they did not hestitate to adopt methods of promoting business which this Committee would be sorry to see imitated by British houses. Consvlar Service. 130. There is, however, abundant evidence that the German trader possessed a great advan- tage in the superior efficiency of the German Consular Service. It has been suggested to us that this superiority was due largely to the very complete form in which information was tabulated by German Consular Officers, and placed at the disposal of the German traders. 131. We recommend that His Majesty's Consular Officers be instructed to supply promptly, by telegram, information as to new tonnage required or likely to be required, and ships actually contracted for, together with a statement, if possible, of their class, tonnage, and contract price. Consuls could obtain much assistance by consulting the technical officers (surveyors) who are stationed at all the leading ports, representing the various classification societies. Consuls, moreover, should have definite instructions to assist all British subjects, visiting foreign countries on business, to the utmost of their power, by giving them every facility to ascertain the financial position and trustworthiness of local firms and their ability to fulfil obligations. 132. It is exceedingly desirable that the personnel of our Consular Service should consist of men endowed with a broad education and sound judgment — a remark applying with equal force to the Commercial Agents abroad of British firms. The special qualifications necessary can best be acquired at our Universities and Technical Schools, and the education there provided should comprise a thoroughly sound training in the humanities and in science. We are glad to know that special committees have been appointed to enquire into the position of science and moderu languages in our educational system, and we hope that good will result from their labours. Industrial Research. 133. We are strongly of opinion that everything should be done to promote industrial research, and to encourage the adoption of improved methods throughout the industries. Much could be achieved by more extensive co-operation among firms, and the general level of technical efficiency could in this way be materially raised. Our attention has been called to the successful 17602 C 2 3<; results obtained by certain firms in the employment of chemical and metallurgical staffs. By this means their foundries and other departments were to a great extent under scientific control, and the quality of their supplies of fuel, paints and metals of all kinds was tested on delivery. 134. While it might not he profitable for each individual firm to employ a chemical staff, laboratories might be established by co-operative effort in convenient centres to which materials would be sent, and from which advice would be obtained. Such central laboratories might also become centres of research for the benefit of the industries. 135. Several privately owned experimental tanks are in existence, but there is only one public tank — namely that at Bushey — from which firms can and do obtain advice on payment of a fee. Most firms of shipbuilders do not see their way to establish a private tank, or to find sufficient employment for it:whereas a publicly or co-operatively provided tank in each district would be of advantage to all, and would encourage research. Such tanks should, however, only be established when it is found that Bushey Tank is being overburdened with work to the detri- ment of its research work, which research work should be largely subsidised through the National Physical Laboratory by the Advisory Council of Scientific and Industrial Besearch. At present the investigations on questions of ship resistance and propeller efficiency in experimental tanks are largely directed towards the designs of warships and high-speed liners, but more experiments should be conducted with regard to vessels of moderate speed and size. An improvement in the efficiency of all low-speed vessels, would clearly be of greater national benefit than an improve- ment in the efficiency of high-speed liners. 136. In regard to research in general, we are aware of what is being done by the Advisory Council of Scientific and Industrial Besearch. "We believe that Council is proceeding on sound lines and is likely to achieve valuable results, provided the requisite financial support from tlie Treasury is forthcoming. VIII.— LABOTJE. 137. In the course of our enquiries dealing with future production and in reply to the following question : " What steps, if any, do you consider should be taken to accelerate output after the war? " we found ourselves in contact with- the labour question. While certain suggestions were made, which have already been discussed one part of the answer was invariably that the present limitation of o\itput should be departed from, that a system of payment by results should be introduced, and that machinery should be worked to its full capacity. We do not consider it our specific duty to report in detail upon this question, but we are convinced that some mutually satisfactory settlement in these directions must be arrived at between employers and employed, if this country is to maintain its position in inter- national competition. IX.— EDUCATION OF BOTS AND APPRENTICES; APPRENTICESHIP.* 138. We asked a series of questions on the training of apprentices and their conditions of work. It was impressed upon us that the present S3'stein was not satisfactory, and that it required very earnest study with a view to re-organisation. The present position is as follows : — the school leaving age is 14t, but it is not the rule for a lad to begin his apprenticeship until he is at least 16. A considerable number of boys between the ages of 14 and 16, however, are employed as messenger boys, steam hammer boys, catch boys attached to riveting squads, mark boys attached to plating and framing squads, and so on. The practice exists principally in shipyards, and only to a small extent in engine works. The present system takes into account the employment of such boys as part of the working force: they work the ordinary hours and are usually attached to certain groups or squads. Need for Increased Education. 139. The period in a boy's life between 14 and 16 is a most critical one, educationally and otherwise. One of our members made a full investigation of the present educational situation, from which it appears that, given proper attention on the lad's part, ample facilities are provided for acquiring a working knowledge of reading and arithmetic, though handwriting does not seem to receive, the same attention. Boys who leave school at 14 have, however, received only a very superficial education and many, before the age of 16, have forgotten nearly all they learned. It is unfortunately true that at the latter age many lads are incapable of writing an intelligible letter in a reasonably legible hand, or of making simple arithmetical calculations. Teachers engaged in the evening Science Classes complain that much of their time is taken up by a course of elementary edtieation so as to enable lads to benefit by the technical training provided. 140. Certain of the lads do not enter the works until they are l(i and ready to become apprentices, remaining at school until then; and these are naturally better equipped educa- tionally. We are of opinion that in the interests of the boys themselves, of the industry, and of the community, the school leaving age should be raised to 16 years. In making this recom- mendation we are aware that the withdrawal of boys under 16 years of age from the shipyards * The Sections of this Report dealing with the Education of Boys and Apprentices were written Wore the publication of the Final Report of the Departmental Committee of the Hoard of Education on Juvenile Education in relation to Employment after the.War. (Cd. 8f>12 of 1917.) f This statement represents the best practice in the United Kingdom. The position so far as England and Ireland are concerned is less satisfactory than in Scotland, since in England total or partial exemptions down to the age of Vi, or even 12 are numerous ; while in Ireland exemptions may be granted down to the age of 11. 37 and marine engine works would entail some re-organisation of the working force, the vacant positions being filled by other labour. 141. We, of course, recognise that the raising of the school leaving age to 16 could only be effected gradually; and we would, therefore, urge that meanwhile a system of compulsory part-time education be introduced for boys between the present school-leaving age and 16 years. As it is unreasonable on account of their youth to expect these boys to attend profitably evening school after their day's work, it is suggested that part of their day's work should be teducational. 142. This would involve a re-arrangement of the maiming of the squads in shipyards, and in the working of lathes and other small machines in engine works. One solution suggests itself — namely, that, if enough boys could be obtained, the difficulty might be got over by allocating two boys to each job, working on the half-time system and changing either daily, weekly, or by any other period fixed. This solution would certainly not suit every locality, and different solutions would have to be adopted, depending upon the supply of boys available. Education of Apprentices. 143. If there were more boys than there were vacancies for apprentices at the age of 16, the balance could go to trades other than Shipbuilding and Engineering, having had the advantage of a continued education and general works' training. At the age of 16 they would probably be physically fit for many occupations, and would be of an age to choose their future work with a reasonable amount of judgment. • 144. It would probably be found impracticable or unsuitable to continue the afore-men- tioned system of compulsory education after the commencement of apprenticeship. We were informed that, working in groups along with journeymen as apprentices generally do, the absence of the apprentices during any part of the daily working hours \ipsets the work, is agreeable neither to the men of the squad nor to the management, and has an unsettling effect upon the apprentices. themselves. This was controverted by one witness who had adopted a scheme involv- ing absence from work during two afternoons per week. The examination papers set in this case at the end of the term for first and second year apprentices were submitted to us along with the details of the marks awarded, and the scheme from the educational point of view was undoubtedly successful. The general opinion seemed to be that at the age of 16 it should be optional for the apprentice to continue his education, and that in this way the lads naturally settle their t>wn future : those who are able to profit by technical education and are anxkms to advance them- selves attend evening classes, while those who are unable to profit cease attendance. 145. We agree with all the witnesses that only a limited number of apprentices are possessed of the necessary brain qualities to absorb and profit by higher technical education, which should be provided for apprentices after the age of 16, following on the general and compulsory educa- tion up to that age. At the same time, we are of opinion that the remainder of the apprentices should be provided with opportunities for continuing their general education, should they so desire. More especially do we think that classes upon literature and simple natiiral philosophy and natural history should be provided, so as to give a liberal education and induce an interest in their surroundings, thus broadening their outlook. 146. Although fees should he charged for this education they should be refunded on evidence of proper attendances at the classes. The remission of the fees should not he dependent upon any report of progress by the educational authorities. Simple attendance for, say, 75 per cent, of the possible attendances should he sufficient for refunding fees. 147. As regards organisation of educational facilities, we are of opinion that for boys between 14 and 16 and apprentices attending evening classes the local educational authority, along with an equal number of members co-opted from the employers in local industries, should control the education outside the works, so that there would not be unrelated control in the schools and the factory, which would be fatal to the system. The Chairman should be drawn from the local educational authority. Technical Schools and Universities also should co-opt a sufficient number of leaders in the local industries, so that the ruling bodies of these institutions would be kept in close touch with practical work. This would inevitably lead to the research work carried out in the laboratories of the Universities and Technical Schools being directed more than hitherto to the solution of practical problems encountered in the factories. 148. We found, from written returns and from oral evidence, that this whole subject of apprenticeship and education was being studied with the keenest interest by all employers, and that some had introduced schemes which had been in operation for a considerable number of years, while others had been commenced since the beginning of the war. 149. There should be no difficulty in introducing a universal system of education and training applicable to all yards and engine works, although variations may be necessary in different localities, which would depend upon the type of work produced and other special circiimstances. 150. Our reason for recommending that a universal system of training be undertaken in all establishments is that all lads should have the same, or roughly the same, opportunities of improving themselves and fully developing their capacities in the best interests of themselves and the nation, and that this important problem should not be left to the efforts of a few well- intentioned employers. A much greater amount of co-operation between firms for the purpose of training the rising generation of workmen is desirable than yet exists. 1760? ° 8 151. With regard to apprentices of special ability or education (such as those from Secondary Schools, Public Schools, and Universities) we find that firms frequently make arrange- ments by which they can receive their training in more than one department. Some firms make special arrangements by which their apprentices are enabled to attend sessions at a University or Technical School, counting the time so spent as part of their apprenticeship. It is desirable that such a system should be adopted more widely. 152. As a result of an investigation made by a member of this Committee, to which reference has already been made, it was found that a large number of bursaries are provided for Naval Architects, so that no really able lad need lack opportunity for advancement to the highest position. So far as Marine Engineering is concerned, some of these bursaries may be taken either by Naval Architects or Marine Engineers, but there seems to be a lack of specific courses for Marine Engineers of an exactly similar character to those for Naval Architects. The number of openings available for the advancement of Marine Engineers is much greater than for Naval Architects. We are awaif that other bodies have been studying this question fof the purpose of organising the training of such men, but we are of opinion that a special University course should be organised for Marine Engineering Designers — at any rate, in Universities situated close to important Marine Engine Works. Duration of Apprenticeship. 153. There was a general consensus of opinion that the period of apprenticeship should not exceed five years ; some trades at present serve six years or more. The extensive introduction of machinery and improved methods of manufacture have undoubtedly shortened the necessary period. It was, however, indicated to us that there were certain trades in which the period might be still further reduced — e.g., those of Drillers and some Machinists, for whom practically no apprenticeship is necessary; likewise that of Biveters, which if done by hand can be learned in a couple of years, and if done by pneumatic or other machines requires a still shorter period to obtain the necessary skill. General Training. 154. The broad question as to the training of lads involves not only the teaching of a trade, but also the discipline and training which are necessary to produce good citizens. In byegone days, in the home, the school and the works, much closer touch was kept with the lads than is now the rule ; for legislation and new social ideas have weakened the old responsibilities to the detriment of the youths. We think that some system of close sympathetic control, which would teach the youths their duty not only to themselves but also to their fellows, should be more generally introduced. In this connection two or three witnesses informed us that they had already appointed supervisors or tutors (hitherto commonly called "welfare workers") whose duty it was to look after and take a personal interest in the boys from the point of view not only of their work, but also of their recreation and social life. The system, though attempted in a few instances even before the war, is still experimental ; but it has already yielded valuable results, and we recommend its extension throughout the industries. Wages of Apprentices. 155. The tendency of personal liberty to degenerate into personal licence has been hastened in certain trades by the large wages paid to the youth of this country, as at an age when they are unfit to spend the money wisely, they find themselves financially independent of their parents. On the other hand, it is undoubted that where parents are capable and exercise their authority with wisdom, and where children recognise the sacrifices their parents have made in supporting them up to a working age, this extra money is wisely spent. 156. It is a question, however, whether the whole of the extra money earned on piece work should be entrusted to the lads, or whether some system of deferred payment, until the age of 21 is reached, might not be introduced. It is recognised that in certain families this would lead to hardships in the household — e.g., in the case of a widow, but it should not pass the wit of man to overcome these difficulties under suitable local control. Thus, even if apprenticeship as now known be varied in its character and in its length from five years and downwards, the control of the youth of the country might still be suitably maintained. The details of such a system must necessarily be a matter of mutual agreement between the employers and the parents. Indenture. 157. We found that apprentices were not as a rule indentured, and that the introduction of compulsory insurance and the formation of Approved Societies connected with trades has led to the apprentices joining Trades Societies for Insurance Benefit purposes. We are of opinion that either an indenture or some form of agreement should be instituted, which would bind the apprentice to be diligent at his work, and the employer to teach the apprentice his trade. Further, that separate approved societies should be provided for youths under 21, from which they could be transferred to their Trade Societies on attaining that age. These junior Approved Societies might be suitably formed by districts under the Employers' Associations. 158. We have dealt at considerable length with the education and training of boys and apprentices, because we feel that ultimately the position of British Shipbuilding and Marine Engineering must depend on the skill, efficiency and ability of the individuals engaged in those industries, whatever their position; and any steps calculated to maintain the high level of the past and even to surpass it are of great importance. We therefore hope that our recommenda- tions will receive the attention of the industries, from whose members we have received many valuable suggestions. 39 X,— SUMMARY OF BINDINGS AND RECOMMENDATIONS. 159. For convenience we summarise below in a brief outline Hie principal findings and recommendations contained in the preceding sections :-- (1) Materials (pars. 28-73). (a) Iron and Steel (pars. 28-70). 1. An attempt should be made to slop "dumping" by means of legislation on liues somewhat similar to provisions already in force in the United States and Canada. 2. The Committee are not able to recommend the imposition of a duty on materials for shipbuilding and marine engineering imported into the United Kingdom. (b) Other Materials (pars. 71-72). 1. Shipbuilders and Marine Engineers should be left free to make their purchases in the best market. 2. The Government should take steps to promote afforestation on suitable land. (2) Machinery and Plant (Depreciation and Income Tan:) (pars. 79-82). 1. In ordinary peace time not less than 15 per cent, should be allowed for depreciation on the decreasing value of machinery and plant, .and 7| per cent, on the decreasing value of docks, wharves, and similar structures and buildings. 2. Patents should be treated as wasting assets for the purpose of depreciation. 3. The practice of depreciating on the decreasing value of plant is open to criticism, and it would be better to fix the life of each class of tool and deduct a uniform annual depreciation during that life. (3) Regulation of Production (pars. 83-84). 1. Any scheme which would stimulate the building of ships on a falling rather than on a rising market is worthy of careful consideration. 2. Greater co-ordination of output among Shipbuilders and Marine Engineers is desirable. (4) Co-operation among Shipbuilders and Marine Engineers (pars. 85-90). A method of effective co-operation between employers must be discovered and adopted. (5) Methods of Stimulating Output (pars. 91-96). 1. The industry should be released from the existing system of Government control at the earliest possible moment after the war. 2. Eull allowance should be made for deferred repairs and for exceptional depreciation or obsolescence of machinery and plant, when the final account for Excess Profit Duty is assessed, as provided in the Finance (No. 2) Act, 1915. 3. The use of improved mechanical appliances and labour-saving tools should be extended. 4. Further provision might be made of covered berths for certain classes of work. (6) Standardisation of Production (pars. 103-109). The Government should suggest to Shipowners, Shipbuilders and Marine Engineers the desirability of forming a joint Committee under the Engineering Standards Committee, in order to promote progressive standardisation in all directions. (7) Metric System of Weights and Measures (pars. 110-114). The Committee see no reason for the adoption of the metric system, so far as Shipbuilding and Marine Engineering are concerned. (8) Banking Facilities (pars. 115-118). Shipbuilders and Marine Engineers would be assisted in their foreign business by increased banking facilities. (9) Company Law (pars. 119-120). Every limited company engaged in Shipbuilding or Marine Engineering should be required to include in its annual return to Somerset House a statement of the amount of its stocks or shares held by or on behalf of aliens, together with a statement of their nationality. (10) Employment of Aliens (pars. 121-122). 1. Any measures adopted with regard to aliens in this country after the war, whether general in character or confined to industries of special national importance, should include Shipbuilding and Marine Engineering. 2. It would be advantageous if all persons and firms, whether British or foreign, repre- senting foreign firms, were obliged to register and take out a licence before being allowed to trade in the United Kingdom. (11) Patent Law (pars. 123-128). 1. Steps should be taken to stop the granting of injunctions in cases of alleged infringement of patent rights, and to deal with the rights of Germans in patents in this country, especially in regard to " blocking patents." 2. A system of Imperial patents at reasonable fees should be introduced as soon as possible. 3. The system of grading annual fees should be amended. (12.) Consular Service (pars. 130-132). Consuls should be instructed to supply promptly by telegram information as to new tonnage required or contracted for; and to assist all British subjects visiting foreign countries on business by giving them every facility to ascertain the financial position and trustworthiness of lo^al firms and their ability to fulfil obligations. 17C02 C 4 40 (13) Industrial Research (pars. 133-136). 1. Laboratories should be established by co-operative effort in convenient centres for the testing of materials. Such central laboratories might also become centres of research. 2. A publicly or co-operatively provided experimental tank in each centre of the industry would be of advantage and would encourage research; but such tanks should only be established when it is found that the tank at Bushey is being overburdened with outside work to the detriment of its research work. 3. With regard to such research work, more experiments should be directed towards the design of vessels of moderate speed and size. (14) Education of Boys and Apprentices; Apprenticeship (pars. 138-158). 1. The school-leaving age should gradually be raised to 16; and meanwhile there should be introduced a system of compulsory part-time education between the existing school-leaving age and the age of 16, such education to be imparted during the day and not in the evening. 2. Compulsory education should cease with the commencement of apprenticeship at the age of 16, when further education should become optional. There should be provided at evening classes (a) facilities for higher technical education for apprentices able and willing to profit by it, and (b) classes on subjects' of a general educational character for other apprentices. Fees should be charged but refunded subsequently it attendance has been satisfactory. 3. There should be a correlated system of control in the schools and in the factory; educa- tion should be in the hands of the educational authorities, but those authorities should co-opt members of the industries to assist in the work. 4. The system of education and training introduced should be universal, with such varia- tions as regards detail as may be necessary to suit different localities. 5. Apprentices of special ability or education should be encouraged to attend sessions at a university or technical school, if they so desire, as part of their apprenticeship. 6. A special course for Marine Engineering Designers should be organised at least in universities near important marine engine works. 7. Apprenticeship should not exceed five years. 8. There should be appointed throughout the industries supervisors or tutors, whose special function it should be to interest themselves personally in the boys and youths from the point of view of their work, their recreation and their social life. 9. Employers should consider the possibility and desirability of introducing a system of deferred payments for apprentices. 10. Apprentices should be indenhired, and should up. to the age of 21 be members of separate approved societies formed by districts under the Employers' Associations. 160. In presenting this Interim Report, the Committee desire to thank the witnesses who were good enough to appear before them. 161. The Committee wish also to record their appreciation of the valuable work done by the Assistant Secretary, Mr. C. K. Hobson, in connection with this portion of their enquiry. We have the honour to be, Sir, Your obedient Servants, (Signed) ALFRED BOOTH (Chairman), W; S. ABELL, TAMES BROWN. G. S. CLARK, ARCHIBALD DENNY, EDWARD HAIN, H. B. HOOPER, SIMMERS HUNTER. JAMES READHEAD. OSWALD SANDERSON. E. H. MARKER, Secretary. C. K. HOBSON, Assistant Secretary. July, 1917. 41 APPENDIX A. Statistical Information as to Quantity or Iron and Steel Shipbuilding Materials used by British Shipbuilders and Marine Engineers before the War. Totu! (Jauntily of Steel Used It is estimated that the total quantity of steel materials (including plates, sections, forgings, castings, &c.) incorporated in war and merchant ships and marine engines newly con- structed in 1913 was not less than 1,400,000 tons. In the preparation of these materials there is a consider- able amount of waste, and it is estimated that the weight of the ingots, from which the finished materials were fashioned, was not less than 1,850,000 tons. The figure would be somewhat greater were steel used for repair work included. The total quantity of steel ingots produced in the United Kingdom in 1913 was 7,663,000 tons, and, allowing for imports and exports, the amount of steel con- sumed was about 6,325,000 tons. The Shipbuilding and Marine Engineering industries therefore ac- counted for fully 29 per cent, of the total consump- tion, or, say, 30 per cent, including steel used for repair work. It should bo noted that these figures relate only to steel, and take no account of iron, though iron materials are used to a considerable extent in the construction of marine engines. Steel Plates and Sections. — Information was sought from all Shipbuilding and Marine Engineering firms in the United Kingdom, except Admiralty Dockyards, as to the quantities of steel plates and sections de- livered to them in 1912 and 1913. The great majority of the firms concerned supplied the desired informa- tion ; and the quantities of steel plates and sections delivered to them in 1912 and 1913 amounted, accord- ing to the returns, to 952,000 tons and 896,000 tons, respectivelv, and the values to £6,553.000 and £6,766,000. A very large part of the British-made material is supplied by firms belonging to the Scottish or the North-East Coast Steel Makers' Association ; but there are also a few firms outside these Associations. The two Associations together delivered some 863,000 tons of steel plates and sections to British Ship- builders and Marine Engineers in 1913, of which about 468,000 tons were delivered by the North-East Coast Steel Makers' Association, and 395,000 tons by the Scottish Steel Makers' Association. The quantities imported during these years have not been exactly ascertainable. The official statistic* of imports do not distinguish between plates and sections for Shipbuilding and Marine Engineering and similar materials for other purposes, and Ship- builders and Marine Engineers themselves are often uncertain as to the origin of their materials, par- ticularly in Scotland where they buy through mer- chants. The figures available, however, suggest that the total quantity of imported plates and sections was certainly below 10 per cent, of the aggregate quantity used. Thus, Shipbuilders and Marine Engineers in England and Ireland stated that the weights of imported materials invoiced to them were 22,810 tons and 18,308 tons, respectively, in 1912 and 1913, whilst members of the Scottish Steel Merchants' Association imported 22,067 tons, 39,661 tons and 51,155 tons in the 12 months ending July 31st, 1912, 1913 and 1914, respectively. It should, however, be borne in mind that these figures cannot be regarded as exhaustive. Forgings and Castings. — Information obtained from the English and Scottish Forgemasters' Association, the Federated Forgemasters' Association and the Steel Casters' Association shows the quantities and values of materials delivered by them to British Shipbuilders and Marine Engineers to have been as follows : — TABLE I. Quantity and Value of Forgings and Castings delivered by British Makers to Shipbuilding and Mar"ine Engineering Firms in the United Kingdom. [Note. — These particulars were obtained during the autumn of 1916 ; and consequently complete figures were not available beyond the end of 1915.] Quantity. Value. 1912. 1913. 1915. 1916 (first six months). Estimate for 1917. 1912 1913. Forgings of Steel : — Stems, Stern Frames, Rudders and Parts thereof, also Propeller Brackets : — Mercantile ... Admiralty Total Shafts — Crank, Thrust, Inter- mediate and Propeller : — Mercantile ... Admiralty Total Other Forgings for Marine Engines : — Mercantile ... Admiralty ... Total Tons. 1,195 903 2,098 11,202 7,228 18,430 2,998 4,474 7,472 Tons. 1,172 1,024 Tons. 450 1,807 Tons. 339 1,282 2,196 10,929 8,049 2,257 5,171 12,692 1,621 2,452 5,406 18,978 2,721 3,316 6,037 17,863 4,264 8,154 12,418 7,858 2,131 4,368 6,499 Tons. £ 34,258 40,115 199,543 206,233 - 89,352 42 TAI5LE I. — continued. Quantity. Value. i 1912. 191'.. 1915. 1916 (first six months). Estimate for 1917 1912. 1913. Forgings of Iron : — Stems, Stern Frames, Rudders and Parts thereof, also Propeller Brackets : — Mercantile Admiralty Tons. 5,782 55 Tons. 5,295 51 Tons. 2,711 456 Tons. 1,124 100 Tons. - 9,246 1 4,325 (• 3,025 156,536 £ 216,053 Total Shafts— Crank, Thrust, Inter- mediate and Propeller : — Mercantile Admiralty ... 5,837 1,501 50 5.346 1,386 50 3,167 984 114 1,224 794 91 34,434 36,170 Total Other Forgings for Marine Engines : — Mercantile Admiralty 1,651 1,891 108 1,436 1,568 97 1,098 1,323 183 885 719 144 31,463 26,721 Total Castings of Steel : — Stems, Stern Frames^ Rudders and Parts thereof, also Propeller Brackets : — Mercantile ... Admiralty ... 1,999 1,881 889 1,665 1,303 1,625 1,506 1,206 2.125 863 505 602 60,507 52,882 Total Castings for Marine En- gines : — Mercantile ... Admiralty ... 2,770 2,^12 709 ' 2,92? 2,493 877 3,331 971 2,013 1,107 398 707 65,284 69.471 Total 3,221 . 3,370 2,984 1,105 — — It sho.uld be explained that the returns for shaft- parison, in view of the fact that machined and bored ing in the above table are based on the Forged weight, Admiralty shaftings are much reduced in weight and not on the weight of the machined or bored compared with finished mercantile shaftings, shafts. This basis was adopted for purposes of corn- Imported Material*. t Information was sought from all important Ship- as to the quantity of British and foreign forgings building and Marine Engineering establishments in and castings invoiced to them in the years 1912 and the United Kingdom, including firms doing work for 1913. The returns show that the proportions of the Admiralty, but excluding the Royal Dockyards, British and foreign material were as follows: — TABLE II. Percentages of Quantities of Forgings and Castings delivered to Siupm-ii.DERs and Marine F.NGINEERS IN THE UNITED KINGDOM IN 1912-13, WHICH WERE (a) British, and (4) Imported. (/>) Imported Material. ^~ ^~~ (a) British. From ALL Countries. From Germany. From Austria- 1 Hungary From Denmark. 1912. 1913. 1912. 1913. i 1912. 1913. 1912. 1913. 1912. 1913. Forgings of Steel : — Stems, Stern Frames, Rudders and Parts 96 % % % % % % * % % thereof, also Propeller Brackets ... 95-0 955 5-0 4-5 50 4-5 Shafts— Crank, Thrust, Intermediate and Propeller » ... 56-4 57-3 43-6 42-7 35 -9 35-4 — — 7-7 7-3 Other Forgings for Marine Engines 89 4 85-7 10-6 14-3 9-4 12-2 — — 1-2 2-1 Forginqs'of Iron : — Stems, Stern Frames, Rudders and Parts thereof, also Propeller Brackets ... 99-2 99-8 0-8 0-2 0-4 0-4 •Shafts — Crank, Thrust, Intermediate and Propeller 98-7 97-0 1-3 30 IS 30 Other Forgings for Marine Engines 100-0 100-0 — _ ._ Catlings of Steel : — Stems, Stern Frames, Rudders and Parts thereof, also Propeller Brackets ... 78-5 774 21-5 22-6 19-1 17-6 2-4 5-0 _ Castings for Marine Engines 94-8 99-1 5-2 0-9 51 0-8 o-i 0-1 " Particulars were also obtained as to the weight of forgings and castings for ships and marine engines fitted into vessels classed with Lloyd's Register of Shipping in the year 1912 and 1913. From these statistics the following tables, which are based re- spectively on (a) the number, and (b) the weight, of such materials, have been compiled, showing the pro- portion of the various materials which were of British and foreign manufacture. It should be stated that the figures take no account of Admiralty work, being in respect only of merchant shipbuilding, and that the data are incomplete in so far as materials fitted into vessels not classed with Lloyd's Register of Shipping are excluded. TABLE III. Percentages of Forgings and Castings for Ships and Marine Engines (a) Produced in the United Kingdom, and (b) Imported in 1912-3 and Fitted into Vessels Classed with Lloyd's Register of Shipping. (o) Percentages based on number of British and Imported Materials used. Imported from Unjted Kingdom. All Countries. Germany. , Austria-Hungary. Denmark. 1912. 1913. 1912. 1913. 1912. 1913. 1912. 1913. 191?. 1913. Castings — Stems ... Propeller Brackets Stern Frames Rudders ... Patent Crank Webs % 81-8 95-0 60-7 20-0 100-0 % 100-0 78-7 63-4 52-6' 100-0 % 18-2 5-0 39-3 8.J-0 % 21-3 36-6 47-4 9-1 23-8 80-0 % 8-5 23-9 47-4 % 9.-1 5-0 15-5 12-8 12-7 % % Total 71-6 70-4 28-4 29-6 18-7 19-7 9-7 9-9 — — Forgings — Stems Propeller Brackets Stern Frames Budders Crank Shafts Thrust Intermed. ,. Propeller „ 100-0 100-0 100-0 99-6 57-9 29-3 35-9 66-3 99-7 100-0 99-5 99-0 66-0 36-8 38-4 63-2 0-4 42-1 70-7 64-1 33-6 0-3 0-5 1-0 34-0 63-2 61-5 36-8 34-5 62 1 49-1 26-0 0-3 0-6 26-0 58-2 51-0 31-3 • 0-4 0-2 0-1 0-4 0-1 0-5 0-4 1-2 0-3 7-4 8-5 14-6 7-5 7-8 5-0 9-3 5-2 Total 58-4 CO-6 41-6 39-4 33-3 33-3 0-2 0-5 8-1 5-6 (b) Percentages based on weight of British anl Imported Materials used. I nported f rom United Kingdom. All Counties. Germany. Austria-Hungary. Denmark. 1912. 1913. 1912. 1913. 1912. 1913. 1912. 1913. 1912. 1913. Castings— % % % o/c % o/o % % °/o o/c Steins 77-3 100-0 22-7 — 18-2 — 4-5 — — — . Propeller Brackets 9i-7 77- i 8-3 22-9 — 10-0 8-3 12-9 — Stern Frames 50-7 59-6 43-3 40-4 29-4 25-9 13-9 14-5 — Rudders ...- 13-4 66-0 86-6 34-0 86-6 34-0 — — Patent Crank Webs 100-0 100-0 — — — — -- — — — Total 63-8 68-4 36-2 31-6 26-2 21-1 10-0 10-5 — — Forgings — Stems 100-0 99-2 — 0-8 — 0-8 — — - Propeller Brackets 100-0 100-0 — — — — — — — Stern Frames 100-0 99-2 — 0-8 — — — 0-8 — Rudders ... 99-:' 98-3 . 0-8 1-7 — 1-1 0-8 0-6 — Crank Shafts 44-4 47-4 55 -rt 52-3 43-7 38-4 0-2 — 11-7 i;;-9 Thrust „ 25-2 ^6-2 74-8 73-8 65-7 67-3 0-2 __ 8-9 6-5 Intermed. ,, 33 39-8 67-0 G0-2 51-4 51-2 0-3 1-3 15-3 7-7 Propeller „ 54-7 54-3 45-2 45-7 36-0 39-7 0-2 0-3 9-0 5-7 Total 53-6 ' 55-6 46-4 44-4 36-7 37-2 0-3 0-7 9-4 6-5 44 Similar information was obtained as to the number and Registry of Shipping, from which the following of forgings and castings fitted into vessels built under table has been compiled: — the survey of the British Corporation for the Survey TABLE IV. Forgings : — Stems Stem Frames ... Rudders Total ... Crank Shafts ... Thrust Shafts... Intermediate Shafts Propeller Shafts Total ... Catlings : — Propeller Brackets Stem Frames ... Rudders Total ... United Kingdom Manufacture. . % 100 100-0 92-6 97-5 18-3 33-8 19-4 47-4 24-6 100-0 53-0 66-6 73-2 German Manufacture. % 7-4 2-5 69-5 56-6 70 6 48-5 65-9 47-0 33-4 26-8 Danish Manufacture. % 12-2 9-6 10-0 41 9-5 A further table is given below containing informa- heads tested at Proving Houses: — tion as to the origin of cast and forged steel anchor TABLE V. Percentages of Cast and Forged Steel Anchor Heads. (a) Produced in (h) Imported into the United Kingdom and tested at various Proving Houses. Period. ■Percentages based on Numbers of Anchor Heads. United Kingdom Manu- facture. Prom all Countries. Imported Prom Germany. Prom Belgimn. Percentages based on Weight of Anchor Heads. United Kingdom Manu- facture. Imported From all Countries. Froji Germany. From Belgium. Year 1911-12— Cast Forged ... Total Year 1912-13 — Cast Forged ... Total Year 1913-14— Cast Forged ... Total Three years 1911-14 Cast Forged ... Total % 35-u 100-0 41-9 33-9 100-0 42-9 3", -4 100-0 43-9 % 64-5 o/o 63- 58-1 57'4 (56-1 65-2 67 • 1 64-6 56-1 5fi-3 04-0 55-6 36-7 100-0 63-3 ' 63-1 46-4 53-6 53-4 o/o 0-7 0-7 2 0-2 0-9 0-8 0-6 0-5 39-3 100-0 44-1 38-2 100-0 44-9 38-3 100-0 40-2 38-6 100-0 45-1 60-7 55-9 61-8 55-1 61-7 53 -X 61 -4 54-9 60-0 55-3 61*7 55-0 61-4 58-6 Gl-0 54 -o 0-7 0-6 01 0-1 0-3 0-2 0-4 0-3 45 APPENDIX B. Prices of British and Imported Materials used in Shipbuilding or Marine Engineering. The following statements, supplied to the Committee by witnesses, are of interest :— Comparison op Quotations for Steel Plates. Prices are Net — delivered Clyde (per ton). Price per ton. German. 1911— February March ... July 1912— August ... October... November 1913— June ... July August ... September October... December 1914 — January February March ... July AVERAGE C £ 10 11 6 12 7 7 12 9 6 17 17 15 i5 15 14 11 5 11 8 6 Scottish. 6 10 9 6 10 9 6 10 9 7 14 5 7 14 5 7 16 9 7 19 ■) 7 19 •_> 7 19 ■2 7 9 8 7 2 6 6 6 1 2 a 1 2 G 1 2 5 7 6 18 9 Com PARISON op English and Foreign Pricks, 1914. Material. Country from which obtained. English. Foreign. Foreign cheaper by £ s. d, £ s. d. Per cent. Angles ton Belgium 7 4 18 6 30 Boiler Plates ... V Germany 10 6 10 35 Furnaces (corrugated flues) ... ■• 1) Germany 34 24 29 Flat and Round Bars Germany 7 17 6 5 9 6 30 Do. do Belgium 7 17 6 5 5 33 Stay Bars Germany 8 2 6 5 12 6 31 Shafting .. cwt. Denmark 1 13 35 Do. n Germany 1 12 9 36 Steel Slabs Belgium 6 9 0-4 41 Chequer Plates ton Germany 8 9 5 9 6 38 Galvanized Sheets Germany 14 9 19 6 29 Steel Sheets, T j"-tV .. cwt. Belgium 10 6 9 324 Planished Sheets Belgium 17 6 13 3 24 Retarder Strips •• n Belgium 8 9 6 9 23 Do. Germany 8 9 6 7( 25 Boiler and Air Tubes Germany 574 %* m%* 32 Sluice Valves, 4" to 8" (group pri ce for a number of valves) ... ton Germany 12 12 6 6 16 46 Discounts off British Tube Makers' List. Comparative Prices op German and British (1) Finished Crankshafts and (2) Rough-turned Propeller Straight Shafts op, say, 12 inches in Diameter and upwards, prom 1905 to 1913. Finished Crankshafts. Rough turned Straight Shafts. German, British, per cwt. per cwt. German cheaper by German, per cwt. British, German per cwt. ! cheaper by January, 1905 1907 ... October, 1908 August, 1909 October, 1910 November, 1911 ... October, 1912 December, 1913 ... s. d. 22 22 6 20 18 18 24 25 22 6 s. d, 24 28 6 26 6 24 25 25 6 30 29 per cent. 8 21 24 J 25 28 4 16 * 22 s. d. 11 6 13 6 10 6 10 10 6 11 3 13 6 11 9 s. d. 16 16 6 16 6 15 16 16 17/6 & 20/- 16 per cent. 28 18 36 33 34 30 28 27 u Comparative Prices of British and Danish Shafting pek Cwt. Year. 1910 1911 1914 Danish. Danish cheaper % 121 22 29 APPENDIX C. Letter, dated the 26th January, 1917, which was addressed to a Witness by a Danish correspondent, and handed in by the former. Industrial Banks in Germany. As far as I know there are no books or pamphlets published here about the above, but several observant .English travellers, who have paid attention to German civil organizations, have from time to time published short articles in newspapers and magazines on this subject, but they would be difficult to find now. These banks were- originally Bismarck's idea, to assist and foster industry of all kinds,- after the German Empire was consolidated. One of the largest trading banks in Germany before the war was the Dresdener Bank, with branches in many countries (also in London, now being wound up), but apart from this large financial institution, there is in most German industrial towns, or indus- trial centres, one or more of what are called Industry Banks, smaller with a limited capital, but more or less supported by the larger trade banks such as the Dresdener Bank. Now take the ease of a very small manufacturer who has enterprise, and wants to extend his trade and his works, but is in want of capital ; or even a clever inventor, say, a clever chemist having as yet no works. Any such will go to an Industry Bank, unless he has a private capitalist to back him, and put his scheme before the directors. He may want to manufacture wire nails, tin tacks, chemicals or any article in general use, but wants capital. Well, the directors will take time to consider the matter and ask him to call again in a month or so. In the meantime they make careful enquiries about the man, if he is clever and reliable, in fact trace his previous career from the beginning, and at the same time they place his scheme before experts in this particular trade (often State experts in the Central Trade Bureau in Berlin), and if everything is found sound and satisfactory the Bank will advance him sufficient capital, always holding a mortgage on the works as security, but at low interest, generally J per cent, to 1 per cent, above the interest on State Consols, and also act as his Bankers, so that they always know his business transactions. Now, if this man succeeds, he will by and by pay off the mortgage and become sole proprietor. But in the German industrial organization there is more than this. Most of the German railways are State railways, or a State guaranteed interest, and these work in connection with the regular steamship companies " with fixed routes," which before the war touched nearly every port of any importance. In every large industrial centre in Germany there is a State railway and shipping official who will quote to any manufacturer a through rate from any German town to, say, Rio, Melbourne, Shanghai, or where German liners touch. The German Consuls abroad send monthly reports home to a Central Bureau in Berlin quoting local prices of commodities in their districts, and these, again, are issued monthly from Berlin to all industrial centres at home. Now you will see at a glance the facility and ad- vantages to the German manufacturer, perhaps in the centre or south of Germany, far from shipping ports. He knows the cost of the article at his own works, and he gets a firm through rate from any German town by rail and steamer to any port abroad where German liners touch (without having to employ shipping agents or brokers), and if he cannot cut under English prices in, say, Shanghai, he may do so in Buenos Ayres or Melbourne, and, in addition for export, he generally gets 10 per cent, to 15 per cent, discount off the ordinary rate on railways and steamers. This is practically all the advantage he has, as State export bounties were done away with years ago. Every German Embassy has a commercial expert on its staff, and some of the more important Consu- lates also, and these experts are not ordinary civil servants brought up in Government offices but practical men trained for this purpose, and always linguists. Such a man is never sent, say, to Turkey or China, unless he speaks Turkish or Chinese (1, myself, have met one who spoke fluently 11 languages). Now these men advise continually the Central Bureau in Berlin what commodities are most in demand in their particular countries, and the Bureau in Berlin issue monthly reports to all Industrial Centres; and in important cases where large contracts are or large trade is expected, experts will be sent abroad first, generally by the large trading banks, to study the local conditions; and these men are very clever and always linguists. The Dresdener Bank have had such experts in all parts and I have met some of them on my travels. In fact, as you will see, the whole German industry, especially for export, is under a regular organization, assisted in every way by the local industrial banks, the large trade banks, as well as by their Embassies and Consuls. The German name for this system is " Kartel System." In a new market where important ex- ports may be expected this Kartel system, supported by the banks, may for a time trade without profit until competitors are driven off, when prices will go up, and by the law of averages they will not lose everywhere. This, however, is not done by the small banks but has been done over and over again by such as the Dresdener Bank. It is very difficult to make this clear in a letter. I could better do so by word of mouth. Bear in mind, I do not defend or even recommend the German trading system as financially sound com- pared to the English system, which, undoubtedly, rests on a sounder financial basis. I am only stating facts as they have struck me before the war; but the fact remains that the British manufacturer is competing single handed against a systemised trade resting on banks, which, again, like insurance com- panies, are based more or less on the law of averages, losses here and gains there. No protection will stop this. You may shut them cut of Britain and the Colonies if you like, but you cannot shut them out of foreign countries, do what you like. Now I wish to point out (as my own opinion only) the inherent weakness of this German system; it rests largely on credit, and during trade depressign, caused by over-trading, or panics, these smaller in- dustrial banks may collapse, which as a matter of did happen in Germany some 8 or 10 years ago and brought a lot of works bankrupt also, but the larger banks by and by put them on their feet again. Now, here you have my views and my personal impression and observation of German trade, especi- ally export trade. I know everybody will not agree with me, but 1 don't think I am very far wrong in yreneral. 4? BOARD OF TRADE. DEPARTMENTAL COMMITTEE ON SHIPPING AND SHIPBUILDING. FINAL REPORT. 48 FINAL REPORT. TABLE OF CONTENTS. Page. Report 51 Part I. — The Reconstruction of the British Mercantile Marine. Introduction 52 Section I. — The British Mercantile Marine before the War 53 General Character 53 Liners and Tramps ... ... ..-. ... ... ... ... ... ... ... 54 Growth of the World's Shipping 55 Relative efficiency of the British Mercantile Marine ... ... ... ... ... ... 55 Section II. — The Effect of the War on British Shipping " 56 The withdrawal of Shipping from Trade ... ... ... ... ... 57 The Enemy's War on Shipping ... ... ... ... ... 58 Shipbuilding during the War ... ... ... ... ... ... ... 59 Other Factors- Repairs ... ... ... ... ... ... ... ... ... ... ... 59 Restriction of Transfer 59 Type of New Tonnage ... ... ... ... ... ... ... 60 Requisition ... ... ... ... ... ... ... ... ... ... ... 60 Loss of Trade during the War ... ... ... ... ... ... ... ... ... 60 Control of Shipping during the War ... ... ... ... ... ... 61 Section III. — The Position after the War 61 Section IV.— General Recommendations 63 Control of Shipping ... ... ... ... ... ... ... 63 The Release of Shipping from War Service ... ... ... ... ... 64 The Surrender of Enemy Shipping ... ... ... ... ... 64 Shipbuilding after the War 65 The Foreign Market— (1) Shipbuilding for Foreign Owners ... ... 66 (2) Sales of Vessels to Foreign (other than enemy) Flags ... ... 68 (3) Building for, and Sales to, Enemy Owners ... ... ... ... 69 Conclusion ... ... ... ... ... 69 Part II. — International Competition and Navigation Policy. Introduction 70 Section I.— The Carrying Trade in 1913 72 Introductory ... ... ... ... ... ... ... 