C 3 C M^ 'T 67 CHANGING PATTERNS IN U.S. TRADE AND SHIPPING CAPACITY U.S. DEPARTMENT OF COMMERCE MARITIME ADMINISTRATION U.S. DEPARTMENT OF COMMERCE Luther H. Hodges, Secretary MARITIME ADMINISTRATION Nicholas Johnson, Administrator Prepared by OFFICE OF STATISTICS December 1964 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402 Price 25 cents Foreword The evolution and growth of nations and new regional economic units around the world is re- flected in the changing patterns of international trade. Nations newly emergent from colonial status do not necessarily follow the trading patterns of former allegiances. Moreover, their rapid development has produced new markets and sources of supply. The Common Market in Europe and the development of other regional trading areas have had a decided impact on world trade. The patterns of United States seaborne commerce have changed substantially, not only since the end of World War II, but in the past decade alone. During the last ten years the volume of its oceanborne exports and imports has doubled, and in the next ten years it is expected to increase by half as much again. This increase has been accompanied by changes in the composition and direction of United States international trade. The dynamic process of constant adjustment to changing conditions will continue, for it is the basis of our success as a trading nation. The role of the American merchant marine in this process of adjustment has been a central one; efficient transportation requires subtle adjustments to the myriad needs of each trade. In meeting this challenge, the shipping industry is confronted with the fundamental truth that its mission is simply to move cargo from one point on the earth to another. There is great danger in remaining tied to traditional notions of the immutable nature of the business of ocean shipping. This basic truth has had relevance for almost all of the programs of the Maritime Administra- tion, as well as for the maritime industry. The goal of federal research and development efforts in this area for example, is not simply to design a better ship, but to seek a better, more eco- nomic way of moving cargo from point of origin to destination. Indeed, the distinguished first Maritime Administrator, Joseph P. Kennedy, set an imagina- tive example for all who followed him when he wrote in 1937, "... there are many cogent reasons why a progressive shipping company might well add flying boats to its cabin liners and its freighters." Aircraft and the Merchant Marine, p. 20 (1937). He did not fear to dream, and therefore could warn that, "It would appear therefore that these services (one- day to Europe by airplane and a 2 1/2 days by dirigible) may, in the near future, be operated at a cost, and with a fare equal to, or possibly less than that of a superliner. Such faster service, with ample capacity for a large part of the passenger, mail and express traffic will cause super- liner service to lose much of its appeal and justification for a large class of traffic." (p. 19) "For shipping companies not to make use of this new vessel on their trade routes may prove quite short-sighted." (p. 21) In evaluating this prediction, it is not insignificant that last year ten percent of the cargo, by value, moving out of New York City went by air. This growing challenge is one to which the ship- ping industry cannot respond in traditional ways. The creation of a more adequate and economic merchant marine will require the courage and imagination which has characterized the great moments in the history of this industry. Basic information like that contained in this document is essential if we are to devise plans to meet this challenge, with its attendant consequences for our export promotion program, national defense, agricultural exports, foreign relations, and the domestic economy, including job oppor- tunities. In the following pages will be found analyses of the changes in United States oceanborne trade, the ships that carry our exports and imports, and some of the changes we may expect to see take place during the coming years. The report contains a wealth of information which should benefit all who have an interest in United States foreign commerce. It was prepared by Irwin M. Heine, Chief, and Muriel W. Coe, Foreign Shipping Analyst, Office of Statistics. Russell M. Brown, Division of Management, designed the charts. Nicholas Johnson Maritime Administrator December 1964 Contents Page Foreword 3 Introduction 5 Part I. -U.S. Flag and Foreign Flag Ships of All Registries 5 Part II. -Panamanian, Honduran, and Liber ian Flag Ships Under the Effective Control of the United States , 10 Conclusions 12 Tables: 1-7. Foreign Trade of the United States, by Flag „ 14-20 8-10. Foreign Trade of the United States, Showing Cargo Carried by Ships Under the Effective Control of the United States 21 Charts: 1-6. Foreign Trade of the United States 22-27 7-20. Movements of Principal Bulk Commodities, 1955-63, and Projections Through 1975 28-32 Changing Patterns in U.S. Trade and Shipping Capacity Introduction It is estimated that the waterborne foreign com- merce of the United States contributes somewhat more than 12 percent to the world's seaborne cargo tonnage movement. 1 Divergent economic and social forces throughout the world influenced the volume and direction of United States foreign trade in 1963. Foreign aid granted by this country to a number of nations whose economies are in formative stages, or which sustained food or other shortages affecting their social structures, resulted in shipments to such countries of over 21 million long tons of agricul- tural and industrial products. On the other hand, a number of similar commodities comprising bulk and general cargoes were shipped in increasing quantities to countries enjoying high industrial activity. Payment methods, however, differed con- siderably as between the two groups. 