THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JULY 5, 1934 SHIPPING SUBSIDY

New Zealand Herald, Volume LXXI, Issue 21844, 5 July 1934, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JULY 5, 1934 SHIPPING SUBSIDY

Tiie battle for the defence of the British Mercantile Marine has been opened. The Government has decided to grant a subsidy limited to £2,000,000, for the assistance of tramp tonnage employed in trade in which subsidised foreign shipping is competing. While the Government will continue to press for international agreement upon this difficult problem, the shipowners of Britain are expected to exert what pressure they can upon foreign shipowners for .the adjustment of the supply of tonnage to world demand in order to raise freight rates to a remunerative level. The method proposed and its limitations will, in the first place, arouse intense controversy in Britain. This will not give any surprise to those who have studied the question, for the shipping industry is the key of key industries. Vast interests are indirectly involved. There is general agreement that something should be done to meet the mounting menace represented by an aggregate annual foreign shipping subsidy of £30,000,000. Yet one school of thought opposes the subsidy method because 'of the danger of reprisals that might further intensify foreign action and jeopardise what is still the largest ocean-carrying trade in the world. Although British tonnage is only 27.5 per cent of the world tonnage, compared with 40 per cent in 191£, although tramp tonnage has decreased by 50 per cent, although shipping income dropped from £105,000,000 in 1930 to £65,000,000 in 1933, the mercantile marine still holds 90 per cent of the carrying trade between the countries of the Empire and SO per cent of that between British and foreign countries. The fear of some interests is that even the least provocative method, that of granting subsidies, might balance any gains by losses. There is the further fact that shipowners to some extent are at economic war among themselves. Liners and tramps are now competing with one another. The liner has secured part of the business which used to go to the ;ramps automatically.

A further side wind to the controversy may come from the shipyards, to which the proposal to scrap and build could not fail to make an appeal, particularly at a time when half the men of the shipbuilding trades are idle. Even here, however, there is no unanimity. One shipbuilder of Newcastle-on-Tyne declared in the Times that while he wanted orders, he did not approve of building more tramp ships until it was possible for them to earn dividends. It was entirely delusive, he said., to think any improved or more economical ships could earn dividends at present rates or enable Britain to regain or maintain its due share of world trade. Other nations would rebuild as fast as Britain, and thus further depress the freight market. In any case, to scrap useful ships would be a waste of capital. On the same subject the president of the Chamber of Shipping said the cause of the trouble was too little trade and too many ships. There was no need for replacement from the competitive point of view. The Board of Trade committee, which investigated this matter in 1930, found that the mercantile marine was relatively as new and undoubtedly as efficient aB it had ever been, and in this respect compared favourably with the shipping of other countries. Only one in five of the tramp vessels on the British Register was over 20 years old, as against one in three abroad. Actually there are cargo vessels being held on the stocks because there is no prospect of running them profitably. The Government's idea in making the proposal, however, was to scrap more tonnage than was built or modernised, and it is still prepared to provide financial assistance if this policy, received unfavourably by shipowners, is reconsidered by them.

It is evident that the Government hopes that the granting of the subsidy will put in train negotiations which may result in the modification of the subsidy system in other countries. It is a bargaining weapon and a small one considering the strength of the opposition, yet it is not too much to hope that at least in the United States, which, with a mercantile marine only half the size of that of Britain, is paying an annual subsidy in the vicinity of £17,000,000, there will be a return to economic reason. The American taxpayer may not be prepared to consent to this vast expenditure indefinitely when it can simply be demonstrated that the return, direct or indirect, cannot justify it. The political grip is strong in the United States, however, and national commitments are difficult to disturb. In the case of Japan it is somewhat different, but just as uncertain. There the grip on shipping subsidies is held through the industrial machine. One of the methods of securing markets for the expanding output of the factories is by way of cheap transport. Italy, another country deeply committed in the subsidy system, seems more disposed to regard its new mercantile marine as a factor in national power than as an industry. For that reason alone little of the spirit of com-

promise may be expected. But no country is more vitally concerned than Britain in the maintenance of its mercantile marine as a second line of defence. Warships alone will not safeguard Great Britain against enemy action. A strong mercantile marine is essential to feed the nation, to convey its raw materials and to maintain the economic life of the Empire. Every country of the Commonwealth is concerned in this matter. The President of the Board of Trade states that in considering the problems now partially attacked it will be essential to have the cooperation of the Dominions and India. An exchange of views is now proceeding. Thus the Government of New Zealand will have decisions to make. No purpose can be served by speculating upon the possible form of Dominion co-operation, but at least this should be said : whatever is done there should be insistence that a condition of any aid should be that only British seamen are employed.