72 The British Share of the World's Carrying Trade 73 The Trade of the U/nited Kingdom 75 Foreign Shipping in the Trade of the United Kingdom 77 Trade at United Kingdom Ports : Coal Exports 78 Distribution of British Shipping 79 The Ocean Trades 80 ' The American Trade 82 Africa, Australasia and the East ... ... ... ... ... ... ... ... 83 The Suez Canal Traffic 83 Imperial Sources of Supply 84 British Exports ... .. ... ... ... ... ... 85 Liners and Tramps ... ... ... ... ... ... ... ... ... ... 85 Foreign Competition ... ... ... ... ... ... 86 The European and Mediterranean Trades ... ... ... ... ... 86 The Ocean Trades 88 Conclusions... 89 Section II.— German Competition 90 The German Carrying Trade before the War ... 90 Trade across the Land Frontiers 91 Transit Trade 99 General Trade 92 Shipping at German Ports ... ... ... ... ... 92 German Trade through Rotterdam and Amsterdam ... ... ... ... ... 92 German Trade through Antwerp ... ... ... ... ... ... ... ... 98 Distribution of German Shipping ... ... ... ... .. ... ... ... 94 Organisation of German Shipping 96 German Shipping Subsidies ... ... .. .. 96 Conclusions 96 4■ 3,717 9,334,000 3,747 10,173,000 17602 Mf~ *fj 3 54 It is interesting to note that the reduction in the number of ships of less than 2,000 tons exactly corresponds with the increase in the number of vessels of and above 3,000 tons. 17. It is not necessary to make any detailed comparison between the British and other Mercantile Marines as regards the size of vessel employed. The average size of steam vessels of and above 100 tons gross (or about 60 tons net) is a rough index to the kind of trade in which the vessels of the respective countries were principally employed ; and the average tonnage of such vessels which were on the Register on June 30th, 1914, is accordingly shown below : — Net tons. United Kingdom 1,350 Germany Italy ... Japan . . . Netherlands France . . . Denmark Norway Russia Sweden 1,500 1,400 1,300 1,300 1,100 800 750 700 600 The high average tonnage of German, and Italian vessels indicates that their trades were almost wholly ocean and indeed liner trades. This is true also, though in a lesser degree, of Japan and Holland. The low average tonnage of Danish, Norwegian, Russian and Swedish vessels is equally significant for the converse reason. The comparison does not, however, do full justice to the United Kingdom, seeing that its ocean-going tonnage alone was more than three times as large as the entire German Mercantile Marine. Liners and Tramps. 18. The British carrying trade before the war was divided between the Regular Lines with scheduled sailings, which traded on defined lxrates, and owners of vessels engaged in general trade or " tramp " owners, whose vessels were often chartered to third parties and traded wherever a cargo might be found. It is impossible, however, to state how much tonnage was allocated at a given timeas between " liners " and " tramps." The Lines ran passenger vessels and also cargo vessels generally of a higher type and speed than ordinary tramp vessels, but there was always a class of vessel on the border line between " liners " and " tramps" which might be of service in either capacity, as occasion required. The only available index of the importance of tramp tonnage is that afforded by the speed of the vessels. It appears from particulars given in Lloyd's Register book that of the steam tonnage owned by the British Empire on June 30th, 1914, 35 per cent, was capable of maintaining at sea a speed of 12 knots or more; and it is probable that all vessels of this speed were liners. It may be estimated roughly that of our total tonnage before the war 60 per cent, consisted of tramps and 40 per cent, of liners. 19. We wish to emphasize the great importance of the tramp owner in the Shipping economy of the Empire. Not only was he responsible for the larger part of our steam tonnage, but we were dependent on him for the import and export especially of what may be termed the rougher class of bulk cargoes which are not as a rule suitable for liner business. It would be impossible for a country like the United Kingdom, with its enormous flow of trade, to depend wholly on regular lines with scheduled sailings. It is essential that there should be a large amount of " loose " tonnage capable of supplementing the liner sailings, and prepared to trade at short notice to any part of the world. Tet, precisely because of his ubiquitous presence, the tramp owner's difficulties are the least easily defined and met, and he is peculiarly susceptible to any serious modification of the conditions under which shipping is carried on. In an enquiry such as ours, which is bound to take account of particular trade routes, there is a real danger that the interests of the tramp owner may not appear to receive the full weight which they merit. 20. Particulars of the speed of vessels of foreign countries are printed in Appendix D (Tables III. (a) and (6) ). It will be seen that they do not on the whole compare favourably with British vessels in this respect. The proportion of Norwegian vessels of 12 knots and above was insignificant, but it is known that the number of Norwegian liners was small. It may be noted that only 23 per cent, of German steam tonnage was capable of maintaining at sea a speed of 12 knots or more, and yet the German trades were pre-eminently liner trades, their tramp interest being small. 21. No account is taken in this Report of Sailing tonnage. Its importance is small ami will become smaller with the advance of Science. The disadvantages of ships dependent on wind and weather are too obvioiis to need comment. Already the carrying power of sailing vessels of a given tonnage is incomparably lower than that of steam vessels of equivalent tonnage; and the error due to the omission of sailing tonnage from any estimate of the world's carrying power is almost negligible. In 1890 the United Kingdom possessed 3 million tons of sailing vessels ; by 1900 the amotint had declined to a little over 2 million tons, and by 1913 to 850,000 tons. A similar, though a somewhat less rapid, decline, due to the supersession of sailing craft by steam and other self-propelled vessels, is visible in the case also of other countries. Growth of the World's Shipping. 22. The quarter of a century or so preceding the war saw an enormous expansion of the world's sea-borne commerce and consequently of the world's tonnage which trebled in volume. In the 20 years up to the end of 1913 there were built some 25 million tons of steam shipping, of which two-thirds was built in the United Kingdom and over one-half for the British flag. The world's shipbuilding, of which particulars will be found in paragraphs 10-14 of our Interim Report on Shipbuilding and Marine Engineering, has increased progressively from some 700,000 tons net in 1894 to an average of about one million tons net a year in the period 1894- 1903, to 1% million tons net a year in the period 1904-1913 and to 2 million tons net in 1913 itself. These figures illustrate the growing demand for shipping that followed the world's economic expansion before the war. 23. In the period under review the steam tonnage of the United Kingdom more than doubled; but, even so, its rate of increase was proportionately not so rapid as that of certain other countries, notably Germany, whose steam tonnage increased fourfold. The fact that the volume of British shipping did not increase at the same relative rate as that of some other countries is not in itself disquieting and is explained on two grounds : — (1) It was not to be expected that the United Kingdom could maintain its great relative preponderance in the world's carrying trade in face of the enormous economic expansion taking place in such countries as Germany and the United States and the opening up of new markets in all parts of the world. It is not surprising that the smaller mercantile marines should have expanded more rapidly than the powerful mercantile marine of the United Kingdom, more especially in view of the maritime efforts of most countries in the period under review. It is noteworthy that, if actual as opposed to relative growth is considered, no foreign country even approximated to the United Kingdom. From statements appended to this Report it will be seen that the growth of Germany's mercantile marine was much more rapid in proportion than that of the United Kingdom; but whilst between 1900 and June, 1914, the United Kingdom added 43 million tons to its steam tonnage, Germany added only If million tons. (2; Great as was the expansion of the world's tonnage in the 25 years before the war, the expansion of the world's power of transportation was even greater owing to the superiority first of steam over sailing ships and then of improved types of steamships over the older types. The carrying power of the United Kingdom proportionately to the tonnage on the Register increased more rapidly than that of other countries. In any appreciation of the maritime position of this country before the war, this factor cannot be overlooked. R(iaii^^E^£ten£^oJ^the British Mercantil e J^Larvnp. ^- 24. The world's shipping was undergoing a continual process of renewal and replacement. Not only were existing ships repaired and even renovated so far as might be necessary, but new ships were continually being built which, on completion, were added to the Register of the several countries and went either to replace older vessels wrecked or broken up or to swell the tonnage at the world's disposal. For the world's tonnage taken as a whole, the increase in the volume on the Register in one year, as compared with a previous year, represented the amount of new tonnage added to the Register less the proportion of that tonnage needed to replace old vessels wrecked, broken up or otherwise destroyed. Thus, immediately before the war the average annual rate of expansion of the world's steam tonnage as a whole was rather less than 5 per cent, of the tonnage on the Register. The output of new tonnage amounted to rather over T per cent, of the tonnage on the Register; and it may therefore be inferred that about 2 per cent, of the world's shipping was every year lost or broken up. 25. Nearly one-half of the world's shipping, as has been above indicated, was on the Register of the United Kingdom. If the mercantile marine of the United Kingdom is taken by itself, it will be seen that the process of development in its case was widely different. In the years immediately before the war the steam tonnage of the United Kingdom increased by not more than 2\ per cent, annually. But, on the other hand, some 600,000 tons net, or nearly b\ per cent, of the total tonnage was every year removed from the Register for one reason or another. Two-thirds, or 400,000 tons, was sold to foreign flags, the amount accounted for by vessels lost or broken up averaging only 150,000 tons. On the other hand, additions to the Register of the United Kingdom in the years 1911-1913 averaged about 803,000 tons a year, of which 93 per cent, comprised vessels newly built. In Appendix D (Tab!es IV. (a) and (b) ) are printed Statements, showing in detail the number and net tonnage of steam vessels added to and deducted from the Register of the United Kingdom, during the years 1909-1915. 26. This fact of the transfer of large numbers of our older vessels to foreign flags was of great importance in cojanexion with the development of our mercantile marine, and it cannot be overlooked in the consideration of future policy. It means that our shipowners were afforded a ready market for the disposal of vessels no longer satisfactory to them as a preliminary to the purchase of new vessels better suited to their purpose, and that the merchant tonnage of foreign countries as a whole was older and therefore less efficient than the tonnage of the British mercantile marine. It illustrates the process of growth which continually kept the Britsh mercantile marine ahead of its rivals and, being the result of a spontaneous development, is * See Appendix D, Tables II (a) and (A). 17602 D 4 56 more conclusive evidence of high efficiency than could be afforded by any amount of written testimony. If further evidence on the subject is desired, it may be found in Tables No. 3 and No. 3a of Lloyd's Register Book, showing the number and gross tonnage of vessels added to and deducted from the merchant navies of the United Kingdom, France. Germany, Italy, Norway and Sweden in the twelve months ended June 30th, 1914. It should be borne in mind that a high percentage of new vessels in additions to tbe Register and a low percentage <'f vessels lost and broken up in deductions from the Register are signs of efficiency, whilst a low percentage in the former case and a high percentage in the latter may be indications of the reverse. The broad results of the tables in question are summarised below, the gross tonnage being converted to net tonnage for convenience:- — Tonnage added. Proportion of new vessels. 1 onuage deducted. ))roken up &c United Kingdom Germany France Italy Norway Sweden Tons net. 955,000 387,000 137,000 137,000 152,000 66,000 Per cent. 97 85 61 12 59 62 Tons net. Per cent. 621,000 24 86,000 33 38,000 58 32,000 66 37,000 49 17,000 53 Whilst the United Kingdom replaced about 5J per cent, of its tonnage in the year in question, Germany replaced less than 3 per cent., and the other countries concerned about 3J per cent. This fact explains in some measure the reason for the apparently more rapid rate of development of foreign merchant navies. 27. As a result of the process referred to it is not surprising to find that 85 per cent, of the tonnage on the Register of the United Kingdom at the end of 1913 had been built since 1895, including G8 per cent, built since 1900 and 44 per cent, built since 1905. The following table shows the distribution of our steam tonnage according to age at the end of 1913: — — Net Tons. Per Cent. 1 890 and earlier 1891 to 1895 1896 to 1900 1901 to 1905 1906 to 1910 Since 1910 ... Total 724,000 930,000 1,979,000 2,718,000 2,614,000 2,308,000 64 83 17-6 24-1 23-2 20-1 11,273,000 1000 Statistics of the age of the merchant tonnage of other countries do not on the whole compare favourably with those for the United Kingdom. 28. In the preceding survey no account has been taken of those personal factors which, whilst an indispensable element of success, are the njost difficult to appraise. The initiative and ente rprise of shipowners and shipbuilders were a vital clement in tbe building up of the greatest carrying trade that the world lias ever seen. A further element of success, on which it is impossible to lay too much stress, was the skill, efficiency and seamanship of the officers and men who manned and navigated our vessels in peace, and who during the war have \>y their courage and devotion ensured the maintenance of our seaborne trade. SECTION II.— THE EFFECT OF THE WAR ON BRITISH SHIPPING. 29. The future position of the mercantile marine is bound up so vitally with developments (hat have taken place during the war that we are obliged to indicate their principal features in broad outline. Only by a proper appreciation of our maritime position before t lie war and t lie changes that have set in during the war, is it possible to advise as to the measures necessary for the restoration of our position after the war. 30. At the outbreak of war the distribution of the world's steam tonnage among belligerent and neutrals was approximately as follows : — ^~~ Million Tons Net. Per lent. British Empire 124 48 Allied Countries* ... 44 17 United States and other American 1-7 7 Republics! < Hher Neutrals 3-7 14 Kneniv Countries ... 3-8 14 Tolul 26 100 * For convenience the following countries are included under this head :— France, Russia, Italy, Belgium, Portugal, Roumania, Greece. Japan, and China. It has been thought advisable for a number of reasons to include the Shipping of all the American Republics (some of which are now Allies) under a separate heading. 5? Thus the Allies had at their disposal over 60 per cent, of the world's shipping, whilst a further 20 per cent, was under Neutral flags. 31. In'addition there is gradually being impressed into service, with the progress of the war and the breach of relations between countries hitherto neutral and the Central Powers, a con- siderable proportion of enemy shipping laid up in Allied and Neutral ports. Although precise information is not available it is probable that over one-half of the total enemy shipping, or about two million tons net, was not able to reach enemy ports at the outbreak of war. The basis of this estimate is given below : — (1) According to Lloyd's Register of Shipping, the steam tonnage owned by the enemy countries on June 30th, 1914, was as follows: — Tons Net. Germany 3,096,000 Austria-Hungary 653,000 Turkey 68,000 Total ... 3,817,000 (2) According to estimates which have been made, the tonnage of enemy shipping laid up in Neutral. British and Allied ports at the beginning of the war was approximately as follows : — Tons Net. Neutral ports (including U.S.A. and Brazil) ... 1,420,000 British ports 303,000 Allied ports 265,000 Total 1,988,000 It- is inevitable that the growing tonnage stringency will compel neutrals, in self defence, to make use to an increasing extent of interned shipping. 32. On the other hand, a certain, though small, amount of British and Allied Shipping was in enemy porta at the outbreak of war and a further amount was immobilised for the time being in the Baltic or Black Sea. 33. The withdrawal from the world's carrying trade of the greater part of the enemy mercantile marines as well as of such Allied Shipping as found itself in enemy ports or in the Baltic or Black Sea at the outbreak of war would not have sufficed to bring about the serious tonnage stringency subsequently experienced. For it must be remembered that the demands made on tonnage by the enemy countries were much reduced, whilst better use was made of the actual carrying capacity of the merchant shipping available Three principal causes lay at the root of the tonnage difficulty, with each of which we deal in turn below : — (1) The withdrawal, for direct or auxiliary War Services, of a large proportion of Allied Shipping; (2) The enemy's War on Merchant Shipping ; and (3) The failure of this country to realise the situation and meet it by the full development of its shipbuilding resources. The Withdrawal of Shipping from Trade. 34. Heavy d emands have been made on Allied Merchant Shipping, and especially on the British Mercantile "Marine, for the provision of auxiliary vessels for the Allied Navies, whether cruisers, patrol vessels, mine sweepers or supply ships. It has, moreover, been necessary to maintain vast oversea expeditions, with the enormous equipment of modern war, in France, Gallipoli, Macedonia, Egypt, Mesopotamia and East and West Africa, whilst ensuring adequate supplies of all kinds for the United Kingdom and the other Allied countries. It is difficult even now to appreciate the magnitude of this achievement, which would have been impossible but for the size and efficiency of the British Mercantile Marine. But the strain has been severe; only about one-half our shipping has been available for the provisioning of this country and for our oversea trade, and our dependence on Neutral shipping increased up to the end of 1916. The following figures of the net tonnage of vessels which entered and cleared with cargoes and in ballast at the ports of the United Kingdom show that, whilst the relative proportion of British tonnage declined and that of Allied tonnage remained steady, the proportion of Neutral tonnage increased from 28 per cent, to 38 per cent, between 1914 and 1916 : — Flag. 1913 1914 1915 1916 1913 1914 1915 1916 •British tAllied JNeutral 93-2 14-8 36-9 Million T 78-7 13-5 360 ons Net. 54-9 11-9 37-7 48-5 10-5 36-8 Per Cent. 64 10 26 Per Cent 61 11 28 Per Cent. 53 11 36 Per Cent. 51 11 38 Total 144-9 128-2 104-5 95-8 100 100 100 100 • The amount of British Shipping captured or detained by the enemy up to the end of August, 1917, was about 125,000 toDS net. t For convenience includes throughout Russian, Belgian, French, Italian, Portuguese, and Japanese vessels. % For convenience includes throughout Swedish, Norwegian, Danish, Dutch, Spanish, and United States Vessels, and vessels of countries not separately distinguished in the Official Statistics. 58 During 1917 the position lias greatly changed, Neutral shipping having largely disappeared from the United Kingdom trade on account of the enemy's unrestricted submarine campaign, as the following figures show : — Statement shotoing the proportion of British and Foreign Vessels uhich entered with cargoes in the Foreign trade at pxirts of the United Kingdom during the gears 1915 and 1916 and in each month of 1917 from January to September. Proportion of which. Total British. Foreign. Per Cent. Per Cent. I'er Cent. 1915 (whole year) 100 68 32 • 1U16 (whole year) 100 67 33 1917 — January 100 71 29 February ... 100 82 18 March 100 85 15 April 100 74 26 • May 100 80 20 June 100 83 17 July 100 82 18 August 100 83 17 September ... 100 83 17 • The Enemy's War on Shipping. 35. Whilst desiring to avoid all discussion of questions affecting the conduct of the war, as falling outside our province, we are nevertheless impelled, owing to the far reaching effects of the submarine warfare on the subject of our enquiry, to trace very briefly its development and to indicate its effects in broad outline. 36. The enemy's war on merchant shipping has been marked by three distinct phases. The first was that lasting till the opening of the first submarine campaign in February, 1915. It was characterised by reliance primarily on commerce destruction by cruisers on the trade routes, and it virtually came to an end in December, 1914, with the sinking of most of these cruisers. The damage caused was comparatively trifling, our total war losses up to the end of 1914 having amounted to only about 150,000 tons net. 37. The second phase of the war on shipping opened after the failure of the enemy's cruisers to interrupt seriously the trade of the Allies. It may be said to have continued throughout 1915 and 1916 with increasing intensity towards its close, and it effected the destruc- tion of some 1"3 million tons of British shipping in those- years. This phase was characterised by the gradual development of the submarine into a vessel which could operate on the trade routes, and it foreshadowed the final decision of the enemy to risk the entry of the United States and other countries into the war against him in a supreme effort to destroy the Allies' sea communications . 38. The third period began in February, 1917. From that date the war on shipping was prosecuted with complete ruthlessness and with alarming success. The enemy seized on the two chief weaknesses in the Allied position : — (1) dependence on a limited number of ocean- going vessels (at the close of 1916 there were on the register of the United Kingdom only 3,475 steamers* of and above 1,000 tons net, of which probably not more than one-half were available for the supply of the Allied countries) ; and (2) dependence in large measure on Neutral Shipping. 39. Up to the end of August, 1917, we had lost from the beginning of the year over 600 of the larger vessels, and the rate of loss per month since February has averaged about 80 large vessels. The tonnage lost in the eight months was, therefore, about 1'7 million tons net. If the average monthly losses remain at about 80 large vessels, it would be necessary to contem- plate the annual loss of about 27 million tons net of shipping, or 27 per cent, of our ocean- going tonnage as it existed at the beginning of the year 1917. It will thus be seen that the New Submarine Campaign has succeeded in multiplying fourfold the rate of loss previous tc its inception. 40. The three phases of the enemy's attack on shipping had thus resulted in a loss of over 3 million tons net of British tonnage. The amount of Allied Shipping destroyed in the same period may be estimated at over 1 million tons. 41. The effects of the enemy's attack on shipping cannot, however, be determined from the point of view solely of the losses inflicted on British and Allied tonnage. In order to achieve his aim of destroying the sea communications of the Allies, the enemy wiis obliged to undertake a no less ruthless attack on neutral shipping, in order, by a policy of intimidation. Of 9,910,000 tons net 59 to prevent neutrals from trading for the benefit of the countries at war with him. The losses of neutrals since the outbreak of war have probably exceeded one million tons net, of which over 50 per cent, was destroyed since the beginning of 1917. Up to the end of August last, Norway appears to have lost nearly one-half of the tonnage she possessed at the beginning of the war. 42. The enemy has, therefore, been responsible for the loss since the beginning of the war up to the end of August, 1917, of over 5 million tons net, or about 2CLper_cent., of the worid's shipping. To this extent he has impaired the world's carrying power, and he has reduced proportionately the ability of the whole world to recover from the devastating effects of the present conflagration. Shipbuilding during the War. 43. . It is easy to see, in the light of war experience, that the unrivalled shipbuilding resources of this country should at the outset have been developed to the utmost limit of their capacity. Had this been done, not only would the tonnage situation have been materially relieved, but we should have been able to view the enemy's efforts with greater equanimity. As it was, the enormous demands made on the resources of this country in respect of men, guns, munitions and ships of war have caused the needs of the mercantile marine to be neglected to such an extent that the tonnage of merchant vessels launched in the United Kingdom declined from over one million tons net in 1914, which was almost a normal year, to 430,000 tons net in 1915, and to 340,000 tons net in 1916 — virtually the lowest point reached in half a century.* We were thus deprived of about 1| million tons net of shipping at the time of our greatest need. The efforts made during 1917 will not succeed in producing more than about twice the amount produced in 1916 — an output utterly insufficient in view of war losses. 44. We cannot but regret a sacrifice fraught with such grave consequences to our position as an Island Power. t In war the Mercantile Marine and the Fighting Navy are comple- mentary, and provision ought to be made for the maintenance of both, whether in respect of men or in respect of steel, no matter how great the demand for other purposes. We are aware that steps have been taken to increase the output of British yards, but those steps are, in our opinion, still inadequate to meet the needs of the situation. We see little prospect of the rate of output in this country even approximating in the near future to the current rate of war losses, apart altogether from the normal replacements for which some provision ought to be made; and, as a result, we view the future maritime position of this country with the gravest misgiving. 45. We have not been able to obtain detailed information with regard to the progress of shipbuilding abroad. It is probable, however, that the decline which took place on the out- break of war has now been more than compensated by the efforts notably of the United States, Japan and also Holland. In the years 1911-1913 the output of countries, other than, the United Kingdom and the enemy countries and the tonnage built on the North American Lakes, averaged annually about 420,000 tons net. The output in 1914 was normal, but in 1915 it declined to some 330,000 tons. The output appears to have risen again in 1916, and if the estimates are realised, the normal will be considerably exceeded in 1917, though not by an amount sufficient to counterbalance war losses. There seems, however, good reason to believe that in 1918 the output of tonnage in American yards may exceed that of this country, and to that extent further compromise our position as the Shipbuilders and the Carriers of the World. Other Factors. 46. Other factors have contributed to the general decline of our mercantile marine. They are of considerable importance though perhaps less fundamental than the factors considered above. We deal shortly with these below. 47. Repairs. — Great difficulty has been experienced as a result of war conditions, in securing timely repairs and overhauls for British vessels. In many instances surveys and repairs have been neglected for long periods, with the consequences inseparable fromsuch neglect. These consequences, which would be serious under normal conditions, have been aggravated as a result of the hard usage to which shipping has been subjected during the war. Whilst unable to form any estimate of the probable effect of this factor on the position, we are bound to point out that an appreciable part of our tonnage will be laid up for deferred repairs at the end of the war. 48. Restriction of Transfer. — Owing to the tonnage stringency and the necessity of retain- ing under British Control as many shipsas possible, the building of ships in British yards for foreigners and the sales of vessels to foreign flags have been virtually suspended since the outbreak of war. By virtue of the British Ships Transfer Restriction Acts, the transfer of * Between 1808 and 1910. The lowest point actually reached in thi, period was in 1880 when the output of tonnage in the United Kingdom declined to 332,000 tons. t We print in Appendix C. a statement showing the growth of the British Mercantile Marine during the Napoleonic Wars and after. The destruction wrought by French Privateers after the Battle off Trafalgar is notorious. Yet during the wars our merchant tonnage increased by about 40 per cent. 60 vessels to foreign flags cannot be effected except by licence of the Board of Trade, and such licence, we understand, is only given in rare and exceptional circumstances. The results may be summarised under three heads: (a) an important source of tonnage has been closed to foreign countries, which have felt with additional severity the effects of the enemy's war on shipping; (b) foreign countries have received an additional stimulus to develop shipbuilding resources of their own ; whilst (c) the general efficiency of the British mercantile marine has suffered through the retention on the Register of tonnage which would ordinarily have been replaced. 49. Type of New Tonnage.— In view of the heavy demand for tonnage, it has been decided to concentrate for a time on quantity of output; and there is little doubt that the tonnage produced recently in British yards has not maintained the same proportion of high class vessels as obtained before the war. We fear that much of the tonnage on our Register at the end of the war may be found inefficient froni the point of view of international com- petition and will have to be replaced by better class vessels and above all by vessels of types more suited to particular trades. 50. Requisition. — Ships actually requisitioned by the Government for war purposes have in many cases been rendered unsuitable for the trades in which they were formerly engaged. They have suffered 1 severely as a result of particularly hard usage sustained in the course of their war employment, and in many cases valuable fittings have been sacrificed. Before these vessels can resume their former trades they will have to undergo extensive repairs and altera- tions; and a considerable time will elapse before they are again available for the Empire's carrying trade. Loss of Trade During the War. 51. The growing shortage of tonnage resulting from the foregoing factors has produced the most serious consequences on our carrying trade all over the world, and more particularly on the Eastern trades. Vessels of a high class built for specialised trades have been lost or utilised for other purposes, and it has been necessary to withdraw ships in increasing numbers froni the more distant trades and to concentrate them on the trades nearer home in order that the populations of the Allied countries might continue to be fed and that raw materials, whether for warlike or industrial purposes, might be supplied for their use. 52. The following illustrations, which are by no means exceptional, show how the position of individual companies has been affected. Three of the best known Companies have lost respectively 160,000, 124,000 and 62,000 tons gross, including a large number of high class passenger and cargo liners which it will not be easy to replace. Other Companies have lost from one-third to over one-half of their pre-war fleets. Many anticipate serious competition, especially in the West Indian and Central and South American trades from the United States, and are apprehensive that it may be difficult, if not impossible, to recover their position. A Company trading to America, Africa and the East has lost nearly 100,000 tons of shipping and anticipates great difficulty in recovering its trade owing to foreign competition. In certain cases vessels built for highly specialised purposes have been lost; particularly those with refrigerated space for the Meat and Fruit trades. On all sides we have received evidence of services greatly reduced or even abandoned altogether! These illustrations could be multiplied indefinitely. 5o\ The stress of war has been felt with extreme severity by Companies trading to the East, where the withdrawal of shipping for the Atlantic trades has led to the encroachment of the Japanese Lines. One Company trading to China and Japan states that its sailings have been reduced from five to one per month and fears serious difficulty after the war owing to Japanese competition. The services of another Company have been reduced by two-thirds. The fleet of yet another Company, comprising specially built cargo liners, has been so depleted that the resumption of its fortnightly service to the East would be impossible. In the case of another Company, loss of tonnage and the necessity of deviation via the Cape have reduced sailings by 60 per cent. A very important firm anticipate the greatest difficulty in the resump- tion of trades carried on for over half a century which they fear will have to be abandoned or reduced drastically through lack of tonnage. Only one firm, who appear to have been more fortunate than their neighbours in securing new tonnage, do not anticipate serious difficulties in the future, but even here there is apprehension as to Japanese competition. Here, again, instances could be multiplied indefinitely: they illustrate the inevitable consequences of with- drawing high class vessels from long established trades for which those vessels were specially built, and the danger of thus leaving the door open to foreign enterprise which' it may be difficult hereafter to combat with success. 54. Similar conditions apply to the Companies which trade in home waters, where the increased competition of Dutch and Scandinavian vessels is already in evidence. 55. We shall have occasion in the Second Part of this Report to refer again to the position of the carrying trade in view of the above facts. They cannot be altogether neglected here because of their important bearing on the more immediate problems of reconstruction, to the solution of which our shipbuilding activity should be directed after the war in the best interests of the Nation. In this connexion we desire to call attention to a Memorandum on "Liner Services, War Wastage and Replacement" which has been presented to us by the Liverpool Steamship "Owners' Association and is printed as Appendix B to this Report. 61 Control of Shipping during the War. 56. Finally a factor, full of grave possibilities, has been introduced into a situation already sufficiently complex. The pivotal position of shipping during the war and the great rise in freights consequent on the tonnage stringency have been piit forward as the reason for the complete control of British Shipping by the Government. A measure of control was. undoubtedly necessary in the circumstances brought about by the war, but it is well to realise that such control has involved the abandonment of that freedom and elasticity which are the essence of enterprise. 57. Moreover, the necessity of financing the war has subjected British Shipping along with other industries to heavy financial burdens from which its neutral competitors have been immune ; and neutral shipowners have thus been enabled to amass enormous profits which will enable them after the war to build and run their ships in severe competition with ourselves Latterly, the position of the British shipowner has been further prejudiced by the general system of control instituted in the shape of operation on Government account, whilst, under the Finance Act of 1917, his liabilities for excess profits duty have been made more onerous than those of any other trader. 58. There is one direction in particular in which the policy of the Government is already producing consequences that appear to us full of danger. A number of important tramp owners are disposing of their tonnage to liner companies, since the former inducement to retain their investment in shipping no longer exists. While a liner company cannot go out of business without sacrificing the goodwill of services built up over a long period of years, no such con- sideration applies in the case of the tramp owner. A considerable part of his investment in shipping has probably already been liquidated by war losses; there is no inducement in the present rates of hire paid by the Government to retain what is left if an attractive price is offered ; and he is, moreover, uncertain as to the use or disposal of Government owned vessels after the war. The liner company, as it cannot build, may be compelled to buy tramp tonnage in order to have steamers of some sort to carry on its services after the war. The tramp owner, however, will not re-invest his money in shipping property until he believes that he will get a return commensurate with the risks of the business. Tlie confidence which is necessary to promote this belief is now unfortunately lacking, and there is, therefore, grave danger that, unless present conditions are radically transformed, many owners may go out of business. A large consequent shrinkage in the tonnage at the country's disposal would thus occur; whilst the nation would suffer the loss of the knowledge acquired by these men as a result of many years of experiment and experience. 59. We regard this whole question of control as fundamental and vital, and as far out- weighing in importance any other single question affecting Shipping after the war. We deal with it fully in paragraphs 70-75 below. SECTION III.— THE POSITION AFTER THE WAR. CO. Whilst the shortcomings of other important industries have attracted a good deal of attention, the great preponderance and high efficiency of our Shipping and Shipbuilding industries have passed almost unnoticed. Till recently the needs of the mercantile marine were neglected ; and no effort was made either to maintain its pre-war standard or to make good the continually growing losses caused by the enemy, who from the first realised the vital im- portance of merchant shipping to the Allies. Tet the British Mercantile Marine has been the pivot of Allied resistance throughout the war : it has enabled us not only to carry on the struggle, but gradually to mobilise the world's resources against the Central Powers — surely a great achievement for private enterprise. 61. The grave situation which has now resulted — the oiitcome of factors already described — needs the most careful handling if £he worst consequences are to be averted. There is a widespread fear in the Shipping and Shipbuilding industries that victory in the war may be followed by the maritime decline of this country, unless steps are taken at once to restore confidence among Shipowners. Before considering the measures that should, in our opinion, be adopted, it may be desirable to summarise, so far as this is possible, the position likely to obtain at the end of the war. 62. To frame any estimate of the probable position of British Shipping in relation to the world's shipping is a matter of great difficulty, in view of the uncertainty still affecting vital factors which it would be necessary to take into account, such as the duration of the war itself, the future progress of the enemy's submarine campaign, and of our counter measures, and the success of Shipbuilding efforts here and elsewhere. As regards the duration of the war, it is possible only to take specific dates in the future, e.g., the end of 1917 or 1918, and to base an estimate on the hypothesis that the war will be over at some time between those date9. The uncertainty affecting the other factors makes it sufficiently difficult to base an estimate on the end of 1918: to go beyond 1918 would be impossible. In Appendix A we print an estimate of the probable position at the end of 1917 and 1918 of the world's shipping and also of British Shipping. Tn many respects such an estimate must be guess work, hut *»«• have endeavoured to make it as reasonable as possible. 62 63. Despite all the existing restriction on building for foreign owners and on transfers from the British Eegister, and despite the addition to our Register of a considerable amount of enemy and other tonnage, the Mercantile Marine of the United Kingdom will have declined by the end of the year 1917 by nearly 2 million tons net, or abont 17 per cent. The world's shipping as a whole will probably have declined by about 5i million tons net. 64. Figures of tonnage actually lost represent, however, only one, though probably the most important, aspect of the matter. Not all the world's shipping is ocean-going, and the sum total of the world's available tonnage cannot be relied upon for the world's trade as a whole. It is an unfortunate fact that the destructive efforts of the enemy have fallen with great severity on vessels of 1,000 tons net and upwards, and that the position as regards the world's trade is in reality far more serious than is indicated even by the foregoing figures. It is improbable that more than about 80 per cent, of the world's steam tonnage as a whole (90 per cent, in the case of the "United Kingdom) was ocean-going — or some 21i million tons net in all. If, as is the case, the world's ocean tonnage has sustained practically the whole of the loss indicated, then it is necessary to deduct the 5J million tons not from 26A million but from only 2H million tons net available for the world's trade at the end of 1914. 65. Further, it cannot be assumed that during the years that the war has been in progress the world's tonnage would have remained stationary at 26i million tons net. On the contrary, at the normal rate of expansion, it would have amounted to at least 30 million tons net by the end of 1917 and to 31 million tons net by the end' of 1918. The expansion in progress before the war was due to the growing needs of the world's trade, and it is not possible, therefore, to assume that the amount of tonnage which would have sufficed in 1914 would still be adequate in 1917 or 1918. It is probable that the demand on tonnage may be greater immediately after the war than it would have been had there been no war. The exigencies of war demands have virtually brought about an industrial revolution in the United Kingdom, and to a certain extent in other countries; the United States have developed a large export trade which is not likely to cease altogether with the close of hostilities; the demand for foodstuffs and raw materials to replenish stocks in all the belligerent countries will be very great : the needs of the devastated districts, so far as they are not made good from enemy resources, will require the transport across the seas of large quantities of materials ; and, finally, the repairs and renewals necessary for the railways and industries of the belligerent countries which have been reduced to a minimum during the war. will undoubtedly entail great industrial activity for some time after the war. To meet these enormous demands there will certainly be available less than 20 million tons of shipping, of which probably 75 per cent, only will be ocean-going, instead of the 30 million tons which might in the normal course of development have been looked for; and of the available shipping a large proportion will be engaged for a considerable time in the homeward transportation of troops and stores of all kinds. 66. In the case of certain foreign countries, anxious to develop their merchant fleets, the evils of the tonnage situation have not been unmixed. Neutral shipowners, who have not been subject to the restrictions imposed on British shipowners, have been able to amass large profits which will enable them to engage in severe competition with the latter after the war. There has been great shipbuilding activity in foreign countries, notably in the United States, Japan and Holland. Japanese encroachment in our Eastern trades is already serious and will become more serious. Competition of the most formidable character is to be anticipated from the United States, where marine enterprise has received a great stimulus during the war from the acute tonnage stringency prevalent throughout the world and from orders on a large scale placed in American yards by foreign countries and not least by this country. 67. The result of the factors described above will be that the lead of this country in the world's carrying trade will, by the end of the war, have been diminished, if not lost; and unless British shipping is enabled at the outset of the Reconstruction period to take full advantage of the new situation, it may fall behind in the competitive race and definitely lose the ascend- ency which has been the keystone of the Empire and a condition of our industrial existence. 68. For these reasons we cannot agree with thoSe who hold that in the Reconstruction period the interests of shipping must be subordinated to those of industry on the ground that a strong industrial position has been the basis in large measure of our maritime strength. The latter proposition we do not challenge; in fact, in the second part of this Report, we emphasise its importance from the standpoint of a permanent commercial policy. But conditions at the end of the war will be wholly abnormal./ Our industrial position will be potentially very strong, whereas we shall be left with a mercantile marine quite inadequate to meet our needs or to recover its former share of the world's carrying trade. \ It will be necessary to make the restora- tion of the mercantile marine the first charge on the national resources unless our industry and our export trade are to be seriously crippled, and we are to suffer the consequences that would attend our decline to the level of a second-rate maritime power. 69. It is on considerations such as these that our recommendations for the reconstruction of the Mercantile Marine are based. We cannot insist too strongly on the overwhelming importance of this problem, which, in our opinion, far transcends every other problem of Reconstruction. 63 SECTION IV.— GENERAL RECOMMENDATIONS. The Control of Shipping. 70. The first and fundamental condition of Reconstruction is the early removal from Shipping of Government operation and control. Such control is not only alien to the British genius but always tends to paralyse individual effort. Especially is this so in an industry like Shipping, which is everywhere exposed to international competition and depends for success on elasticity and freedom from restrictions. Private enterprise, which has often saved the country in the past, built up the splendid mercantile marine without which this war could not have been carried on; and it is our conviction that any departure from a principle which has been of such material value to us, would be a dangerous experiment and a blunder of the worst kind. 71. We believe that the continuance of Government operation and control' is bound to extinguish private enterprise and lead to State ownership. It is inconceivable that if State ownership be substituted for private enterprise, the State should continue the carrying trade between one foreign country and another. It would inevitably have to confine its activities to regular services between different parts of the Empire and between the Empire and foreign countries; and the world's carrying trade in a wider sense, especially as typified by the world- wide operations of the tramp steamer, which has formed an integral part, if not the backbone, of British marine enterprise, would be lost to this country. 72. We are far from suggesting that there should not be some means of adjusting differences between shippers and shipowners when these differences touch vital questions of national policy. Such an arrangement, which would be quite distinct from Government control in any form, would be advantageous to all concerned,* but a condition of its success would be the recognition that there exists competition of services as well as of commodities, and that success in the former may be just as important to the nation as success in the latter. 73. The foregoing considerations have a most important bearing on the position likely to arise immediately on the conclusion of peace. There will be a world-wide shortage of tonnage, and the difficulties under such conditions will be very great. On the other hand, commercial and maritime influence will be in a state of fluidity; and that country will emerge strongest from the reconstruction period which has been able to make the deepest impress on trade con- ditions not yet crystallised. It is improbable that we shall at the end of the war maintain the lead in merchant shipping that we had at the beginning. The United States of America, formerly a great maritime nation, may possess a mercantile marine as great as, if not greater, than our own; whilst in the East Japan is making considerable progress. It is not right that we should disguise our apprehensions on this subject. The prospect, after our unparalleled exertions, is deplorable; but it need not cause dismay so long as the hands of British shipowners are not tied in competition with other flags. 