8 Over the 10- year period 1953-62, the annual average growth rate of our country's oceanborne commercial foreign trade was 8.2 percent 3 com- pared with 7.1 percent 1 for total world seaborne commerce. Yet, in contrast to the continuing up- ward trend in the volume of our overseas trade, U.S. flag ships were carrying a decreasing share of the total. (See Table 1.) Much has been said about the part played by a number of ships registered under Panamanian, Honduran and Liberian flags which are considered by the Navy Department to be under the effective control of the United States. For the first time since 1960, a detailed analysis of the types of ships, their size, age and the cargoes they carried has been made. The results are included in Part II of this study. Part I. — U.S. Flag and Foreign Flag Ships of All Registries The participation of U. S. flag ships in our coun- try' s foreign trade is in sharp contrast to that of other national flag fleets in their respective over- seas trades. For example, listed below are ten of the maritime trading nations which possess sub- stantial merchant fleets. Although none of these nations approaches the volume of foreign trade en- joyed by the United States, each is dependent upon its merchant fleet for a contribution to its national economy. It will be noted that of the ten countries listed, only two of their fleets carried less than 25 percent of their overseas trade. The remainder carry from one- third to three-fifths. 1 United Nations, Statistical Yearbooks 1959-63. 2 Payment for agricultural and other commodity exports moving through regular commercial channels is made either in dollars or other freely convertible hard currencies. These receipts are an important factor in the United States balance of payments. On the other hand, a nation may be given a grant of United States Government-sponsored cargoes which requires no repayment, while other countries may pay for such cargoes in local currencies that are not always freely transferable and which may be earmarked for special uses either by the United States or the recipient country. To an increasing de- gree, loans made by the Agency for International Development (AID) now call for repayment in dollars on special terms such as low interest rates, longer periods of repayment and other concessions. Country UNITED STATES . . Denmark France Germany, West . . Greece Italy Japan Netherlands. . . . Norway* Sweden United Kingdom 11 Percent participa- tion in National Trade 8.5 23.0 58.7 37.0 46.6 32.6 46.2 16.0 42.7 33.4 52.0 Latest Year Available 1963 1963 1962 1962 1963 1962 1962 1963 1962 1963 1962 ♦Excluding export shipments of Swedish ore via the port of Narvik. **Net registered tonnage of vessels with cargo. Data based on cargo tons carried are not available from official or other sources. It is believed, however, that while the percentage shown for British flag ships is not directly comparable, it is indica- tive of the extent to which they participate in the country's overseas trade. Source: Latest data available from foreign mari- time representatives and foreign government statis- tics. 3 Maritime Administration, Office of Statistics. It may also be interesting to note the following comparison of the merchant fleets of the world as compared with the U.S. merchant fleet for the last ten years. In this connection it should be borne in mind that in those years more than half of the tonnage of the U.S. fleet has been inactive in the reserve fleet. This condition still prevails. A Comparison of the United States and World Merchant Fleet for the Years 1954-63, as of December 31 (000 gross tons) Total Year world 1963 137,657 1962 132,064 1961 125,851 1960 122,027 1959 117,640 1958 112,314 1957 104,770 1956 97,665 1955 92,944 1954 89,258 Percent of U S . privat 3ly Percent of U.S. privately world ai id Government world owned (3 t 2) 7.3 owned (5 t 2) 10,076 22,520 16.4 9,982 7.6 22,883 17.3 9,616 7.6 22,580 17.9 9,610 7.9 23,754 19.5 9,519 8.1 24 , 036 20.4 9,213 8.2 24 , 247 21.6 8,982 8.6 23,725 22.6 9,189 9.4 24 , 013 24.6 9,177 9.9 25,250 27.2 9,645 10.8 25,483 28.5 Source: Maritime Administration, Office of Statistics. COMPOSITION OF UNITED STATES OCEANBORNE FOREIGN TRADE (a) Liner Service 4 Cargoes carried by freighters in liner service constituted a relatively stable volume of tonnage in United States overseas trade. During the five- year period 1959-63, liner tonnage carried by ships of all flags ranged from a low of 46.2 million tons in 1959 to a high of 48.3 million tons in 1960. In 1963 liner cargoes totaled 47.2 million tons. (See Table 3.) Of the latter amount, 36.2 million tons consisted of general cargo, a producer of higher revenues, and 11 million tons of bulk commodities. (1) In the export trade freighters in liner service carried 20.6 million tons of general cargo and 8.8 million tons of bulk commodities con- sisting of, among others, 3.3 million tons of agri- cultural products, over 2 million tons of coal (most of which went to Japan), more than one million tons of phosphate rock, about one- half million tons of sulphur, and one- quarter million tons of lubricating oils and greases. U.S. flag ships carried 9.2 million tons, or over 31 percent of the 29.4 million tons of liner cargoes which moved by ships of all flags. They carried 3.4 times as much general cargo as bulk outbound, compared with the cargo mix of foreign flag ships whose general to bulk car- goes ratio was 2 to 1. (2) Inbound shipments on ships of all flags totaled almost 18 million tons. General cargoes accounted for 15.6 million tons and bulk cargoes for 2.2 million tons. The latter group consisted principally of 500,000 tons of sugar, some 400,- 000 tons of manganese and chrome ores, lesser volumes of copra, residual fuel oils, iron ore, and other products. It will be noted that whereas general exceeded bulk cargoes by 2.3 to 1 in the export trade of the United States, the ratio was 7 to 1 for imports. U.S. flag ships carried 4.6 million tons, or about 26 percent of the total imports which amounted to 17.8 million tons. Of the 4.6 mil- lion tons, 631,000 tons were bulk cargoes con- sisting largely of manganese and chrome ores, inedible molasses and sugar, among other items. The ratio of general to bulk cargoes, however, was 6.3 to 1, indicating that U.S. flag ships carried relatively more bulk commodities in liner service inbound than foreign flag ships. (b) Irregular Service^ The 139.5 million tons of cargo carried by ships of all flags in irregular service were the largest for any service on record. (See Table 4.) Car- 4 Liner (berth) service is a scheduled operation by a com- mon carrier whose ships operate on a predetermined and fixed itinerary over a given route, at relatively regular intervals, and are advertised considerably before sailing in order to solicit cargo from the public. 