195 Code/202

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

My Dear Mr. Secretary: I am in receipt of a letter dated April 22 [21] 1934, from the Undersecretary of State, William Phillips,52 enclosing a letter from the French Ambassador, André de Laboulaye.53 The Ambassador’s letter raises several objections to the proposed General Shipping Code. Before answering the specific objections raised by the Ambassador’s letter I should like to outline the general position [Page 719] taken this far by the National Recovery Administration regarding the General Shipping Code.

Much has been said about the General Shipping Code conflicting with the rights granted under our various commercial treaties. I do not interpret the Code as being in derogation of the rights granted under treaties as all of them carry with them provisions to the effect that any restrictions and rules and regulations placed on American flag vessels may also be placed on foreign flag vessels providing there is no discrimination. Indeed, the development of minimum rates for the outbound foreign commerce of this country is in my opinion parallel to the establishment of any port rule or regulation which, if applied equally to foreign and native vessels, do not constitute discriminatory practices.

Is it not a fact that in the development of such rules and regulations there is nothing in the treaties that provides that foreign interests shall be given an opportunity to be heard in connection therewith? In my opinion it should distinctly be appreciated that the opportunity granted the foreign flag lines to be heard in respect to the General Shipping Code, is not a right to which they are entitled by law or treaty, but merely the extension of a courtesy. The General Shipping Code, moreover, gives foreign flag lines an equal vote with the American flag lines in the establishment of such fares and other rules and regulations. It would certainly appear to me that the allegation that this proposed Code violates treaty rights is entirely out of order. I would appreciate your views on this point in particular. I believe you will agree that with this code being drawn up in a foreign country, American flag lines would have little, if anything, to say in its formulation and still less in its application.

It is my understanding that your Department is interested not only in the international aspect of this Code but also in protecting the interests of exporters. The stabilization of rates, fares and charges, through the establishment of minimum tariffs, should give the exporters of this country greater protection than they now receive, and especially the smaller exporters who heretofore have not been able to bargain for special low rates as have the larger exporters. A great many objections have been raised to the Code by shippers and exporters, a number of which have come to the attention of your Department. The National Recovery Administration has definite proof that a substantial portion of the exporters’ and shippers’ objections to the Code have been fostered by propaganda of foreign interests which seek to defeat the purposes of the Code and this propaganda has very definitely misrepresented the facts of the case. The vast majority of the protests made to the stabilization provisions would appear to arise from a lack of understanding of how the Code will operate.

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The details of the administration of the Code and the division codes thereunder, have been tentatively worked out and the Shipping Board Bureau figures prominently in the administration of the rate stabilization features. This should give additional assurances to the exporters that their position will be adequately safeguarded.

Specifically, in answer to the four points raised in the memorandum from the French Ambassador, the position taken by the National Recovery Administration thus far is as follows:

The organization and administration of the foreign trade divisions of the General Shipping Code only divides the groups into foreign and American separately when a failure to agree as a body is apparent. It has taken some time to work out this method of voting and it is apparently the only practical method possible. To be sure this voting arrangement is at variance with that now prevailing under conference agreements. However, it has not been the desire of the National Recovery Administration to place a code on the foreign trade shipping of this country which would give foreign flag lines an advantage over American flag lines. In the event of disagreement, foreign and American lines are separated and have equal votes regardless of the predominant interest in the trade, and there can be no accusation of discrimination against foreign flag vessels. In the event of the majority of each of these groups failing to concur, the decision rests with the National Recovery Administration. Equal voting rights and powers are granted between the two groups.
As to the minimum rates, fares and charges which may be adopted under the Code, it appears to me that this is the only logical solution to bring order out of chaos in the Shipping Industry. Every care and consideration will be given to all parties in interest when the actual rate schedules are discussed and before their adoption. Foreign and American lines will have an equal voice in the making of rates, fares and charges. It is hardly conceivable that we should impose minimum rates on American flag vessels while their foreign competitors carry commerce of this country and are left free to quote any rates they desire.
As far as inward freight is concerned we have taken no definite stand, although it will probably develop that no attempt will be made to cover minimum rates of trade from foreign countries to this country. It may well be that the President, in working out his reciprocity treaty agreement, which power he is now seeking from Congress, will be glad to avail himself of the power to control inbound freight rates, and it is not my opinion that we should at this time concede any of our rights, or possible rights, to foreign nations.
The administrative machinery established under this Code is not as complex as it may appear. It will be spread over a very large number of groups, such as, inland water carriers, towboats, service vessels, etc., and the share of this particular company will be, at most, nominal. The cost of the divisional codes will doubtless be less than the cost of the present conference agreements.

I have endeavored briefly to give you the position the National Recovery Administration has taken thus far. There can be no doubt [Page 721] but that the Code, as drawn, is nationalistic, but only to the extent that it provides for equality in foreign trade shipping that thus far has been denied American flag vessels. As written the Code provides a firm control over shipping.

The issue has been clearly drawn by the proponents of the Code. In view of the highly controversial points raised in connection with the Code I would appreciate a full expression of the views of your Department in the subject matter of this letter, and I would especially appreciate your bringing to my attention any of the above points which you believe to be in conflict with either the domestic or foreign policy of the Administration.


Hugh S. Johnson
  1. Not printed.
  2. Dated April 19, p. 708.