74. It is essential that British shipping should be enabled to take full financial advantage of the period of trade activity which will certainly follow the conclusion of peace, and should not be set free only when the inevitable depression has set in and made trade impossible save at a loss. In the latter case we fear that British shipping would not recover its old ascendency over other flags. 75. Our recommendations on this subject are as follows : — - (1) The release of privately-owned shipping from Government operation and control should take place when the war comes to an end ; vessels still required for Govern- ment purposes of any kind should be chartered either at market rates or at agreed rates, based on market conditions. v (2) Any advantage enjoyed by foreign shipowners as regards rates should cease when the war conies to an end, if not earlier; and every effort should be made by the Government to see that, so far as possible, British Shipowners are not placed at a ; disadvantage with their foreign competitors in this respect. (3) Since large sums will be necessary for the restoration of the Mercantile Marine, the shipping industry should, for the remainder of the war, be placed on the same footing as regards profits and financial control as other industries, and special provisions with regard to Shipping, such as those contained in the Finance Act of 1917, should be repealed. (4) Immediate steps should be taken to bring the rates of hire paid by the Government to British Shipowners up to a level which will ensure a reasonable return on vessels built at present prices. For example, it is essential that the tramp owner should be in a position to obtain as good a return by retaining his investment' in shipping as by selling out and investing in Government Securities. (5) The Standard Ships built by the Government during the war and any other merchant vessels owned by the State should be sold under conditions of open com- petition to British Shipowners as they cease to be required for direct Government Services arising out of the war. * This question is more germane to the Second Part of this Report, where it is fully considered. {See pars. 268 & 362). 64 The Release of Shipping from War Service. 76. The release of skipping from Government control may be materially facilitated by a wise policy in regard to demobilisation. It is difficult to do more than outline the broad principles which should govern this policy: — (1) The release of shipping from war service should be rapid but also economical. It is of the xitmost importance that as large a proportion as possible of the world's shipping engaged in trade should be under the British flag at an early date after the war. (2) To hasten the process, Government-owned ships, including enemy ships, or even chartered Neutral ships, should, wherever possible, be substituted for privately- owned British tonnage in the conveyance of troops, stores and so forth. Alter- natively, Government-owned vessels should be chartered or sold to British Ship- owners whose vessels cannot be released. (3) In view of the severe depletion of high-class tonnage, vessels of the greatest value to trade should, so far as possible, be released first. The Surrender of Enemy Shipping. 77. In a memorandum, dated November 8th, 1916, on the position of the Shipping and Shipbuilding Industries during the period of Economic Reconstruction, this Committee deemed it essential that war losses must be made good from the Merchant Fleets of the Enemy, and that this must be made a condition of peace — a policy clearly contemplated in Resolution B (I) of the Paris Economic Conference. We see no reason to modify in any way this conclusion, which has, on the contrary, been reinforced by subsequent events and is supported by the unanimous opinion of the industries we represent. We would go further, and insist that no peace would be satisfactory which did not enforce this condition and inflict drastic and exemplary punishment for the enemy's crimes at sea. 78. The post-war aspect of the enemy's attack on Merchant Shipping cannot be over- looked, since the crippling of the world's power of transportation must impede Reconstruction for all countries alike. If, under such circumstances, the enemy were allowed to retain his ships, his submarine warfare, whatever its effect on the war, would have achieved an important post-war aim, by giving the enemy countries a great advantage over other countries, including ourselves, in the provision of tonnage for the needs of Reconstruction. 79. It is therefore, in our opinion, absolutely essential that the enemy countries should be required, as a condition of peace, to surrender to the Allies all their merchant shipping, whether in enemy ports at the close of hostilities or in ports of countries still neutral ; to forfeit all ships laid up since the outbreak of hostilities in porta of countries that have become involved in war or have broken off diplomatic relations with them; and to restore to the Allies all Allied shipping that may have come into their possession since the outbreak of hostilities. 80. We recommend further, that shipping taken over in this manner from the enemy should be utilised, so far as possible, to assist the general process of demobilisation, and to release for purposes of trade a proportion of the Allied Shipping absorbed in transport work. This is a bare measure of justice to those countries which have devoted a great part of their Maritime resources to the prosecution of the common struggle oversea. When Allied Shipping cannot for any reason be released, the shipowners concerned should be given the opportunity of chartering at the equivalent of market rates enemy tonnage which would temporarily replace their own. 81. As and when demobilisation is completed, all enemy vessels not already sold should be sold by auction in the various countries. The proceeds of the sales should be treated as part of the common war indemnity paid by the enemy countries and should not be retained by individual Allied countries. Money so realised should be used, in common with other sums realised from the enemy, for meeting Allied claims in general in accordance with their urgency or the priority agreed upon by the Allied Governments. 82. We attach less importance to the actual distribution of enemy tonnage among the Allies than to its removal from the enemy; and we should view with regret any inter-Allied jealousies on this subject which might impede the execution of measures so vital to all of ftm. We doubt for instance whether it would be possible in all cases to induce those countries which have made use of interned enemy tonnage during the war to forego their rights to such toBttftge : and the utmost that could be achieved would probably be to take account of tonnage so held in any allocation of further amounts of tonnage seized from the enemy. Subject to this reserva- tion, a scheme of distribution which would secure the allocation of enemy tonnage among the different Allied flags in some rough proportion to the losses sustained by them would offer man y advantages. If, however, this course should not prove practicable, we think that the enemy vessels should be sold by auction in the various countries to the highest bidder, so long as he is of Allied nationality and is abl« to furnish satisfactory proof that he is acting on behalf of Allied interests. 83. Neutrals and enemies should not be admitted to purchase; and some condition should be attached to the sales to prevent the retransfer of vessel- to enemy interests or to interests 65 controlled by the enemy for such period as restrictions may be imposed on enemy ships, shipping and trade in general. After the expiration of this period we see no reason why vessels formerly under the enemy flags should be treated differently from other vessels as regards transfer to other flags. It is no more objectionable that a former German vessel should be resold to German owners than that a British or French vessel should be transferred to the German flag. We deal with the question of transfer to foreign flags in a subsequent section of this Report. 84. It will be seen that we have not recommended any special allocation of enemy tdnnage to individual British owners whose vessels have been destroyed by the enemy. We are convinced that any attempt so to distribute a quota assigned to a particular flag would present insuperable difficulties. Vessels lost have been insured and the owners have therefore received some compen- sation for their loss, even if inadequate to defray the cost of building at enhanced prices. In other cases owners may have secured new tonnage and may not desire to utilise German ships which are perhaps unsuitable for their trades. 85. Naturally the foregoing recommendations are conditional on the attainment of com- plete victory in the war. But the seizure of enemy shipping is, in our view,- just as vital to this country as is the recovery of Alsace-Lorraine to France. For,, if after the war we are faced with German marine competition as well as with the intense competition of other countries, the restoration of our maritime position, which will in any circumstance be difficult, may provp impossible. Shipbuilding after the War. 86. The actual reconstruction of the mercantile marine must ceteris paribus depend ultimately on the efforts of our own shipyards and engine shops. As the efficiency of our mercantile marine has greatly deterioriated during the war for the reasons already set out, the process of reconstruction cannot be unduly prolonged without risk of disaster. "It is therefore essential that we should be prepared immediately on the conclusion of peace to complete annually not less than 2 million tons net of merchant shipping. 87. For the purposes of this shipbuilding programme it is most important that the requisite preliminary measures should be taken not when the war comes to an end, but imme- diately. We indicate their nature below and we recommend that steps be taken at once to devise the necessary machinery : — (1) It should be arranged that yards engaged on Admiralty work should be in a position to resume merchant work immediately the war is over ; (2) Skilled workers drawn from the shipbuilding and marine engineering industries for military, naval or auxiliary purposes should be returned to the industries immediately on the conclusion of peace ; and (3) Shipbuilders and marine engineers must be free to obtain the supplies of steel required by paying the necessary price without being handicapped by any system of priority certificates.* 88. In connection with the reconstruction of the mercantile marine it is most important to restore the high standard of pre-war efficiency ; and attention will therefore have to be paid to quality at least as much as to actual volume of output. For this reason Government control over the construction of vessels should cease immediately the war ends and the initiative as to the type of vessel to be built should be left to the shipowner in consultation with the shipbuilder, t Only the shipowner can determine the type of vessel that will suit his trade, as on him lies the responsibility of making that trade remunerative. 89. In particular we would call urgent attention to the necessity of building vessels suitable for the liner trades, which, owing to their specialised character, are far less easily replaced than general tramp vessels. The depletion of our liner tonnage during the war has been dispropor- tionately severe, and it will be literally impossible to resume our great carrying trade unless determined efforts are made immediately on the conclusion of peace to repair this wastage without prejudice to the actual quantity of output deemed necessary. It would be a mistake to make mere volume of output after the war the only consideration. The prosperity of the carrying trade has depended in large measure on quality nnd efficiency, and nothing but harm could ultimately result from the neglect of all factors but quantity. 90. We attach so much weight to the early provision of high class tonnage for the purpose of restoring our carrying trade that we strongly urge that even during the war some facilities should be afforded, as part of the shipbuilding programme, for the production of liner tonnage to the owner's own design, with such limitations with regard to speed and passenger accommodation as may be necessary to ensure rapid output and large carrying capacity. Whilst reluctant to hamper the difficult task of the Administrative Departments by any positive recommendations with regard to war policy, however closely allied to post-war considera- tions, we would suggest that these observations be brought to the notice of the Ministry of Shipping and the Admiralty. * It is anticipated that when the war comes to an end, the steel required for all commercial purposes will be available because the present great demand for shells and other munitions of war will then cease. \ In this connexion we desire to call attention to pars. 103-109 of our Interim Report on Shipbuilding and Marine Engineering. 17602 E 6b" 91. We now pass to certain subsidiary but important questions which, are closely bound up with other measures for the reconstruction of the Mercantile Marine. These questions are as follows : — (1) The extent to which shipbuilding for foreign flags should be allowed in British yards after the war; (2) The extent to which it is advisable to allow the transfer of British vessels to foreign flags after the war; and (3) The policy which should be adopted with regard to the enemy countries on these' two questions. The Foreign Market. (1) Shipbuilding for Foreign Oicners. 92. It has been suggested that in view of the enormous requirements of our own mercantile marine, it may be advisable to continue in force for a period after the war the existing restric- tion on the building in British yards of ships on foreign account. There is undoubtedly con- siderable apprehension among British shipowners that Neutral owners may after the war be in a position to outbid them in the placing of orders and so frustrate their endeavours to secure the new tonnage essential to them. In response to an enquiry on the subject made by this committee, shipowners have expressed themselves with few exceptions in favour of restriction, the majority recommending that no ships should be built for foreign flags until the requirements of the British mercantile marine are satisfied. Many suggest a specific period of restriction of 2, 3, 5 or even 7 years after the war. On the other hand many shipowners recognised the necessity of considering the matter also from the standpoint of the shipbuilding industry. ' 93. Shipbuilders, from whom we received evidence in connection with our Interim Report on Shipbuilding and Marine Engineering, were on the whole opposed to any Governmental restriction after the war on the building of ships for Allies and Neutrals. They feared that the only result would be to encourage foreign countries, such as the United States, Norway, Sweden, Denmark and Holland to set up yards of their own:* Though time and labour were required for this purpose, experience tended to show that once a yard was set up, work was found to keep it occupied even at unremunerative rates. Ultimately therefore the foreigner would undercut the British builder and take away work from him. It was pointed out that the importance of the foreign connexion lay not only in securing the ascendency of this country in shipbuilding and marine engineering, but even more in providing a valuable source of revenue in times of depression when orders from British Shipowners were scarce. In this way the British Ship- owner was assured of the maintenance of the shipbuilding industry; and it was moreover of great advantage to him that the turn-over of British yards should be as large as possible, since only so could the class of work supplied be maintained at the highest level and at the lowest price. 94. Nevertheless, there was a general feeling among shipbuilders that some kind of spontaneous priority should be given to British Shipowners in view of the heavy losses which they had suffered. It was thought that such priority would in practice be assured by the ultimate dependence of British Shipbuilding on British Shipping for the bulk of its trade. So great was the interdependence of the two industries that in the long run the decline of British Shipping, would react with disastrous effect on British Shipbuilding. Shipbuilders were generally of opinion that an amount of building on foreign account in excess of the pre-war level of 20 to 25 per cent, would be unsatisfactory from their own point of view, but they were of opinion that it would in fact be found to fall short of this level. 95. It will be seen that there is some divergence of view between shipowners and ship- builders on a matter of considerable importance to both industries. "We believe, however, that this divergence arises from a failure to realise that the interests of the two industries in this matter are really identical and from a tendency, natural enough after three years of wholly artificial conditions, to treat the symptom rather than to attack the root cause of the disease. 96. The magnitude of our shipbuilding effort after the war has a very important bearing on this particular question. If we are able, once warship construction has either ceased or fallen off considerably, to increase materially the output of merchant tonnage in this country as compared with pre-war standards, it is evident that the use of a small percentage of our resources for foreign building could not prejudice the reconstruction of our own mercantile marine. Noi only would the British Shipbuilder benefit from the high prices Neutrals will be prepared to pay, but the foreign shipowner will again look to British yards for new tonnage. Moreover, so far from pursuing a purely selfish policy, we should, whilst safeguarding our own require- ments, assist not only our Allies but also Neutrals whose losses have in many cases been due directly to their unwillingness to compound with the enemy. We cannot help thinking that in this matter, the broader our policy, the greater will be the ultimate benefit to this country. In the period of depression, perhaps of great severity, which will almost certainly follow an outburst of prosperity at the end of the war, British shipbuilders will again welcome foreign orders, and the maintenance of the foreign connexion may once more be of inestimable benefit to the industry. * Since this evidence was taken, the entry of the United States into the war has led to increased shipbuilding in that country. (57 97. We do not believe that foreign orders need cause alarm, so long as there is simultaneously a proportionate demand from British shipowners. We are convinced that such a demand will arise, if the shipping industry is assured of freedom from Government Control mi 1 he conclusion of peace. Otherwise the natural demand for new tonnage on a large scale will probably be paralysed. Of this we have had conclusive proof in the course of our investi- gations. When taking evidence from Shipbuilders and Marine Engineers in the Winter of 1916-17, we were assured that there were sufficient British orders to keep yards occupied for a period of from two to three years after the war, the estimates being of course based on the pre-war standard of production. We understand, however, that since then the increased control of shipping and the placing of Government orders for standard ships have led to grave uncertainty as to the future of the industry and to the withholding of orders by British owners. The post-war market is thus left more open to foreign, and especially neutral, competition, which, we understand, is already causing embarrassment to British shipbuilders. We are convinced that the only effective measure that can be taken to meet this danger is a specific assurance to both industries as to the early removal of Government control after the war. 98. No restriction on the building of ships for foreign owners can possibly remedy the evil consequences of a dearth of British orders, if such a dearth is due to the decay, temporary or permanent, of British marine enterprise, whether the result of direct Government action or of other circumstances connected with the war. On the contrary, to prevent building for foreign flags under such conditions would prejudice still further our shipbuilding industry and ensure its transference to other countries. At a later date the restoration of British shipping would be impeded by the absence of a sufficient shipbuilding industry in this country. 99. The relative importance of foreign orders after the war cannot be tested from the business of individual firms but must be determined from the business of the whole shipbuilding industry of this country in the aggregate. In other words the test should be whether the proportion of tonnage under construction in the United Kingdom as a whole that is intended for foreign owners exceeds a proportion deemed reasonable, and not whether the proportion being built by an individual firm exceeds that ratio. We have found that certain firms have a large foreign connection, whereas others build entirely for British shipowners. It would therefore be manifestly unfair to expect all shipyards without exception to confine their foreign building to a standard recommended for adoption in the aggregate; regard must be had to pre-war business and other special circumstances affecting each individual case. 100. Although the relative position of the British Mercantile Marine will undoubtedly be determined in large measure, as in the past, by the efficiency of its units, it does not follow that the interests of individual owners immediately after the war may not best be served in some cases by the retention for a period of older vessels built at pre-war prices rather than by the purchase of new tonnage built at the high prices likely to prevail for some time after the war. It is impossible for us to advise on this question which must, in our opinion, he left to the discretion of the shipowner, who should be the best judge of his own business. It would, however, be a mistake to restrict building for foreign flags if for the reason indicated there should be any temporary lack of British orders. Any tendency of this kind is bound to adjust itself in the long run so long as shipping remains as attractive an investment to British capital ns to foreign capital. 101. The foregoing observations have been based in the main on an assumed deficit of British orders. W T e have however no reason to fear any such deficit if the restrictions on shipping are removed ; and it is necessary, therefore, to consider the possibility of an excess of British orders accompanied by severe comjietition for foreign, and especially neutral, ship- owners who may be in a position to outbid the British owner owing to profits accumulated during the war, and so to force up prices to his detriment. 102. It is possible that the expansion of our shipbuilding resources may serve to meet all or most of the demands likely to be made on our yards, always allowing for the usual practice of "booking" orders which cannot be executed immediately. In that case the normal demands of the British Mercantile Marine, accentuated as they would be* by the war wastage which has fallen on it with exceptional severity, should serve to maintain approximately the former balance between British and foreign ordei's. It is true that prices may be forced up, but it is difficult to see how State action, with its attendant disadvantages, would prevent this ' contingency; and the competition of foreign yards, which have been much expanded during the war, would necessarily operate as a check on the undue inflation of prices in this country. We therefore deprecate any Government intervention in regard to prices. 103. It must on the other hand be recognised that the expansion of the world's ship- building resoiirces, including our own, may not suffice to meet the demand for new tonnage during the period following immediately on the conclusion of peace. In that case, if the British shipbuilder were so shortsighted as to make the price offered from any quarter the only consideration affecting his action, the proportion of tonnage under construction for foreign account might be abnormally high. Shipbuilding and Marine Engineering witnesses were, however, generally agreed that it was in their own interest to render all possible assistance to British shipowners in the restoration of their fleets by voluntarily giving them some measure of priority in the execution of their orders, but that, if British orders were not sufficient to occupy all the available slips, there should be no obstacle to executing foreign orders. They were, however, strongly of opinion that any priority accorded by their industries to the British ship- owner should be Granted voluntarily and in no circumstances as a result of Government action. 17603 E 1 68 104. We are now able to state the conclusions we have reached on this subject : — (1) If the recommendations made in paragraph 75 with regard to release from control are carried out, the demand for new tonnage by British owners will be relatively as great as the demand by foreign owners. (2) Subject to the same proviso, British shipping will retain its attraction as an invest- ment for British capital, and such new capital will be attracted to the industry as will be required to supplement the profits and insurance moneys which would normally be reinvested. (3) No restrictions on the acceptance of foreign orders should therefore be imposed by the State on Shipbuilders and Marine Engineers, as such restrictions would be unneces- sary and could only damage the Shipbuilding and Marine Engineering industries without in the long run benefiting Shipowners. (4) If at any time when the demand for shipping is active it should be found that the amount of building for foreigners shows a tendency to rise, the deduction must be that all is not well with the shipping industry. The root cause of the disease should then be discovered and removed. 105. We should, however, approve of any measures which the Government may decide to take for the purpose of safeguarding the position until the action we have recommended in par. 75 has had time to take effect. (2) Sales of Vessels to Foreign (other than Enemy) Flags. 106. It was seen* that the transfer of vessels from the British Eegister to Foreign Flags formed an important feature of our maritime development before the war and was incidentally an index to the relative efficiency of the British merchant fleet as compared with those of other countries. To the individual shipowner there was thus secured a ready means of selling vessels no longer serviceable and of assisting the purchase of new vessels in this country. We consider it most important that the conditions underlying a process of such value to British Shipping and shipbuilding should be restored as soon as possible after the war. These conditions of course pre-suppose some kind of equilibrium between tonnage on the Register and the trade to be done, which allows the replacement of less efficient by more efficient vessels apart from the normal replacement and expansion that took place in all merchant fleets before the War. ^ In view, however, of the grave depletion of tonnage that is still taking place, there is a general feeling among shipowners that measures may be necessary to secure the retention on the Register of all vessels under the British Flag. 107. It is clear from an enquiry made by this Committee that the majority of the Steam- ship Companies, with, however, a few important exceptions, favour restrictions on the transfer of British vessels to foreign flags, for a period up to five years after the end of the war. It has, however, been suggested that such restrictions should not apply to vessels more than 20 to 25 years old. The recommendation of the Joint Committee of the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association on this subject is as follows : — " In view of the war wastage to which the British Mercantile Marine has been subjected, we are of opinion that in the national interest the existing prohibition against the transfer of British ships to foreigners should be continued for a fixed period, which should not be less than five years after the termination of the war." 108. We have given careful attention to these views but the following considerations should not be overlooked : — *7_) (1) If there should be such a shortage of tonnage as seems to be anticipated, it is most improbable, at the high rates likely to rule and assuming that our recommendations with regard to the removal of Government control are carried into effect, that there would be any considerable transfer of vessels to foreign flags. The British ship- owner would be anxious not only to retain, all vessels actually in his possession but also to purchase more ships either at home or abroad. (2) If on the o.ther hand the shortage of tonnage should be less serious and it became clear that British shipowners were disposing of their old vessels in order to secure vessels more suitable to their trades, it would be a grave mistake to place any obstacle in the way of a movement so advantageous to the British Mercantile Marine. It would be an injustice to the shipbuilder and it would hamper the shipowner in his legitimate business. (3) If, however, owing to irksome restrictions of one kind or another, British ship- owners showed signs of wishing to sell their ships in order to go out of business, it is difficult to see how such a process could be arrested (and not merely post- poned), except by the removal of the restrictions. (4) The figures of the withdrawal of ships from the British Register by sales to foreigners, taken together with the figures of additions to the Register, are the thermometer by means of which the health of the Shipping industry can be tested. If we have fears for the health of the industry in the future, it seems idle to suppose that we can cure the disease by breaking the thermometer. 109. By virtue of the British Ships Transfer Restriction Acts, it will not be possible for a period of three years after the war to transfer any British ship to a foreign flag without a licence. Because of the strong views on this subject held by many Shipowners, we do not recommend the repeal of this legislation, especially as the fact of licensing will permit a careful * See pare. 25 and 26. 69 watch to be maintained over the process of transfer. We believe, however, that when the bulk of the privately-owned British tonnage now employed on direct Government service has been returned to the owners, it will be desirable to relax considerably the stringency of the licensing system, with a view to the establishment of free licensing as soon as possible. (3) Building for, and Sales to, Enemy Owners. 110. Shipbuilding witnesses who gave evidence before this Committee, were somewhat divided in their views as to the attitude which should be adopted after the war as regards the building of ships for enemy flags. A number of witnesses, who were opposed to restrictions on building for foreign owners generally, offered no objection to, and even favoured, the imposition of such restrictions in the case of enemy owners. One witness was inclined to consider the question as largely academic; he did not think that building for the enemy was at all probable for a considerable time after the war, and that the matter might well be left to the discretion of the British shipbuilders. 111. This question cannot be separated altogether from that respecting the transfer of vessels to the enemy flags. The view generally held in the industry is that, if restrictions are to be maintained on the transfer of British vessels to foreign flags generally, they should apply a fortiori to transfers to the enemy flags. 112. Certain articles in the German press have recently betrayed considerable appre- hension with regard to Germany's maritime future, and legislation has been introduced for according State assistance to German shipowners, not only for increased building at home, but also for extensive purchases abroad, in order that the German mercantile marine may be reconstituted as early as possible. If our recommendations with regard to enemy ships are carried into effect, we should see little reason to fear German Marine competition for a con- siderable time after the war. It is generally our view that the indemnities in cash and kind that the enemy countries should be forced to pay to the Allies should be on a scale sufficient to discourage State enterprise in Germany for future aggrandisement. 113. It appears to us useless to suggest special restrictions on the building of ships for enemy owners, or the transfer of ships to the enemy flags, unless all the Allies, including the United States, are prepared to exert pressure on Neutrals to the same end. If such measures are decided upon for defence reasons as part of a larger economic policy directed against the enemy countries during the early Reconstruction period, the building of ships in the Empire for enemy owners and the transfer of vessels to the enemy flags should be prohibited for such time as these measures are enforced. Otherwise, so far as this country is concerned, the same result could very largely be achieved by British shipbuilders and shipowners themselves giving a preference to all flags over the enemy flags, both in the building of new tonnage and in the transfer of existing vessels. We have reason to believe that such an arrangement would accord with sentiment in the industries. Conclusion. 114. It is essential that there should be the closest consultation between the Government and the industries in any measures taken during the period of demobilisation. Such measures should be entrusted, so far as possible, to the industries themselves, and the intervention of Government Departments should be avoided. It should be the primary function of the Govern- ment to further the reconstruction process by removing difficulties and not to impede it by imposing restrictions. The country's ability to recover from the effects of the war will ultimately depend on its oversea trade and therefore on its shipping. 115. It is our profound conviction that the best conceived, measures for the restoration of the mercantile marine must fail unless it is freed from Government control when the war comes to an end. We have endeavoured to set out the fundamental principles on which in our opinion the Government will have to base its policy with regard to shipping, if the British sea carrying trade is to prosper in the future as it has in the past. We believe that an announce- ment by the Government that it accepts these principles as sound would do much to dispel the paralysing uncertainty from which the industry is now suffering. We are fully alive to the fact that a complete change of policy, such as we recommend, must be carried out step by step with careful regard to the actual conditions which exist at every stage. Action in certain directions could be taken at once; in others it will be necessary to wait until the war is over. The' main point is that these steps should steadily tend in the right direction. 17602 E 3 PART II. International Competition and Navigation Policy. INTRODUCTION. 116. In the first part of this Report we considered the effect of the war on the position of tbs British mercantile marine, and we dwelt on the gravity of that position as a result parti- cularlj of the enemy's submarine campaign and our neglect of merchant shipbuilding. From all points of view, that must be regarded as the most important part of our enquiry- For, unless action is taken to meet the situation we described, no measures, however well conceived, after the transition period could avert a serious decline in the maritime influence of this country. Our investigation would, however, be incomplete without a careful survey of the carrying trade and without some indication of the general principles which should, in our opinion, guide the navigation policy of H.M. Government when stable conditions return. Such a policy cannot be founded on a war situation which changes from day to day, but its basis must be sought in economic forces and tendencies, which are more or less constant. We shall accordingly devote this part of our Report mainly to an examination of the sea-carrying trade under the conditions which prevailed before the war; and we shall frame our recom- mendations as to permanent policy in the light of this examination. 117. The conclusions reached and the recommendations made in the succeeding sections are based on the assumption that effect will be given in principle to our recommendations as to the reconstruction of the mercantile marine. On no other assumption could a consideration oi permanent navigation policy, in our opinion, possess any value. At the outset of this Enquiry it is advisable, therefore, to restate in general terms our previous conclusions: — (1) The one fundamental condition of our maritime recovery is the early release of shipping from Government control, the maintenance of private enterprise in shipping and shipbuilding, and the consequent repudiation of any scheme of State ownership in either industry after the war. (2) Essential to the resumption of our old position in the carrying trade are: — (a) The seizure of enemy shipping; and (&) the prosecution of an energetic shipbuilding programme both during and after the war. 118. Before examining the position of the carrying trade it is desirable, in view of the intimate relation which has. always subsisted between industry, trade and shipping in the economic history of this country, to make a few introductory remarks with regard, firstly, to our commercial and maritime policy in the past and, secondly, to the general industrial position of the United Kingdom at the outbreak of war. Neither of these questions falls properly within our reference, but both have a very important bearing on the subject before us. 119. The Mercantilist policy, which obtained from the close of the sixteenth century down to the time of the Industrial Revolution, coincided with a long series of exhausting wars during which this country gradually rose to the position of the foremost power in Europe. Its object was the development of industry and the creation of a strong self-sufficing State. To this end were subordinated not only the interests of the Colonies, but also individual English interests which happened to conflict with it. On the maritime side this policy found expression in the Navigation Laws, the provisions of which were complex and subject to modification as conditions changed or as loopholes were discovered. Like all drastic rules, they lent themselves to evasion and the rigour of their enforcement secm> to have varied according to circximstances ; but such measures should no doubt be judged by their broad results rather than by individual defects. Although a detailed examination of the Navigation Laws i> hardly germane to this enquiry,* it is important to note their main principles, which were RS follows: — ■ (1) Foreign vessels were excluded from the Inter-Imperial and coasting trades. (2) Foreign vessels were prohibited from importing into the United Kingdom or any British Possession in Asia, Africa, or America, any goods unless such goods were (a) the produce of the country to which the importing vessel belonged : + and (b) imported in >uch vessel direct from the country of origin. (3) The indirect importation into the United Kingdom via European countries of the produce of Asia, Africa, or America was prohibited. * A good deal of information on the subject is obtainable from the Parliamentary Return (No. •";!* of 1902) which contains a Reprint of the Ap]>eiidix to the Fifth Report of the Select Co'iimittee on the Navigation Laws, 1*47 f la the case or import* into the Dinted Kingdom from European countries, tbis provision applied only to the principal staples. 71 120. These .Rules, as is well known, were aimed to a large extent at Holland, which had established important carrying and entrepot trades. Dutch vessels, besides being excluded from the Inter-Imperial and coasting trades, were unable to carry to the United Kingdom for con- sumption the produce of third countries whether shipped direct from those countries or in- directly after transhipment in Holland. Further, by virtue of principle (3) the produce not only of the British but also of the Dutch Possessions in the East was excluded from the United Kingdom, if it had previously been brought to Holland for distribution. It is interesting to note that one result of the Navigation Laws seems to have been increased Dutch competition in the North Sea and Baltic trades — a result which is not surprising in view of the fact that Dutch shipping, excluded from some of its wonted activities, was driven to seek an outlet elsewhere. British maritime influence in these trades suffered a corresponding decline, a fact which has led some writers to question the success of the navigation policy. It is, however, probable that the early diversion of British shipping to the ocean trades, with their wide possibilities of development, was an important contributory cause to its great expansion after the Napoleonic wars. 121. Towards the close of the eighteenth century, industrial discovery, and especially the use of steam power, gradually revolutionised economic conditions in this country. Abundant supplies of coal and iron near the sea-coast enabled the counti-y to reap the full benefits of the new discoveries and to remain for a long period the most important, if not the only, industrial power in the world. During the period of peace which followed the Napoleonic Wars, the population grew rapidly, the national wealth increased to an enormous extent and there gradu- ally arose the modern position of the United Kingdom with its great dependence on the outside world for food and raw materials and for the marketing of its manufactured products. In such circumstances restrictions on trade, as on sea transport, were felt to paralyse the industrial expansion of the State, and were gradually removed. The final repeal of the Navigation Laws did not in fact take place till 1849*; but their enforcement had little by little been relaxed as a result of numerous concessions made to foreign countries on grounds of reciprocity or otherwise. t , 122. The modern position of the United Kingdom as the great shipowiiing and ship- building country of the world dates from the substitution of steam for sailing power and of iron and steel for wood. In 1850, when there were still few steamers, the total mercantile tonnage of the Empire amounted to rather more than four million tons net, and that of the United States, including only vessels registered for the foreign trade, to as much as 1§ million tons. Fifty years later the tonnage of the Empire had grown to over lOi million tons net, whilst that of the United States had declined to less than one million tons. Similar tendencies were apparent in the shipbuilding of the two countries. For, once the discoveries of the industrial revolution were applied to the instruments of sea transport, the resources of the United Kingdom in coal and iron nnd their proximity to good shipbuilding sites furnished the means for a great expansion; whilst the energies of the United States were absorbed in the development of their vast Western territories. 123. In the period up to the outbreak of war we were the ocean carriers of the world. Our carrying trade was dependent on three main factors: — (a) The strong industrial position of the United Kingdom itself, based on free access to the markets of the world for foodstuffs and raw materials ; (o) a world-wide Empire with well-distributed coaling stations and ports of call ; and (c) a large coal export trade which provided ships with outward freights which would otherwise have been lacking. 124. These factors ensured for shipping low cost of construction and of operation, and gave [the Tinted Kingdom a natural advantage ove^ every othervcountry in the ocean carrying trade. 125. An important element in the maritime position of this country was the readiness of foreign countries to participate in the benefits of the efficient and economical transport system which it provided. Till twenty-years ago a great part of the trade between foreign countries was carried in British ships, and even at the outbreak of war about thirty per cent, of this trade was so carried. 126. Our maritime policy was the corollary of these factors. Foreign flags received equality of treatment with our own vessels in British ports, and we aimed at securing similar treatment for British shipping in foreign ports. * The Coasting Trade of the United Kingdom was not in fact opened to foreign flags till 1854. f It is interesting to note that the first important breach in the Navigation Laws war, made in favour of the United States, then our chief maritime competitor, a fact which no doubt facilitated the grant of concessions to other countries. ' Before the outbreak of the War of Independence, the trade of the American Colonies was regulated as follows : — (1) They could neither import nor export in any but British vessels ; (2) They could not export the most important articles of their produce to any parts of Europe other than Great Britain ; (3) They could import no goods from any part of Europe other than Great Britain. After the War of Independence vessels of the United States were precluded from trading with the British Colonies in North America. Such a position could not be maintained indefinitely. 17602 B 4 72 127. Jf we look to the future, the prosperity of British shipping is seen to depend on two conditions of vital importance : — (1) The maintenance and extension of British industry; and (2) the development of the resources of the Empire as a whole. In the Empire we possess resources at least equal to those of any other nation, and their development after the war should give a powerful stimulus to British industry, and therefore to British shipping. 128. Although this Committee is not competent to consider in any detail the general position of British industry, the matter is so intimately connected with the future of shipping that some reference must be made to it. In the past the maritime ascendency of this country has depended primarily on the industrial strength of the United Kingdom with the great flow of trade to which it gave rise; and unless similar conditions obtain in the future, it will be difficult to maintain an adequate mercantile marine. It is indeed possible to contemplate the existence of a great carrying trade without a strong industry ; but such a trade would necessarily be precarious, dependent as it would be on the needs of other countries, and, therefore, on their goodwill. 129. The period before the war was marked by the industrial rise of foreign countries, some with more rapidly growing populations and with resources in certain directions greater than those of the United Kingdom. It was not to be expected, therefore, that the United Kingdom could have maintained indefinitely its unique position in the world's markets : and, when due allowance is made for this factor, it must be recognised that the strength and vitality of British industry both before and during the war have been remarkable. 130. Defects there undoubtedly were, some perhaps inevitable, others capable of remedy. The preponderance of the United Kingdom appears to have lain chiefly in the old staple trades. In some of the newer branches of production our manufacturers seem to have been surpassed, and sometimes far surpassed, by those of Germany and the United States. Yet these branches will be vitally important in the future, and it is to be hoped that British industry will devote to them a full share of attention, besides developing the older trades in which it naturally posses-es a great advantage. The, position of certain important British industries lias formed the subject of investigation by Committees specially appointed for the purpose, and it would be improper for us to discuss the causes of shortcomings in those industries or to indicate the means by which they may be remedied. 131. It is for all the industries of this country to perfect their organisation, to ensure the employment of the most up-to-date methods and to make full use of scientific and industrial research in order that they may meet on equal terms the intense competition that is certain to arise after the war. The success of their efforts is of deep import to British shipping, which will in its turn have to meet the enhanced competition of foreign flags throughout the world. SECTION I. THE CARRYING TRADE IN 1913. Introductory. 132. A detailed examination of our carrying trade before the war is a necessary pre- liminary to the consideration of future policy. Such an examination is at once simple and complex. It is simple because our one really formidable competitor was Germany, and German competition hardly began before 1895. The examination is complex, firstly, because the carrying trade is international and we are, therefore, concerned with the trade of all countries; secondly, because shipping is affected by the volume rather than the value of trade, and statistics of volume are unsatisfactory; and, thirdly, because navigation statistics are very inadequate and can only be used with reserve and for rough approximations. • 133. We recognise the difficulty of compiling navigation statistics of real value, without imposing a disproportionate burden on the shipping industry; and we have found that the statistics of this country on the whole compare favourably with those of other countries. It is, however, a fact that we are not in a position to determine from them with any degree of accuracy the proportion and kind of trade carried by British vessels in any part of the world. When vessels are recorded as having cleared with cargoes, we do not know how much cargo they loaded or of what description; or, when they are said to clear for a particular destination, we do not know how much of their cargo may be discharged en route. 73 134. Since the need for shipping arises primarily in connection with the demand for food and raw materials, our survey of the carrying trade is confined largely to the sea-borne carriage of these commodities. Their bulk is far greater than that of manufactured articles. From the shipping standpoint commodities may be classified in three groups : — (1) Rough, low priced commodities, such as coal, timber, ores, stones and slates, fertilisers and the like. (2) Bulky commodities of medium value, such as grain and other foodstuffs, textile materials, crude metals, oleaginous produce, petroleum, hides, skins and leather, and the more bulky manufactures. (3) Fine goods of all kinds which are of high value in relation to their bulk. The groups, of course, shade off into one another, but the classification is useful for the purposes of this Report. 