5 Irregular service is comprised of "tramp" and other types of service which do not conform to the criteria described for a common carrier in "liner" service. A "tramp" ship in traditional terms is one that operates on an irregular or unscheduled basis from one port of lading to one port of dis- charge, lifting one dry cargo commodity, usually of low value, without mark or count, and from one shipper to one consignee. The "tramp" operator does not usually hold himself out as a common carrier and his ship is free to travel anywhere on any terms, not infrequently being chartered out on "time" terms. goes moved by tramp ships and industrial carriers are increasing steadily in volume. For example, the 139.5 million tons that moved in United States foreign trade in 1963 exceeded the 1962 tonnage volume by 15 million tons; the annual average for the five-year period 1958-62 by 30 million tons; and the annual average for the decade 1953-62 by al- most 43 million tons. During the past two years, ships in irregular service carried more cargo tonnage than tankers. In large measure the increases noted above re- sulted from (a) exports of Government- sponsored cargoes to many areas throughout the world; (b) increased cash sales shipments of agricultural commodities and industrial products to nations with high level operating economies (e.g., Japan, West Germany, Holland, etc.); (c) imports of strategic materials under Title III of Public Law 480; 6 and, among others, (d) the increasing quanti- ties of foreign raw and semi- finished materials and ores required to replace depleting resources in the United States and to meet the rising produc- tion demands of our expanding economy. Without the Government- sponsored aid cargoes, it is doubtful if the U. S. flag tramp fleet could survive. Nor would many U.S. flag tankers find even the limited employment in foreign trade which they now enjoy were it not for the Government- financed grain cargoes moving from the United States. The importance of aid cargoes in sustain- ing the operations of U.S. flag ships operating in liner, irregular and tanker services is shown by the following table: Contribution of Government-Sponsored Cargoes to U.S. Foreign Trade i 1963, Showing Participation by U.S. Flag Ships by Type of Service (Thousands of long tons) Total commercial (including Government-sponsored cargoes) Total Government- sponsored All flags Type of Service (tons) Total Exports and Imports.. 312,732 Liner 47,217 Irregular 139 ,489 Tanker 126 , 026 Total Expor t s 121,670 Liner 29 , 447 Irregular 78,335 Tanker 13 , 888 Total Imports 191,062 Liner 17,770 Irregular 61 , 154 Tanker 112 , 138 U.S. flag U.S. flag (tons) (percent) 26,625 8.5 13,798 29.2 7 256 5.2 5,571 4.4 17,063 14.0 9,231 31.3 4,842 6.2 2,990 21.5 9,562 5.0 4,567 25.7 2,414 3.9 2,581 2.3 cargoes (Est . ) All flags (tons) 21,234 7,044 10,205 3,985 20 , 086 6,960 9,141 3,985 1_J ,148 84 1, 064 U.S. flag (tons) 4,595 2,730 11,607 4,807 4,070 2,730 U.S. flag (percent) 69.1 45.0 68.5 69.1 44.5 68.5 70.2 49.3 Government- sponsored cargoes represent movements for the account of the Department of Agriculture, Agency for International Development (AID), Bureau of Public Roads, and General Services Administration. Tonnage movements initiated by Export-Import Bank loans are not available and would presumably appear in both liner and tramp commercial carryings. Source: Traffic. Maritime Administration, Office of Statistics and Division of Operating Agreements and Based upon projections of some of the principal bulk commodities for the period 1965-75, it is estimated that the volume of tonnage moving in the irregular service of United States overseas trade will increase sharply. The 13 commodities or commodity groups used as a basis for the pro- jections are representative of the dry bulk com- modities which are presently moving in large tonnage volumes and, it is believed, will continue to be representative of commodity movements dur- ing the next decade. (See Charts 7-19). Not all of the cargo carried by ships in irregu- lar service was of bulk type. Of the 139.5 million tons, almost 12 million tons consisted of general cargo items such as automobiles, finished steel products, machinery, lumber, and paperboard. U.S. flag tramp ships and industrial carriers carried 7.2 million tons of cargo, or 5 percent of the 139.5 million tons which moved in irregular b Pumic Law 480, which was passed by the 2d Session of the 83rd Congress on July 10, 1954, and subsequently amended, provides for the overseas shipment of surplus U.S. agricul- tural commodities under four titles-. Title III— Barter and Donations (a) Bartering of surplus commodities (grain) for strategic ores and minerals for U.S. stockpiling program. (Title III, Sec. 302(2)) Principal Dry Bulk Commodities* Exported and Im- ported in U.S. Oceanborne Foreign Trade, Actual Tonnages for 1955, 1960, 1963, and Projections for 1965 Through 1975 (In millions of long tons) Total Exports Imports 1955 86.1 50.4 35.7 1960 110.0 58.2 51.8 1963 124.1 75.1 49.0 1965 152.6 88.6 64.0 1970 191.1 113.2 77.9 1975 215.6 123.7 91.9 ♦Commodities exported Commodities imported Coal Bauxite Corn Chromite Cotton (unmfgd.) Jron ore