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The National Recovery Administrator (Johnson) to the Under Secretary of State (Phillips)

My Dear Mr. Phillips: In reply to your letter of February 14, 1934,9 enclosing therein a copy of a memorandum from the Norwegian [Page 688] Minister,10 relative to the proposed Code of Fair Competition for the Shipping Industry, your attention is invited to the following facts:

The National Industrial Recovery Act declares it to be the policy of Congress to provide for the general welfare (of the United States) by promoting the organization of industry for the purpose of cooperative action among trade groups.

The Merchant Marine Act of 192011 declares that it is necessary for the National defense and for the proper growth of its foreign and domestic commerce, that the United States shall have a Merchant Marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a Naval or Military auxiliary in time of war or National emergency; and declares it to be the policy of the United States to do whatever may be necessary to develop and encourage the maintenance of such a Merchant Marine.

This has not yet been attained.

One of the greatest obstacles to the growth and development of the American Merchant Marine has been lack of stabilization in Ocean freight rates and the inability of American Flag vessels to obtain in competition with Foreign Flag vessels, not a greater portion of its commerce but even half of the commerce of the United States. No other country has willingly and voluntarily offered to share on an equal footing the transportation of its Foreign commerce with other Nations, and the provisions of the proposed General Shipping Code impose nothing on Foreign Flag vessels that it does not impose upon vessels of the United States.

In nearly all Foreign trade routes to and from the United States, Foreign lines predominate, both in number of lines and in vessel tonnage; surely, with this advantage, there should be no objection to regulations, which are imposed on all with equal force.

It is true that the proposed Code for the Shipping Industry will be binding on every Foreign shipowner trading with the United States, but only so far as that trading consists of export trade from the United States. This is true whether or not a Foreign shipowner assents to the general Code or any sub-division Code. By assenting to the Code he may participate in the self-government set up under the Code.

This Code, in giving to the Foreign Flag owners equal voice with the American Flag owners in the selection of a Division Code Authority, is eminently fair, and surely no objection can be made to placing in the hands of the Administrator the final determination on any question in the case of a dead-lock. It certainly could not be expected that we should turn over to Foreign shipping interests the right to [Page 689] prescribe our minimum rates and fix rules and regulations to govern the Industry.

It is not the intention of the Code to interfere with the Nationals of other countries on Foreign Flag vessels. The language of the Code, to this extent, will be clarified before approval.

With reference to the language included in a previous draft of this Code, relative to “service frequency, limitation of vessels’ tonnage, duplication of service, and excess competition”, you are assured that the General Shipping Code will contain nothing to upset the rights guaranteed by the Treaty.

It is not conceivable that any provision of this proposed Code will interfere with the traditional policy of freedom of navigation. Nothing contained therein bars vessels coming to United States ports, but it is intended and desirable that when Foreign Flag vessels elect to engage in the Foreign commerce of the United States, that they observe such rules and regulations, including fair minimum rates, as are imposed on vessels flying the Flag of the United States.

With reference to the provisions of Article VII, of the Treaty of Friendship, Commerce, and Consular Eights, it should not be considered a violation of this Treaty for the United States to ask the vessels of its friendly Foreign nations to observe, when engaged in the carrying of the Foreign commerce of the United States, such rules and regulations, equitable to all, as may be adopted to carry out the policy of the United States, which policy tends to reserve to vessels of the United States only their rightful portion of its Foreign commerce.


Hugh S. Johnson
  1. Not printed.
  2. Supra.
  3. 41 Stat. 988.