135. Since an analysis of the carrying trade can only be valuable if it bears some rela- tion to the great trades and trade routes, we have adopted certain broad divisions based mainly on geographical considerations. We have, however, not lost sight of political boundaries. Statistical difficulties have added certain complications- Thus no distinction is made in the official statistics between imports from North and South Russia, though we know that most of the grain came from the Black Sea and most of the timber from the North. Again, we do not know the distribution of imports between the Atlantic and the Mediterranean ports of France and Spain; and it is difficult to draw any distinction between the Pacific and the Atlantic coasts of America. 136. The world's sea trades from the starting point of the United Kingdom fall into two groups, which are fairly well defined. There are (1) the European and Mediterranean trades, viz., the trades with Northern Europe and the Baltic; with countries fringing the North Sea; with the Atlantic ports of France, Spain and Portugal; and with Mediterranean countries. There are (2) the trades with countries outside Europe and the Mediterranean, which throughout this Report we describe as the Ocean Trades. The divisions adopted in this section are as follows : — (1) The European and Mediterranean trades: — Russia. Scandinavia, i-e., Sweden, Norway and Denmark. Central Europe, i.e., those countries whose outlet is principally on the North Sea, viz., Germany, Holland, Belgium and Switzerland. Western Europe, i.e-, the United Kingdom, France, Spain and Portugal, including the Mediterranean ports of France and Spain and Northern Africa as far east as, and including, Tunis.* The Mediterranean, i.e., Italy, Austria-Hungary, the Balkan States, Turkey and Egypt, Tripoli and the islands in the Eastern Mediterranean. (2) The Ocean Trades : — North America, i.e., Canada, Newfoundland and the United States. Central America, i.e., the Islands in the Caribbean and the districts on the Main- land from Mexico to Colombia, Venezuela and Guiana inclusive. South America (except Colombia, Venezuela and Guiana). West and South "Africa (including the Union of South Africa). Trades East of Suez, i.e., Eastern Africa (not including the Union of South Africa), Persia, India, Ceylon, the Malay Peninsula, Siam, the Dutch East Indies, the Philippine Islands, China and Japan. Australasia, i.e., Australia, New Zealand and the islands in the Pacific. The British Share of the World's Carrying Trade. 137. In Appendix E we print an estimate of the proportion of the world's trade which was carried in British ships. Our conclusions on this subject are summarised below. In 1912 the world's sea-borne trade, as represented by imports into all countries, probably amounted in value to about £3,400 million, of which £510 million (or 15 per cent.) comprised the British Inter-Imperial Trade. The trade between the Empire and foreign countries amounted to over £1,300 million (or 39 per cent.). Thus the trade of which one or both terminals were within the Empire aggregated to not less than 54 per cent, of the whole. The trade of which one terminal was in the United Kingdom was about 40 per cent, of the * The bulk shipments of iron ore, esparto grass and phosphate rock from Algeria and Tunis bring these regions into close relation with the trade of Southern Spain, and we have, therefore, deemed it advisable to include these regions in the trade of " Western Europe." For convenience Morocco, Gibraltar and Malta are similarly included. 74 world's sea-borne trade — a fact which shows the importance of'the United Kingdom to British shipping. 138. We estimate that British shipping carried nearly £1,800 million or about 52 per cent, of the total sea-borne trade of the world, including 92 per cent, of the Inter-Iiuperial trade, 63 per cent, of the trade between the Empire and foreign countries, and 30 per cent, of the trade between foreign countries. The proportions were distributed as follows: — £ Million. Per cent. Between the United Kingdom and the British Oversea Possessions ... ... ... ... ... ... 393 Between the British Oversea Possessions ... ... ... 78 Between the United Kingdom and Foreign Countries ... 627 Betw-een the British Oversea Possessions and Foreign Countries ... 205 Between Foreign Countries ... ... ... ... ... 465 Total ... 1,768 94 85 66 55 30 52 | 92 139. We believe that the actual volume of the world's sea-borne trade carried in British ships was about one-half of the total volume; but the weight of commodities shipped from one country to another cannot be determined with accuracy- It probably amounted to between 250 and 300 million tons, of which more than one-half appears to have originated in the Empire, the figures being swollen by the large export of coal from the United Kingdom. 140. Statistics of the world's shipping movement are very incomplete, and it is not possible to distinguish in all cases vessels which entered or cleared with cargoes from those which entered or cleared in ballast, the two being generally grouped together. In view of the smaller number of ballast voyages that appear from the statistics to have been undertaken by British than by foreign ships, it is probable that an estimate based on the available data may underrate the part played by British shipping. If, moreover, it were possible to differentiate between the short sea voyages and the Ocean trades proper, the proportion of British trade would be greater than appears from these data. In adjusting the statistics some allowance has been made for these factors. 141. The total trade of the world, as represented by the entrances of vessels with cargoes and in ballast at the ports of all countries in the year 1911-12, may be estimated at about 570 million tons net divided equally between the Inter-Imperial and Foreign trade of the Empire on the one side and the trade between foreign countries on the other. Over 70 per cent, of the total entrances of British vessels was in the trade of the Empire, whilst conversely the greater proportion (nearly two-thirds) of the entrances credited to foreign vessels, as might be expected, was in the trade between foreign countries. 142. About 41 per cent, of the actual entrances of vessels with cargoes and in ballast was credited to the British flag, including 85 per cent, in the Inter-Imperial trade, 52 per cent, in the Empire's foreign trade, and 24 per cent, in the trade between foreign countries, as is shown below : — Vessels Entered with Cargoes and in Ballast. British. Foreign. Between the United Kingdom and the British Oversea Possessions ... 18'9 Between the British Oversea , Possessions ... ... ... 21 • 8 Between the United Kingdom , and Foreign Countries ... 69." 7 Between British Oversea Possess- ions and Foreign Countries... 63*6 Between Foreign Countries ... 67-0 Mi llion tons n 2-0 .V4 r,|-'.i 529 214-0 Total. Proportion of British. et. •jo-: i 27 2 131*6 106'6 281-0 Per Cent. '.ID 80 68 60 24 Total 231-0 336-2 :>er ... 74 67 9-0 3-1 16 3-5 3-0 South Wales 14 35 31-7 1-3 it; America, British Lines also ran to America from the Mediterranean, where outward cargoes included such articles as wine, fruit, macaroni, marble and hemp: between North America, South America and the "West Indies: and between the Pacific Const of North America, the Far East and Australasia. British ships also engaged in the coasting trade on the "West Coast of South America. 171. It must, however, be borne in mind that on the Atlantic routes the passenger traffic was more important than on any other route, since it would not have been possible, without a strong basis of passenger traffic, to maintain the fast and frequent services which were characteristic of this trade. Most of the important Atlantic Lines carried passengers, and in some cases passengers and not cargo formed the backbone of their business, 83 Africa, Australasia, and the East. 172. Although about one-half of the British shipping engaged in the trades outside Europe and the Mediterranean appears to have traded to countries in the Old World, yet the quantity of the imports into the United Kingdom from these countries- amounted to little more than one-fourth of the imports from countries outside Europe and the Mediterranean. The explanation of this fact is no doubt to be found largely in the difference of distance between the United Kingdom and America and between the United Kingdom and the East and Australasia, since three voyages can be made between this country and North America for every one between this country and Australia. It would be erroneous therefore, from the shipping point of view, to regard the trades of the Old World as less important than those of the New World simply because of the greater volume of the latter as compared with the former. It has been possible in this war to draw on the great reserve of shipping thus existing and to utilise it effectively in the trades nearer home, however detrimental such a course must be to the trades from which the ships were withdrawn. It is, moreover, in the Old World trades that the importance of the Empire is most pronounced. The following were the principal articles imported into the United Kingdom from the countries in question during the year 1913 : — (Million Tons.) From Africa (West and South). From Australasia. From Countries East of Suez. Grain and flour Other foodstuffs Metallic ores ... Wood and Timber Textile materials Oleaginous produce Petroleum Other articles ... •1 •0 •4 •1 1 •2 ■1 1-6 •2 ■3 •1 •4 ■6 •2 •2 Total 1-4 3-6 The articles included under the head of "other foodstuffs" are largely refrigerated meat and also butter from Australia and New Zealand, and tea and coffee from the East. The ores include manganese ore from India and various non-ferrous ores from Australia. We imported wool from South Africa, Australia, and New Zealand, jute from India, and hemp from the East generally. 173. Outward cargo to the above destinations was of a general description. To the East fine cotton shipments were combined with rougher cargoes, such as machinery, iron and steel structural materials, chemicals and so forth. Inward shipments from South and West Africa consisted chiefly of wool, hides, skins, maize, seeds, copra and palm kernels, with sugar and hemp from Mauritius; from Australia shipments comprised wool, tallow, skins, concentrates, wheat, butter and frozen and chilled meat; from New Zealand, meat, dairy produce, wool, tallow, and hides; from India and the East, wheat, rice, tea, beans, copra, nuts, seeds, jute and gunnies, cotton, rubber, teak, hides, skins, and so forth. 174. It should be noted that besides services between the United Kingdom and the countries named above, there were lines from India to the Persian Gulf, South Africa, the United States, the Plate, Chile, and Peru and from the Far East to South Africa; in the trade between ports in India and Ceylon and also between India, Java and the Straits Settlements; and between Ihe China Coast, the Philippines, Bangkok, Singapore and the River Yangtze. 175. The Suez, Canal Traffic. ••-. Reference must be made in this connection to the traffic through the Suez Canal, since through it passes the greater part of our trade with the East and with Australasia. The net tonnage of the vessels of different flags which passed through the Canal during Ibe year 1913 (with the average size of the vessels) was as follows : — Flag. British German Dutch French Austro-Hungariiin Other Flags Total .. Net tonnage. Million tons net. 12' 3 1' 20-0 Proportion of each Flag. Per cent. 00-2 16-7 64 4-7 4-2 7-8 100-0 Average size of Vessels. Tons net. 4,080 4,310 3,760 3,620 3 440 3,060 3,940 17602 F 2 84 The flags next in importance after that of Austria-Hungary were the Japanese, the Russian and the Italian flags — 344,000, 341,000 and 291,000 tons, respectively. The tonnage credited to the three Scandinavian countries together amounted to 388,000 tons net. 176. The 1913 figures for British tonnage are not so favourable, either absolutely or relatively, as those for the previous year: in fact the three years 1911-13 show a slight decline in the British and a rise in the German position : — Year. 1911 1912 1913 United Kingdom. Net Tonnage of Vessels. Million tons net 11-7 12-8 12-1 Proportion of Total. Per cent. 64-0 63-4 60-2 Germany. Net Tonnage ! Proportion of of Vessels. Total. Million tons net. 2-8 3-0 3-4 Per cent. 15-2 14-9 16-7 Of the British vessels that made use of the Canal in 1913, 84 per cent, are classed as merchant vessels, 9 per cent, as mail steamers and 5 per cent, as vessels in ballast. Of the German vessels, on the other hand, 58 per cent, are classed as merchant vessels and 41 per cent, as mail steamers, the actual tonnage of the German being slightly higher than that of the British mail steamers. 177. The following were the principal classes of merchandise carried through the Canal from North to South : — Coal Petroleum Railway material Salt 178. The traffic from South to North is shown below: Million Tons. 1-2 •5 •6 •4 Cereals Oleaginous produce Textile materials . Minerals Total From all sources. From India, Australia and Straits. Million tons. 4-0 2-7 1-7 1-6 Million tons. 31 1-6 1-4 1-4 10-0 7-5 Per cent. 78 59 82 87 75 The volume of traffic from other sources was relatively small, the most important being the Far East with 8 per cent, of the whole. East Africa and the Dutch East Indies together only accounted for 5 per cent, of the traffic. The above figures show the importance of the British Dominions and Possessions in the Old World as sources of foodstuffs and raw materials. Imperial Sources of Supply. 179. We print in Appendix G. (Table III.) two statements, the first showing the world's exportable surplus of a number of important raw materials (textiles, ores and metals) with the amount in each case exported from the Empire; and the second showing the proportions of certain important foods and raw materials supplied from the Empire over a period of years between 1900 and 1916. The facts that emerge from these tables may be thus summarised : — (1) Practically the whole of the world's jute supplies and 56 per cent, of the world's wool supplies were drawn from the Empire, the United Kingdom depending almost entirely on the Empire for its supplies of both commodities. On the other hand flax and hemp came almost wholly from foreign countries; whilst the Empire supplied little more than 20 per cent, of the world's cotton. (2) There has been a most important development of the rubber industry in our Eastern possessions, with the result that the proportion of our supplies drawn from tne Empire rose from 49 per cent, in 1913 to 71 per cent, in 1916. This, of course, is due to the great development of Para rubber production in the East. The pro- duction of this rubber, which is mostly British, increased from 8,000 tons in 1910 to 153,000 tons in 1916, and it is estimated that the production in 1917 amounted to 220,000 tons. Prior to 1910 the world's supplies of Para rubber were drawn almost entirely from the Amazon valley. 85 (3) As regards metallic ores, other than iron, Imperial sources of supply are very im- portant, especially in the case of manganese, tin, zinc, nickel and ulso lead. (4) The great stimulus given by the war to the crushing of oleaginous nuts, kernels and seeds, which before the war was largely a German industry, may lead to a considerable development in our Eastern and West African possessions, whence we already draw a large proportion of our supplies. (5) As regards foodstuffs, the production of cereals, meat, butter, and cheese within the Empire is already important and will become increasingly so. India and Ceylon supply the greater part of the tea consumed in Europe and America; whilst as regards sugar, the stoppage of supplies from the enemy countries increased our dependence on the Empire from 4 per cent, of the total imports in 1913 to over 20 per cent, in 1915. 180. It is difficult to single out other articles for mention in this connection ; but tho development in the future of the great iron ore resources of Newfoundland and Labrador may give an important stimulus to the Atlantic carrying trade, and increased cotton growing in the Empire would exercise a considerable influence on the Eastern trades. 181. Altogether there seems good reason to look with confidence to the Empire, with its vast resources, for the supply to an ever-growing extent of the world's essential needs. It is in the Eastern trades, in view of the greater distances, that such an expansion would produce the greatest demand for shipping; and inasmuch as there is necessarily a close connection between trade and the flag, British shipping should derive much benefit from this development. 182. On the other hand it must not be forgotten that developments perhaps as great will take place in South' America and in the Far East where British shipping will not enjoy the natural advantage of trade with countries under the British flag. The opening of the Panama Canal has brought many of these countries nearer to the Atlantic seaboard of the United States ; and the proportion of the trade of these countries carried in British ships may become a test of our ability to maintain British maritime ascendency in the future. British Exports. 183. We have found, as a result of careful enquiry, that the liner services were important in connection with the exportation of British manufactured goods. A considerable part of the earnings of the steamship lines was derived from passenger traffic, or from inward freights, or from both, and British manufactures were, therefore, carried abroad at rates which could not have been accorded but for the existence of highly organised services with a considerable volume of trade in other directions. British exporters enjoyed an advantage in the foreign market through frequent and regular outward sailings from the United Kingdom ami the stable freight rates that ruled. 184. This factor was of especial importance in the outward trade to North America and, to a smaller extent, to South America. The words of one Company may be quoted as characteristic : " The principal freight being earned homewards enabled the lines to fix favourable rates of freight on British exports, and shippers not only had the benefit of fast modern tonnage, and could rely on definite sailings at not only frequent but regular intervals, but contracts at low rates were given to associated British trade to enable it to secure foreign orders." The practice of according specially low rates of freight to British exports was, however, the exception rather than the rule in the Central American and West Indian trades where inward cargoes were less abundant. Nevertheless the comment on this question of one firm engaged in the trade between Belgian ports and the Gulf of Mexico is interesting and suggestive. This firm were able to give specially favourable treatment to British exports to the Gulf, because " the large cargoes obtainable for Antwerp and Ghent allowed us to combine outward loadings from Antwerp and London, and so provide direct facilities from London to the Mexican and United States Gulf ports, which otherwise did not and could not exist, as London does not provide enough outward cargo, and in the absence of cotton nothing could load from Galveston to London." 185. In the Indian trade, too, certain steamship lines were able, in view of the full home- ward cargoes, to charge moderate rates of freight outwards^ since they looked to homeward freights to give them a return on the round voyage. Liners and Tramps. 186. We have already pointed out in the First Part of this Report the large and important part plajed in our maritime economy by the tramp steamer, which before the war comprised about 60 per cent, of the total British tonnage, and was indispensable as a means of moving from the various parts of the world the seasonal crops of grain, cotton, wool, rice and similar commodities, which it was impossible for the liners on the different routes to deal with. There were, however, tendencies in the years immediately preceding the war (which have continued since its commencement) towards — (1) the gradual conversion, in some cases, of the tramp into a regular line; _ (2) the successful competition of an established line, where tramp vessels had succeeded in opening up a more or less regular trade ; and (3) the absorption of tramp vessels by regular lines. 17602 F 3 86 187. The first tendency is natural. Many of the existing lines were established as the uireet result of pioneer work by tramp vessels; and the fostering of a constant trade between two places developed into a regular line. There were, moreover, a large number of important British steamship companies whose vessels had for many years traded on well defined routes and differed only from the lines in the irregularity of their sailings, due generally to the seasonal character of the produce shipped. These companies formed an intermediate class between the ordinary tramp owner, whose vessels traded as required to any part of the world, and the estab- lished line with scheduled sailings. 188. A number of tramp owners complain of increased severity in the competition of regular lines, British and Foreign, and especially the latter. Thus one company say that the Hansa Line frequently took business from them in the Calcutta trade, and that German lines, by undercutting in the freight market, deprived them of charters for zinc and copper ore and concentrates from Australia. Another firm complain of severe competition from the German Lines, who, " having squeezed merchants under the Conference arrangements, were better placed for capturing open business by cutting rates." No doubt the presence of the tramp owner acted as a wholesome check on the Conference system, but there are indications that, when the lines were in a position to enter into direct competition with tramps, the former tended to win. In shipping as in other industries the modern tendency is in the direction of large organisations; and, while there is much trade which cannot be done by the lines, it is only to be expected that the lines will gradually absorb most of the trades where there is business for which it is worth their while to cater. 189. We saw in the first part of this Report that the absorption of tramp tonnage by the companies owning regular lines was a most unfortunate feature of the present shipping situation. In our opinion this absorption is fraught with special danger to the supremacy of British shipping after the war, and only such action as we have recommended can prevent it from being disastrous. It is the direct outcome of the present situation and is due to the fact that the lines, under present conditions, are not able to build ships and are, therefore, forced to buy whatever they can secure so as to have some kind of tonnage available after the war. After the war trades, which were formerly the recognised domain of the British tramp owner, may, as a result, be carried on by the lines, or more probably by foreigners. Fokeign Competition. The European and Mediterranean Trades. 190. In the European and Mediterranean trades competition was experienced from German, Dutch, Scandinavian and other foreign shipping. The competition of the German lines was severe, and the British lines engaged in these trades complain of the general practice of rate cutting indulged in by the former. To a certain extent this appears to have been part of the usual German practice in other branches of industry; but the evidence we have received suggests that the Germans were assisted (a) by having at their disposal large quantities of rough cargo (of a somewhat higher grade than coal), such as cement, ironwork and chemicals, for export to the destinations in question, and (o) by the adjustment of railway rates in such a way as to give the exporter in Germany or the German shipowner or both an advantage over foreign competitors. 191. The adjustment of railway rates was an element in German marine competition which we discuss in paragraphs 240-254 below. In the considered views of two lines trading to the Mediterranean, the Germans could not have been satisfied with the low rate they charged from United Kingdom ports, or run the class of vessel they ran, without a subsidy to recoup them for the loss which they must otherwise have sustained. It is known that goods despatched from inland place; in Germany to the East and shipped by the German Levant Line enjoyed the benefit of special railway through rates not accorded to goods shipped to the same destinations by any other line.* The adjustment of railway rates, we are informed, operated in two principal directions: — (1) It diverted to the German ports a good deal of traffic that would in the ordinary way have passed through Rotterdam or Antwerp. Such traffic was taken away from the British Lines and went almost entirely to the German companies. Thus ..we are informed by one British company that, whilst their sailings from Hamburg to the United Kingdom had remained stationary in the 12 years before the war, those of the Argo Line had doubled, largely because of their arrangements with the German State Railways for the carriage of a certain volume of traffic l>y " Kurswagensdienst " (i.e., by goods trucks attached to passenger trains). (2) Where traffic still passed through Antwerp and Rotterdam, the Germans appear in practice to have secured better railway rates than their British competitors. * .. . ' " ; — — — — ^^^-^ * See below, pars. 246-248. '87 192. In November, 1913, the British line-i trading to Belgian ports were further pie judiced by the action of the German Stahlwerksverband in chartering foreign vessels for the carriage of its products from Bruges to Grangemouth, where it was helped by the low port dues charged by the British railway authorities as compared with the dues in other Scottish ports. Shipment from Antwerp would have cost 50 or 60 centimes more per ton; and, as the Stahlwerksverband was naturally interested only in the sale of its Steel products, it could afford to cut the shipping rates on other goods. 193. British Lines also complain of the facilities afforded to German Lines for loading additional cargo in ports of the United Kingdom at rates which were often disproportionate to the service rendered, the bulk of the profits of the German Lines of course depending on the cargo shipped from German ports or from Antwerp or Rotterdam. The complaint, so far as we understand it, is that it was generally impossible, owing to the railway rates in Germany, for British Steamship Companies to retaliate by similar action. Closely analogous is a complaint that traffic was taken from British Lines by vessels of the great German liner companies calling at United Kingdom ports and picking up cargo at low rates. It must, of course, be remembered that the geographical position of the United Kingdom made its ports natural places of call for vessels proceeding westwards from Continental ports. 194. We have reason to believe that a certain amount of trade was lost through the gradual development of the railway system between Germany and the Mediterranean and through the grant by the German railway administration of specially low rates for goods carried overland to the Levant. A good deal of traffic, which had previously gone by sea, was probably carried overland to Italy, the Balkans and Turkey. 195. We have heard on all sides that the British Lines were losing ground to the Germans in the European and Mediterranean trades. This loss of ground was due in part to natural advantages possessed by the Germans and also to the efficiency and enterprise shown by them both in their methods and in the class of tonnage employed. There is, however, reason to believe that it was due also to the railway facilities afforded in Germany for German goods and ships; but the expansion of German trade especially with European and Mediterranean countries would in any case have given a stimulus to German shipping. 196. Competition was experienced also from other flags. In the Mediterranean trades there was keen competition from Scandinavian shipowners " whose rates of pay to the navi- gating staff, and whose other generally low expenses were such as to enable them to run at rates which may have been remunerative to them, but which caused us (i.e., the British line in question) to work the Mediterranean/bnsiness with scarcely any siirplus-" . . 197. W~e have received strong representations respecting the competition of two Dutch steamship companies — the Holland Steamship Company, of Amsterdam, and the Shipping and Coal Company, of Rotterdam. The former company traded between Amsterdam and London, Hull, the British Channel and Leith,.but appears to have suspended its sailings since the beginning of the intensified submarine warfare. The Dutch Government apparently hold, through the Netherlands Handels Maatschappij, a certain interest in this concern which, like most Dutch steamship lines, appears also to enjoy a nieasui-e of support from the Dutch railways.* We are informed that the Shipping and Coal Company of Rotterdam, though managed by a Dutch subject, is principally financed and controlled by the enemy. This company, which appears to have loaded coal at Leith before the war, has been much in evidence since the out- break of hostilities, having entered into the general cargo business. 198. Finally, whilst recognising the obligation imposed on His Majesty's Government of taking all possible steps to-attract to, this country neutral shipping which might otherwise have remained idle in port, we think it right to call their attention to the following representations which have been made to us by a steamship line engaged in the Dutch and Belgian trades: — " In order to secure as much tonnage as possible for the conveyance of materials for " the mamifactnre of margarine to Holland, the British shipping companies have been " practically forbidden to carry anything else. All export licences have been endorsed " ' in a Dutch vessel ' and consequently all the regular exports on which the steamers " used to rely and on which after the war they will again have to rely are forced. into the " hands of such companies as described above. We would emphasise that both are hostile " to British interests, and that the real nationality of the Shipping and Coal Company .'* is well known to the Foreign Office."- " Before the war and since, certain shipments have been made by the Dutch Govem- " nient. In spite of equal rates and our good relations with the suppliers, these were " invariably shipped under the Dutch flag. In contrast, many shipments have beer " made on behalf of the British Government by these Dutch and German-Dutch vessels, " even within recent weeks, although the British companies offered equal or greater ■ "facilities." * AVe ave informed that the Dutch Railway Administration pays a liberal commission for stated quantities of traffic carried over the Dutch railways for the Steamship Companies, who combine with their business the work of forwarding agents, and thus in fact receive payments amounting to a material subsidy. 17602 F I $8 The Ocean Trades. 199. German competition was experienced in all the ocean trades. In many respects the severity of that competition was due to the organising ability of the German steamship companies, to the energy with which they conducted their business, to pains taken in matters of detail, to lower prices offered by German manufacturers and traders, to the excellence of travellers and agents sent abroad, and especially to larger credits given in the markets with which they traded. The vessels employed by the German lines appear generally to have been as good as those employed by the British lines, and sometimes better. 200. Moreover, the rise of German ocean shipping appears to have drawn away from the United Kingdom much of the Continental transhipment traffic which, in the absence of direct lines from the Continent, used to be sent to this country for shipment in British vessels to its ultimate destination. Thus we lost most of the trade from German and Russian northern ports; and the German short-sea lines cut rates to Scandinavia in such a way as to draw to German ports much of the Scandinavian oversea trade that used to pass through the United Kingdom. We are informed, for example, that the export trade in wire rods from Gothenburg to Canada was entirely lost to British shipping. In this connexion the influence of the Merchandise Marks Act, 1887, must be borne in mind : in the early years of its enforcement it stimulated German trade by revealing the country of origin of many manufactured articles. 201. The interests of German and also of Dutch shipping were assisted by the activities of two shipping associations which collected from the manifests particulars of all goods brought to the United Kingdom and there transhipped into German or Dutch vessels. One of these associations was established in Germany and the other in Holland, the latter working in close touch with the former. The particulars collected included the names of the consignor and consignee, whether or not the cost of transhipment was included in the ocean freight and so forth ; and this information was made the basis of a canvas at both ends for the traffic, with the object of capturing it for Germany and Holland to the benefit both of the manufacturers and of the shipowners of the two countries respectively. 202. Broadly speaking, the rise of German marine competition had at the outbreak of war resulted in a compromise, expressed in a number of Conference Agreements, which left the trade of the United Kingdom to the British lines, whilst the latter abstained to a certain extent from participating in the trade from the Continent and especially from the German ports, it being understood that outward freights from the United Kingdom and from the Continent were to be approximately equal. There were nevertheless signs that the Germans were endeavouring to encroach even on the British trade proper. Thus we are informed that jute bagging was shipped from Dundee to Hamburg for shipment by the German lines to Central America; and that the Hansa Line called at Middlesbro' for British cargo shipped thence to India. 203. The German steamship companies appear to have enjoyed the full support of their Government in their fight with the British companies. There is a consensus of opinion that they were helped not only by direct subsidies, such as that of the German East Africa Line, but even more by the adjustment of railway rates in Germany in favour of the lines. It was this fact which prejudiced the British lines to a considerable extent even at Antwerp; and it had far-reaching consequences in other directions. 204. Most serious of all was the advantage given to the German lines in the Atlantic by the control which they were able to exercise over the stream of Eastern emigration which passed across German territory. With this question we dealt fully in our Interim Report on the German Control Stations and the Atlantic Emigrant Traffic. 205. German competition appears to have been most severe in Central and South America, where, no doubt, political considerations gave a stimulus to commercial activity. It is in con- nexion with these trades, and especially the trade with Mexico and Central America, that we have received the most persistent representations as to evasion of Conference Arrangements which otherwise seem to have been fairly well observed. On the Pacific coast, the large German element in the -population contributed materially to the success of the Kosmos Line, who were able to start a cargo service from London to the West Coast of South America, shipments from the United Kingdom having previously been made from other British ports. The subsidy paid to the German East Africa Line enabled the latter for a considerable time to hold a virtual monopoly of the East African trade, until the British lines resumed their calls at British and other East African ports and Zanzibar.* In the Australian Trade, German competition seems to have been severe: the German lines absorbed practically all the Continental traffic and even carried increasing quantities of wool shipped to German ports and the bulk of that shipped to Antwerp. It is alleged that German manufacturers and German banks co-operated to this end, and that the latter extended credit only to shipments made in German vessels. We understand that at the outbreak of war the German lines were contemplating a service to New Zealand, and this service would no doubt have absorbed all the cargo exported from Germany to the Dominion. Such cargo had previously been carried by German steamers wi!h transhipment in Australia or by British steamers with transhipment in London. * By agreement with the German lines calls were not made at Tanga or Dares-Salaam because, according to the Gerann lines, the German Government would not consent to reciprocity in this matter. 89" 206. As regards other foreign flags, competition, more or less severe, has been experienced in the Atlantic passenger business from Danish, Norwegian, Swedish, Dutch, Belgian, French, Italian, Austrian and Greek lines, many of them subsidised ; in the Mexican, Central American and West Indian trades from Dutch, Danish and French lines; in the South American trades from Dutch and Italian lines; in the trade between America and the Far East from the Japanese; in the Eastern trades from the Austrians and the Japanese; and from the Dutch, as is natural, .in trade with the Dutch Eastern Possessions. We learn that the Holland-America Line have shown a marked aggressive tendency since the opening of the Panama Canal ; whilst in the Eastern trades (including the Indian coasting trade) the heavy subsidies paid by the Japanese Government to the Japanese lines have rendered the. competition of the latter very formidable. The present withdrawal of British ships from the East on a large scale must inevitably render Japanese competition a factor of serious consequence after the war — important trades between foreign countries, such as that between the United States and the Ear East, whence almost all British ships have been withdrawn, may be captured entirely by the Japanese. It must be recognised that the competition of American, Japanese and neutral flags in all the trades of the world will be much accentuated after the war. 207. We wish to draw special attention to the position of Japanese shipping. It appears to us that geographical and economic conditions favour a formidable expansion of Japanese sea-power throughout the Pacific and the East; and we think that developments in this part of the world should be watched by H.M. Government in the years following the conclusion of peace. Conclusions. 208. Our conclusions may be summarised as follows : — (1) Before the war over one-half of the world's trade was carried in British ships, includ- ing nine-tenths of the Inter-Imperial trade, over three-fifths of the trade between the Empire and foreign countries and nearly one-third of the trade between foreign countries. (2) Although the volume of trade carried in British ships was increasing, the proportion of the world's trade carried in British ships tended to decline. (3) Imports into the United Kingdom in 1913 aggregated about 55 million tons 'in weight and £769 million in value. Nearly three-fifths in weight, but little over two-fifths in> value came from European and Mediterranean sources, the trade with countries outside Europe being smaller in volume but greater in value than the trade with countries nearer home. (4) On the export side conditions were similar. Our exports in 1913 amounted to about 100 million tons in weight and £635 million in value. Of this, coal accounted for 76 million tons, or three-fourths of the weight, but for only £54 million, or one-twelfth of the value. Of our total exports (including coal) it would appear that about three-fourths in weight, but little more than two-fifths in value, went to countries in Europe and on the Mediterranean. (5) Statistics indicate that much of the trade with European and Mediterranean countries was carried in foreign vessels, which loaded over 60 per cent, of the coal shipped to these destinations. Of the total coal exports from the United Kingdom over one-half was carried in foreign ships. (6) On the other hand, four-fifths of the shipping movement at United Kingdom ports between the United Kingdom and countries outside Europe and the Mediterranean was British. (7) It is probable that about four-fifths of the shipping of the United Kingdom was engaged in the Ocean trades, most of the balance trading to the Mediterranean. (8) About one-half of the British shipping engaged in the Ocean trades traded to America, which supplied nearly three-fourths in weight of our imports from countries outside Europe, including the greater part of the grain imported into this country. The passenger movement on the Atlantic trades was further of great importance to shipping. (9) The importance of the other Ocean trades lies in the great amount of shipping which they absorbed and in the fact that they are pre-eminently Empire trades. (10) The development of Imperial resources should afford a great stimulus to British shipping; but it is not enough .to be content with expansion here. If British shipping is to maintain its relative importance in the world's carrying trade, it will have to participate also in the trade of foreign countries, notably South America and the Far East, which the opening of the Panama Canal may be expected to stimulate. (11) The British Liner Services directly facilitated the marketing of British goods abroad; whilst the tramps were indispensable as a means of moving from the different parts of the world the seasonal crops of grain, cotton, wool, rice and so forth. (12) Foreign competition was severe before the war, especially in the trades near home. In part this competition was of the ordinary commercial type, but there is reason to believe that much of the competition of German lines was due to artificial causes. After the war the competition of American, Japanese and neutral flags — but especially of the Japanese flag — will be much accentuated. 90 SECTION II. GERMAN COMPETITION. 209. German maritime competition is closely connected with some of the most troublesome trade problems of the past, problems to which our attention was specifically directed. Tbe subject is complex, and it will be necessary to deal with it at some length. We" accordingly devote this Section to an examination, firstly, of the German oversea trade before the war; secondly, of certain factors in German competition, such as the control stations, the railway rebates and the practice of rate cutting; and, thirdly, of the effects produced by these factors on particular trades politically important to the enemy, on freight rates to the British Dominions and on Conference Agreements. An examination of the general character of German com- petition is, moreover, necessary to the determination of our maritime policy after the war. The German Carrying Trade before the War. 210. A great development of German trade took place in the period before the war. A large part of this development was in trade with countries on the land frontier, but there was also a great expansion in the oversea trade, as is shown by the following figures: — German Foreign Trade. Imports. Exports. 1901. 1913. .Increase in 1913 over 1901. 1901. 1913. Increase in 1913 over 1901. A Countries on thr Land Million £ Million £ Per cent. ■ i Million £ Million £ Per cent. • Frontier : — (Russia, Denmark, Belgium, Holland, France, Switzer- land, Italy, Austria-Hun- gary) 118-3 210-5 78 105-6 262-0 148 B. Other Countries in Europe (except Turkey) 40-4 75-3 86 59-1 1101 86 C. Other Countries 106-7 243-7 128 49-1 124-3 153 Total 9 266-5 629-5 99 217-9 496-4 128 * The totals for 1901 include German trade with the Hanse towns. 211. The total weight of the goods imported into and exported from Germany in the (jeneral and the special traded during the years 1912 and 1913 was as follows : — {Million tons.) Imports. Exports. 1912. 1913. 1912. 1913. General Trade ... Special Trade 79-2 81-4 71-1 72-8 73-5 82-2 65-6 73-8 212. An examination of the German Trade statistics shows that the distribution by weight of Germany's special trade was approximately as follows : — A 1! Countries tin the Land Frontier :— (Russia — including Finland — Denmark, Belgium, Holland, France, Switzerland, Italy, Austria-Hungary) Other European and Mediterranean CoUNTKin Other Countries Total Imports. Per cent. 50 34 16 100 Exports.- Per cent. 83 100 f See par. 217 for an explanation of the terms "General trade" and "Special trade: 91 . Of the traffic up stream to Germany more than one-half represented iron and other ores, white grain, timber, petroleum, fertilisers and oil-seeds represented the greater part of the balance. 224. The goods imported at Rotterdam by sea amounted to 21 million tons in 1912 and to 22 million tons in 1913. The goods exported at the port in the two years were as follows : — Exports from Rotterdam. A. Export by Sea : — In the free traffic Transit with transhipment ... Total B. Export along the Rivers :— In the free traffic Transit with transhipment ... Total C. Export by Land D. Transit without Transhipment Total 1912. 21-1 1913. Million tons. Million tons. 5-4 •6 6-5 •6 6-0 7-1 14-1 •7 14-9 •7 14-8 15-G •1 •2 •1 •2 23-0 A comparison of this table with the preceding table shows that the volume of the goods exported from Rotterdam by sea corresponds almost exactly with the volume of the down stream traffic from Germany, and that the volume of the goods exported from Rotterdam along the rivers corresponds almost exactly with the volume of up stream traffic to Germany. It follows that the importance of Rotterdam was very largely due to the trade that passed through it between Germany and other countries. 225. The net tonnage of vessels which entered at the port of Rotterdam during 1912 may be estimated as follows : — British ... Dutch ... German... Other Flags Total Million tons net. 20-0 Per cent. 32-0 17-0 21 5 29-5 100-0 Thus German ships could only have carried a fraction of the German trade that passed through Rotterdam. The amount of British shipping at the port was actually 50 per cent, greater than the amount of German shipping, but the British figure is weighted by a large amount of short-sea traffic. German Trade through Antwerp. 226. Appended to this Report is a statement showing the import and export trade at Antwerp during the year 1912, and distinguishing (a) countries and (h) classes of goods.* The See Appendix G, Table IV. 94 official Belgian statistics, from which these figures are taken, show only the quantities of the goods derived from various countries and it is therefore not possihle in this case to show values. The following facts appear from these tahles : — (L) Imports at the port of Antwerp during the year 1912 amounted to 12 8 million tons, of a value of £130 million. Exports during the same year amounted to 10'2 million tons, of a value of £122 million. (2) Four-fifths both of the imports and of the exports passed by sea, the balance being imported or exported by canal or river. (3) Of the canal or river traffic the bulk (80 per cent, as regards imports and 60 per cent. as regards exports) was German, most of the balance being Dutch. (4) Although Germany was first on the list of countries trading to or through Antwerp, her trade amounted to only 18 per cent, of the whole. (5) The general character of the canal and river traffic resembled that at Rotterdam. 227. The Belgian statistics distinguish the shipping movement by flags and countries only for all Belgian ports together and not for Antwerp separately. Nevertheless, 85 per cent, of the entrances and clearances took place at Antwerp. Of the remainder it is known that about two million tons of Belgian shipping (6 per cent, of the total shipping movement at Belgian ports) entered and cleared at Ostend from and to Dover in the Belgian mail service between these ports. As this represented about one-half of the movement of Belgian shipping, it follows that the trade of Antwerp was overwhelmingly carried on by shipping not xmder the Belgian flag. The net tonnage of vessels which entered and cleared at the Belgian ports during 1912 was as follows : — Flag. Entered. Cleared. Total. British ... German ... Belgian ... Scandinavian Dutch ... Other ... Total Million Tons Net. 7-1 7-0 43 4-2 1-9 1-9 1-3 13 ■4 4 1-4 11 14 16-4 15-9 Proportion of each Flag. Per Cent, 44 26 12 8 2 8 32-3 100 It will be seen that the share of British shipping in the carrying trade to and from Belgion ports was far more' important than that of any other flag, having amounted to 44 per cent, of the whole, whereas the German share was only 26 per cent, of the whole, but, as in the case of Rotterdam, the British figure is weighted by a large amount of short-sea traffic. 228. In this connection attention may be drawn to the inequitable treatment accorded in the port of Antwerp to British as compared with German shipping. "We have received repre- sentations on this subject from a number of steamship companies who attribute this treatment to the preponderating influence exercised by the German lines through their agents at the port. It is known that the Belgian Government paid a subsidy of 80,000 francs a year to the North German Lloyd for calling at Antwerp en route to Australia and the East, and caused light and pilotage dues to be refunded to that company. Moreover, one British company state that German steamers were allotted better loading and discharging berths, for which no dues were paid, whilst they had themselves to pay heavy rent for sheds. Accord ing to a British line trading to the East an undue proportion of berths in the river was assigned to German steamship companies; whilst, if two vessels, one of which was German, were competing for the same berth, that berth was certain to be secured by the German vessel.* Distribution of German Shipping. 