Grain sorghum Manganese Scrap iron and steel Sugar Small grains' Soybeans Wheat and grain equivalents of flour Sources: Maritime Administration, Office of Statistics: Grateful acknowledgement is made for the cooperation and assistance given by commodity specialists in the Department of Agriculture; the Department of the Interior, Bureau of Mines; and the Institute of Iron and Steel Scrap. service. About 900,000 tons of the 7.2 million tons consisted of general cargo items. (1) Export shipments carried in irregular service by ships of all flags totaled 78.3 million tons, of which more than 73 million tons con- sisted of bulk commodities such as 29 million tons of agricultural products, over 32 million tons of coal and coke, almost 3 million tons of phosphate rock, about 4.5 million tons of iron and steel scrap, and more than one million tons each of iron ore and sulphur. Numerous other commodities which moved in lesser quantities totaled 2.2 million tons. U.S. flag ships carried 4.8 million tons, or 6 percent of the total irregular outbound move- ments. Of this amount, 500,000 tons were clas- sified as general cargo. Slightly more than 4 million tons of the 4.8 million tons consisted of Government- sponsored cargoes, while the re- mainder moved as a result of regular commer- cial transactions, primarily to European areas and the Far East. (2) Imports carried by tramp ships and indus- trial carriers amounted to slightly more than 61 million tons of cargo. Of that total, 54 million tons were bulk cargoes, about 51 million tons of which consisted of iron ore, bauxite, gypsum, sugar, manganese, chromite, and copra. U.S. flag ships carried only 2.4 million tons, or 4 percent of the total import cargoes. Of the foregoing amount, 525,000 tons consisted of strategic materials imported under the bartering provisions of Public Law 480- Title III. Of the 2.4 million tons, about 2 million tons consisted of five commodities: viz., iron ore, bauxite, manganese, chromite, and sugar. The remainder was general cargo type imports. (c) Tanker Service Cargoes carried by tankers of all flags in United States foreign commerce have steadily increased since the end of World War II, despite the dampen- ing effect of import quotas on petroleum products first imposed in March and April 1959. In 1963, tanker cargoes totaled 126 million tons (see Table 5), about 6 million tons more than in the preceding year, and 13 million tons above the annual average of the last five years. In no other year 7 had the volume been so large. However, projections 8 for the imports of petroleum products indicate that the tonnage carried by tankers in 1963 may be ex- ceeded by at least 40 million tons by 1975. (See Chart 20.) (1) Tanker exports from the United States totaled 13.9 million tons in 1963. An important factor in this service was the increasing use of tankers to carry dry bulk cargoes. In addition to the 6.8 million tons of petroleum products, tankers carried 5.3 million tons of agricultural products, 1.6 million tonsof chemicals, and 200,- 000 tons of miscellaneous cargoes. U.S. flag tankers carried 3 million tons of cargo, or 20 percent of total tanker exports. In- stead of the traditional bulk liquid cargoes, how- ever, most of the cargo consisted of 2.2 million tons of agricultural commodities, 2 million tons of which were wheat. This movement has been a sustaining influence in helping to keep even a minimum number of U. S. flag tankers operating in foreign trade. (2) Imports carried by tankers totaled 112 million tons, of which 109 million tons were petroleum products consisting of 62 million tons of crude petroleum, 40 million tons of residual fuel oil, and over 7 million tons of other petro- leum products. The remainder was made up of 1.3 million tons of molasses and 1.8 million tons of chemicals and other liquid bulk commodities. U.S. flag tankers carried inbound 2.6 million tons, or 2.3 percent of the total. With the excep- tion of 26,000 tons of molasses and chemicals, the remainder consisted of crude oil, residual fuel oil and other petroleum products. PARTICIPATION BY VARIOUS FLAG SHIPS IN U.S. FOREIGN TRADE The question as to which flags carry the bulk of United States oceanborne commercial foreign com- 7 Data showing tonnage volumes on a continuing basis were begun by the U.S. Shipping Board in 1921. In that year, tankers of all flags carried a total of 23,342,000 long tons of cargo. 8 Based upon data estimated by the Office of Oil and Gas, Department of the Interior. merce is answered by the data in Table 2. This table also shows the importance of ships under Panamanian, Honduran, and Liberian flags in United States overseas trade. It must be pointed out, however, that not all of the ships under " PanHonLib" flags are under effective United States control. The differences between these two categories will be discussed in another section of this study. By far the greatest tonnage in United States for- eign trade in 1963 was carried by Liberian flag ships (primarily dry and liquid bulk cargoes), and exceeded the volume carried by Norwegian and U.S. flag ships combined. Ships registered in Panama and Liberia together carried more than 32 percent of total United States foreign trade on a volume basis. The second largest volume of United States trade was carried by Norwegian flag ships, more than twice that carried by U.S. flag ships. Norwegian flag ships carried a substantial amount of cargo in liner, irregular, and tanker services, amounting to 54 million tons, or 17.3 percent of total U.S. foreign trade. Cargo tonnages carried by U. S. flag ships ranked third in volume. Liner cargoes comprised the greater part of the total and were larger in this service than the tonnage volume carried by any other flag. In large measure, the predominant position of liner cargoes carried by U. S. flag ships is due to: (a) the operating differential subsidies granted by the Government to operators of some 318 U.S. flag ships in foreign trade, (b) the comparability of commodity rates charged by foreign flag liners which belong to the same shipping conferences, since freight rates are presumably the same for all conference members, and (c) the availability of Government- sponsored cargoes which must be shipped in accordance with the provisions of Public Law 664 . 