229. We have no means of determining the actual distribution of Germany's mercantile marine over the trades of the world. The movement of German shipping, during the year 1912, us shown by entrances and clearances, was, however, as follows: — Million Tons Net. Between German Ports ... ... ... ... ••• ••• 12"8 Between German Ports and Foreign Ports 259 Between Foreign Ports ... ... ... ••• ••• ••• 20"8 Total 595 Every voyage has, of course, been counted twice. 230. The entrances and clearances of German shipping in the foreign trade (Mil million tons) were distributed among the different trades, approximately, as follows : — » The quays at Antwerp were the property of the town, and the Antwerp Town Council was largely cnmpostd of German nominees. 95 Trade. Proportion in each Trade. North and West European Mediterranean West and South African American (East Coast) Pacific Australasian ... Middle and Far Eastern Unaccounted for Total ... Average size of Vessels engaged in the Trade. Per cent. Tons net. 34-2 490 11-3 2,260 1-9 2,570 32-3 3,360 0-9 2,000 2-3 3,140 11-3 1,830 5-8 1,420 100-0 1,030 As might be expected the greatest shipping movement and also the largest type of vessel engaged outside the European and Mediterranean trades was in the American trade. The importance of the African, Australasian and Eastern trades was also very considerable, when account is taken of the longer distances on these routes. 231. Thirty-six per cent, of the movement of German shipping in the foreign trade was in trade of which, at least, one terminal was within the British Empire, including 4 per cent. where both terminals were within the Empire. Organisation of German Shipping .* 232. At the outbreak of war over 60 per cent, of Germany's shipping was held by a group of 10 Lines working with one another and sometimes with associated interests. A number of lines outside this group were either controlled by some member of it or worked in close relation with it, particularly the Argo Line, and it is believed, the Neptune Co. (owning respectively 38,000 and 53,000 tons gross of shipping). The most important line outside the group, and having no relation to it, was the German Levant Line (155,000 tons gross), which had absorbed tlie Bremen Atlas Line from Bremen to the Levant. The ten Lines were:- 1. The 2. The o o. The 4. The 5. The 6. The 7. The 8. The !». The (I. The Hamburg America Line ... North German Lloyd Hamburg South America Line Hansa Line German Australian Line ... Kosmos Line Roland Line German East Africa Line Woermanu Line Hamburg-Bremen-A.frica Line Total Tonnage on June 30th 1914. (Tons Gross.) ... 1,093,000 716,000 268,000 339,000 264,000 179,000 75,000 105,000 112 000 43,000 3,194,000 These lines were members of the " Reederei-Vereinigung," which was virtually a German Mercantile Shipping Union, trading all over the world. A Contract entered into with one of these lines was a Contract with the group. The clo?e association of so much shipping intensified German competition before the war, since each line was prepared to support every other against foreign flags. This "Reederei-Vereinigung" had at its disposal in 1911 some 23,000 tons of shipping which could be chartered at reasonable rates by its members in the event of rate wars or other need arising. 233. The following were the trades engaged in by the 10 Lines which formed the " Reederei-Vereinigung " : — 1. The Hamburg America Line 2. The North German Lloyd ... 3. The Hamburg South-America Line 4. The Hansa Line ... 5. The German, Australian Line 6. The Kosmos Line 7. The Roland Line 8. The German East Africa Line 9. The Woermann Line 10. The Hamburg-Bremen -Africa Line To all parts of the world except Australia and the East Indies. To all parts of the world except East and West Africa and the West Coast of America. To South and Central America and from New York to South America. Cargo Service to India, Red Sea Por*« and South America. To Australia and the East Indies. V To the West Coast of America. To East Africa. ... } To West Africa. * We are indebted for much of this information to a Report on the subject of the German Mercantile Marine by Sir Francis Oppenheimer, formerly H.M. Commercial Attache 1 for Germany. 96 German Shipping Subsidies. 2-34. The subsidies paid annually by the German Government to German steamship lines were as follows : — To the North German Lloyd, £30,450 for services to China, the East Indies and Australia. To the Hamburg-America Line, £10,000 for a service to Heligoland, Borkum, &c. To the German East Africa Line, £67,500 for the service to East Africa. There is nothing to suggest that the above subsidies were other than mail subsidies or payments for services rendered. Apart from the above subsidies, the German Levant Line received a subsidy from the Bulgarian Government in respect of a service between Hamburg and Antwerp and Varna and Burgas. The subsidy and other privileges accorded by the Belgian Government to the North German Lloyd have been mentioned in paragraph 228 above. Conclusions. 235. The position of German shipping before the war may be thus summed up : — (1) Germany possessed a great and growing sea-borne trade which warranted the employ- ment of a considerable amount of merchant shipping. The most important part of Germany's ocean-going shipping was engaged in the Atlantic trade. (2) A considerable proportion of Germany's foreign trade passed through the ports of Rotterdam, Amsterdam and Antwerp. In this connexion Rotterdam was most important. (3) Ten German steamship lines, which owned 60 per cent, of Germany's merchant shipping, were closely associated and well organised, especially in the years immediately before the war, with a view to furthering the interests of German shipping as a whole in all parts of the world. (4) There is no evidence that the direct subsidies paid by the German Government to German steamship lines were abnormal, or were not merely payments for services rendered or obligations incurred. Alleged Unfair Methods of German Lines. (1) The Control Stations. 236. In view of the detailed consideration which we gave to the question of the German Control Stations in our Interim Report on that subject we need only point out here its important relation to wider questions of shipping policy. The essence of the Control System, as we saw, was that : — (1) The most important part of the Eastern emigration movement to America passed across Germany and Austria-Hungary ; (2) This movement was tapped by the German lines at Control Stations erected at the chief frontier posts; (3) Most of the emigrants were forced to travel by the German lines on pain of being refused transit*; (4) This Control over the emigrant traffic was used by the German lines as a weapon for dividing their competitors and forcing unfavourable agreements on them; and (5) The action of the German lines enjoyed the support of the German Government. 237. In this connection it is necessary to bear in mind the salient features of German marine enterprise before the war : — (1) The German Mercantile Marine was essentially a " liner " fleet in which the passenger element was all important. (2) The bulk of German shipping was owned by a few powerful companies, more or less closely associated and working in close agreement. (3) The main strength of German shipping, despite its world-wide activities was con- centrated in the Atlantic trades ; and the principal services of the two most power- ful German companies — the Hamburg-America Line and the North German Lloyd — were to the United States. 238. It follows that developments affecting the prosperity of the Atlantic trades reacted on the whole body of German shipping. The prosperity of the Atlantic trades was intimately bound up with the emigrant traffic. That traffic was the basis of the Atlantic passenger business, which in its turn was the foundation in many respects of the trade of the chief German steamship lines and, therefore, of German shipping. Without this basis it would have been almost impossible for the German lines to start cargo services for political reasons or to open up new business in other trades by systematic rate-cutting. If, therefore, the Control Stations were swept away at the conclusion of peace, the effect would be felt far beyond the Atlantic trades, t * Thus in 1913 the enemy lines carried 417,000 third class " continental" passengers out of a total of 829,000 carried to the United States and Canada by the North Atlantic passenger lines, f See also paragraphs 286-9 and 320-2, 97 2-39. Support of the Control System by the German Government involved in essence: — (i) Denial of the right of passage to subjects of a foreign country ; and (ii) Flag discrimination in favour of German shipping. (2) Through Rates on the German State Railways. 240. It is well known that before the war the German export trade was assisted by a preferential system of through rates accorded on the German State Railways to goods despatched from inland towns in Germany to oversea destinations. British shipowners, however, allege that in practice these rates operated not only in favour of the German exporter but also in favour of the German steamship lines; and they suspect that in many instances these preferential rates applied only to shipments made in German vessels and were not extended to foreign lings. Two distinct questions are involved: — • (a) The assistance afforded by the German railways, and therefore by the German Government, to the German manufacturer in the marketing of his produce abroad. In so far as the national trade tends to be carried largely in national vessels, this would indirectly assist the German lines, though it was primarily and funda- mentally, a bounty to the German manufacturer, and would not properly con- stitute flag discrimination. (b) Direct assistance to the German steamship lines by limiting privileged rates to goods shipped in German vessels. Such a practice would constitute flag discrimination. 241. A subsidiary question arises in connection with the division of the through rates between the steamship lines and the railways. It is possible that, without any benefit to the exporter beyond the receipt of a low rate of freight, the through rate system might be mani- pulated, by a process of book-keeping or otherwise, in such a way as to evade the intention of agreements with foreign lines. Ostensibly the port to port rate might be that agreed upon ; but the steamship company's share might secretly be adjusted either (1) to be less than the agreed port to port rate, the balance going to the railway, in which case 1 the Conference Agreement would be violated, or (2) to be more than the port to port rate, in which case the steamship company would virtually be subsidised to that extent by the railway, or in other words by the State. In the latter case we are concerned with a shipping subsidy, and in the former case with a subsidy to the exporter. Neither would necessarily constitute flag discrimination. "All that we were interested in," write an important British line, "was the maintenance of equal rates of freight from the various ports, it being understood that all cargo found its way to its natural outlet, it being the business of the merchant or shipper to obtain the lowest f.o.b. price at any particular port." 242. In view of the important bearing which this question, like that of the Control Stations, has on future shipping policy, we have endeavoured to sift as carefully as possible such evidence on the subject as we were able to obtain. The investigation has been rendered difficult by the secrecy maintained in this matter by the German Government and the German Lines, and beyond certain well-established facts there must remain a large element of uncertainty. The established facts are : — (1) That low through rates on the German State railways were given to assist the German export trade ; and (2) That over and above these rates, special rates were accorded to goods despatched from inland places in Germany and shipped to certain ports by the German Levant Line and the German East Africa Line. These rates were not accorded to similar goods despatched from the same places to the same destinations when shipped by foreign lines, or indeed, by other German lines. • Through Rates to Assist the German Export Trade. 243. The operation of the German " Ausnahme Tariffe" is discussed fully in a Report on Railways in Germany by Mr- C. H. Pearson and Mr. N. S. Reyntiens, which is printed as an Appendix to the Report of the Railway Conference.* The object of these special tariffs is defined as follows : — " The advancement of the internal industrial and agricultural productions by the granting of facilities for the supply of raw materials. " To assist the native products to obtain markets in competition with foreign rivals by granting facilities for export. " To support the trade of German commercial centres, and more especially the seaports, against foreign competition. " To support the inland means of communication, and principally the railways, against foreign competition." 244. The following illustrations, likewise taken from the Report in question, show the difference between the normal rate and the export rate. The quotations relate to lots of 100 kgs. consigned from Cologne to Hamburg: — » Cd. 4677 of 1909. See pages 97-105, 17602 G 98 Article. Normal Kate. Export Rate. Copper wares Lead in blocks, leaden tubes, pipes, zinc in sheets Cotton goods Machinery and parts, iron wares of all descriptions Iron plates, railway locomotives Marks. 2-68 2-04 2-68 2-04 1-61 Marks. 1-32 1-33 1-53 1-06 0-56 245. There can be no doubt that the system of through rates afforded material assistance to the German exporter by reducing the cost of carriage from places far distant from the sea coast, which must otherwise have been prohibitive. But the system could, of course, be adjusted to particular objects, and there is reason to believe that the cost of inland carriage was sometimes so reduced as to place German products at an advantage, as regards transport charges, with similar British products, despite the shorter rail haulage necessary for the latter. To quote the words of a British steamship company : — "The system of reduced rates, so far as we understand it, is not a standard one; it is flexible and is granted primarily to enable the German manufacturer to place his special brand of goods at a particular port of shipment, or in a particular market, at a rate as low as, or lower than, a British or any other non-German manufacturer can do. " The through rates under the above system would, in effect, act as a means of cutting agreed port to port rates, provided there was no clause in the agreement that the ordinary through tariff rates were to be observed. Even if this were done, ways and means in the matter of book-keeping could be found of secretly refunding the difference between the tariff rate and the preferential rate." Export rates in favour of German goods do not constitute flag discrimination, unless they are conditional on shipment under the German flag. We have now to consider how far such a condition was enforced. The Levant and East Africa. 246. In the Appendix to the Report of the Royal Commission on Shipping Rings* is printed a despatch from H.M. Consul-General at Hamburg, dated the 27th April, 1907, which deals with the arrangements existing between the German steamship companies and the German State rail- ways for through rates in respect of goods sent from inland towns in Germany to ports abroad. For full information, reference must be made to that Report, but the salient facts are as follows : — (1) Special through rates (as distinct from the low export rates mentioned above) were accorded to goods exported on through bills of lading from inland places in Germany and shipped — (a) by the German Levant Line from Hamburg to Malta, Messina, Alexandria, ports in Greece and Turkey (including the Levant), and to Russian and Turkish ports on the Black Sea; (o) by the Atlas Line from Bremen to the same destinations;! and (c) by the German East Africa Line from Hamburg to ports in East and South Africa, including Beira, Chinde, Dar-Es-Salaam, Delagoa Bay, Durban, Mozambique, Zanzibar, &c. (2) If goods were either not shipped on a through bill of lading or shipped by any other line (German or Foreign), such goods could not benefit by the special through rate, but were subject to the export rate, whatever the flag of the vessel carrying them. (3) The proportions allotted out of the total through rate in each case respectively to these steamship companies and to the State railways were kept secret. 247. It is clear from certain information as to the division of the through rates between the steamship lines and the railways which has come into the possession of the Board of Trade that these special through rates were elaborated on a uniform basis, the allotment to the railways being the same irrespective of the oversea destination. + Thus, in the case of yarns and textiles exported in lots of 10 tons or more from Chemnitz, which is distant 280 miles from Hamburg, the railways received Mks. 12.30 per ton of the through rate for the transport from Chemnitz to Hamburg, no matter whether the goods were intended for the Levant (in which case the total through rate was Mks- 37.20) or for East or South Africa (in which case the through rate was Mks. 135.70). It should be observed that the rate allotted to the railway works out at 4.4 pfenniee or about \&. per ton mile, which is far below even exceptional rates granted on the British rail- ways for relatively rough freight. In the case of such articles as pig iron, locomotives and iron rails, the railway share of the through rate from Essen via Hamburg was Mks. 5.40, or 2"7 • Cd. 4669/1909, pages 216-217. See also the Report, par. 131. f Since absorbed by the German Levant Line. % This information relates to 1907, and little object would be served by an exhaustive examination of the rates, «ee, however, the illustrations given in the annex to this section (page 105). 99 pfennige (0_3 pence) per ton-mile. Miscellaneous (Class II) goods were transported from Munich to Hamburg under the .through rate system at a total cost of from 25 to 29 marks per ton according to the size of the lot; the distance is over 500 miles, and the rate therefore in any case is under $d. per ton-mile. 248. Broadly speaking, therefore, three main classes of rates were in operation on the (ierman State railways : — (1) the normal inland rates ; (2) export rates available for goods exported by any flag ; and (3) special through rates available only for goods shipped on through bills of lading to certain destinations by specified German lines. The last class, undoubtedly, had a prejudicial effect on British trade with the Levant and Eastern Africa. The adjustment of rates made Conference Agreements virtually impossible ; whilst the adoption of a weight basis for the German rate and a measurement basis for the British shipping rate led to confusion and subterfuge. Did Special Through Rates Exist in other Trades ? 249. We have endeavoured to ascertain whether the special through rates for goods shipped by German lines extended beyond the Levant and East African trades ; but, owing to the secrecy maintained by the German interests concerned, the point is difficult to establish. On the one hand, we were informed in evidence that a large number of bales and cases shipped from Hamburg or Bremen for consumption in the United Kingdom were marked " Bombay," " Karachi," " Singapore," and so forth, the object of the German shippers apparently being to obtain the benefit of a German railway tariff which applied to the East and was not intended for the United Kingdom. The fact that goods so marked were shipped indifferently under the German or under the British flag suggests that there was no flag discrimination in respect of the preferential rate accorded on the railways to goods destined for the East. 250. On the other hand, many British lines are convinced that special through rates were given to goods exported from Germany to important Oversea markets in German vessels which were not extended to similar goods exported in British vessels. It is held, in fact, that special tariff arrangements were not confined to trade with the Levant and East Africa but were applied to other markets if there was thought to be a sufficient reason for so doing. Such markets were South America, the Middle and Far East and even Australia. We understand that the German lines have consistently denied the truth of this allegation and we are unable to support it by concrete proof. Nevertheless our impression is that, while no special through rate may have existed, the export rates from Germany were, with the aid of Confer- ence Agreements, so worked as in fact to be available only for goods shipped in German vessels, because British vessels trading to the same markets were excluded by Agreement from the German ports. Such an arrangement would be in keeping with what is known of German methods, and it would, moreover, explain the German denial to which we have referred. We are, therefore, inclined to suspect that special through rates for German goods shipped in German vessels did, in practice, exist in other trades besides the Levant and East African trades. Effect of the Railway Through Rates. 251. It is advisable to guard against exaggerating the importance of the through-rate system in relation to foreign competition. In the first place, low as the through rates undeniably were, they were not necessarily unremunerative, having regard to the wide extension and organisation of the railway system in Germany as compared with the United Kingdom. Secondly, the average haulage distance from inland points in Germany to the coast is so much greater than in this country that it would require an enormous reduction in the German ton-mile rate to place similar commodities in the two countries on the same footing as regards trans- portation charges. Lastly, German trade was aided by the system of " Spediteurs," or Forwarding Agents, which has hitherto not found favour to any great extent in this country. 252. The " Spediteurs" made it their business to collect goods from individual firms and arranged for their forwarding with the railway administration or the steamship lines, as the case might be, the firms paying the " Spediteurs " a commission for their service. The " Spedi- texir," having collected a sufficient quantity of goods for a given destination, would then obtain from the railways or the steamship lines a reduced rate corresponding to the size of the lot. In view of the small bulk of high-class goods, such an arrangement had many advantages in per- mitting the extension of low rates to this grade of traffic. The exporter received a lower rate than he could have obtained by any other means, whilst the railways were relieved from the uneconomical handling of large numbers of small parcels. The importance of the system is shown by the provision made in the special tariffs to the Levant and East Africa for lots of different size in the case of valuable goods, such as textiles. Whilst the steamship lines in most cases received much the same amount per ton, whatever the size of the lot, a considerable abatement (from 20 to 30 per cent.) was made in the charge for land carriage in the case of a parcel of 10 tons, or more, as compared with a parcel of under 5 torls. Thus the railways and not the steamship lines, went short of the full amount chargeable under the maximum rates' of the special tariffs ; no doubt because a main object of the through- 17602 G 2 100 rate system was to reduce the handicap of the inland German manufacturer in foreign competition.* . The comments of our witnesses on the transactions of the " Spediteurs " were far from favourable. The commission system seems to have lent itself to much abuse; and many of tho evasions of Conference Agreements and much of the rate cutting attributed to German steam- ship lines may, perhaps, be traced, directly or indirectly, to the operations of the " Spediteurs ." t But these forwarding agents worked in close co-operation with the lines and also with the State Administration. Their position became very powerful ; and they were undoubtedly an integral part of the German trade system. It is our considered opinion that they fulfilled an important function in placing German wares economically on foreign markets. 253. When due allowance has been made for careful railway organisation in Germany, for the greater haulage distances and for the efforts of the " Spediteurs," the fact remains that the foreign consumer was systematically favoured as against the home consumer. Either the home consumer in Germany had to pay (by increased inland charges) for the assistance given to the exporter, or the State Administration — which owned the railways — was content to forego a part of its profits in order to subsidise the export trade. The German Government, therefore, adopted the system of the cartels, which dispose of their surplus production by selling at low prices abroad. 254. We wish to point out that the German system of export and through rates was essentially distinct, both in its aim and in its result, from the ordinary practice of all transport, bodies in granting lower rates where there is a large volume of traffic, or where traffic conditions otherwise permit. If through rates in the United Kingdom are sometimes lower than inland rates, it is generally because special circumstances render it commercially sound for the railway companies to give such rates, and not because of a deliberate policy to afford special facilities with a view to furthering particular sections of the export trade. Herein lies the fundamental difference between the British and the German systems. Our conclusion then is that the privileged treatment of exports by the German State Railways was an integral part of German trade policy, which might in practice, and did in fact, give rise to discrimination in favour of the German flag. (3) Rate Cutting. 255. We have received a large number of complaints as to the frequency with which the German Lines cut rates agreed to in Conference, the object being in nearly every case to secure a temporary trade advantage. In other cases, the German Steamship Companies shipped goods at low, and even unremunerative rates, in order to obtain a footing in a new trade or to destroy the competition of foreign Lines. There is reason to believe that the success of the Hamburg-America Line in the Persian Gulf was due directly to this cause; whilst the threat of a German service to New Zealand forced the British Companies engaged in that trade to ship goods from the Continent at lower rates than they were able to allow for similar goods exported from the United Kingdom. § 256. The methods characteristic of German trade in general were adopted also by German shipping. Profits realised in one market were used for imdercutting in another, and a prospec- tive gain was allowed to cover a present loss. The close organisation of the German Lines, to which we have already referred, made them in practice a great combine able and willing to undersell their competitors and to " squeeze" them in the Conferences into which they forced or induced them to enter. We do not wish to imply that up to the outbreak of war these methods had been attended by any large share of success; but it is clear that the German Lines, aided by the Control Stations and the State railways, possessed means of pressure which could be used with serious effect against their more loosely organised competitors. 257. Severe competition with British shipping ensued ; and we shall consider certain of its aspects under three heads : — 1- Political aspect; 2. Rate anomalies; 3. Conference Agreements. Effects of German Competition. (1) Political Aspect. 258. It is important to appreciate the close connexion between political and economic aims in German expansion before the war, since the German Mercantile Marine was an instrument well suited to the furtherance of German objects. German shipping was, in fact, the spear-head of German aggression. It was used to force a way into markets to which access would otherwise have been difficult, and so to pave the way for German penetration. In this respect the position of British shipping was different. German ambitions centred in four principal markets: — 1. The Near and Middle East, especially Asia Minor, the Levant, and the Persian Gulf. 2. Equatorial Africa. 3. South and Central America. 4. China and the Ear East. * See the table of special rates annexed to this section (page 105). f German shippers not only misdeclared the contents of packages in Bills of Lading, out also understated* the weights. It is possible that these practices were in many cases due to the Spediteur*. § See below, pars. 263-8. loi German influence throughout the Turkish Dominions has been only too ■appurt.ut during the war; before the war the interests of the Germans in connexion with* the Bagdad Paiiway and their trade activity in the Persian Gulf were well known. In Africa the Germans aimed at the creation of a great Central Empire stretching from the West to the East Coast ; in "Western Africa the settlement of the Agadir crisis gave them access to the Congo Eiver, whilst German East Africa abutted on the great tract of territory known as the Belgian Congo. As regards America, large numbers of German Colonists had settled in Brazil, in Argentina and on the West Coast, and there can be little doubt of German aims in this region. In China Germany not only possessed territorial interests ; but strove by every means to increase her trade : the subsidy paid in con- nexion with the China trade to the North German Lloyd and the excellence of the main steamship services and their local feeders afford sufficient illustrations of the importance attached by the German Government and the German people to the development of their trade with the Far East. 259. The above factors are closely connected with German Marine competition in these trades. The heavy subsidy paid to the German East Africa Line and the special through rates afforded to that line and to the German Levant Line served political objects, as is shown by the great development of German trade with the Near East and the Levant and with East Africa. It has been suggested to us that the special through rates in practice extended to the Persian Gulf, but of this we have been able to obtain no evidence. We think it more probable that the advantage enjoyed by the Hamburg-America Line in connexion with the Control Stations enabled them to cut rates and so to enter this and other trades in which it was politically desirable to extend German influence. In South and Central America there is no evidence, as we have seen, of special through rates for German goods shipped by German lines; but there is reason to believe that the rates that existed were in practice not widely different. German shipping in these trades, moreover, felt the benefit, direct or indirect, of the emigrant traffic and was assisted by the large German element in the population. 260. Apart from State assistance or encouragement, there was another factor which tended to increase German influence in certain directions. British shipping, with its long record and its established connections, was reluctant to engage in unremunerative trades when the more lucrative trades of the world were open to it. German shipping, being a late comer, had in a sense to be content with the leavings and to develop new spheres which might in time become profitable. It would appear that factors of this kind existed in the Persian Gulf, and in Eastern Africa, and that, when German competition became keen, the British companies did not think the trades worth fighting for. The following statement made to us by an important British company interested in the East African trade supports our view : — " So far as the German East Africa Line were predominant in the East African " trade, this was due principally to the fact that they commenced to develop that trade " by a subsidy, before the British lines (who had some years before given up their calls " owing to lack of sufficient support) considered this trade of sufficient importance to " warrant them in seeking to regain a footing in it at a loss. Even after re-entering " the trade, the ■ — Line carried on its East African service at a very heavy loss for " several years prior to the war. The predominant interest in this trade remained in the " hands of the German lines, whose revenue was aided by subsidies and the manipulation "of the railway through rates. . . ." Our attention has been drawn to the careful methods of the Germans in opening up new trades and in pushing their interests in other trades. Thus, in the East African trade the Germans established " a thorough organisation of coasting facilities as feeders to the ocean steamers." 261. As regards the West Coast of South America, German shipping was helped by economic needs at home. We understand that the agricultural interests in Germany " encour- aged the import of nitrate of soda from Chile in large quantities for the cultivation of beet sugar in competition with cane sugar from our own Colonies and Dominions." The fact that German marine influence in Latin America, including the Pacific coast, was not mainly political, but was due largely to domestic requirements and to general commercial conditions is shown by other evidence. The following is the comment of a British firm on this subject : — " Our advices and information show that in so far as the Manchester fine goods " trade was concerned the German competition was not effective. In the case of ship- " ments of enamelware - , glass and cheap German commodities the predominance, in our " opinion, was a result of the merchants' activities more than of any special efforts on " the steamship companies' part. Having regard to the fact that the Germans were able " successfully to export this class of trade to England there should be no surprise at " their successful competition in other countries. " In Central America German business houses predominate, and the large exports " of coffee to Hamburg were paid for by German goods. " There was a large rice trade to Colombia and other Central American countries " which was practically a German monopoly. Here again the trader was responsible "and not the shipowner by giving extended credit ranging from 6 to IB months, as " compared with the cash against documents required by English shippers." 17602 G 3 102 262. - U •has beeii : said Ikat the intensity of German competition abroad was in large measure due" to domestic economic conditions. Large scale production, not to say over produc- tion, at home required foreign markets for the disposal of the surplus output, and the whole German system was directed to facilitate marketing abroad, whether by cartels or by special railway arrangements, or again by the action of the steamship lines. It became the function of the latter to assist the national object. German competition was formidable, through a com- bination of factors — over-production at home; the care taken by the manufacturer to meet the precise demand of the oversea consumer, and by the State to assist him in the marketing of his goods; the organisation of trade and transport; and, lastly, the co-ordination of these factors under able political direction. (2) Rate Anomalies. 263. In this connection we shall examine a question which has given rise to much feeling in the British Dominions — the grant by British steamship lines of lower rates of freight for goods shipped to the Dominions, and especially to New Zealand, from Continental ports than for similar goods shipped to the same destinations from ports in the United Kingdom. In the words of the Dominions Royal Commission,* " the net result of this practice . has been, and must be, to facilitate the competition of German manufactures with British in New Zealand, unduly to handicap British manufacturers, and to destroy, at least to the extent of the difference in freights, the advantage intended by New Zealand to be given, by means of preference, to the British manufacturer." It is not necessary to discuss the practice in detail since its existence before the war is well established. We propose rather to show its close relation to the whole problem of German competition and to indicate the broad lines that successful counter-measures would have to take. These suggestions will be further developed in the concluding Section of our Report. We share the general views of the Royal Commission as to the undesirability of this practice, which, if indulged in constantly, could not but tend to prejudice our trade relations with the Dominions. It is, therefore, the more essential that any remedial measures should go to the root of the matter. 264. A distinction must be drawn between the preferential rates complained of in the New Zealand trade and the ordinary variation of rates that may result from competition. The British shipowner has to compete with the foreign shipowner in the provision of services, just as the British manufacturer has to compete with the foreign manufacturer in the supply of commodities. To meet such competition rates for foreign goods may at times be lower than rates for British goods, just as British goods may be sold abroad at lower prices than they are sold to the home consumer. Some latitude in this respect must be allowed to the shipowner as it is allowed to the manufacturer, since international competition would otherwise be impossible. 265. Again, a large volume of traffic on a particular route may warrant a reduction in the rates ruling for that route as compared with other routes. Such differences are due to traffic conditions and not to foreign competition. We believe that this factor has generally, though not universally, favoured the British exporter, who has on the whole benefited from frequent and regular services and favourable outward rates owing to the large volume of inward traffic. 266. In the New Zealand trade, the variation of rates, so far as we are able to determine, could not be attributed to traffic conditions, or to the every day incidence of foreign competition. Low rates were given for Continental traffic in order to prevent the establishment of a German direct service and the rates were fixed, not by the British lines, but by their potential competi- tors. We understand that the British lines definitely informed the German lines that whatever rates of freight the latter might quote would be accepted by them. Our experience of German competition suggests that the German lines here, as elsewhere, sought to establish a footing by cutting rates, and then to secure the best possible terms on admission to the Conference. It is probable that these terms would ultimately have involved the abandonment of the Continental traffic by the British lines, though the rates from the United Kingdom and the Continent would then have been equalised. We are convinced that the lower rates accorded to Continental goods were due to the German efforts to obtain admission to the Conference. In other words, the British lines adopted a policy of " dumping " services in order to prevent German encroachment in their trade. The question, therefore, is this : was it better for the British lines to have adopted a dumping policy, irrespective of its duration, or to have secured the equalisation of rates by admitting the German lines to the Conference ? 267. Germany before the war attached great importance to the expansion of her trade with the British Empire, and there is no doubt that she viewed with distrust and apprehension the growing movement towards Imperial Preference as likely to impede that expansion. This point is illustrated by the acute controversy following the grant of preference to British goods in • SecoDd Interim Report (Cd. 7210 of 1911). Pare. 95-98. 103 Canada, which, led in July, 1897, to the denunciation by H.M. Government of the Commercial Treaty of May, 1865, between Great Britain and the Zollverein.* It was by the develop- ment of shipping services and the advertisement inevitably given to German goods by the presence of the German hag, together with the development of agencies and com- mercial organisations, that Germany sought in some measure to counteract tbe handicap of Preferential Duties. Neglecting the sentimental aspect of the question, we are convinced that British interests were furthered by the fight of the British lines against German intrusion more than they were prejudiced by the grant of lower rates of freight to German goods. If evidence is needed to support this conviction, we would point to the growth of German trade in India, where the equalisation of rates was conditional on the British lines abstaining from carrying goods to India from German ports. German agencies were set up, market conditions were carefully studied, and the Germans captured a large amount of trade that might have remained in British hands. The efficient services of the Hansa Line were a most important factor in the attainment of this result. We lay stress on this point, because we feel that sufficient weight is not always given to the exceedingly important part played in the development of German trade by the German merchant who both assists and is assisted by the establishment and exten- sion of regular German steamship services. Nevertheless it is, in our opinion, essential to avoid, wherever possible, any action calculated to prejudice Imperial trade relations. 268. Complaints of the kind referred to by the Dominions Royal Commission might be met by one of three measures : — 1. British lines might be debarred by law from carrying the same goods to a British Dominion at lower rates from the Continent than from the United Kingdom. 2. Lower rates so granted might be countervailed in the Dominions by additional duties analogous to dumping duties, whatever the flag of the importing vessel ; alterna- tively action might be taken against foreign steamship lines practising unfair rate- cutting. 3. The British lines throughout the world might enter into an arrangement with one another, similar to that of the German lines, for the purpose of resisting foreign aggression wherever it occurred. The first alternative may be dismissed at once, since it would leave the Germans free to quote any rate they pleased without any check. The second would be difficult to enforce, whilst the third is for the consideration of shipowners themselves. It is clear, however, that an impartial Board of Investigation of the character indicated in paragraph 362 below would perform a valuable function in sifting complaints of this kind, which are necessarily complex and difficult to fathom. (3) Conference Agreements. 269. We have now to consider briefly the question of Conference Agreements with the German lines, to which our attention was specifically directed. We shall endeavour to show first how these agreements operated and we shall then consider whether they were desirable. The immediately preceding paragraphs illustrate an important aspect pf the Con- ference question. In the case of the preferential rates to New Zealand, the apparent prejudice to British trade was due directly to the disinclination of the British lines trading to the Dominion to enter into any such agreements with the German lines. Broadly, Conference Agreements are designed to prevent the kind of abuse which has attracted so much attention in the New Zealand trade, but immunity from such abuse may be bought at too high a price. Shipping, however, could not subsist on rate wars and the whole object of Conferences is to avert them and to produce equality of rates and stable conditions in the great ocean trades. This aspect of the matter was clearly brought out in the Report of the Royal Commission on Shipping Rings and we see no reason to dissent from the general conclusions stated in that Report. 270. Later developments of the conference system were, however, due in large measure to the severity of German competition, and it is possible that the views of the Royal Commission might have been modified by the fuller revelation of German methods since made. Germany's organisation and the expansion of her oversea trade would in any case have made her an important maritime country, but she did not scruple to increase her advantages by the employ- ment of unfair methods. Every weapon was used by the German lines not only to obtain admission to the Conferences, but, when admitted, to extort further concessions, not always justified by the magnitude of their trade. In order to avoid a continuous series of rate wars, which could have conferred little advantage, the British lines frequently compromised with the Germans, a common basis of division being the reservation of the United Kingdom trade to the British lines and the reserva- tion of the trade from German ports, and sometimes from Dutch and Belgian ports as well, to the German lines. It was, in fact, as a correspondent has expressed it, an arrangement " to keep off one another's territory." Naturally an arrangement of this kind was not as favourable to British shipping as might have been desired, since it tended to deprive us of the trade from Continental ports which had hitherto been an important part of the British carrying trade. It was in essence a compromise and had this advantage, that it removed some of the uncertainty which would otherwise have greatly prejudiced the prosperity of British shipping. * The Treaty, accordingly, in pursuance of Article VIII, ceased to be in force after July 30th, 1898. The termination of this Treaty involved likewise the termination of the Treaty of Navigation between Great Britain and Prussia of August, I860, which, by virtue of Article VI., was to have the same duration as the Treaty of Commerce with the Zollverein. The Navigation Treaty with Prussia gave National and Most Favoured Nation treatment in all matters of Navigation, including admission to the coasting trades of the United Kingdom and Prussia respectively. For the Treaty relations with Germany after the termination of the two Treaties referred to, see paragraph 277. 17602 G i 104 271. There are, however, indications that the Germans, not content with the concessions made to them, were endeavouring to extend their influence hy underhand methods. We have made careful enquiry on this subject; and, while we have reason to believe that Conference arrangements on the whole worked satisfactorily, cases of evasion and subterfuge were too common to be regarded as accidental. The following illustrations taken from communications made to us by British Steamship Lines are representative of the feeling in the industry. Thus a line engaged in the Central American trade states that the German lines "evaded their agreements when it suited them. They had many methods and varied them according to circumstances. If detected they would frequently plead ignorance and blame their agents." A characteristic method was "the convenient finding of an alleged opposition service, and the consequent excuse for a lowering of German rates to meet the supposed competition." Many lines suspected that " agreements and rules were clandestinely broken by the Germans," though actual proof might not be forthcoming, and " in Mexico there was reason to believe that they were as usual tricky to a degree." One company write 1 with reference to the South American trade, " It is common knowledge that they (the Germans) have used other trades in which they were engaged to grant concessions so as to meet shippers, thus enabling them on the one hand to appear before the British Conference as having upheld rates, while on the other giving their shippers the desired rebate." Again, in the Indian trade British lines " have had instances where secret rebates have been given to shippers contrary to Conference Agreement." Finally, we cite in full the following illustrations of German methods which have been supplied to us by the courtesy of two British steamship companies : — " At meetings when matters were arranged in regard to agreements, we have found " that, on the return of the representatives to Germany the arrangements have not been " adhered to. To instance a case in point, for a commodity — rice — in which Liverpool " is largely interested, it was arranged at meetings that a certain rate was to be charged. " The United Kingdom representatives, on their return home, notified their shippers and "buyers of the rate that -had been arranged. Shortly afterwards, a telegram was " received from Germany, stating that it was impossible to carry out the arrangement as "regards rates which was come to at the meeting, and, consequently, they intended " FORTHWITH to quote a lower rate of freight. The inference is, of course, that the " lower rate had been quoted before the telegram was despatched, and possibly, before " the representatives went to the meeting to arrange fuhire rates of freight." " Generally the Conference arrangements worked fairly well, and it was difficult to "discover any breach of these agreements. It was known to the British lines that the " German lines had made specially favourable contracts with certain large German "exporters and manufacturers, e.g., Messrs. Koppel, Allgemeine Elektrische Gesellschaft " (A. E.G.), &c, but the British lines were never able to obtain exact particulars of these " contracts which the German East Africa Line pleaded were governed by overriding "considerations due to Government orders from Berlin. Since the war, freight notes "made out at lower rates than tariff have come into our possession, but these have been " difficult to obtain. The Germans naturally tried to cover up their tracks in this matter, " but the fact that these evasions of the Conference agreements did take place leads to the " presumption that many more may have taken place without detection." 272. It may be noted that the experience of the larger and more powerful lines was on the whole more satisfactory than that of the smaller lines in the above respect; and there are indications that the Germans were seeking out the weak spots in the armour of their opponents. It further appears that cases of evasion were most frequent in trades where there were important German political interests, as in the trades to Central and South America and especially in the Mexican trade. 