9 Although Japanese flag ships were only in ninth place in the carriage of total U.S. overseas com- merce, they were surpassed only by Norwegian and United States flag ships in the carriage of liner cargoes. Strangely enough, most of the cargo carried by Japanese flag ships outbound in liner service from the United States consisted of coal. Japanese flag ships carried 9.7 million tons of all kinds of cargo in the total foreign trade of the United States, of which 9.1 million tons was in trade be- tween Japan and the United States. Despite the fact that Canada had only 61 ships of 241,000 gross tons, and Mexico 39 ships of 239,000 gross tons in the oceangoing trades of their respective countries, they appear in Table 2 as im- portant carriers of cargo in United States foreign trade. The Canadian ships moved agricultural commodities from United States Great Lakes ports to Canadian ports above Quebec on the lower St. Lawrence River, while Mexican flag ships carried petroleum products principally between Mexican, Californian and U.S. Gulf ports. Tables 3 through 6 show the extent to which ships of the 18 principal maritime trading na- tions 10 participated in oceanborne trade between the United States and those nations, as well as the part played by the so-called "PanHonLib" ships. The type of service involved is important to the extent national flag ships are utilized in United States overseas trade. For example, some na- tional tanker fleets may be used to better advantage in trades other than with the United States. As a result, tankers of United States or third country registry would appear advantageously in trade with a given country (India, Greece, Spain) although the tonnage carried may be relatively small. (See Table 5.) However, the competition in liner service (see Table 3) is very keen due to the movement of higher- revenue -producing cargoes. Although rates for specified commodities are presumably equal, U.S. flag ships carried considerably less than national flag ships in liner service between their countries and the United States. The degree of competition for this trade is seen in the disparity in the relative amounts of tonnage carried by U. S. flag ships and national flag ships in trade with the following countries: Percent Percent carried by carried by U.S. national flag ships flag ships Trading partner Denmark West Germany Italy Japan Netherlands Norway Sweden United Kingdom 12 16 20 13 5 38 9 This law provides that at least 50 percent of the tonnage of Government-sponsored cargo transported on ocean vessels shall be carried on privately-owned U.S. flag commercial vessels to the extent such vessels are available at fair and reasonable rates. 10 These are the 18 countries having the largest fleets of merchant ships of 1,000 gross tons and over, excluding Pan- ama and Liberia which are not considered principal trading nations, and the U.S.S,R., Poland and Communist China for which reliable data are not available. Part II. — Panamanian, Honduran, and Liberian Flag Ships Under the Effective Control of the United States Certain misconceptions still persist concerning the part played by ships registered under Pana- manian, Honduran and Liberian (PanHonLib) flags in the foreign trade of the United States, viz.: (1) That all PanHonLib ships are under the effective control of the United States, (2) That all effective U. S. controlled (E.U.S.C.) ships operate in the foreign trade of the United States. As a matter of fact: (1) Less than 30 percent of the total PanHonLib fleets and 46 percent of their total deadweight tonnage are deemed by the Navy to be under effective United States control. 11 The remainder is believed to be foreign owned or controlled and is not susceptible to United States direc- tion. (2) There were 463 different ships of 12.6 million deadweight tons that were, at one time or another, during 1963, deemed by the Navy to have been under effective United States control. Some of the ships may have been under effective control for a matter of days or weeks, others for months or the entire year. Some may have been transferred to other registries, others may have been lost or converted to non- merchant types, such as barges. One Liberian flag ship was redocumented under U.S. flag. (3) Of the 463 ships, only 313 made one or more sailings to or from the United States during the year. The other 150 ships were operated in other areas of the world or were laid up. (4) The 313 ships 13 carried 60.8 million long tons of bulk dry and liquid cargoes and 42,460 tons of general cargo, or a total of 19.4 percent of the 313 million tons moved by ships of all flags in United States foreign trade. (5) This compares with the 63.7 million tons of bulk dry, liquid arid general cargoes carried by 353 E.U.S.C. ships in 1960, which comprised 23.3 percent of the total United States ocean- borne foreign trade in that year. (6) There has been a steady decrease since 1960 in: (a) the number of ships under effective United States control; (b) the number, although not the deadweight tonnage, of E.U.S.C. ships that were engaged in United States foreign trade; 11 On December 31, 1963, there were 1,507 merchant ships of 1,000 gross tons and over with a total deadweight of 26.9 million tons, comprising the entire Panamanian, Honduran and Liberian fleets. Of that number 443 ships of 12.3 million deadweight tons were deemed by the Military Sea Transporta- tion Service of the Navy Department to have been under effec- tive United States control on that date. 12 All PanHonLib flag ships, including those under effective control carried 102 million long tons of cargo or about 33 percent of the total United States oceanborne trade in 1963. (c) the cargo tonnage volume the E.U.S.C. ships carried in United States export and import trade; and (d) the percentage of the cargo tonnages carried by E.U.S.C. ships in total United States overseas commerce. TYPES OF E.U.S.C. SHIPS The following two tabulations show the age and size distributions for each of the major four types of E.U.S.C. ships in 1963. An analysis of their data indicates that: (a) more than half of the tankers and bulk carriers that operated in United States trade were less than ten years old, 13 pointing up the fact that they were built following the Suez Crisis principally in foreign shipyards; (b) the trend toward larger size tankers and bulk carriers is manifest since more than half of the E.U.S.C. tankers which operated in United States foreign trade ranged from 30,000 to over 90,000 deadweight tons while about one- third of the bulk carriers were 30,000 deadweight tons and over; 14 (c) only a few of the E.U.S.C. tankers were built prior to and during World War II, especially those which op- erated in trade with the United States; and (d) two- thirds of the freighters were Liberty types, built during World War II, and almost three-quarters of all the E.U.S.C. freighters were 20 years or older and approaching obsolescence. CARGO TONNAGE CARRIED BY E.U.S.C. SHIPS The extent to which cargo tonnages carried by E.U.S.C. ships contributed to the overall ocean- borne foreign trade of the United States in 1963 is indicated in Table 8. Of the 60.8 million long tons of cargo that were carried inbound and outbound by the 313 E.U.S.C. ships in 1963, 40.7 million tons were carried by tankers and 20.1 million tons by freighters and bulk carriers. Combination passenger- cargo ships operating primarily in cruise service carried very little cargo. Imports accounted for 56.1 million tons or 92 percent of the total cargoes carried and consisted principally of petroleum products, iron ore, baux- ite, sugar, bananas and other agricultural and mineral products. 13 Of the 297 tankers and 63 bulk carriers in the U.S. flag privately- owned fleet on December 31, 1963, 84 tankers or 28 percent and one bulk carrier were less than ten years old. The average age of all the 297 tankers was 14.6 years and for bulk carriers 18.6 years. 14 There were 69 tankers (23 percent of the 297 U.S. flag tankers) that were 30,000 deadweight tons or larger on Decem- ber 31,. 1963. There were no U.S. flag bulk carriers that came within those size groups. The great majority of the U.S. flag privately-owned bulk carriers were converted from other types. 10 Distribution of E.U.S.C. Ships by Deadweight Tonnage Groups During 1963 Deadweight tonnage groups Under 6,000 6,000 to 9,999 10,000 to 10,999 11 , 000 to 15 , 999 16 , 000 to 16 , 999 17 , 000 to 19 , 999 20,000 to 29,999 30,000 to 39,999 40,000 to 49,999 50,000 to 59,999 60,000 to 74,999 75 , 000 to 84 , 999 85 , 000 to 99 , 999 100 , 000 and over Total (a) In U.S. Trade (b) Not in U.S. Trade Number of Number of Number of Number of combination tankers Freighters bulk carriers pass ./cargo (a) (b) (a) (b) (a) (b) (a) M 3 12 13 2 4 5 3 5 2 1 40 27 2 4 6 7 1 17 4 15 30 2 11 7 5 45 6 9 33 10 9 2 48 21 12 1 7 4 2 7 1 5 2 1 2 6 2 Distribution of E.U.S.C. Ships by Age Groups During 1963 Age groupings Under 5 years 5 to 9 years 10 to 14 years 15 to 19 years 20 years and over Total (a) In U.S. Trade (b) Not : in U.S. Trade Number of Number of Number of Number of combination tankers Freighters bulk carriers pass ./cargo (a) (b) (a) (b) (a) (b) (a) (b) 25 12 15 4 75 31 1 22 3 2 34 10 2 1 8 23 19 13 7 4 1 1 20 34 44 25 21 3 3 177 106 60 33 70 11 6 The 4.7 million tons of exports were somewhat larger than the 4 million tons which moved in 1960. Much of this cargo consisted of grains, coal, scrap iron and steel, phosphates, sulphur and petroleum products. TYPES OF SERVICE Tankers comprised the largest group of ships under effective United States control (see Table 9). It has already been noted that they carried two- thirds of the total cargoes transported by all E.U.S.C. ships in 1963. Freighters and bulk carriers were employed primarily in industrial service; i.e., the sailings were made in connection with the industrial or commercial operations of a specific company, with the shipping function constituting an integral part of the company's commercial or industrial ac- tivities. It is estimated that of the 16.8 million tons of dry cargo imports carried by E.U.S.C. ships in 1963, about 75 percent to 80 percent was carried by industrial carriers. Ships, other than industrial carriers, engaged in irregular or tramp services carried practically all of the export cargo which moved by freighters and bulk carriers and about 20 percent to 25 per- cent of the dry cargo imports. The few thousand tons of cargo that moved in liner service were carried by ships which oper- ated on a scheduled berth service outbound while operating as industrial carriers inbound. 15 Also included with liner cargoes are the very small cargo tonnages carried by cruise ships on the in- bound and outbound legs of their vogages. 15 Primarily ships operated by fruit and aluminum com- panies. 