273. Lastly, we quote below a statement made to us by a British line engaged in the North Atlantic trade, in order to illustrate the advantage which the German lines would sometimes take of an Agreement which bound a trade rival : — " In 1908 a series of Agreements was concluded, upon which it is possible to form some opinion of the manner in which the German lines observed their obligations. Having been drawn up by representatives of the German lines it was perhaps natural that their working would, in effect, favour the German lines, and this was experienced in the agreements which they concluded with the Russian American line of Petrograd, the Compagnie Generate Transatlantique of Paris and the Austro-Americana Steamship Co. of Trieste. We were not in direct contractual relationship with the companies named. We were in agreement with the German lines, and the operation of the two sets of agreements resulted in this situation — that the three steamship companies mentioned were forced by the Germans in their agreement to reduce their rates, causing a severity of competition which we could not redress owing to our contractual obligations with the German lines. It was an unfair situation, and it was one which we were determined to adjust and remedy in any new agreements we were to conclude." 274. Our conclusion, therefore, is that the German lines observed their agreements only so far as it paid them to do so. Where an important object could be served by disregarding an agreement, an excuse was generally found. It would appear that the British lines preferred to 105 put up with a certain amount of evasion rather than engage in a ruinous rate war. Conferences with the German lines represented the less of two evils and on the whole it is probable that the British lines gained more than they lost from them. In this question, as in every other question affecting German competition, the means for safeguarding British shipping are two- fold : (1) Steps to counteract unfair competition ; and (2) Better recognition, on the part of British shipping as a whole, of the support due from all its members to the British flag, and greater readiness to co-operate in the face of such competition. Conclusions. 275. Our conclusions on the subject of German competition may be summed up as follows : — (1) Germany's great and growing sea-borne trade, together with the efficiency of the German mercantile marine and the close association of the principal steamship lines would in any circumstances have made German competition formidable. (2) That competition was accentuated by the employment of methods at times unfair; these methods were principally : — (a) The grant by the State Railways of privileged rates to German exports, especially if shipped in German vessels ; (b) Rate-cutting by the German lines ; and (c) Abuse of the Control Station system. (3) Besides being otherwise detrimental to British interests, this competition had serious consequences in certain directions, viz. : — (a) German penetration in trades politically important; (6) The cutting of rates by British lines in favour of Continental, and especially German goods, thus prejudicing the position of Imperial Preference in the Dominions ; and (c) Conference Agreements increasingly unfavourable to British interests. (4) Most of the problems connected with German marine competition may be traced, directly or indirectly, to the enormous influence enjoyed by the German lines in the North Atlantic trade, which was due primarily to their abuse of the Control Stations. The satisfactory solution of that question igyflccordingly the key in many respects to the solution of the other problems. Annex. Statement showing the division between the 'steamship lines and the State raihoays of the special through rates for certain selected commodities which were accorded in 1907 to goods exported to the Levant and, East Africa from inland towns in Germany and shipped by the German Levant Line and the German East Africa Line. Marks per 1,000 kilogs. Through rate via Share of Steamship Approxi- • Article and source (with approximate distance in miles from Hamburg). Hamburg. from Hamburg to Railway Share. mate rate in Marks Levant. East Africa. Levant. East Africa. per ton mile. Lead from Dortmund (211 miles) : — Less than 5 tons 24 20 39-60 15-60 31-00 8-60 •041 5 tons, and less than 10 tons 18-50 37-70 12-20 31-40 6-30 •030 10 tons and over ... 17-90 37-10 12-20 31-40 5-70 •027 Do. from Breslau (380 miles) :— Less than 5 tons 29-70 45-60 15-10 31-00 14-60 •038 5 tons, and less than 10 ton-s 22-40 42-10 11-70 31-40 10-70 •028 10 tons and over ... 21-40 41-10 11-70 31-40 9-70 •025 Yarns and texti'es (except silk) from Elber- feld (240 miles) :— Less than 5 tons 40-90 137-10 25-80 122-00 15-10 •063 5 tons, and less than 10 tons 36-00 134-10 24-30 122-40 11-70 •053 10 tons and over ... 34-90 133-10 24-30 122-40 10-60 ■044 Do. from Chemnitz (281 miles) : — Less than 5 tons 43-30 140-20 26-10 122-90 17-20 •061 5 tons, and 1 ss than 10 tons 38-40 136-90 24-90 123-40 13-50 •048 10 tons and over ... 37-20 135-70 24-90 123-40 12-30 •044 Miscellaneous (Class II.) goods from Berlin (174-184 miles) :— Less than 5 tons 64-60 162-00 52-40 149-80 12-20 •070 5 tons, and less than 10 tons 62-70 160-50 52-20 150-00 10-50 •061 10 tons and over ... 61-60 159-50 52-10 150-00 9-50 •055 Do. from Munich (505 miles) : — Less than 5 tons ... 75-40 176-30 46-10 147-00 29-30 •058 5 tons, and less than 10 tons 73-40 174-70 46-00 147-30 27-40 •054 10 tons and over ... 70-90 172-20 46-00 147-30 24-90 •049 Exceptional Tariffs (200 miles) : — Pig iron from Essen 17-60 — 12-20 — 5-40 ) ljocomotives from Essen ... 28-20 — 19-20 — 5-40 \ -027 Iron rails 36-80 31-40 5-40 1 106 SECTION III. GENERAL RECOMMENDATIONS. 276. We have now completed our survey of the general position of British Shipping; and we are, therefore, in a position to outline the principles which should, in our view, guide the policy of II. M. Government in matters of navigation. Our recommendations will embrace, besides navigation policy proper, certain questions connected with defence, the development of shipping communications and lastly certain important questions of domestic organisation, such as the relations between the Government and shipping and between traders and shipowners, as well as the development of railway and port facilities, taxation and the like. The conclusions and recommendations in this Part of our Report are based on the assumption that the relative position of British Shipping in the world's carrying trade after the period of demobilisation will approximate to its position before the war and, therefore, on the assumption that the proposals advanced in the First Part of our Report are in principle adopted. Navigation Policy. \o) Commercial Treaties : Navigation Clauses. 277. We print in Appendix F. a detailed statement of the Treaties, Conventions and Arrangements, affecting Navigation, which are in force between the United Kingdom and Foreign Countries, together with their main provisions; and we propose here only to summarise their main features and then to indicate, ironi evidence we have received, the points in which they fell short of requirements. Broadly, the Treaty position at present is as follows : — (1) All Treaties with enemy countries were cancelled by the outbreak of war ; and, in the absence of Provisions in the Peace Treaty, H.M. Government will be free to discriminate against them in any way they deem proper unhindered by any Treaty obligations. The cancelled Treaties which contained provisions with regard to navigation were as follows : — Austria-Hungary. — Treaty of Navigation of 1868. Bulgaria. — Convention of Commerce, Customs Duties and Navigation of 190-5. Our maritime relations with Turkey were governed by provisions in the Capitula- tions. After the termination in July, 1898, of the Treaties with Prussia and the Zollverein,* our commercial relations with Germany were governed by a law passed every two years by the Bundesrat, which granted " to the subjects and products of the United Kingdom of Great Britain and Ireland, and of the British Colonies and Foreign Possessions," the same advantages as were granted by the Empire to the subjects or products of the most-favoured nation. It is not clear that this law covered navigation, unless implicity. (2) We have no Treaties with a number of Latin-American States, some of them impor- tant, viz.\ Cuba, Hayti, San Domingo, Guatemala, Salvador, Panama Brazil, Uruguay, Chili and Ecuador. In the case of the Argentine Treaty, notice of termination has been given by the Argentine Government. The difficulties of concluding Treaties with Central and South American States are, we understand, considerable, in view of the growing tendency to grant specially favourable treat- ment to other American States, which is not extended to European countries. Nevertheless, certain of these countries have in practice accorded full national treatment to British shipping, including even admission to the coasting trade. (3) Treaties are in force with practically all other countries, though commercial relations with Belgium and Spain have been governed by a Modus Vivendi in each case, pending the conclusion of a more permanent treaty. We understand that the Anglo-Russian Treaty has recently been denounced. 278. The commercial treaties which govern our maritime relations with foreign countries cover a period of more than 250 years, during which our policy has gradually changed from the Mercantilism of the Navigation Laws to the freedom of more recent times. Most of these treaties are relatively modern, but some, especially those with the old maritime powers, such as Sweden, Denmark, Spain and even France, Holland and the United States go far back and bear the impress of the policy underlying them. Since the middle of last century the navigation policy of this country has been based on the great ascendency of the British mercantile marine and the widespread character of our trade, which made protection both unnecessary and undesirable. Our object was to obtain free access to the ports and the trade of foreign countries ; it was therefore inexpedient to give British shipping privileged treatment at home, since such action could only have afforded foreign countries an excuse for similarly differentiating in favour of their own vessels. In view of its great relative size, the British mercantile marine stood to gam more from free access to foreign countries than foreign flags stood to gain from free access to British ports ; and conversely a policy of mutual restriction would for the same reason have caused more harm to British than to foreign shipping. 279. The navigation policy of our modern commercial treaties may be summarised as follows : — (1) General freedom of navigation, i-e., liberty to come with ships and cargoes to places in the territory of the contracting parties (national treatment); See paragraph 267 and the footnote on page 103. 107 (2) National treatment as regards the stationing loading and unloading of vessels in ports, docks, roadsteads and harbours; (3) National treatment as regards duties of tonnage, harbour, pilotage, lighthouse, quarantine, or other analogous duties or charges levied for the profit of Govern- ment, public functionaries, private individuals, corporations, or establishments of any kind ; (4) Prohibition of differential flag treatment ; and (5) General most-favoured-nation treatment in all matters relating to navigation. In practice the Coasting trades of the United Kingdom and most of the British Oversea Dominions and Possessions (as well as the Inter-Imperial trade) have been open to the flags of all nations. 280. H.M. Government have aimed at securing liberty of action for the Dominions and Colonies in matters affecting navigation. 281. Stationing, loading, fyc. of Vessels. — We have already called attention in para- graph 228 to the preferential treatment given in the port of Antwerp to German shipping before the war. It is essential that no similar handicap should be imposed cfn British shipping after the war, whatever the treatment meted out to enemy shipping in Allied ports; and the Belgian Government should be urged to remove this handicap. The point will be of considerable importance on the close of hostilities. 282. Dues on Shipping. — The only cases of differential treatment of British vessels as regards shipping dues and charges are the following* : — (1) Brokerage in certain French ports. There is no provision in our treaties with France providing for national treatment of British shipping as regards dues; and it is in any case doubtful whether such a provision would cover this charge which is paid to a privileged class of brokers. In the words of the Joint Committee of the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association " the fees this special class of brokers are authorised to charge were fixed many years ago and are based on the tonnage of the vessel. With the increased size of the foreign and especially of the British ships, trading into French ports, the fees that are paid to the brokers amount to very substantial sums, quite out of proportion to the services rendered. They in fact amount to a substantial tax on the shipping and oversea trade — a tax, moreover, which is not levied for the benefit of France, or of the particular ports." The Committee add that where, as at Marseilles, the sworn brokers, as a matter of business arrangement, agree the amount of the fees with the shipowners, the fees amount to from one-tenth to one-twentieth of the legal tariff rates. The Committee referred to suggest that British shipowners should be left free, as are French shipowners in British ports, to employ any agent who is capable of performing his duties efficiently, and to arrange with such agent the amount of his remuneration for the service rendered. We agree with this proposal and recommend that a suitable opportunity should be taken of obtaining from the French Government the redress of this grievance. Alter- natively the fees should be fixed on a reasonable basis. (2) Portuguese ships in Portuguese ports pay only one-half of the dues paid by foreign shipping. We understand that H.M. Government endeavoured to obtain for British shipping national treatment in this respect, but that the Portuguese Government refused to concede anything more than the treatment of the most favoured nation. In view of the difficulties experienced in the negotiation of a commercial treaty, we do not wish to press this point, which, though important in principle, is not in practice a serious handicap. 283. Flag Discrimination. — This is by far the most serious of all the questions of Naviga- tion policy which we have to consider, and we therefore quote in detail the treaty provisions on this subject in their most recent f orm : — " Each of the contracting parties shall permit the importation of all merchandise which may be legally imported or exported, and also the carriage of passengers from, or to their respective territories upon the vessels of the other; and such vessels, their cargoes, and passengers shall enjoy the same privileges as, and shall not be subjected to any ( other or higher duties or charges than, national vessels and their cargoes and passengers." 284. These provisions reverse a rule of the old Navigation Laws and embody the funda- mental principle that the carrying flag must not be made a basis of differential treatment for imports or exports. They lay down two rules: — (1) Imports and exports to and from each country, which may be carried in national vessels, may be carried likewise in vessels of the other country. (2) Imports and exports to and from each country shall receive identical treatment in all respects, whether carried in a national vessel or in a vessel of the other country. / 7 * We are informed by the Board of Trade that the United States Tariff Act of 1909 repealed the provision by which Tonnage dues in the United States were remitted on a vessel entering from a foreign port to the extent by which such dues exceeded the tonnage and lighthouse dues or other equivalent tax, imposed in that port on American vessels by the Government of the country in which it was situated. In view of the lighthouse dues levied on shipping in the United Kingdom, we understand that this provision was detrimental to British interests. 108 285. Actually flag discrimination has been experienced in two main directions. The practice has in each case originated with Germany, and it was in each case arguable that the strict ^letter of existing treaties or arrangements did not forbid such discrimination. The two directions in which discrimination occurred were: — (a) In respect of passengers, and (6) in respect of railway through rates. We have already considered both questions in detail; and our remarks here may therefore be brief. 286. Passengers. — In our Interim Report on the German Control Stations and the Atlantic Emigrant Traffic we showed how developments on both sides of the Atlantic had made the passenger movement, and particularly the emigrant traffic, a factor of commanding importance in maritime policy; and we pointed out that the control of a large part of this traffic was at the root of German maritime development. Passenger busine?s is so vital a factor in the develop- ment of liner trades that no country, seeking to foster its mercantile marine, could afford to neglect it. Many States, accordingly, sought to obtain for their own flags the bulk of the passenger traffic which emanated from, or passed through, their territory. This applied especially to the steerage business, where sanitary and other requirements gave an excuse for supervision, whether on grounds of public health and safety or in the alleged interest of the emigrants themselves. Representations as to flag discrimination were liable to be met by the plea that " passengers " could not be regarded as " cargoes," and were therefore not covered by any treaty provisions. As a result especial reference to passengers is now, wherever possible, in- serted in the treaties, but in fact the italicised words quoted above occur only in the treaties with Japan (1911) and Portugal (1914). The latter, however, forbids discrimination as between foreign flags only. 287. In our Interim Report we drew a distinction between discriminatory treatment in respect of : — (a) Subjects of the discriminating country; and (6) Subjects of third states who merely pass in transit through that country on their way to another destination. 288. Every country is, of course, entitled to lay down whatever rules it sees fit with regard to its own nationals; but we recommended that H.M. Government should insist on full national treatment in respect of passengers in all commercial treaties, and should not in any case allow the right of transit, under proper safeguards, of non-nationals to be inter- fered with. We pointed out that refusal of the right of transit, except on genuine sanitary grounds, to foreign nationals, desiring merely to pass through a country on their way to a third country was a breach of what should be regarded as an elementary international right in time of peace. This right should in fact be treated on the same plane as the recognised right of all flags to use on equal terms the great inter-oceanic canals of the world. 289. We stated in our Interim Report that the freedom of British ships to embark passengers had been restricted or was about to be restricted in ports of the following countries : — Germany, Austria-Hungary, France, Russia, Italy. The first three countries interfered with the right of transit, whilst the last two countries imposed or sought to impose restrictions on their own nationals. To the above list of countries must be added Spain. The Spanish Emigration Law appears to be so designed as to draw revenue by licence or taxation from all except National Lines. 290. Railway Through Rates. — We indicated in Section II. our reason for considering that the German through-rate system did in certain cases amount to flag discrimination. 291. It may, however, be argued that rates applicable only to specified German lines (the Levant and East Africa Lines) to the exclusion of other German lines did not constitute discrimination against foreign flags. This, however, is not so, in view of the territorial basis of these rates; they applied in fact to the only German lines trading primarily to the Levant and East Africa. It is inconceivable that they should have been extended to any foreign lines, even assuming that the latter were willing to undertake the obligations co-incident with the privilege. 292. It is, however, extremely difficult to bring this practice under the head of any specific treaty provision, and we are, therefore, of opinion that it would have to be met by other means. 293. Coasting Trade. — Inasmuch as the question of the coasting and Inter-Imperial trades closely affects our future commercial policy, we reserve it for further discussion below. It should, however, be noted that, although the coasting trade of the United Kingdom and the trade between different parts of the Empire were open to the flags of all nations, British vessels 10!) were excluded from the similar trades of trie principal foreign countries, including Russia, France and the French Possessions, Holland and the Dutch Possessions, Spain, the United States and the American Possessions, Brazil, Argentina and Japan. As regards Chili, a law has been passed which will close the Chilian coasting trade to British vessels after the lapse of a certain period. By special arrangements British ships were admitted to the coasting trade in Italy, Greece and Turkey. We understand, however, that British shipping derived little benefit from the nominal opening of the Italian coasting trade, since local regulations were enforced on coasting vessels with which it was difficult, if not impossible, for British vessels to comply. As regards Turkey, we trust that H.M. Government will make every effort to ensure the re-opening after the war to British shipping of the coasting trade throughout the former Ottoman Dominions. 294. The French Surtaxe d'Entrepot. — In connexion with navigation provisions in commercial treaties reference may be made to the Surtaxe a" entrepot, which is a special duty imposed on all goods not imported into France direct from the country of origin. Since the United Kingdom is the natural entrepot centre for Colonial and oversea produce generally, the duty hits the British carrying trade with especial severity. The remission of this duty is a matter of considerable importance to British trade and shipping, and we recommend that advan- tage be taken of future commercial negotiations with France to secure its remission as one of the most valuable concessions which could be made by France in return for concessions which H.M. Government may be invited to make. 295. Miscellaneous .- — Attention may be drawn to a few further points not involving any treaty questions which, however, affect British shipping in competition with foreign flags. (1) Foreign Legislation. — There is a growing tendency abroad, and particularly in the United States, to pass legislation calculated to interfere between the ship and cargo owner and between shipowners and their crews. Instances are the Sherman Act, the Harter Act and the United States Seamen's Act. We, of course, recognise the right of every Government to legislate for the protection of its own subjects, but we think that the tendency we have described is dangerous and should be carefully watched by H.M. Government with a view to energetic intervention on behalf of British interests wherever necessary. (2) Foreign Ships Using but not Entering British Ports. — We concur generally in the recommendation made by the Joint Committee of the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association that foreign ships using, though not actually entering, our ports should contribute to their upkeep. The point is, however, not altogether easy of solution. It is true that German passenger steamers before the war lay off Southampton Water and there embarked and disembarked their passengers without, so far as we are aware, contributing in any way to the upkeep of the port — a fact which has occasioned a good deal of comment and dissatisfaction in the shipping industry — but we are disposed to think that the position at Southampton was exceptional. Our general view is that all vessels making use of a British port should be required to pay dues proportionate to the service rendered by the port. It is, however, desirable to avoid action which would simply involve the transfer of trade to foreign ports. (b) Questions of General Policy. 296. We have now to consider whether, and if so, to what extent our former policy of equal treatment for all flags should be modified after the war. The suggestions that Have been put forward fall under two main heads : — (1) Privileged treatment of certain flags over other flags. (2) Reservation, partial or complete, of the coasting and inter-Imperial trades. Flag Discrimination. 297. A number of proposals have been made for giving preferential treatment to certain flags over other flags, viz. : — (1) To the British flag over all flags ; (2) To the British and Allied flags over neutral and enemy flags ; (3) To the British, Allied and Neutral flags over the enemy flags. All these proposals may, of course, be combined. The position of the enemy countries is in all respects so far removed from that of other countries, especially in view of the cancellation of Treaties with them, that we prefer to treat this aspect of the problem rather as a defence question than as one of commercial policy. As regards distinctions between Allied and Neutral flags, the entry of the United States into the war has practically divided the world into two camps. Of the Maritime Nations, who are not belligerents, the most important is Norway, a country whose ships have been run in the Allied interest and in spite of the enemy's submarine warfare. In view of her heavy marine losses, we should regret to see Norway penalised in any way after the war. There remain only Sweden, Denmark, Holland and Spain; and it may be doubted whether it would be worth our while to single out these countries for discriminatory treatment. 110 298. Apart from the special question — to be considered separately — whether enemy shipping should be penalised after the war, the problem for consideration may, therefore, be stated thus : Should British shipping be accorded preferential treatment over the shipping of other nations? 299. It is well to realise that an affirmative decision would involve a reversion to the general principles of the Navigation Laws. Preference to British shipping might take three forms, each of which could be used in combination with one or both of the other two, viz. : — (1) Preference in respect of port facilities ; (2) Preference in respect of shipping and port dues ; or (3) Preference in respect of the imports and exports carried in British vessels. 300. Of these forms of preference the first would be difficult to enforce, and the second would, in our opinion, be ineffective unless the dues in question were made exceedingly onerous. Whatever the merits of Preference in this connection, we should deprecate the imposition of port charges or shipping dues on a scale higher than is necessary to defray expenses. "We are thus left with the third form of Preference which involves flag discrimination in the purest form. We have only to examine the nature of our carrying trade to see the undesirability of adopting any such policy. 301. Before the war we owned nearly one-half of the world's shipping, and we carried over one-half of the world's trade. The entrances of British shipping in the different trades during 1911 were as follows: — Million Tons Net. Per cent. Between the Empire and foreign countries ... ... 123" 3 53'4 Inter-Imperial Trades 407 176 Between foreign countries 670 290 2310 100-0 302. Only the Inter-Imperial trade would be immune from retaliatory action by foreign countries. The trades between foreign countries would be exposed to retaliation of both terminals, whilst the trades between the Empire and foreign countries would be liable to retaliation at the foreign end. 303. The adoption of a discriminatory policy would, therefore, hit with great severity that portion of our shipping which trades between foreign countries, and especially the tramp interest, at the very time when it will be necessary to make every effort to recover our former ascendency in the distant trades and to repair the very grave damage caused during the war to the tramp owner's position. 304. One argument against a policy of discrimination remains to be stated, and it is one that in our opinion overrides all others- Whatever may be the merits or the practicability of a League of Nations after the war, it seems clear that our object must be to eliminate the causes of international friction which might lead to future wars. International commerce will be more than ever necessary after the war, and it would be deplorable to set out on a course which would hamper the natural flow of trade and lead to endless quarrels among the maritime nations of the world. Freedom of the seas, in the sense of equal treatment of all flags in all ports, should therefore be a cardinal principle in our post-war policy. 305. Our conclusion then is and must be that the only policy which can meet the position is one which, instead of giving preference at home, will secure the grant of national treatment to British shipping in the fullest sense abroad. Action should be directed towards main- taining this treatment where it is already given and towards securing it where it has hitherto been withheld. So far as maritime policy is concerned this is the most effective support that H.M. Government can give to British shipping during the difficult period of Reconstruction. Coasting and Inter-Imperial Trades. 306. We have now to consider the suggested reservation of the Coasting and Inter-Imperial trades to British shipping. By "coasting trade" we mean the carriage of passengers or cargo from one port to another port of the same country. Vessels which enter in ballast from, or clear in ballast to, a port of a s, most of which can only be used for short voyages.* It has been pointed out to us that, while the running costs of the British ships have increased considerably, the earnings, especially of the coasting liners, have tended throughout the war to be limited by railway competition. It is feared, therefore, that foreign competition may be much increased after the war. In particular there is a tendency to view with some concern the possibility of an increase in the number of triangular voyages, of which one section is in the coasting trade, undertaken by foreign ships. Thus a foreign vessel, it is said, may bring cargo to a port in the United Kingdom and there pick up any cargo offering for a second port in the United Kingdom whence she would return with coal to her home port. Since the earnings for the round voyage would be looked for from the two voyages made in the foreign trade, it is argued that cargo might be carried on the coasting voyage at rates so low as to menace the interests of the British shipowner whose earnings were derived wholly or principally from the coasting trade. 313. Inasmuch as the coasting trade is a domestic trade in which the British flag has enjoyed and should continue to enjoy, a great natural advantage, the above apprehensions are important as indicating the gravity of the general shipping position. They do not, however, in our opinion, justify the closing of the coasting trade to foreign flags. The real basis of British Sea Power centres in the ocean trades, where the danger of foreign competition after the war appears to us greater than in the domestic trades of the Empire. We wish, however, to call attention to our recommendation in paragraph 324 as to the importance of making every effort to enforce strictly on foreign ships calling at British ports all safety requirements and require- ments in the interest of the health of persons on board the ship, whether imposed by Merchant Shipping Acts, Public Health Acts or Factory Acts, which apply to British shipping. 314. The Indian Coasting Trade. — The coasting trade of British India, like that of the United Kingdom, is open to the flags of all nations. There is, however, a strong feeling among certain of our Eastern Lines that this trade should in future be reserved for British ships. We understand that already before the war the Japanese Lines strove to force their way into the coasting trade by a policy of rate cutting in which they were directly assisted by the heavy subsidies paid to them by their Government. Inasmuch as the coasting trade is every - * According to the Dutch Shipping papers there were launched in Holland during 1917 101 vessels of less than 2,000 tons gross, while 120 such vessels were on the stocks at the end of that year. 112 where regarded as a domestic trade, the action of the Japanese undouhtedly caused resentment, more especially as the coasting trade of Japan is closed to foreign shipping. 315. It is impossible to determine from the Indian Navigation Statistics the extent of foreign participation in the coasting trade proper of British India.* The available figures, how- ever, suggest that the total foreign participation was very small; and the Japanese share can only have been a fraction of this amount. We doubt, therefore, whether the reservation of the Indian Coasting Trade to British ships only would, of itself, materially aid British shipowners in meeting Japanese competition elsewhere. 316. The Inter-Imperial Trade. — Much the same arguments apply to the Inter-Imperial trade as apply to the coasting trad© of the United Kingdom. In paragraph 138 we estimated that about 92 per cent, of the Inter-Imperial trade was carried in British ships, including 94 per cent, of the trade between the United Kingdom and the British Overseas Possessions and 85 per cent, of the Inter-Colonial trade. It is very doubtful, therefore, whether a change of policy would be justified. 317. On the other hand attention may be called to a number of points which would be solved by reservation : — (1) German steamers would be debarred from loading additional cargo in the United Kingdom at low rates for India. (2) We should be able to prevent foreign ships from engaging in the Inter-Colonial trade of the West Indies (including Trinidad, British Honduras and Demerara). No such competition has been experienced in the past, but British shipowners are apprehensive as to the future. 318. If ever the general reservation of the Coasting and Inter-Imperial trades were decided upon by His Majesty's Government on other than trade grounds, it would, in our opinion, be essential to provide for certain exceptions, viz. : — - (1) Those countries should as a rule still be allowed to participate which open their coasting trades to British shipping; and (2) Important entrepot centres, such as Hong Kong, Singapore and Penang, should be excluded from the coasting trade limits. 319. We should not, however, recommend the general reservation of the Coasting and Inter-Imperial trades. There are serious objections to such a policy: — (1) In the past British shipping, without artificial aid of any kind, had almost a monopoly of the Inter-Imperial trade and the Coasting trade of the Empire. (2) To quote the words of the Committee appointed by the Chamber of Shipping of the United Kingdom, and the Liverpool Steamship Owners' Association — "if the Empire trades were reserved for British shipping, it is manifest that the State would seek to impose obligations on the British shipowners in exchange for what it would regard as the concession of a valuable monopoly; but a democratic Government would probably attach an exaggerated value to these advantages and, therefore, impose obligations the burden of which would outweigh the benefits received. The Commonwealth of Australia in conferring on the Australian ship- owners a monopoly in the Australian coasting trade, has imposed obligations which have effectively excluded Australian shipowners from competing in the freight * The Indian statistics do not distinguish the coasting trade proper. Vessels in the oversea trade are recorded as entering in the foreign trade on the voyage inwards at the first port where cargo is discharged and as clearing in the foreign trade on the voyage outwards at the last port at which cargo is laden, other entries and clearances of these vessels at Indian ports being dealt with as coasting trade. It follows that the figures for the coasting trade include vessels coming from abroad which, after having discharged a part of their cargo at one Indian port, arrive at a second Indian port to discharge a further portion. In the year ended March, 1913, there entered with cargoes in the Inter- portal trade of British India 15 - 6 million tons net of shipping of which 13 million tons (or 8 per cent.) was foreign. In the year ended March, 1914, the corresponding figures were 15-2 million tons net of shipping, including 17 million Cor 11 per cent.) of foreign shipping. It may be doubted, however, whether much of this foreign shipping was engaged in the coasting trade proper. It is probable that most of it comprised vessels which simply proceeded to another Indian port to discharge the remainder of their cargo — a conjecture supported by the relatively small volume of foreign shipping recorded as engaged in the foreign trade. The entrances and clearances of vessels of all flags in the foreign trade of British India during the year ended March, 1914, are shown below : — German Austro-Hungarian Japanese Dutch Italian Other Foreign Total Foreign ... British, British Indian and Native . Total Entered. Million Tons net. •9 •4 •3 •2 1 •3 22 64 Cleared. Million Tons net. •9 •4 •3 •2 1 •2 8-6 21 67 8-8 113 market of the world, and in doing this the Commonwealth has secured a coasting service which, whatever its merits, is undoubtedly inferior to that which would have been provided by the shipping of the world if the monopoly had not been conferred." (3) It is difficult to believe that protective measures would stop with the reservation of the Inter-Imperial trade. Foreign ships trading to the Empire would tend increasingly to carry imperial produce direct to foreign countries, whilst shippers in the United Kingdom would tend to ship their goods to the Continent for tran^ shipment to the Empire, if by so doing they could obtain improved facilities. To a certain extent, therefore, competition would be restored but a demand would probably arise for the revival, with modifications, of the third Rule of the Navigation Laws, alluded to in paragraph 119 of this Report, for the purpose of preventing indirect shipments by foreign flags. (4) In the period immediately following the end of hostilities there is likely to be a serious shortage of tonnage, and it would, therefore, be impossible for some time to impose any further restrictions on the use of the tonnage still at the world's disposal. Right of Transit. 320. The right of transit has three forms according as it affects ships, goods or persons. It is the right that should be given to vessels of all flags to pass through a waterway in the territory of a given country from one sea to another sea or to goods and persons to pass in transit across the intervening territory of a third country. Such a right is an integral part of the general policy of freedom which we advocated above;* and we think it sufficiently fundamental to be embodied in the diplomatic instruments which will no doubt be drawn up at the end of the war for the future regulation of international intercourse. Practice in the past has been as follows : — , (1) Vessels. — The outstanding instances of equal treatment for all flags are afforded by the Suez Canal and by the Panama Canal. The principle of equality, which is of the utmost importance to international relations after the war, was furthered by the acquiescence of the United States Government in the claim of His Majesty's Government that preferential treat- ment in respect of the remission of tolls on the Panama Canal could not be accorded to American coastwise shipping under the terms of the Hay-Pauncefote Treaty. We should, therefore, deprecate any arrangement, direct or indirect, which would give British shipping preferential treatment in respect of Suez Canal dues. (2) Goods. — The transit of goods under bond free of duty is generally guaranteed either by treaty 'or by international comity. Care is, of course, taken that the fiscal interests of the country of transit are not prejudiced by the illicit entry of such goods into the local market. (3) Passengers. — In the case of persons, notably emigrants, the right of free transit has been persistently disregarded. The German action in regard to the Control Stations constituted the most conspicuous instance in which " Freedom of the Seas " was withheld before the war; and we would suggest that H.M. Government should consider the advisability of making full use, from this point of view, of the facts to which we draw their attention in our Interim Report on the subject. 321. As regards vessels, therefore, the principle of free transit has been recognised by the British and American Governments and has, moreover, been endorsed by Germany and Austria- Hungary and the other coimtries which are signatories to the Suez Canal Convention.! The corresponding right of transit overland for passengers has, however, not received universal recognition; and we think that such recognition should now be accorded. For His Majesty's Government and the Government of the United States a general provision on the subject would imply merely a renewal of their solemn undertaking that they for their part will guarantee to the flags of all nations the use, on terms of perfect equality, of the canals of Suez and Panama. To the Central Powers such a provision would imply the recognition of the right of transit, without molestation, of persons desiring to pass across their territory. The obligations would be reciprocal and conditional ; that is to say, the continued free transit of German and Austrian vessels through the Inter-oceanic Canals would depend on the free passage of persons across the Central Empires, and the maintenance of free passage for persons in the latter case would depend on the free transit of German and Austrian vessels in the former. It is, of course, desirable that an arrangement of this kind should, if possible, be couched in general terms, embracing not only the two canals particularly referred to but any other waterways important to international commerce, as well as the transit, under proper safeguards, of goods and passengers through all countries. 322. Whilst the above proposals are based on grounds of equity, we have naturally been guided not less by the interests of British shipping. Our investigation of German methods has shown that in the case of agreements with German interests security against evasion cannot be attained unless those agreements possess a sanction which would make their breach unremunera- tive. An effective sanction exists in the Inter-oceanic Canals, and especially the Suez Canal, which are of great importance to German and Austrian trade. The removal of the Control Stations would still leave the German Lines an important geographical advantage in the Eastern * See pars 304-305. . • ■ f The Convention was signed in 1888 by Great Britain, Germany, Austria-Hungary, hpain, b ranee, Italy, Holland Russia and Turkey. 17602 H 114 emigrant traffic; but it would secure the foreign lines against the unfair competition in that respect which was experienced before the war. It must of co\irse be borne in mind that the Suez Canal Company is to a large extent privately owned, and that the interests of its shareholders must be protected. The abolition of the Control Stations is of great importance also to French shipping, and we think that action in the general direction indicated should enjoy the support of the French Government. The question is, moreover, of interest also to Canada both as a carrying nation and as a country in need of settlers. Similar considerations apply to the United States. International Safety Regulations. 323. We concur generally in the remarks on the subject of safety regulations made by the Committee appointed by the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association. These remarks are as follows : — r " Until these regulations are established and enforced internationally, equal protec- tion should be secured throughout the voyage for all passengers travelling from or to our ports on both British and foreign vessels. The adequacy of protection on many points (boats, lifebelts, &c.) depends on the total number on board, and therefore foreign vessels carrying passengers from or to this country should be placed under the same restric- tions as British ships in regard to the numbers carried on every stage of the voyage, including passages between foreign ports. " The British load line regulations should be enforced throughout the voyage on foreign ships trading with this country, and not only on such vessels whilst in our ports. As the law now stands, a foreign vessel can start on a voyage to this country over-loaded to the extent of the weight of coal used on the voyage." 324. The difficulties above referred to are due largely to the fact that this country, as the first maritime nation of the world, has rightly taken the lead in matters affecting safety at sea ; and that, as a result, British shipowners were occasionally at a disadvantage through being subject to regulations which did not apply universally to their .competitors. Although the Merchant Shipping Act of 1906 requires foreign vessels in ports of the United Kingdom to comply with the general safety rules prescribed by H.M. Government for British ships, or, by special agreement, with the equivalent rules of the country owning the vessel, this measure could not prevent foreign vessels from overloading at foreign ports after leaving the United Kingdom or, as has been pointed out, from starting on a voyage to the United Kingdom overloaded to the extent of the weight of coal consumed on the voyage. Nor was it possible to prevent German passenger steamers which left the United Kingdom outward bound to South America with a full complement of passengers from embarking a considerable further number at Spanish ports. Practices of this kind are best rectified by international agreement for the universal enforcement of the rules concerned. The International Conference, which met in London in 1912 and 1913 and signed the Convention for the Safety of Life at Sea, made important progress in that direction, though the putting of the Convention into force internationally has been hindered by the war. It is very desirable that all safety regulations made by His Majesty's Government should be such as to command the universal assent of the principal maritime nations. To command such assent safety rules must necessarily conform to certain broad principles: — (1) They must be based solely on grounds of humanity ; (2) they should be framed so as to place on shipping the minimum obligations compatible with their object ; and (3) they should be sufficiently elastic to meet the varying demands of different classes of ships and of different trades and the progress of invention. "We think that after the war H.M. Government should take energetic action towards secur- ing the international recognition and enforcement of all broad regulations designed to secure safety at sea; and, whilst maintaining as high a standard of safety for British shipping as may be reasonably practicable, should avoid, so far as possible, imposing on British ships restrictions not enforced on the shipping of foreign flags. In any case every effort should be made to enforce strictly on foreign ships calling at British ports all safety requirements and requirements in the interest of the health of persons on board the ship, whether imposed by Merchant Shipping Acts, Public Health Acts or Factory Acts, which apply to British shipping. This is especially important in connexion with the coasting and short sea trades. 325. In view of the large amount of new evidence which is, unfortunately, now available with regard to flotation and life-saving apparatus, we are of opinion that the rules laid down shortly before the outbreak of war with regard to bulkheads, lifeboats and rafts should form the subject of further investigation when the war is over. 326. It is most important that the Safety Standards adopted throughout the Empire should be uniform; and it is reasonable that the standards of the United Kingdom, which own- over nine-tenths of the tonnage under the British flag, should, so far as necessary, be adopted in the Dominions. In any case standards recognised in the United Kingdom should be accepted as adequate by the Dominion Governments for ships on the Register of the United Kingdom trading to their ports. 115 Defence Questions. Enemy Shipping After the War. 327. The adoption of the following recommendations made by this Committee would radically affect the shipping position of the enemy countries after the war : — (1) The seizure of the enemy ships ; and (2) the abolition of the Control Stations and the establishment, on an international basis, of the right of free transit for passengers. If these recommendations are carried out, we see little reason to fear the revival of serious maritime competition from the enemy countries during the critical period following the close of hostilities; and we doubt whether further restrictions on enemy shipping would be justified by results. The most drastic measure which could be imposed by His Majesty's Government would be the total exclusion of enemy shipping from the ports of the Empire for a period of years after the war. Such a measure, whilst closing to enemy shipping a great part of the trades of the Old World would leave open to it the American trades which were before the war the most important sphere of its operations. The result would be increased competition in those trades and in consequence little gain to British shipping as a whole. This objection could of course not be maintained if all the Allies, including the United States and the more important Latin American States, were prepared to adopt similar measures. * 328. There is indeed this further possibility that the Allied States may, for a period after the war, adopt concerted economic measures against the enemy countries for political reasons. In that case restrictive measures would doubtless be imposed on enemy shipping, whether sailing under the enemy flag or under the flag of a. third country*; and non-enemy shipping would presumably be required (as during the war) to conform to the general policy laid down by the Allied Powers. In such an eventuality, we would urge that such precautionary rules as would apply to non-enemy shipping shoiild be limited strictly to the object in view. 329. As regards the use of British coaling stations by enemy or other foreign shipping, we should deprecate the continuance of restrictions'after the war except for the strictly limited object indicated in the preceding paragraph. There is nothing to prevent the establishment of coaling stations on foreign territory, and it is on every ground desirable that as many as possible of these stations should be under British control. Company Law. 330. It has been suggested that the law relating to limited liability companies should be amended so as to extend the provisions of the Merchant Shipping Acts, which preclude foreigners from owning British Ships, to foreign shareholdings in British steamship companies. At pre- sent there is nothing to prevent the whole capital of such a company being owned abroad or to prevent the company itself being controlled by foreign interests, whether through share- holdings or through an alien board of directors appointed by foreign shareholders. The opinion of the industry on this subject is somewhat divided, but there is undoubtedly a feeling that the present position is not altogether satisfactory. 