11 U.S. FLAG VERSUS E.U.S.C. SHIPS IN U.S. FOREIGN TRADE There were 734 different 1 * U.b. flag ships that made one or more sailings with cargo, during 1963, in the oceanborne foreign trade of the United States. They carried 26.6 million tons of cargo or 8.5 percent of this country's interna- tional seaborne commerce. The latter tonnage is less than one- half the 60.8 million tons carried by the 313 E.U.S.C. ships. Table 8 illustrates clearly the marked difference that existed, not only in the kinds of cargoes carried, but in the distributions of cargoes by types of service. For example, 92 percent of the total cargo movement by E.U.S.C. ships was in- bound and was comprised largely of tanker car- goes. On the other hand, 64 percent of the total cargo movement, carried by U.S. flag ships was in the export trade and consisted predominantly of general cargo moving in liner service. In this context it will be noted that U.S. flag ships in liner service accounted for 52 percent of the total cargoes carried by U.S. flag ships inbound and outbound— in contrast to the E.U.S.C. ships that carried .07 percent. One of the principal differences between the operations of U.S. flag and E.U.S.C. ships is that of purpose. On average, throughout 1963, about 80 percent of the number and 73 percent of the deadweight tonnage of the U. S. flag ships in for- eign trade operated as common carriers. They were employed on a predetermined and fixed itinerary over a given route at relatively regular intervals, and their schedules were advertised long before sailing, so that cargoes could be so- licited from the public. With the exception of some of the companies operating outbound in "liner'' service and in "in- dustrial" service inbound, E.U.S.C. ships in United States foreign trade operated primarily as con- tract carriers. Independent owners, whose ships accounted for somewhat more than one- half of the number and tonnage of all E.U.S.C. ships, operated on a contract basis for the carriage of bulk ma- terials, either liquid or dry cargo. Transit time was not as important to the U.S. importer as the cost at which the cargo, predominantly of relative- ly low value, could be moved. A number of the independent owners of tankers and bulk carriers chartered their ships on a long term basis to foreign subsidiary shipping and/or producing com- panies of U.S. industrial concerns, which are de- pendent upon foreign sources for petroleum prod- ucts, agricultural commodities and numerous raw materials. American oil, steel, fruit, bauxite, and other industrial companies, through foreign owned or controlled subsidiaries, operated about 43 per- cent of the number and 49 percent of the tonnage of the E.U.S.C. ships in U.S. foreign trade, in order to have a relatively low- cost, dependable means of serving their own import requirements. The following table shows the distribution of E.U.S.C. ships in United States foreign trade by type of ship and by type of industry group con- trolling their operations in 1963. E.U.S.C. Ships in U.S. Foreign Trade by Type of Ship and by Category of Industrial Group Controlling Their Operations in 1963 (In thousands of deadweight tons) Industrial group No. Dwt. Oil 100 3,666 Iron and steel 8 392 Aluminum 7 74 Other industrial 20 178 Independent 178 4,488 Total 313 8,798 Pass ./cargo Tankers Bulk carriers Freighters combination No. Dwt. No. Dwt. No. Dwt. No. Dwt. 100 3,666 8 7 392 74 1 11 7 111 12 56 76 2,532 48 1,422 48 507 6 27 177 6,209 70 1,999 60 563 6 27 Source: Military Sea Transportation Service and Office of Statistics, Maritime Administration. Conclusions 1. The 313 million long tons of cargoes which were carried by ships of all flags in United States foreign trade in 1963 was the largest volume ever recorded. It exceeded the cargo tonnage moved in 1962 by 21 million tons and the annual average for the 10- year period 1953-62 by 75 million tons. 16 Of the 734 ships, 101 were tankers, 600 were freighters and bulk carriers combined and 33 were combination passeng- er-cargo ships. 2. Despite the overall increase, U.S. flag ships carried only 26.6 million tons, or 8.5 percent of the total tonnage volume, compared with 8.9 per- cent in 1962. In this connection it should be noted that the 26.6 million tons about equaled the annual average volume for the period 1958-62 and were 10.4 million tons less than the annual average for the 1953-62 decade. 12 3. Revenue earnings of U.S. flag ships engaged in liner service outbound from the United States would appear to be higher than those of foreign flag ships. In 1963, the cargo mix for U.S. flag ships was 3.4 tons of general cargo to 1 ton of bulk cargo, compared with a ratio of 2 to 1 for foreign flag liners. 4. In this connection it should be noted that Government- sponsored cargoes (excluding defense shipments) comprised 52 percent of total exports carried by U.S. flag ships in liner service. 5. Conversely, U.S. flag ships carried a higher ratio of bulk cargoes in liner service inbound than foreign flag ships. The ratios were 6.3 tons of general cargo to 1 ton of bulk cargo for U.S. flag ships, compared with a ratio of 7.4 to 1 for for- eign flag ships. 6. The trend of dry and liquid bulk cargo ex- ports and imports carried by ships of all flags is constantly increasing, while general cargo move- ments have remained relatively stable. 7. Since 1954, however, U.S. flag ships carried a decreasing proportion of the liner, tramp and tanker cargo movements, despite the allocations of cargoes to U.S. flag ships under the cargo preference laws. 8. Cargo tonnages carried by U.S. flag ships are not keeping pace with the increase noted in the nation's overall oceanborne foreign trade. It would seem, therefore, that unless positive meas- ures are taken to correct the conditions that af- fect the ability of the American merchant marine. to compete more actively in the carriage of this country's international seaborne commerce, par- ticularly dry bulk and liquid bulk cargoes, a con- tinued downward trend in its relative participa- tion is indicated. 9. Even if the cargo tonnages carried by foreign flag ships under the effective control of the United States were to be added to those carried by U.S. flag ships, the absolute as well as the relative position of the combined fleets showed a down- ward trend. In I960 17 the combined fleet carried 92.3 million long tons, or 33.8 percent of total United States oceanborne foreign trade. In 1963, cargoes carried by both fleets declined to 87.4 million tons, or 28 percent of the 313 million tons noted above. 17 The first and only year studied prior to 1963. See "An Analysis of the Ships Under Effective U.S. Control and their Employment in U.S. Foreign Trade During I960," published by the U.S. Department of Commerce, Washington, D.C., Febn a: UJ en UJ Q- >- CD ro cvj — 23 24 CO or m *: z < i- < ro co co & a. — — I o x — ? CO OJ 5 0> 2- O - I c uj ? < Q ° O < | ^ P ° 5 5 >- 21 m uj r cr co ^ o ? a: < o _i < - ~ J _ CO LlJ h- < 1- CO " /^ Q UJ h; - co' < < \- _J CO Ll 2 - UJ CD t ui ■z. (Z Z> O \ \ \ L o ° 1 1 - ) - / en z o H f I CD o -I o J CO ■z. o 5 § 2 ro O o o o 25 en UJ o z < en ro a. CO X a> en i o c\i o o> q: < o UJ >- Q or < o (T H > 00 2 o o UJ UJ < or o u_ o en o o Z> tr < z o en i- or o o. x UJ 1 \ \ - J / - CO / UJ iS3 CO Li. \ Q 2 UJ o t u z or \ — \ Q 1 u. o ° 1- ^UJ M UJ 1- z 1 _ ■z. o { H 1 o 1 - Li_ o en z o 1 - **> S i CM o o ^8 O If) 26 0) en LU Z < I- cn *1 I — en • o O - or Q >- CD O UJ O UJ or o < o en* 8 = O O CO I- cr o a. / J: A 1 1 1 cn \ en UJ H < cn Q UJ H Z 3 OREIGN FLAG < 1 CO / Q 1 UJ 1 H 1 z 1 v\ _l < H O 1- CD -z. o h- o o _l Li_ o " CO -z. o 5 § IScvj 27 Movements of the Principal Bulk Commodities, 1955-63, and Projections Through 1975* To an increasing extent the movement of bulk dry and liquid cargoes is becoming more im- portant in the overseas commerce of the United States. This has been particularly so since the end of World War II, when the dynamics of po- litical and economic forces created demands upon this country's resources for assistance to emerg- ing nations, and to sustain established govern- ments until their economies recovered and they could stand alone. The millions of tons of grain, coal, phosphate rock, scrap iron and steel, mineral products and other commodities moving in bulk outbound to overseas areas continues. It moves whether as a Government sponsored cargo or as a purely commercial cargo for which payment in hard, freely transferable currencies is received. As the standard of living rises in the industrialized and economically mature countries of the world, more of our commodities will move to help them achieve their wants. For the foreseeable future it seems probable that the United States will continue to grant aid to those countries whose need for food and the means of improving their agricultural potential are of primary importance. For example, in 1955, United States exports of seven principal bulk commodities totaled 51 mil- lion tons. In 1963, their tonnage amounted to 75 ♦From a report prepared by Irwin M. Heine, Chief, Office of Statistics, and Joseph G. Nale-Povic, Assistant Chief, Di- vision of Cargo Data, Office of Statistics, Maritime Admin- istration. million tons and by 1975 it is estimated that their volumes will be about 124 million tons. If the United States was generous in the assist- ance it gave others in the postwar period, it was also using up some of its natural resources at a very rapid rate while expanding enormously its commercial transactions at home and overseas. As a consequence, our imports of essential foods, mineral and petroleum products increased enor- mously. Bauxite, chromote, iron ore, manganese and sugar are among the largest imports on a tonnage basis that move in United States ocean- borne trade. In 1955, our imports of these com- modities amounted to 36 million long tons. Eight years later the tonnage volume had increased to 51 million tons, and by 1975, it is estimated the requirements for these essential imports will rise to nearly 91 million tons. On the basis of past performance, it can be assumed that there will be sufficient shipping capacity of all flags available to carry not only these and similar com- modities in United States trade, but in world trade as well. Except in war or periods of interna- tional crises, world shipping has always been available to meet transportation requirments for seaborne cargo movements. This has not been the case, however, as far as United States flag shipping is concerned or even shipping under the effective control of the United States. A study of the following charts indicates how small a volume of each commodity moved in United States flag ships. Table 11.— Principal Bulk Commodity Exports in U.S. Ocean- borne Foreign Trade— Actual: 1955, 1960, 1963 and Pro- jected: 1965 Through 1975 (I i million of long ton s) Commodity 1955 (tons) 1960 (tons) 1963 (tons) 1965 (tons) 1970 (tons) 1975 (tons) 32.1 2.7 0.5 1.6 3.8 1.9 0.1 1.5 0.3 1.5 7.2 22.4 4.9 1.5 2.4 5.6 2.5 0.1 1.9 0.5 3.3 15.6 33.2 8.8 0.9 2.8 4.9 1.4 0.3 1.0 0.1 3.9 19.2 45.0 9.4 1.0 3.1 6.3 1.7 0.2 1.4 0.1 5.0 17.1 65.0 11.2 1.0 4.0 4.6 1.2 0.2 0.9 0.1 6.8 19.4 72.0 Corn 2 Cotton (unmfgd.) 3 . . . Grain sorghum 2 Scrap iron and 11.9 1.1 4.2 4.7 Small grains 2 1.2 0.2 0.9 0.1 8.5 Wheat and grain equivalent of flour 2 20.1 Total 51.3 58.2 75.1 88.6 113.2 123.7 x Bureau of Mines, Department of Interior. 2 Foreign Agricultural Service, Export Grain Division, E partment of Agriculture. 3 Economic Research Service, Department of Agriculture. 4 Institute of Iron and Steel Scrap. Policy and Program Appraisal Division, Department of Agriculture. Table 12.— Principal Bulk Commodity Imports in U.S. Ocean- borne Foreign Trade— Actual: 1955, 1960, 1963 and Pro- jected: 1965 Through 1975 (I n million of long tons) Commodity 1955 (tons) 1960 (tons) 1963 (tons) 1965 (tons) 1970 (tons) 1975 (tons) 5.2 1.6 23.5 1.9 68.6 43.9 24.7 3.5 9.6 1.1 34.6 2.3 99.7 57.3 42.4 4.2 10.6 1.1 33.4 1.9 116.6 63.6 53.0 4.0 12.4 1.3 44.0 2.1 122.0 66.2 55.8 4.2 15.5 1.6 53.0 2.4 138.5 76.1 62.4 5.0 20.5 2.0 60.0 2.7 Petroleum products 2 155.1 87.0 All other Sugar 3 68.1 5.5 Total 104.3 151.5 167.6 186.0 216.0 245.8 1 Bureau of Mines, Department of Interior. 2 0il and Gas Office, Department of Interior. 3 1955-60-63 data by Economic Research Service, Agriculture Stabilization and Conservation, Department of Agriculture. 1965-70-75 projections by Marad, Office of Statistics. 28 U. S. OCf/WB0/?A/£ EXPORTS OF COAL /9SS-/963 ACTUAL MILLIONS Of LONG TONS 70 S * / (,0 L / / / SO / / 40 / / 30 f X/ 20 /O ^ TONNAGE BV U.S. FLAG ill i i + i 1 i i 1 1 1 1 a S. OCEANBORNE EXPORTS OF SCRAP IRON AND STEEL /955-Z963 7)C7V/9L 77/LL/ON5 OF LONG TONS 7 79SS /?60 /96S /?70 /976 /980 fffOJFCTED 7955 /960 /96S /970 /97S /?80 7>7?0