331. It appears to us that the only danger that could arise in peace lies in the possible control of a British steamship company by foreign interests for the purpose of starting competition from within, as it were, to the disadvantage of British shipping. Again, a foreign country controlling a certain amount of British shipping might arrange, in the event of war, that such shipping should not be available for use by this country. We think, however, that these objections are altogether outweighed by the following important considerations: — (1) Everything should be done to encourage the investment of foreign capital in this country, especially after the war. (2) At the outbreak of war, it was directly advantageous to His Majesty's Government to have control over a large amount of shipping under the British flag which was not predominantly owned in this country. Had a measure of the kind suggested been in force, it is certain that the amount of shipping imder the British flag would have been materially less than it actually was. (3) Ships owned by foreign-controlled British companies necessarily comply with the domestic regulations prescribed by His Majesty's Government. We think, therefore, that the correct policy for this country is to encourage the placing of as much as possible of the world's shipping under the British flag. We would suggest, how- ever, that, as a precautionary measure, every limited liability company engaged in the shipping industry should be required to include in its annual return to Somerset House a statement of the amount of its stock and shares held by or on behalf of aliens, together with a statement of their nationality. * Our attention has been drawn to the possible bearing of the provision in most Commercial Treaties as to " National Vessels " on this question (nee Appendix F.). We can only express a hope that, whatever policy against the enemy countries is ultimately decided upon, efforts will be made to retain in the Treaties a provision which is essentially more valuable to a country with a great mercantile marine than to the smaller maritime countries. It is most important that a vessel recognised to be British in British Law should be so recognised throughout the world. 17602 • H 2 116 Masters, Officers and Crew. 332. As a result of enquiries made by us, we are of opinion that any measure preventing the free employment of foreign seamen on British ships would he undesirable on account of the world-wide character of the shipping industry. In this connexion it is also important that restrictions should not be placed either in the United Kingdom or in the British Dominions on the employment of Asiatic or coloured seamen, whether British subjects or not. We consider, however, that the Master should always be a natural-born British subject. As regards other officers we should welcome the ultimate adoption of a similar rule, were it practicable; but we doubt whether in existing circumstances it would be wise to handicap shipping by any such general rule. As a matter of fact the proportion of foreigners employed as officers has always been very small. With regard to the employment after the war of enemy subjects in any of the above capacities, we would suggest that, if the Government adopt a general policy of restrictions on the employment of enemy aliens in essential industries, these restrictions should for such time as they may be in force apply to shipping. 333. We recommend that pilots' certificates should hereafter be given to natural-born British subjects only. Conference Agreements. 334. We considered the question of Conference Agreements with German lines fully in paragraphs 269-274 and we can add little to the remarks there made. The objectionable features present in these agreements were largely absent in agreements with other foreign steamship lines and any conclusions on this subject, therefore, stand or fall with the former. Our general view is that Conference Agreements are the corollary of economic conditions, and that, so long as maritime competition exists, it would be inexpedient to prohibit them. Their object is to prevent rate wars and to place the shippers from each country on an equal footing. In the case, however, of agreements with foreign companies, it might, in our opinion, be desirable that copies should be furnished confidentially to His Majesty's Government in order that the Depart- ments concerned may be in possession of all the facts necessary for the safeguarding of British interests in peace and in war. Development of Shipping Facilities. 335. Imperial Mail Subsidies. — The Dominions Royal Commission in their Final Report* make a number of important recommendations for the development of mail services between different parts of the Empire. Improved communications necessarily mean increased trade; and we are, therefore, in hearty agreement with any measures designed to connect the scattered parts of the Empire. We do not, however, think that the best interests of the Empire would in fact be served by the subsidised mail services recommended in the Report. If by means of such subsidies an uneconomic type of passenger vessel is evolved in the trade between the United Kingdom and the British Dominions beyond the Seas, there will be less room for the develop- ment of the best type of intermediate cargo and passenger steamer in which large quantities of cargo can be carried at low cost and at comparatively high speed. 336. A further suggestion made by the Royal Commission is that the grant of mail subsidies in respect of services to the Dominions might be made subject to the shipowner accepting conditions amounting in certain circumstances to the control of freights by the State. We are strongly of opinion that a departure of this kind would not conduce to the wider interests of British trade and shipping as a whole; and we consider that mail subsidies should amount simply, to payment for service rendered. Where at the instance of the Government, mail or other services, which are commercially unremunerative, are undertaken for Imperial purposes the subsidy would naturally have to make good the loss incurred. 337. AVe believe that in general the best results would be obtained by avoiding, where practicable, exclusive mail contracts with particular lines and by sending mails and parcels at rates which would represent full payment for services rendered by the steamers of any line which came up to a prescribed minimum speed and other standards laid down. 338. Development of Imperial Harbours. — The recommendations of the Dominions Royal Commission as regards the development of harbours! throughout the Empire are closely connected with their proposals for the subsidising of mail services. These recommendations are in many respects valuable, since the employment of larger, faster and more economic types of vessels depends upon the existence of suitable port accommodation for such vessels. Two condi- tions must, however, in our view, be postulated: — (1) That the position of British shipping in the world's trade has been restored ; and (2) That public money will be available after the war for elaborate developments of the kind proposed. We think that the first duty of H.M. Government must be the restoration of the ordinary liner and tramp services on which the bulk of the Empire's trade will always depend- The vessels required for this trade are of a size able to make use of existing harbours and ordinary routes : and the deepening of harbours for large mail steamers should, in our opinion, be reserved • See paras. 564-577. t F"»l Report, paras. 526-563. 117 till after the transition period, during which public expenditure should be confined to more urgent work, such as the improvement of ports in the United Kingdom. 339. We are, moreover, of opinion that, whatever the merits of alternative routes for special purposes, the Suez Canal route, as the shortest to some of our most important Oversea Dominions and Possessions, will continue to be the chief route for our trade with these territories. 340. It should not be forgotten that the Report of the Dominions Royal Commission was written before the full gravity of the Shipping position had made itself felt ; and it is no doubt for this reason that the Report appears to give insufficient weight to the conditions that will exist at the end of the war. The general restoration of this country's maritime position is fundamental to the cohesion of the Empire, and the creation of a number of highly specialised mail services could not be a substitute nor even a palliative. 341. Improved communications with Russia and Italy. — Resolution C. II. of the Paris Economic Conference of June, 1916, is as follows: — " In order to permit the interchange of their products the Allies undertake to adopt measures for facilitating their mutual trade relations both by the establishment of direct and rapid land and sea transport services at low rates, and by the extension and improve- ment of postal, telegraphic and other communications." 342. This Resolution, we presume, had in view particularly the development of shipping facilities with Russia and Italy. We would accordingly submit the following observations, from the standpoint of British shipping, for the careful consideration of H.M. Government: — (1) The real strength of British shipping lies in the ocean rather than in the home trades ; and no gain in the latter could compensate for a serious loss of ground in the former. From the standpoint of shipping alone, the artificial development of services with Allied countries in Europe must, in our opinion, be infinitely less beneficial to British interests, than a similar development of services with the great Oversea Dominions or with India. (2) The obstacle to shipping developments with Russia has been the unfavourable treat- ment accorded to British shipping ; and in this connection reference may be made to paragraphs 47 and 50 of our Report on the Control Stations and the Atlantic Emigrant Traffic. Since that Report was submitted, the Russian situation has pro- foundly changed; and it is, therefore, impossible to make any specific suggestions which could be of value. So far, however, as British interests are concerned, we see no reason to modify the views expressed in our Interim Report. Fast steamship services are intimately bound up with passenger traffic ; and, so long as British lines are not given full national treatment in respect of passengers, it is difficult to see what action of His Majesty's Government could bring about improved shipping facilities between this country and Russia. If national treatment is conceded wo believe that little difficulty would be experienced in improving such facilities without artificial aid. (3) As regards the development of communications with Italy, certain economic faces should not be lost sight of : — (a) The most valuable part of the Italian export trade consists of expensive articles of small bulk, such as silk, beads, hats, gloves and the like, which are able to bear the cost of carriage overland. (b) There were good transport facilities between this country and Italy by the short-sea routes with overland carriage between Italy and the Con- tinental ports concerned. For much of the traffic affected these facilities offered, and will continue to offer, effective competition to the long sea-route past Gibraltar. (c) The geographical position of Germany and the excellent railway facilities that existed on the Continent made the German land-borne competition even more formidable to the long sea route. Considerations such as these must, in our opinion, carry weight. We are not aware that the direct steamship services between this country and Italy were inadequate for the traffic offering; nor do we think that any useful purpose would be served by attempting after the war to improve artificially the menus for direct shipment. Domestic Organisation. Organisation of Shipping. 343. We saw that a most important factor in the success of German shipping before the war was the close organisation of the chief German steamship lines, which gave them a larger share of influence in the Conferences than they should properly have held. British shipping was more loosely organised. It is true that the lines tended increasingly to form larger combinations; but these combinations worked independently of one another, and the powerful German combination could bring its united weight to bear against each of them in turn. Outside the lines there was the great tramp interest, representing about 60 per cent, of the entire steam tonnage of the British mercantile marine, but distributed over a large number of relatively small firms each with individual and sometimes diverse interests. Thus the British liner combinations worked independently of one another and of the large but scattered tramp interest. 17602 H 3 118 344. To a great extent British shipping reflected the weakness of British organisation in general before the war — strong individualism and reluctance to forego a small share of inde- pendence for the sake of united action. We think that British shipowners ought not to disregard the tendency of modern industry towards closer organisation, since united action on the part of foreign shipping can only be met effectively by similar action on the part of British shipping. If British shipowners were prepared to act unitedly, we believe that their objects would generally be attained. 345. Most of the difficulties arising out of international competition can only be met by the industries themselves. They either fall outside the scope of Government action or any action that the Government might take would be slow and, therefore, not as effective as might be necessary. It is, moreover, a sound rule that the intervention of the Government should not be invoked save in exceptional circumstances or in cases where the matter cannot be settled by the industries. We are of opinion, for example, that systematic rate-cutting of the kind practised by the German lines, with the consequent anomalies to which reference has been made,* are more readily met by the united action of British shipping than by administrative action, since these practices change according to circumstances and their field is the whole world. It is for British shipowners themselves to devise the best methods of bringing united action into play. The Railways of the United Kingdom. 346. There is a feeling that the best use was not made before the war of the railways of the United Kingdom for the purposes of our oversea trade; and we think that certain adjust- ments could be made which would materially benefit British trade and shipping, and would, moreover, be advantageous to the railways themselves. The following points have been brought to our notice : — (1) There is said to have been a shortage of trucks — a point which, we understand, was in large measure remedied by the pooling arrangements made during the war;t (2) It is said that rates on the British railways were high as compared with Continental rates; and (3) There is said to have been insufficient elasticity in quoting rates for large volumes of traffic. The pooling of trucks which has proved so beneficial during the war should, in o\\v view, certainly be continued during the period of reconstruction, when our railway facilities will be taxed to the utmost. Not only would considerable economies in rolling stock be thus effected, but it would be possible to avoid the waste of space and power due to the necessity of returning trucks empty to their owners. 347. We are of opinion that the railway companies might well contemplate the grant of lower rates, especially for large consignments intended for export, wherever traffic conditions appear to warrant such a course; and that by concerted action between the railways and the -steamship companies rates might be made more elastic for the purpose of assisting the British exporter, where necessary, to meet State-aided foreign competition in important markets. The indebtedness of this country after the war can only be paid off by a great stiimilation of the export trade, and it is the clear duty both of the railways and of the steamship companies to further this process by every means in their power. 348. We had occasion in a previous section* to refer to the important part taken by the " Spediteurs " in facilitating the German export trade. A similar function is fulfilled by the express companies in the United States ; and it is for the merchants and manufacturers of this country to consider the means by which similar results may be achieved for British trade. Experience has shown, however, that the system of forwarding agents is open to much abuse ; and we should, therefore, prefer to see analogous functions exercised by the strong export associations which there is now a tendency to form. Port Facilities in the United Kingdom. 349. No survey of our transport arrangements could be complete without some reference to the facilities at the ports of the United Kingdom through which our whole oversea trade has to pass. As we have pointed out in the first part of this Keport, there will be a considerable shortage of tonnage immediately after the war. On the average a ship spends more time in port than on the high seas ; and it is therefore most important to omit no steps calculated to reduce this time and so to increase the carrying power of our shipping. For this reason we have made careful enquiry as to the experience of British shipowners in regard-fto facilities at British as compared with foreign ports; and we have found that the older ports, such as London, Liver- pool, and especially Birkenhead, which have grown up with our trade and necessarily reflect conditions no longer applicable, leave much to be desired. 350. The provision of port facilities appears to us of great importance to the retention by this country of its central shipping position; and we think that H.M. Government ought not • See paras. 203-268. ■' . , f We understand that the pooling arrangements affect only trucks owned by the Railway Companies, but that efforts are being made to extend them to privately owned trucks. t See paras. 251-252. 119 to be satisfied with any conditions which leave our principal ports at a disadvantage with foreign ports. Should it be decided after the war to undertake constructional schemes in the national interest, whether to afford employment to labour or for other reasons, it is difficult to suggest any direction in which such energy could be expended with greater advantage to trade and shipping and to the welfare of the Empire as a whole. In view of the national importance of this question, H.M. Government ought, in our opinion, to be prepared to assist the Port Authorities in obtaining the funds necessary for the execution of any schemes deemed expedient. 351. We would submit the following suggestions to the careful consideration of H.M. Government ; they should be carried into effect as and when conditions permit : — (1) Ports should be provided with adequate railway and road facilities at the quays. (2) The principal ports should be provided with modern appliances and with labour- saving machinery of all kinds to the fullest extent necessary. There has been a great deficiency of travelling cranes, elevators and the like. (3) There should be ample warehouse accommodation for goods, and the abuse of quayside space for the storage of goods, which leads to congestion, should be prevented. The above suggestions apply with especial force to London and Liverpool, the two ports through which the greater part of our oversea trade passes. They may ultimately involve a considerable remodelling of these ports, but we think that action in this direction would be of more value to the nation than many more showy schemes of Imperial development. 352. Free ports. — In this connection, reference must be made to the free port system prevailing in many foreign countries- Should it be decided, whether for revenue or other purposes, to extend widely the range of diities on imported articles, the question of creating similar free ports in the United Kingdom would become a matter of pressing importance. It is essential that the position of the United Kingdom as a great transhipment and entrepot centre should not be impaired, and the best means of safeguarding these national interests would undoubtedly be by the establishment of free Customs areas on a large scale at the ports princi- pally concerned. 353. It has also been suggested to us that a measure of relief might be afforded to the ports and to the railways by a better utilisation of our canals and inland waterways, particularly for bulk traffic. We are in agreement with this suggestion but refrain from comment, as the matter has recently engaged the attention of a Royal Commission. 354. Finally we wish to call attention to the need of taking early steps to secure the release from the colours, immediately the war ends, of as many transport workers as possible in order to prepare the way not only for demobilisation, but also for the demands of trade which will follow the conclusion of peace. It is of the utmost importance during the transition period, when we shall be suffering from a grave depletion not only of our merchant shipping but also of our railways, to make the most economic use of such plant as will be left to us. By providing ample labour facilities especially at the ports, it will be possible to increase considerably the carrying power of shipping and so aid the national recovery. This point is, in our opinion, vital to Reconstruction ; and we attach no less importance to it than to our recommendation in the First Part of this Report respecting the early return of skilled workers drawn from the shipbuilding and marine engineering industries.* Government Regulations. 355. We have so far considered safety regulations only from the point of view of foreign competition and we now desire to comment shortly on the mode of their enforcement on British shipping as a measure of domestic policy- While we do not desire any relaxation of rules necessary to secure safety at sea, we think that these rules should be as elastic as possible. It is evident, for example, that the rigid enforcement of regulations designed for conditions of a peculiar character prevailing in the North Atlantic may be unnecessary in other trades ; and the experience of the war has shown that considerable latitude may be allowed without serious risk in certain of these regulations. We would suggest that the whole question of safety regulations should be reviewed by the Government in the light of this experience in its bearing on the regulations in question. It is essential that the effective tonnage available in the difficult period of Reconstruction should not be reduced by the strict enforcement of any rules that can possibly be relaxed. 356. Light Dues.— The Joint Committee of the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association point out that every year upwards of £500,000 is levied in the United Kingdom in the form of General Light Dues on the ships using our ports, of which from £350,000 to £400,000 is contributed by British vessels, to provide for the cost of lighting the coast-line and the great trade routes of the country. This sum is levied in addition to about £100,000 a year raised in the form of Local Light Dues for lighting ports and their approaches. We concur in the view of the Committee that the cost of lighting the coast ought more properly to be borne by the State than by merchant shipping. * See Part I, Section IV, par. 87 (2). 17602 H * 120 Taxation- 357. The most important question relating to taxation was considered in the First Part of this Report in connection with the Control of Shipping. The policy at present pursued by the Government in this respect is highly dangerous, and we have already emphasised the necessity of immediate action to remedy the existing situation. As regards general policy after ( the war, our view is that industry should be freed at the earliest possible moment from the burden of war taxation in order that industrial recovery may not be grievously delayed. Especially is this necessary in the case of shipping where a considerable portion of the plant of the industry has, so to speak, been liquidated as a result of enemy action, inadequate new construction and the other factors considered in the First Part of this Report. 358. A further point to which we wish to call attention is the inadequate allowance made for depreciation in the assessment of income tax. This is at present 4 per cent, on the first cost, and is based on the assumption that the life of a vessel is 25 years, whereas under modern conditions the effective life of a steam vessel is on an average considerably less. It is important that in the Reconstruction period every inducement should be given to the British shipowner to restore the efficiency of his fleet by the early replacement of obsolete tonnage, and we recom- mend, therefore, that the allowance for depreciation should in no circumstances be less than 5 per cent, on the first cost of the vessel, and that special provision should be made for exceptional depreciation in the value of vessels built or acquired on the basis of war prices. Freights. 359. We have now to consider the question of the relations between traders and ship- owners in regard to ocean freights. The matter has given rise to some misunderstanding in the past and we have already considered certain aspects of it in a previous section.* We desire in this connection to call the careful attention of H.M. Government to the remarks on this subject made in the Report of the Joint Committee appointed by the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association.! We wish to preface our remarks on this subject with some general observations on the control of freights by the Government in view of the demand for such action which is sure to arise after the war. 360. If the control of freights is confined simply to certain commodities of primary import- ance, a preference will be given to the carriage of all other commodities and the result will, therefore, be the exact opposite to that intended. If the control of freights is confined to parti- cular trade routes, British tonnage will be diverted from those trade routes to others in which the freights are not controlled. To prevent this, British ships would have to be forced to run in the trades where the freights are controlled. Meanwhile, foreign shipping would be working at market rates elsewhere, and the inevitable consequence would be a growth of foreign shipping at the expense of British shipping. If all freights by British ships are controlled, the State will be forced to decide what cargo and whose shipments are to, be carried, and, therefore, to control or even own the cargo itself. The ultimate consequence of a control of freights imist, therefore, be the elimination of private enterprise in foreign trade. The course of events during the last two years affords ample proof of the truth of this proposition. During the period of Reconstruction the only safe course will be to allow free play to the freight market, but to devise means, by taxation or otherwise, whereby competition for freight space, for raw materials and for labour will be confined to essential or productive industries. If circumstances compel the Government for a time to retain complete control of a great staple commodity such as wheat, it should charter tonnage or freight space in the open market and charge in its own accounts whatever rate it chooses to suit the policy adopted with regard to the selling price. 361. Any interference with the freedom of contract between trader and shipowner necessarily involves to a greater or less degree the difficulties referred to in the preceding para- graph. The following considerations must also be borne in mind: — (1) The shipowner is faced with foreign competition no less than the trader. State action, in so far as it fettered the freedom of the shipowner in meeting such competition, would ultimately result in a shrinkage of marine enterprise and, therefore, in the reduction of the facilities afforded to the trader. This fact of international competition vitiates the apparent similarity between shipping and the railways. The railways of a country possess absolute freedom from foreign competition in that country, whereas shipping is only free from such competition in specially reserved trades. In short no policy could be satisfactory which did not recognise transport competition equally with trade competition. In many respects the former is more important, since shipping services are the arteries of oversea frade and their severance would destroy it altogether. (2) In shipping, as in other industries, large scale enterprise is essential, if rates are to be moderate. We are convinced that the magnitude and efficiency of British shipping before the war gave traders facilities in respect of freights which they could not otherwise have enjoyed. (3) Shipping is not merely a liability — a necessity for a country which has access to other markets only across the sea. It is an asset of high value, which enables this country in peace to • See pars. 263-268. f See pars. 103-115 of the Report of the Committee appointed by the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association, to advise as to the measures requisite for tho maintenance of tho British Mercantile Marine (Volume I, pp. XIX-XXTI). 121 trade ataii economic advantage with other countries in the markets of the world, and in war to feed its population, to maintain its industries and to support large armies oversea. 362. For these reasons we are convinced that the permanent regulation of freight rates by the Government, to meet isolated cases of complaint, would not only impair the prosperity of British shipping, but would be highly detrimental to the wider interests of British merchants and manufacturers, whose needs can only be satisfied by a great and efficient mercantile marine. The complaints put forward by traders have arisen very largely from factors due directly to international competition. They are due in fact to the necessity sometimes imposed on British shipowners of having to sell their services abroad at lower prices than at home in order to maintain their position in a given market — a practice equally adopted, where necessary, by other industries- We have endeavoured to show the danger of dealing superficially with a most difficult problem ; and we have suggested that the remedy is to be sought mainly in a better organisation of British shipping and in the united action of our shipowners against unfair foreign methods. We would, however, make the following further suggestions which should, if adopted, •go far towards removing misunderstandings of the kind encountered in the past: — (1) A Board of Investigation, such as that recommended by the Dominions Royal Commis- sion, and in somewhat different terms, by the Royal Commission on Shipping Rings, appears to us desirable in the interests not only of traders but also of shipowners. Through the impartial findings of such a Board misunderstandings could be dissipated and the real conditions of competition ascertained. It is of course necessary that the Board should be so constituted as to be in a position to appreciate the needs both of trade and of shipping and to give full weight to the position of this country as a maritime nation. We do not think that the Board's powers should go beyond investigation, conciliation, and, where deemed expedient, the publication of its findings. (2) Even more important, in our opinion, is the growth of strong trade associations among traders themselves, which by their influence would be able to meet the shipping conferences on equal terms. Co-operation on such lines is bound to conduce to the welfare of both sides. Conclusion. 363. Finally, it is necessary to insist on the need for close co-operation between traders and shipowners in the period of Reconstruction. In the difficult times before the nation/ domestic quarrels must be avoided, since the severity of foreign competition will afford enough diversion. Every industry in seeking to recover and extend its position will be performing a function of vital national importance and should be entitled to all the sympathy and assistance which the Government can afford. The needs of the nation can only be focussed in their entirety by the Government, and we would suggest that the primary function of the Govern- ment during the process of Reconstruction should be to watch that process, to co-ordinate individual efforts and to render to industry all the assistance that can be rendered, without impeding the general progress by restrictive action or by measures which could only operate as checks on the national recovery. 122 PART III. Summary of Parts I. and II. Our findings and recommendations are based on two hypotheses, neither of which is likely to be controverted — the first, tJuit the maritime ascendency of the Empire must be maintained at all costs, and the second, that the grave wastage sustained by the Mercantile Marine during the war must, therefore, be repaired without delay. (Paragraph 5.) PART l.—THE RECONSTRUCTION OF THE BRITISH MERCANTILE MARINE. . 364. The British Mercantile Marine before the War (Section I., paragraphs 13-28). — At the outbreak of war the British Mercantile Marine was the largest, the most up to date and the most efficient of all the merchant navies of the world. It comprised nearly one-half of the world's steam tonnage and was nearly four times as large as its nearest and most formidable rival — the German Mercantile Marine. The initiative and enterprise of shipowners and ship- builders were a vital element in the building up of the greatest carrying trade the world has ever seen. A further element of success, on which it is impossible to lay too much stress, was the skill, efficiency, and seamanship of the officers and men who manned and navigated our vessels. 365. The Effect of the War on British Shipping (Section II., paragraphs 29-59). — Owing to the demands made upon the British Mercantile Marine for direct or auxiliary War Services, only about half our shipping has been available for the provisioning of this country and our allies and for our oversea trade. From the beginning of the war up to the end of August, 1917, the enemy had been responsible for the loss of over 3 million tons net of British shipping and over 2 million tons net of Foreign shipping (Allied and Neutral). To this extent he had impaired the world's carrying power and he had reduced proportionately the ability of the whole world to recover from the devastating effects of the present conflagration. It is easy to see in the light of war experience that the unrivalled shipbuilding resources of this country should at the outset have been developed to the utmost limit of their capacity. The needs of the mercantile marine have been neglected to such an extent that the tonnage of merchant vessels launched in the United Kingdom declined from over one million tons net in 1914, which was almost a normal year, to 430,000 tons net in 1915, and to 340,000 tons net in 1916. The efforts made during 1917 will not succeed in producing more than about twice the amount produced in 1916 — an output utterly insufficient in view of war losses. The growing shortage of tonnage has produced the most serious consequences on our carrying trade all over the world. It has been necessary to withdraw ships in increasing numbers from the more distant trades and to concentrate them on the trades nearer home. The door has thus been left open to foreign enterprise which it may be difficult hereafter to combat with success. The position of the British shipowner has been further prejudiced by the system of complete control now exercised by the Government. At the rates of hire at present paid, the tramp owner has no inducement to maintain or renew his investment in shipping property, and there is a grave danger that many firms may go out of the business, with a large consequent shrinkage in the tonnage at the country's disposal. 366. The Position after the War (Section III., paragraphs 60-69). — To meet the enormous demands which will arise immediately after the war there will be available less than 20 million tons net under all flags, instead of the 30 millions tons net which might in the normal course of development have been looked for. Neutral shipowners have been able to amass large profits which will enable them to engage in severe competition after the war. Japanese encroachment on our Eastern trades is already serious and will become more serious. Competition of the most formidable character is also to be anticipated from the United States where marine enterprise has received a great stimulus during the war. Unless British shipping is enabled at the outset of the reconstruction' period to take full advantage of the situation, it may fall behind in the competitive race and definitely lose the ascendency whjch has been the keystone of the Empire and the condition of our industrial existence. General Recommendations (Section IV., paragraphs 70-115). 367. The Control of Shipping (paragraphs 70-75). — The first and fundamental condition of Reconstruction is the early removal of Government operation and control from shipping. Such control is not only alien to the British genius but always tends to paralyse individual effort. It is our conviction that any departure from the principle of relying on private enterprise would be a dangerous experiment and a blunder of the worst kind. Our recommendations are accordingly as follows: — (1) The release of privately ouned shipping from Government operation and control should take place when ■■: ' . • ' ; (1) We should deprecate any arrangement, direct or indirect, which would give British shipping preferential treatment in respect of Suez Canal dues. '1) In the case of passengers the right of transit has been persistently disregarded : The use made of the Control Stations by the German Government and the German steamship lines constituted the most conspicuous instance in which the " Freedom 129 of the Seas " was withheld before the war; and we would 'suggest that His Majesty's Government should consider the advisability of making full use, from this point of view, of the facts to which we drew their attention in our Interim Report on the subject. (3) We think that the time has arrived when the right of transit for passengers should be established internationally in the same way as the corresponding right for vessels. For His Majesty's Government and the Government of the United States a general provision on the subject would imply merely a renewal of their solemn undertaking that they for their part will guarantee to the flags of all nations the use, on terms of perfect equality, of the canals of Suez and Panama. To the Central Powers such a provision would imply the recognition of the right of transit without molestation of persons desiring to pass across their territory. The obligations would be reciprocal and conditional — that is to say, the continued free transit of German and Austrian vessels through the inter-oceanic canals would depend on the free passage of persons across the Central Empires, and the maintenance of free passage for persons in the latter case would depend on the free transit of German and Austrian vessels in the former. An arrangement of this kind should, if possible, be couched in general terms, embracing not only the two canals particularly referred to, but any other waterways important to inter-national commerce, as well as the transit, under proper safeguards, of goods and passengers through all countries. 400. International Safety Regulations. — We concur generally in the remarks on the subject of safety regulations made by the Joint Committee appointed by the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association. Our recommendations are as follows: — (1) It is very desirable that all safety regulations made by His Majesty's Government should be such as to command the universal assent of the principal maritime nations. To command such assent safety rules must necessarily conform to certain broad principles : — (a) They must be based solely on grounds of humanity ; (b) They should be framed so as to place on shipping the minimum obligations compatible with their object; and (c) They should be sufficiently elastic to meet the varying demands of different classes of ships and of different trades and the progress of invention. (2) We think that after the war His Majesty's Government should take energetic action towards securing the international recognition and enforcement of all broad regula- tions designed to secure safety at sea, and whilst maintaining as high a standard of safety for British shipping as may be reasonably practicable, should avoid, so far as possible, imposing on British ships restrictions not enforced on the shipping of foreign flags. (3) In any case every effort should be made to enforce strictly on foreign ships calling at British ports all safety requirements, and requirements in the interest of the health of persons on board the ship, whether imposed by Merchant Shipping Acts, Public Health Acts or Factory Acts, which apply to British shipping. This is especially important in connexion with the coasting and short sea trades. (4) In view of the large amount of new evidence unfortunately now available with regard to flotation and life-saving apparatus, the rules laid down shortly before the out- break of war with regard to bulkheads, lifeboats, and rafts should form the subject of further investigation when the war is over. (5) It is most important that the Safety Standards adopted throughout the Empire should be uniform ; and it is reasonable that the standards of the United Kingdom, which owns over nine-tenths of the tonnage under the British flag, should, so far as necessary, be adopted in the Dominions. In any case standards recognised in the United Kingdom should be accepted as adequate by the Dominion Governments for ships on the register of the United Kingdom trading to their ports. Defence Questions (Paragraphs 327-334). 401. Enemy Shipping after the War. — If our recommendations respecting the seizure of the enemy ships and the abolition of the Control Stations are carried out, we see little reason to fear the revival of serious maritime competition from the enemy countries during the critical period following the close of hostilities; and we doubt whether further restrictions on enemy snipping would be justified by results, ^he exclusion of enemy shipping from the ports of the Empire — the most drastic measure which could be imposed by His Majesty's Government — would be of little value to British shipping, as it would leave open the American trades, unless all the Allies including the United States and the more important Latin-American States, were prepared to adopt similar measures. In the event of concerted economic measures being adopted by the Allied countries against the enemy countries after the war, with consequent restrictions on enemy shipping, we would urge that such precautionary rules ns would apply to non-enemy shipping should be limited strictly to the object in view. Similarly, we should deprecate the continuance of restrictions on the use of British Coaling Stations by enemy or other foreign shipping after the war, except for the strictly limited object indicated above. 402. Company Law. — We think that the correct policy for this country is to encourage the placing of as much as possible of the world's shipping under the British flag. Every limited liability company engaged in the shipping industry should however be required, as a pre- 1.602 I 130 cautionary measure, to include in its annual return to Somerset House a statement of the amount of its stock and shares held hy, or on behalf of, aliens, together with a statement of their nationality. 403. Masters, Officers and Crew. — Our recommendations are as follows : — (1) Any measure preventing the free employment of foreign seamen on British ships is undesirable; and it is important that restrictions should not be placed either in the United Kingdom or in the British Dominions on the employment of Asiatic or coloured seamen whether British subjects or not. (2) The master should always be a natural-born British subject. As regards other officers, we should welcome the ultimate adoption of a similar rule, were it practicable: but we doubt whether in existing circumstances it would be wise to handicap shipping by any such general rule. (3) If the Government adopt a general policy of restricting the employment after the war of enemy aliens in essential industries, these restrictions should, for such time as _ they may be in force, apply to shipping. (4) Pilots' certificates should be given to natural-born British subjects only. 404. Conference Agreements. — Conference agreements are the corollary of economic con- ditions, and. so long as maritime competition exists it would be inexpedient to prohibit them. In the case of agreements with foreign companies, it might, in our opinion, be desirable that copies should be furnished confidentially to His Majesty's Government, in order that the Depart- ments concerned may be in possession of all the facts necessary for the safeguarding of British interests in peace and in war. Development of Shipping Facilities (Paragraphs 335-342). 405. Imperial Mail Subsidies. — Our conclusions on this subject may be summarised as follows: — (1) Whilst we are in hearty agreement with any measures designed to connect the scattered parts of the Empire, we do not think that the best interests of the Empire would be served by the subsidised mail services recommended in the Report of the Dominions Boyal Commission: nor do we think that their further suggestion, that the grant of mail subsidies might be made subject to the shipowner accepting conditions amounting in certain circumstances to the control of freights by the State, would be conducive to the wider interests of trade and shipping. (2) We consider that mail subsidies should amount simply to payment for service ren- dered ; or, where at the instance of the Government, mail or other services, Which are commercially unremunerative, are undertaken for Imperial purposes, the subsidy would naturally have to make good the loss incurred. (3) We believe that in general the best results would be obtained by avoiding, where practicable, exclusive mail contracts and by sending mails and parcels at rates which would represent full payment for services rendered by the steamers of any line which came up to a prescribed minimum speed and other standards laid down. 406. Development of Imperial Harbours. — The recommendations of the Dominions Royal Commission on this subject are in many respects valuable. We think, however, that the first duty of H.M. Government must be the restoration of the ordinary liner and tramp services on which the bulk of the Empire's trade will always depend. The vessels required for this trade are of a size able to make use of existing harbours and ordinary routes ; and the deepening of harbours for large mail steamers should, in our opinion, be reserved till after the transition period, during which public expenditure should be confined to more urgent work, such as the improvement of ports in the United Kingdom. The Suez Canal route is the shortest to some of our most important Oversea Dominions and Possessions, and will, therefore, continue to be the chief route for our trade with these territories. 407. Improved Communications with Russia and Italy. — We submit certain observations, summarised below, with regard to Resolution C. II. of the Paris Economic Conference, of June, 1916, in its bearing on improved communications with Russia and Italy : — (1) The real strength of British shipping lies in the ocean rather than in the home trades ; and no gain in the latter could compensate for a serious loss of ground in the former. (2) The obstacle to shipping development^ with Russia has been the unfavourable treat- ment accorded to British shipping; and in this connection we refer to certain remarks on the subject contained in our Interim Report on the Control Stations and the Atlantic Emigrant Traffic. Since that Report was submitted, the Russian situation has profoundly changed ; and it is, therefore, impossible to make any specific suggestions which could be of value. If, however, national treatment is conceded to British shipping in respect of passengers, we believe that little diffi- culty would be experienced in improving without artificial aid the shipping facilities between this country and Russia. (3) As regards Italy, certain economic facts connected with the geographical position of that country should not be lost sight of. We are not aware that the direct steam- ship services between this country and ItaTy by the long sea route past Gibraltar were inadequate for the traffic offering; nor do we think that any useful purpose would be server* by attempting after the war to improve artificially the means for direct shipment. 131 Domestic Organisation (Paragraphs 343-363). 408. Organisation of Shipping. — Although, before the war, the British lines tended in- creasingly to form larger combinations, these combinations worked independently of one another and of the large but scattered tramp interest. We think that British shipowners ought not to disregard the tendency of modern industry towards closer organisation, since united action on the part of foreign shipping can only be met effectively by similar action on the part of British snipping. "We are of opinion, for example, that systematic rate cutting by foreign lines, such as forced the British lines to carry goods to New Zealand at lower rates from Continental than from British ports, can be met more readily by the united action of British shipping than by administrative action. It is for British shipowners themselves to devise the best methods of bringing united action into play. 409. The Railways of the United Kingdom. — For the purpose of assisting British trade, and particularly the export trade, after the war, we make the following suggestions: — (1) The pooling of trucks, which has proved so beneficial during the war, should certainly be continued during the period of reconstruction, when onr railway facilities will be taxed to the utmost. (2) The railway companies might well contemplate the grant of lower rates, especially for large consignments intended for export, wherever traffic conditions appear to warrant such a course. (3) It is for the merchants and manufacturers of this country to consider the means by which results, similar to those achieved by the " Spediteurs " for German trade and by the Express Companies for American trade, may be obtained for British trade. Experience has shown, however, that the system of forwarding agents is open to much abuse; and we should, therefore, prefer to see analogous functions exercised by the strong export, associations which there is now a tendency to form. 410. Port Facilities in the United Kingdom. — The provision of port facilities appears to ns of great importance to the retention by this country of its central shipping position; and we think that H.M. Government ought not to be satisfied with any conditions which leave our principal ports at 'a disadvantage with foreign ports. Should it be decided after the war to undertake constructional schemes in the national interest, it is difficult to suggest any direction in which such energy could be expended with greater advantage to trade and shipping and to the welfare of the Empire as a whole. In view of the national importance of this qirestion, H.M. Government ought, in our opinion, to be prepared to assist the Port Authorities in obtain- ing the funds necessary for the execution of any schemes deemed expedient. "We make the following recommendations: — (1) The suggestions summarised below should be carried into effect as and when conditions permit : — (a) Ports should be provided with adequate railway and road facilities at the quays, (o) The principal ports should be provided with modern appliances and with labour-saving machinery of all kinds to the fullest extent necessary, (c) There should be ample warehouse accommodation for goods ; and the abuse of quay-side space for the storage of goods, which leads to congestion, should be prevented. The above suggestions apply with especial force to London and Liverpool, the two ports through which the greater part of our oversea trade passes. (2) Should it be decided, whether for revenue or other purposes, to extend widely the range of duties on imported articles, the question of creating Free Ports in the United Kingdom would become a matter of pressing importance. It is essential that the position of the United Kingdom as a great transhipment and entrepot centre should not be impaired, and the best means of safeguarding these national interests would undoubtedly be by the establishment of free Customs areas on a large scale at the ports principally concerned. (3) We are in agreement with the suggestion that a measure of relief might be afforded to the ports and to the railways by a better utilisation of our canals and inland waterways particularly for bulk traffic. (4) It is of the utmost importance during the transition period, when we shall be suffering from a grave depletion not only of our merchant shipping but also of our railways, to make the most economic use of such plant as will be left to us. We wish, therefore, to call attention to the need of taking early steps to secure the release from the colours, immediately the war ends, of as many transport workers as possible, in order to prepare the way not only for demobilisation, but also for the demands of trade which will follow the conclusion of peace. This point is. in our opinion, vital to reconstruction. 411. Government Regulations. — While we do not desire any relaxation of rules neces- sary to secure safety at sea. these rules should be ns elastic as possible. The experience of the war has shown that considerable latitude mav be allowed without serious risk in certain of these regulations; and we would suggest that the whole question of safety regulations should be reviewed by the Government in the light of this experience in its bearinc on the regulations in question. It is essential that the effective tonnage available during reconstruction should not be reduced by the strict enforcement of any rules that can possibly be relaxed. 17602 I :? 132 412. Light Dues. — We agree with the Joint Committee of the Chamber of Shipping of the United Kingdom and the Liverpool Steamship Owners' Association that the cost of lighting the coast ought more properly to be borne by the State than by merchant shipping. 413. Taxation. — Besides the proposals made in Part I. of this Report, we make the following further recommendations : — (1) Industry should be freed at the earliest possible moment from the burden of war taxation in order that industrial recovery may not be grievously delayed. Especially is this necessary in the case of shipping where a considerable portion of the plant of the industry has been liquidated. (2) It is important that in the B-econstruction Period, every inducement should be given to the British shipowner to restore the efficiency of his fleet by the early replace- ment of obsolete tonnage. The allowance for depreciation should, therefore, in no circumstances be less than 5 per cent, on the first cost of the vessel ; and special provision should be made for exceptional depreciation in the value of vessels built or acquired on the basis of war prices. 414. Freights. — In paragraph 360 we point out the danger of any attempt to control freights after the war. Such control cannot, for the reasons there given, be confined to commodi- ties of primary importance or to particular trade routes. It would have to embrace all British shipping and the commodities carried in the ships. The ultimate consequence must be the elimination of private enterprise in foreign trade. During the period of Reconstruction, the only safe course will be to allow free play to the freight market, but to devise means by taxation or otherwise, whereby competition for freight space, for raw materials and for labour will be confined to essential or productive industries. If circumstances compel the Government for a time to retain complete control of a great staple commodity such as wheat, it should charter tonnage or freight space in the open market and charge in its own accounts whatever rate it chooses to suit the policy adopted with regard to the selling price. 415. The following further considerations must be borne in mind : — (1) No policy could be satisfactory which did not recognise transport competition equally with trade competition. The shipowner is faced with foreign competition no less than the trader; and State action, so far as it fettered the freedom of the ship- owner in meeting such competition, would ultimately result in a shrinkage of marine enterprise and, therefore, in the facilities afforded to the trader. (2) In shipping, as in other industries, large scale enterprise is essential, if rates are to be moderate. (3) Shipping is not merely a liability — a necessity for a country which has access to other markets only across the sea. It is an asset of high value for the purposes of trade in peace, and it is indispensable in war. 416. We are convinced that the permanent regulation of freight rates by the Government would be highly detrimental to the wider interests, of British merchants and manufacturers, whose needs can only be satisfied by a great and efficient mercantile marine. Complaints made by traders in the past have arisen largely from factors due to international competition; and we have suggested that the remedy is to be sought mainly in a better organisation of British shipping. We would, however, make the following further suggestions : — (1) A Board of Investigation appears to us desirable in the interests alike of traders and of shipowners. It should be so constituted as to be in a position to appreciate the needs both of trade and of shipping, and to give full weight to the position of this country as a maritime nation. The Board's powers should not go beyond investigation, conciliation, and, where deemed expedient, the publication of its findings. (2) Even more important is the growth of strong trade associations among traders them- selves, which, by their influence, would be able to meet the Shipping Conferences on equal terms. Co-operation on such lines is bound to conduce to the welfare of both sides. 417. Conclusion. — The needs of the nation can only be focussed in their entirety by the Government, and we would suggest that the primary function of the Government during the process of Reconstruction should be to watch that process, to co-ordinate individual efforts and to render to industry all the assistance that can be rendered, without impeding the general progress by restrictive action or by measures which could only operate as checks on the national recovery. 418. Part I. of this Report was submitted by us separately in December last, since, in view of the urgency and importance of the questions therein considered, we deemed it inexpedient to delay presentation pending the completion of the remaining portions. Part I. is now embodied in this Report. 419. In presenting this Report we desire to thank the witnesses who were good enough to appear before us and the large number of steamship companies who have given us important information in response to our enquiries. 133 420. We wish to place on record our warm appreciation of the invaluable work clone by our Secretary, Mr. E. H. Marker, throughout our enquiry. The devotion and skill with which he has marshalled the facts and evidence, which we have had to consider, have been beyond praise. Great assistance has been afforded to us by the Statistical Department of the Board of Trade, and in particular by Mr. F. W. Perrett, in the preparation and analysis of statistics. We wish also to acknowledge our indebtedness to our Assistant Secretary, Mr. C. K. Hobson, especially in connection with our Interim Report on Shipbuilding and Marine Engineering, and to Mrs. A. Crozier for the preparation of material reqiiired for this Report. We have the honour to be, Sir, Your obedient Servants, (Signed) ALFRED BOOTH (Chairman), W. S. ABELL, JAMES BROWN, G. S. CLARK, ARCHIBALD DENNY, H. B. HOOPER, SUMMERS HUNTER, .FAMES READHEAD, J. A. ROXBURGH, OSWALD SANDERSON. B. H. MARKER, Secretary. (!. K. HOBSON, Assistant Secretary. March, 1918. 1 7602 134 APPENDICES. APPENDIX A. THE TONNAGE POSITION AT THE END OF THE WAR. 1. An estimate is made below of the amount of steam tonnage that will be left (a) to the world as a whole and "(b) to the United Kingdom at the end of 1917 and 1918 respectively. In the nature of the case such estimates must be largely conjectural. I. — The World's Tonnage. la) Shipbuilding. 2. Particulars of the gross tonnage of merchant vessels of 100 tons gross and upwards launched in all countries of the world are contained in returns issued by Lloyd's Register of Shipping. According to these Returns the average annual output of merchant ship- ping during the years 1911-13 in the United Kingdom, in enemy countries and in other countries was as follows : — Tons net. United Kingdom 1.140,000 Enemy countries 260,000 Other countries ... . 450,000 Total 1,850,000 These figures include sailing vessels and shipping built for the North American Lakes, and a slight allowance is necessary on this account. 3. The following has been the world's output of new tonnage in the years 1914, 1915, 1916 and 1917,* so far as information is available: — 1,000 tons net. — 1914. 1915. 1916. 1917.* United Kingdom Enemy Countries Other Countries 1,050 260 470 430 340 340 ?400 700 ?600 Total 1,780 770 ?740 • ? 1,300 basis there would have been completed in the 3 years : — 1915 1916 1917 Tons Gross. .. 180,000 . 220,000 .. 250,000 650,000 -> 400,000 tons net. 6. We have, therefore, on the credit side of the account some 3-2 million tons of shipping, or deduct- ing sailing and lake tonnage 2-9 million tons net. (b) War Losses. 7. On the debit side of the account it may be estimated that by the end of 1917 War Losses will have been approximately as follows: — Tons Net. 3,800,000 It will be seen that the year 1914 was normal in respect of shipbuilding, that there was a sharp fall in the years 1915 and 1916 and that 1917 is still very unsatisfactory so far as regards the United Kingdom. In view of the shipbuilding activity abroad, it is pro- bable that there will be a considerable increase in the output of foreign countries. 4. Excluding the enemy countries, it is probable, therefore, that there will have been built in the world, outside the enemy countries, about 2-8 million tons of shipping between December 31st, 1914, and December 31st, 1917. If the proportion of sailing and lake ton- nage included in this total be placed at roughly 10 per cent., there would remain little over 2 J million tons of steam shipping of a sea-going character. 5. Inasmuch, however, as enemy shipping, whether taken over by the Allies or not, will be available for the carrying trade as a whole, some account must be taken of building in the enemy countries during the war. Our information on this subject is unfor- tunately very imperfect. Few particulars are avail- able as to ships built in Germany, and none as regards building in Austria-Hungary But the output of the latter country is not sufficiently important to affect a broad estimate. According to the Scandinavian paper " Politiken " there were actually completed in Germany during 1915, 180,000 tons gross of Merchant Shipping, and according to an estimate of the War Trade Intelli- gence Department, about 110,000 tons gross during the first six months of 1916. It is improbable that this amount was exceeded in the latter half of 1916, and in view of the heavy drain on enemy resources for other purposes it is doubtful whether more than 250,000 tons for 1917 should be allowed. On this British Foreign* 2.700.000 6,500,000 Of this tonnage a small percentage would comprise sailing vessels. (c) Marine Bisk, etc. 8. In addition to actual war losses allowance must be made for losses by ordinary marine risks and the inevitable breaking up of vessels too old for service. Even if, in view of the tonnage stringency, removals from the Register on the latter account are reduced to a minimum, the retention of these vessels is pro- bably more than counterbalanced by additional losses through marine risk due to the removal of lights and other circumstances arising out of the war. More- over, no account is taken under the head of war losses of vessels badly damaged by the enemy which managed to reach port. A proportion of such vessels will necessarily pass off the Register. Before the war the rate of replacement of the world's steam tonnage was about 2£ per cent, annually. In the years 1915-1917 losses on this account may therefore be estimated at about 2 million tons net of steam tonnage. The estimate may be too low. Conclusion. 9. It may therefore be estimated that additions to and deductions from the steam tonnage of the world in the years 1915-1917 have been as follows Tons i Deducted — War Losses Losses by Marine Risk, etc.. Added— New Construction, sal- ons Net. 6,500,000 2,000,000 8,500,000 3,000,000 Loss on Balance 10. The above figures cover the years 1915-1917 ex- cept for war losses, which are estimated from the outbreak of war. The losses were small in 1914, whilst shipbuilding in that year was normal. 11. On June 30th, 1914, the Steam tonnage of the world, excluding vessels engaged in trade on the North American Lakes amounted to 26 million tons net. At the normal rate of progress this figure would have increased by December 31st. 191-1. to about 26-5 million tons." By December 31st, 1917, the world's steam tonnage will, therefore, have de- clined to 21-5 million tons — a decrease of over 17 per cent. 12. It should be noted that on June 30th, 1916, the world's tonnage still amounted to 25-9 million tons or very little less than on June 30th, 1914, and only 600,000 tons less than the estimated figure for December 31st, 1914. The great proportion of the net loss will thus have been incurred in the 18 months ended December 31st, 1917, or during the • Figures for 1917 are estimated. * From information received since the presentation of Part I. of this Report it appears that Foreign war losses up to the end of 1917 amounted to about 2,520,000 tons. 135 period of intensified submarine warfare, which really began in the second half of 1916, when neutral losses were exceptionally severe. 13. This, however, is not all. In the ordinary course, the world's tonnage would have expanded to meet the requirements of expanding trade. The normal rate of expansion was nearly 5 per cent. Allowing only 4 per cent., the growth of the world's steam tonnage would have been as follows: — On the Register on Million Tons Net. December 31st. 1914 26-5 1915 27-6 1916 ... 28-7 1917 29-8 1918 31-0 By the end of 1917 the Steam tonnage of the world would probably have amounted to nearly 30 million tons, as compared with the 21 million tons that will be available, a loss of nearly 9 million tons, or nearly 30 per cent. 14. Estimates for 1918 must be guess-work. If the submarine campaign maintains anything like its present intensity — and it would be foolish to make any other assumption — war losses during the year may amount to 4 million tons net. At the best, it does not seem possible to allow for less than 2 million tons net of British losses and 1^ million tons net of foreign losses. 15. If, as seems highly improbable, the Shipping Controller's building programme of 3 million tons gross is realised during 1918 and a proportionate effort is made elsewhere, then the following amounts of new tonnage — the estimate, of course, is very rough — will be forthcoming during 1918: — Tons Net. United Kingdom 1,900,000 Abroad 1,100,000 3,000,000 It would thus scarcely be possible, with the united efforts of the whole world to make good war losses apart from other losses, and we shall be fortunate if at the end of 1918 we are left on balance with 20 million tons net of shipping. II. — Tonnage of the United Kingdom. 16. The Steam tonnage on the Register of the United Kingdom on the 31st December of each of the years 1913-1916 is shown below : — Tons Net. 1913 11,270,000 1914 11,620,000 1915 11,650,000 1916 11,040,000 It will be seen that the decline up to the end of 1916 was insignificant, the reasons being that trans- fers to foreign flags were restricted, and that a cer- tain amount of tonnage, including vessels taken over from the enemy, was added otherwise than by new construction. 17. Since 1916, however, the position has become worse. By the end of June, 1917, the tonnage on the Register of the United Kingdom declined by about 1 million tons net, and by the end of the year there will have been a further decline, so that there will remain on the Register only about 9£ million tons net. 18. Before the war the Steam tonnage of the United Kingdom was growing by about 2J per cent, annually, not allowing for replacements on a large scale. At a rate of growth of only 2 per cent., there would have been on the Register of the United King- dom about 12 million tons net at the end of 1916, and 12-2 million tons net at the end of 1917. The loss in actual tonnage will, therefore, probably have amounted to not less than 3 million tons net, or 25 per cent. The loss in efficiency cannot be esti- mated. 19. The tonnage of the British Dominions and Colonies has, for statistical reasons, been included with that of " other countries," except as regards " War losses," when- the losses of the whole Emphv are included under the head of British. The losses have, however, fallen almost exclusively on the Mer- cantile Marine of the United Kingdom itself, and any error in the calculation is small. At the end 17602 of June, 1916, the British Empire (outside the United Kingdom) owned about 900,000 tons net of steam shipping. There has probably been a small decline. 20. For the purposes of the Empire's carrying trade the tonnage of the. British Dominions and Colonies may be included with that of the United Kingdom. On this assumption, the distribution of tonnage at the end of 1917 would be approxi- mately : — Tons Net. British Empire 10,250,000 Other countries 11,250,000 21,500,000 APPENDIX B. MEMORANDUM LIVERPOOL STEAM SHIP OWNERS' ASSOCIATION. Lines Services. War Wastage. Replacement. War Services. 1. The Liner Services have played, and are playing, an all important part in the War. They have pro- vided the ships needed for Auxiliary Cruisers, Trans- ports, Supply Ships, and Hospital Ships. By the carrying capacity and speed of their ships they have carried, and are carrying, the greater part of our oversea supplies of food and munitions of war. These Services had been steadily developed year after year whether trade was good or bad, by the energy and enterprise and at the cost of the Regular Lines, and they were at the disposal of the Nation on the out- break of War. Without these Services the War could never have been fought. - Exports. 2. Under Peace conditions the great bulk of the exports of the United Kingdom, apart from coal, are carried by the Regular Lines. This is especially the case in regard to the manufactures of the United Kingdom which consist so largely of fine cotton and woollen goods and steel manufactures. In bulk the coal exports are large, but in value the exports carried by the Lines represent considerably more than 75 per cent, of the total exports. To distribute these high valued exports, not only have ships to be specially designed for the different trades, but constant and regular services must be maintained from our Ports. Imports. 3. In the carriage of imports into the United Kingdom the general trading ships play a greater part, but here again ships have to be specially de- signed to carry successfully such articles as provisions, tea, cotton, (b) Value. I. — Inter-Imperial Trade :— •At United Kingdom Ports from Empire. *+At Empire Ports from M 8-9 10-0 illion tons ne 1-0 1-0 t 9-9 ll-ii 27-2 Per cent. 90 91 80 Per cent. 97 94 Per cent. } " United Kingdom. At Empire Ports outside United Kingdom from other Empire Ports outside United Kingdom. Total (I.) II. — Foreign Trade op the Empire :— *At United Kingdom Ports from Foreign Countries. 21-8 5-4 9 85 40-7 7-4 48-1 85 — — 35-4 30-9 31-0 26-3 26-6 66-3 65-3. 51-5 55-0 53 53 49 51 63 64 *fAt Foreign Ports from United Kingdom. At Empire Ports from Foreign Countries. At Foreign Ports from Empire Ports. Total (II.) 34-3 25-2 28-4 83 •> •> 67 I 55 123-3 114-8 238-1 52 . — — Total Trade of Empire (I. & II.). III. — Trade between Foreign Countries. Total Trade of the World ... 164-0 67-n 122-2 286-2 • .214-0 281-0 57 24 •> 30 231-0 336-2 567-2 41 — * 1912 figures. f Clearances from United Kingdom. q> i.e., British proportion of vessels entered with cargoes. 20. Imports by sea into all the countries of the tries (excluding bullion and specie) are shown below, world in the years 1911 and 1912 from all other coun- with the estimated share carried by British vessels: — World's Sea-borne Trade. Estimated Total Imports Estimated Amount Estimated Proportion by 3ea. Carried by British Vessels. Carried by British Vessels. Countries into which Imported. 1911. 1912. 1911. 1912. 1911. 1912. I.— Inter-Imperial Trade : — Milh on £. Milli on £. ' Per cent. Per cent. Into United Kingdom from 192 212 180 1991 Empire. [ 94 94 Into Empire from United 188 206 177 194J Kingdom. Into British Possessions out- 84 92 71 78 85 85 side the United Kingdom from British Possessions outside the United King- dom. Total (I.) 464 510 428 471 92 92 II.— Foreign Trade op the Empire : — Into United Kingdom from 488 533 317 346 65 65 Foreign Countries. * •Into Foreign Countries from 400 420 268 281 67 67 United Kingdom. Into Empire from I oreign 115 143 63 79) Countries. h 55 55 flnto Foreign Countries from Empire. Total (II.) 200 230 110 126) 1,203 1,326 758 832 63 63 Total trade of Empire (I. and 1,667 1,836 1,186 1,303 71 71 11.). III.— Into Foreign Countries 1,445 1,550 434 465 30 30 from Foreign Countries. Total Trade of the World ... 3,112 3,386 1,620 1,768 52 52 Estimated from United Kingdom exports (including re-exports), f Estimated from Colonial exports (including re-exports). 17602 146 31. The above estimate is based on the general imports of all countries. In the case of foreign coun- tries, imports from the United Kingdom and the British Oversea Possessions have been estimated from the exports from the latter countries, a small allowance (about 5 per cent.) being made for cost of carriage and insurance. Egypt has throughout been treated as part of the Empire. 22. The following deductions from the total trade have been made for trade across land frontiers : — 1911. 1912. Imports into Canada and India. Imports into the United States of America Imports across European land frontiers. Total Million £. 75 Million £. 95 19 21 975 1,040 1,069 1,156 38. It would seem, therefore, that British ships carried 52 per cent, of the world's seaborne trade, the proportions in the different trades being distributed as follows : — Ptr cent. Inter-Imperial trade 92 Between the Empire and foreign countries 62 Between foreign countries 30 24. The volume of trade carried under the British flag was probably slightly less for the United King- dom, bringing the average for the world's trade down to about 50 per cent. 25. No doubt if the short sea trades were excluded the British proportion would be materially higher. APPENDIX F. Navigation Clauses in Commercial Treaties. 1. Whilst it is not possible in the space of this Appendix to, consider exhaustively the Navigation pro- visions in bur Commercial Treaties with Foreign Countries, it is desirable to indicate the more im- portant of these provisions. It will be convenient to do so in tabular form, with a few prefatory remarks as to their general character. It must be borne in mind that the Treaties cover a period of more than 250 years, that they reflect the conditions and the policy of the period when they were concluded, and that for present purposes they have to be construed in the light of these facts. 2. The Navigation provisions of the Treaties may eonveniently be summarised under the following heads, •ach of which will be considered in turn : — (1) General Freedom of Navigation; (2) Stationing, loading, etc., of vessels; (3) Duties of tonnage, harbour, etc. ; (4) Flag Discrimination ; . (5) General Most Favoured Nation treatment ; (6) Coasting Trade ; and (7) National vessels. (1) General freedom of Navigation. —The following it the usual form of the provision in modern treaties: — " There shall be between the territories of the two Contracting Parties reciprocal freedom of Commerce and Navigation. " The subjects or citizens of the two Contracting Parties (a) shall have liberty freely to come with their ships and cargoes, to all places and ports in the territories of the other to which subjects or citizens of that State are or may be permitted to come, and (b) shall enjoy the same rights, privi- leges, liberties, "favours, immunities and exemp- tions in matters of Commerce and Navigation as are or may be enjoved bv subjects or citizens of that State . . ."" The first paragraph, which is common to most Treaties, is not specifically provided for in the annexed table. The second paragraph, it will be observed, gives full Sational treatment aa regards (a) the right of vessels to enter ports, and (5) the treatment they there receive. In the treaties actually in existence, however, most favoured nation (M.F.N.) treatment only may be conceded in one or in both of these provisions. This is necessary where all ports are not open to foreign shipping, as in Japan, or where special favours are granted to the National Flag. Sometimes, again, the, first provision is omitted or is merged in the general stipulations as to Freedom of Navigation (as, for instance, in the Anglo-Dutch Treaty of 1837). Provision (a), of course affects the opening or closing of ports to foreign shipping, whilst provision (b) affects the question of granting preferential treat- ment to British over foreign flags or to some foreign flags over other foreign flags. (2) Stationing, L&iding, etc., of Vessels. The following is the usual form of this provision : — " In all that regards the stationing, loading and unloading of vessels in the ports, docks, road- steads and harbours of the territories of the Con- tracting Parties, no privilege or facility shall be granted by either party to national vessels which are not equally granted to vessels of the other country ; the intention of the Contracting Parties being that in this respect also the vessels of the two Countries shall be treated on the footing of perfect equality." It is usual to give full National treatment in the abovo respect, but sometimes most favoured nation treatment only is given. (3) Duties of tonnage, harbour, etc. — The following is the usual form of this provision: — " No duties of tonnage, harbour, pilotage, lighthouse, quarantine or other analogous duties or charges of whatever nature, or under whatever denomination, levied in the name or for the profit of the Government, public functionaries, private individuals, corporations, or establishments of any kind, shall be imposed in the ports of the terri- tories of either of the Contracting Parties upon the vessels of the other country which shall not equally and under the same conditions be imposed m the like cases on national vessels in general. Such equality of treatment shall apply to the respective vessels from whatever port or place they may arrive and whatever may be their destination." It is usual to give full National treatment in the above respect, but sometimes M.F.N, treatment only is given. (4) Flag Discrimination. — The most recent form of this provision is given in par. 233 of this Report. The provision in this form, however, occurs only in two recent Treaties, and it is therefore better hare to quote the provision as it occurs in the more modern Treaties other than the two referred to:* — " Each of the Contracting Parties shall permit the importation or exportation on the vessels of the other of all merchandise which may be legally imported or exported ; and such vessels and their cargoes shall enjoy the same privileges and shall not be subjected to any other or higher duties or charges than national vessels and their cargoes." It is usual in modern treaties to prohibit the differential flag treatment of goods carried in non- national vessels. The rule is. however, by no means universal, and a number of treaties secure only that goods carried to or from the other country in British vessels shall be treated as favourably as those carried in any other foreign vessel, i.e., goods carried in national vessels may receive more favourable treat- ment than goods carried in British vessels, which receive, therefore, M.F.N, treatment only in this respect. •, 1 _ *In the annexed table the reference is to this pro- vision. Where a stipulation with regard to passengers occxirs. the fact is noted by the addition of the words " also passengers." 147 It may be remarked that there are two princi- pal variants to the ordinary form of the provision quoted above. Sometimes there is only a general provision to the eifect that vessels and their cargoes shall receive national (or M.F.N.) treatment, without any specific reference to the duties levied on, or drawbacks given in respect of, goods imported in the vessels, though no doubt national (or M.F.N.) treatment is implied (e.g., in the treaties with France, Mexico ami Paraguay). Some of the older treatii .s tend to emphasize the goods rather than the vessels (e.g., the treaties with the United States of America, Holland, Liberia, Argentina and Venezuela). Cer- tain provisions indicate a state of things no longer existing. Thus the United Kingdom and the United States reserve the right to discriminate as regards drawbacks in the case of goods of their respective production when re-exported in vessels of the other to third (foreign) countries. In the annexed Table differences of this kind are neglected. (5) General Most Favoured Nation Treatment. — The usual form of the provision is as follows: — " The Contracting Parties agree that, in all matters relating to commerce, navigation and industry any privilege, favour or immunity which either Contracting Party has actually granted, or may hereafter grant, to the ships and subjects or citizens of any other foreign state, shall be extended immediately and unconditionally to the ships and subjects of the other, it being their intention that the commerce, navigation and in- dustry of each country shall be placed in all respects on the footing of the most favoured nation." This is a general provision intended to ensure that the contracting parties shall enjoy treatment as favourable as that extended to any other foreign country in matters which may not be covered by the other provisions of the treaty. In modern treaties the Most Favoured Nation treat- ment accorded is unconditional ; but in a few of the older treaties it is conditional. Thus in the treaties with Liberia (1848) and Costa Rica (1849) the pro- vision is as follows : — " Any favour, privilege or immunity whatever in matters of commerce or navigation, which either party has actually granted or may here- after grant to the subjects or citizens of any other State, shall be extended to the subjects or citizens of the other Contracting Party, gratuit- ously if the concession in favour of that other State shall have been gratuitous : or in return for a concession as nearly as possible of propor- tionate value and effect, to be adjusted by mutual agreement, if the concession shall have been con- ditional." A similar provision occurs in the Anglo-Dutch Treaty of 1837. (6) Coasting Trade The most recent form of the provision relating to the Coasting Trade is as follows : — " The provisions of this treaty relating to the mutual concession of national treatment in matters of navigation do not apply to the coasting trade in respect of which the subjects and vessels of the Contracting Parties shall enjoy most . favoured nation treatment. " British and vessels may nevertheless proceed from one port to another, either for the purpose of landing the whole or part of their cargoes or passengers brought from abroad, or of taking on board the whole or part of their cargoes or passengers for a foreign destination. " It is also understood that, in the event of the coasting trade of either country being exclusively reserved to national vessels, the vessels of the other country, if engaged in trade to or from places not within the limits of the coasting trade so reserved, shall not be prohibited from the carriage between two ports of the former country of passengers holding through tickets or mer- chandise consigned on through bills of lading to or from places not within the above mentioned limits, and while engaged in such carriage these vessels and their cargoes shall enjoy the full privileges of this Treaty." 17602 The above provisions therefore reserve the coasting trade, but grant most favoured nation treatment in respect of it. The last two paragraphs do not occur in all the treaties, but they are really corollaries of the first paragraph. In certain treaties the coasting trade is reserved absolutely. In other treaties the coasting trade is not specifically referred to and the right to most favoured nation treatment in regard to it is depen> dent on other provisions of the treaty.* The Anglo- Greek Treaty of 1886 provides for National Treat- ment in the coasting trade, and British vessels are admitted to the Italian coasting trade under the Exchange of Notes of 1904. In the Protocol to the Anglo-Paraguayan Treaty of 1881 it is provided that • : the stipulation of Acts II. and IV. of the Treaty now concluded shall be understood to open the free navigation of the Rivers Paraguay and Parana, in- cluding the coasting trade, to British vessels. "t Note. — The Anglo-French Convention of 1904 allows British vessels to participate in the Moroccan coasting trade and French vessels to participate in the Egyptian coasting trade. (7) National Vessels — The usual form of the pro- vision on this subject is as follows: — " All vessels which according to British Law are to be deemed British vessels, and all vessels which, according to (Italian) Law, are to be deemed (Italian) vessels, shall, for the purposes of this Treaty, be deemed to be British and (Italian) vessels respectively." The above provision reflects the policy consistently followed since the repeal of the Navigation Laws; we leave it to the country owning tho vessel to determine what shall constitute a National vessel, and by reciprocity we expect that country to recognise, as British, vessels deemed to be British by British Law. It is interesting to contrast, for instance, Article 8 of the Anglo-Argentine Treaty of 1825, which, after de- lining British vessels, defines Argentine vessels as " all vessels, built in the territories of the said United Provinces, properly registered and owned by the citizens thereof, or any of them, and whereof the master and three-fourths of the Mariners at least are citizens of the said United Provinces." 3. Applicability of Treaties to British Oversea Dominions and Possessions. — The position of tho British Oversea Dominions Colonies and Possessions under the Treaties is one of considerable complexity, but it need not be considered in detail. The practice in the conclusion of treaties in recent years has been to provide : — (a) That the Treaties bind only the United King- dom; but (b) that other Dominions and Colonies may accede to them separately ; and (c) that they may withdraw from them separately. Many of the Older Treaties bound the British Dominions and Colonies, but in most cases agreements have been concluded enabling the Self-Governing Dominions to withdraw from them separately. The only Treaties of importance from which the Self- Governing Dominions cannot withdraw are those with Russia (now denounced) and Italy. The Treaties with Argentina (notice of termination has been given), Venezuela and Norway (1826) possess a limited ap- plication to the Self-Governing Dominions. A num- ber of Treaties are, however, binding on Colonies not possessing responsible governments. 4. Treaties with Enemy Countries In the Table annexed to this memorandum the provisions of the Treaties with Austria-Hungary and Bulgaria are summarised for convenience of reference. These Treaties, of course, lapsed with the outbreak of war. * The Anglo-Serbian Treaty of 1907 probably entitles British ships to National treatment in the Serbian Coasting trade by virtue of the general provision respecting freedom of Navigation (Article 1). t It is provided, however, that owners of line* between British and Paraguayan ports shall not in con- sequence be entitled to claim special privileges or sub- ventions granted to other lines for specific purposes. K 3 148 Our Commercial relations with Germany were governed by a special Law to which reference is made in Par. 277 of the Report, and those with Turkey by the Capitulations, which in practice conferred full National Treatment on British Shipping, including admission to the coasting trade. 5. Provisional arrangements. — Our Commercial rela- tions with Belgium and Spain are governed by a Modus Vivendi providing for general most favoured nation Treatment, but containing no specific reference to Navigation. 6. Other Treaties. — No specific reference is made to the Treaties with China, Persia, Morocco, Siam and Muscat. Many of the provisions in these Treaties are unilateral, and British Ships in practice enjoy National treatment, including admission to the Coasting Trade. 7. There is no general commercial Treaty with the following countries: — Brazil. Hayti. Chile. Panama. Cuba. Salvador. Ecuador. Santo Domingo. Guatemala. Uruguay. 8. It must, of course, be remembered that where a particular provision does not occur in a given Treaty the privileges that would have been conferred by that provision may be obtainable in virtue of another Clause in the Treaty. Thus in the French Treaties there is no provision with regard to duties of Tonnage, etc., but British Ships would be entitled by virtue of the general M.F.N, provision to treatment" as favour- able as that accorded in this respect to the vessels of any other foreign country. SUMMARY OF PRINCIPAL PROVISIONS RELATING TO NAVIGATION IN TREATIES. CONVENTIONS, &c, BETWEEN THE UNITED KINGDOM AND OTHER COUNTRIES. NOTE.—K. = National Treatment. R. = Reserved (Coasting Trade). M.F.N. = Most Favoured Nation Treatment. L = Nationality of vessels determined by the Law of the Country whose Rag the vessel flies. S.D. = Nationality of vessels determined by Special Definition. Date of Principal Treaties, Conventions, Freedom of Country. Navigation. Stationing, Loading. &c, of Vessels. Duties of Tonnage, Harbour, Ac. Flag Discrimina- tion. General M.F.N. Treatment. Coasting Trade. National (a) (b) Vessels. &c Right of Privileges. Entry. &c. Rut tin (Treaty de- mo .V./--..Y. X. -V. X. .Y. .!/./■•. X. /,'. I.. nounced) Sweden 182fi — — M.F.N. N. N. M.F.N. — — Norway 1826 — — M.F.N. N. N. M.FJJ. — — Denmark 1670 & 1824 — — M.F.N. X. X. M.F.N. — — Netherlands 1837 & 1861 N. M.F.N. M.F.N. N. X. Conditional M.F.X. — L. France 1826 & 1882 _ N. — X. M.F.N. R. — Portugal 1914 N. — M.P.N. M.F.N. M.F.N, (also passengers) M.F.N. R. L. Italy 1883 N. N. N. X. X. M.F.N. X. (1) L. Serbia 1907 X. N. — — M.F.N. — Montenegro 1910 — — — — M.F.N. — — Greece 1886 X. N. N. N. N. M.F.N. N. L. Roumania 1905 N. N N. N. X. M.F.N. M.F.N. L. Egypt 1889 N. N. N. N. N. M.F.X. R.(3) L. Liberia 1848 — — — N. X. Conditional M.F.N. — — Japan 1911 M.F.N. N. N. N.& M.F.N. N. (also passengers) M.F.N. M.F.N. L. United States 1815 M.F.N. — — N. N. — — — Mexico 1888 — M.F.N. M.F.N. M.F.N. M.F.N. — L. Costa Rica 1849 M.F.N. — N. (2) — — Conditional M.F.N. M.F.N. R. — Honduras 1910 N. N. N. N. N. M.F.N. L. Nicaragua 1905 N. N. N. N. N. M.F.N. M.F.N. L. Paraguay 1884 — — N. N. N. M.F.N. N. L. Peru 1850 M.F.N. — — — — — R. — Colombia 1866 M.F.N. N. N. H. N. — R. L. Argentina [notice given 1825 M.F.N. — -V. C9) .v. N. — — S.D. of termination). Venezuela 1825 M.F.N. N. (2) N. N. — — S.D. Treaties with Enemy Countries, lapsed with Outbreak of War :— Austria-Hungary • WBS — — — — M.F.X. (5) M.F.N. L. Bulgaria... 1905 N. N.^ M.F.N. N. 4 M.F.N. X. L. (1) ByiExchange of Notes of 1904. (2) Loading and unloading only. (3) By Anglo-French Convention of 1904. French vessels may participate in the Egyptian coasting trade and British vessels in the Moroccan coasting trade. 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Of which from the British Empire. Remarks. 1,000 tons. 1,000 tons. % Textile. Mat* rials. Baw Cotton 3,431 752 22 74% from U.S.A. Baw Wool 874 491 56 29% from South America. Raw Jute 874 874 100 T'lax and Flax tow 640 6 1 70% from Bussia and Belgium. Hemp ... 642 54 9 Philippine Islands, United States, Russia, Italy. Metallic Ore.* — Manganese Ore 1,915 622 32 52% from Bussia. Copp-r Ore 768 155 20 Largely, Spain, Mexico, Chile, Cuba. Tin Ore 102 47 16 38% from Bolivia. Zinc Ore and concentrates 1,149 472 -11 Other countries — Italy, Spain, France and French Possessions. German v. Bauxite and Cryolite 148 — 93% from France. Nickel Ore 117 39 33 63% from French Possessions. Metal*— Copper, unmanufactured 680 62 9 52% from Hiked States. Also Mexico, Japan, Germany, Chile. Tin 126 1 1 61 21% from Dutch East Indies. Spelter ... 368 4 1 Chiefly, Belgium and Germany. Aluminium 40 13 33 Other Countries — Switzerland. France, Germany. Belgium. Nickel 21 1 3 57% from United States. Other coun- . • tries — France and Germany. TABLE HI— continued. (6) Proportions of certain Commodities imported by the United Kingdom, which were consigned from other parts of the British Empire in each of the undermentioned years. Foodstuftx : — Cereals (1) Meat (2) Dairy produce (3) Sugar Tea lextile Materials : — Baw Cotton „ Wool „ Jute Other Ran: Materials : — Oleaginous produce (4) Rubber Metals and Ores : — Manganese Zinc ore Lead, pig and sheet Tin (blocks, ingots, slabs). bars and 1900. 1905. 1913. 1915. 1916. % % % % 27 32 27 31 34 29 31 29 39 34 33 37 7 4 21 14 90 87 82 86 19 22 21 21 82 81 91 91 99 99 99 99 69 66 65 72 49 72 71 . 30 51 93 • 4 •>K 35 30 37 35 96 96 87 * In view of the increasing quantities of metals imported on direct Government account, it is probable that the recorded imports are incomplete, and it might therefore l>e misle a din g to quote figures for 1916. (1) Includes wheat, wheat meal and flour, barley, oats, rye, maize and rice. (2) Includes bacon, ham. lieef (chilled and frozen), mutton | fresh and frozen), and preserved meat (!>eet and mutton). (SI Includes butter, cheese, and also maigarine. (4) Includes u nuts and kernels for expressing oil therefrom," and also oastot seed, Unseed, cotton seed. ra|>e seed, soya beans, and unenumerated oil-seeds. 155 TABLE IV. Trade of Antwerp in 1912; (a) Statement showing the weight of the articles imported and exported at the port of Antwerp during the year 1912 from or to the undermentioned countries. 1,000 Metric Tons. (i.e. Imports Goods unloaded). (i.e. Exports Goods loaded). By sea. By canal or river. Total. By sea. By canal or river. Total. Russia 935 — 935 149 149 Germany ... Holland 187 4 2,175 2,362 423 427 477 3 1 ,302 524 1,779 527 France 112 81 193 118 247 365 United Kingdom... 1 ,537 1,537 1,560 — 1,560 Spain 339 — 339 283 — 283 Balkans and Turkey 1,404 1,404 364 — 364 British Self - Governing Domi- nions and India 1,485 1,485 896 896 United States 1,284 2 1,286 723 723 Latin' America 1,401 — 1.401 1,633 1,633 Other Countries ... 1,392 1 1,393 1,870 10 1,880 Total 10,080 2,682 12,762 8,076 2,083 10,159 TABLE FT—coTtHmusd. (I)) Statement showing the value of the imports and exports at the port of Antwerp during the year 1912, distinguishing the principal articles. Imports. (i.e., Goods unloaded). Exports. (».«., Goods loaded). By sea. By canal and river. Total. Value. By sea. By canal and river. Total. Value. I. Living Animals H. Food and Drink — Corn and Grain ... Oilier Food and Drink ... 1,0( 16 3,515 357 10 Metric 1 78 141 'ons. w 3,593 498 £1,000. 645 28,798 13,036 1,000 Metric T 1 — 73 i 877 266 | 89 \>ns. 1 950 355 £1.000. 97 7,818 10,203 Total III. Raw Materials, etc. — Coal Metallic Ores Metals Other Mineral Substitutes Textile Materials Other Raw Materials ... 3,872 808 503 222 2,185 273 1,701 219 968 6 31 582 29 87 4,091 1,776 509 253 2,767 302 1,788 41,834 1,301 417 4,573 11,601 18,425 27,310 339 966 1,402 ! 10 25 i 128 390 i 43 1,680 360 104 40 194 405 1,305 1,412 153 433 2,040 144 599 18.021 1,102 51 6,046 4,834 6,594 14,118 Total IV. Manufactures — Chemicals, Dyes and Colours. Iron and Steel Other Metals Textiles ... Other Manufactures 5,692 285 52 2 34 127 1,703 137 505 3 9 106 7,395 422 557 5 43 233 63,627 5,843 5,024 251 * . 4,084 6,946 .3,795 ; 986 272 90 2,660 1 1 16 1 1 77 4 916 : 25 4,781 362 2,671 17 81 941 32,745 5,349 23,218 1,11C 14,724 26,639 Total V. Bullion and Specie 500 760 1,260 23,048 586 3,941 131 4,072 71.04C 115 Total — — — 586 — — — 115 Grand Total ... 10,080 2,682 12,762 129,740 8,076 2,083 10,159 122,018 156 TABLE V Statement showing the number and net tonnage of German vessels (including their repeated -voyages) "which entered and cleared in the foreign trade at ports of the United Kingdom during 1913, distinguishing the trade routes as well as the vessels which called to embark or to land passengers for or from countries out of Europe and not on the Mediterranean — Entehed. Cl.EACEIl. Voxels calling to em- Vessels calling to land Route. lark or to land pas- or to embark passengers All Vessels. sengers for or from countries out of Europe All VesM-ls. for or from commie out of Europe and and not on the not on the Mediterranean.* Mediterranean.* No. Tons net. No. Tons net. No. Tons net. No. i 'runs net. To and from Germany 3,580 4,803,303 281 2,099,123 4,054 4,738,970 298 2,166,910 Atlantic ports of Europe ... 1,649 1,528,170 — — 1,213 1,064,964 — — Mediterranean 97 186,473 — — 289 436,334 _ — North Atlantic 190 1,479,914 129 1,364,629 238 1,573,436 121 1,327,344 South Atlantic 82 312,683 42 253,490 81 330,929 44 266,957 Central Atlantic 21 80,669 15 72,073 32 115,103 16 79,607 West Coast of Africa 51 169,883 47 162,558 43 115,444 31 103,805 East Coast of Africa 13 48,623 23f 90,516 37 139,562 30+ 117,445 India and Australia 54 211,866 14+ 68,493 50 194,903 13+ 67,249 China. Japan, &c. ... 18 72,107 28f 155,151 33 132,708 26+ ! 137.716 West Coast of America ... 48 107,035 — 65 195,949 — — Total 5,803 9,000,726 579 4,266,d33 6,135 9,038,302 579 4,266,033 * These vessels have been grouped in accordance with the most distant places from or to which passengers were carried. In so far as the vessels landed or loaded no cargo in the United Kingdom they would be entered or cleared from or to the nearest port of call, and thus fall into a different group in the classification adopted for "all vessels.' In particular, the passenger service to the East Coast of Africa consisted largely of vessels which, if not mrying United Kingdom cargo, would be entered or cleared from or to ports in Italy, Spain or Morocco. + A'ia Mediterranean. Printed under the authority of His Majestv's Stationery Office By DARLING and SON. Limited. Bacox Street, E.2. 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