Foreign Relations of the United States Diplomatic Papers, 1937, The British Commonwealth, Europe, Near East and Africa, Volume II

811.71247H/85

The British Embassy to the Department of State

Shipping Situation in the Tasman Sea

It is understood that the Chairman of the United States Maritime Commission⁹⁸ considers that the Australian Bill in its present form would not permit Matson Line vessels to disembark or embark passengers at a New Zealand port, and would therefore prevent these vessels calling there, and it has been suggested that, as perhaps the whole situation in which the Australian and New Zealand Governments have felt impelled to enact legislation giving restrictive powers in the latter country and to introduce it in the former may not be entirely clear to the Chairman, it would be opportune to set out the whole position.

2. For the commencement of the events which have led up gradually to the present situation, it is necessary to go back to the year 1885 when the Union Steamship Company of New Zealand, Ltd., a company registered in New Zealand, the shares in which were held largely in that country and in Australia, inaugurated, in conjunction with an American company, a trans-Pacific mail service between Australia, New Zealand, Honolulu and San Francisco. In 1900, when the United States coastwise law was extended to include Hawaii, and so excluded the ships of the Union Steamship Company from the Honolulu–San Francisco service, the eastern terminal was changed from San Francisco to Vancouver, and, some time later, Fiji was included as a port of call. At a later date this service was taken over by a Canadian Company, the Canadian Australasian Line, half the shares in which are held by the Union Steamship Company of New Zealand. But, meanwhile, in 1909, the Union Steamship Company, with the assistance of a subsidy from the New Zealand Government, had inaugurated a service between New Zealand, Rarotonga and Tahiti, which was soon after extended to San Francisco at one end and Sydney at the other. In 1926 the United States of America service between San Francisco and Sydney, which had been inaugurated in 1883, was acquired by the Matson Navigation Company who from 1931 on included a call at Auckland, and for the first time began to compete in the passenger traffic between New Zealand and Australia hitherto confined to unsubsidised Australian and New Zealand shipping. This competition was intensified when two fast modern liners, built with the financial assistance of the United States Government, were placed on the run in 1932. In the face of this competition the Union Steamship Company steadily lost business, and in December, 1936, found themselves forced to discontinue the service between San Francisco, New Zealand and Sydney. The situation thus created was the cause of great anxiety to the Australian and New Zealand Governments. The New Zealand Government took powers to protect the local trade in the Tasman Sea and later somewhat similar but more far-reaching legislation was introduced into the Australian Legislature but has not yet been passed. In the New Zealand Act and in the Australian Bill both Governments purposely refrained from reserving the Tasman trade to British shipping and confined themselves to taking powers to exclude from that trade ships belonging to countries which in effect discriminate by subsidies, etc., against British shipping.

3. The points which should be emphasised are:

(a) That the company whose ships have been withdrawn from the San Francisco–New Zealand–Australia service is registered in New Zealand, and the shareholders are largely New Zealanders and Australians.

(b) That the same company has a one-half interest in the service between Canada, New Zealand and Australia.

(c) That the ships of both companies are manned in the main by Australians and New Zealanders employed under New Zealand conditions and regulations.

(d) That the United States line between San Francisco and Australia did not call at New Zealand until 1931, when a call was introduced at Auckland, New Zealand, and that since that date its competition in the trans-Tasman passenger trade has seriously prejudiced the Australian and New Zealand owned and unsubsidised shipping on this service, which is paid on a poundage basis for carrying mails.

(e) That it had been a long standing grievance in Australia and New Zealand that their ships were shut out of the Honolulu–San Francisco trade; that this feeling of grievance was substantially increased after the entry in 1931 of the Matson Line into the New Zealand–Australian trade, and is widespread for whilst, on the one hand, the Australian and New Zealand shareholders resent the loss of their profits, the seamens and other unions resent the fact that ships employing Australians and New Zealanders have been forced to discontinue running. The legislation recently enacted or introduced has therefore very strong backing; and, finally

(f) That the legislation passed in New Zealand and introduced in Australia is not designed to give British shipping as such any advantage over the United States of America shipping, but to protect Australian and New Zealand owned shipping employed between Australia and New Zealand against subsidised foreign shipping.

As regards the point raised by Mr. Kennedy with reference to the effect of the Australian legislation on the New Zealand call of the Matson Line, the Australian Government have already realised that the Bill introduced into the Commonwealth Parliament might be interpreted in the way Mr. Kennedy indicates. They propose, therefore, to introduce amendments to ensure that the Bill will not prevent the Matson Line disembarking or embarking in New Zealand passengers with through tickets from or to Australia. It is understood that the New Zealand Act does not create any such difficulty.

5. In this whole situation the Commonwealth and New Zealand Governments feel strongly that Dominion shipping is not getting a fair deal in that it is prevented by United States law from participating in the Honolulu–United States traffic and as a result of United States subsidies is being seriously prejudiced not only in the trans-Pacific trade but also in the Tasman trade. They realise the political difficulties in the way of the admission of other than American ships to the trade between Honolulu and the United States. As indicated in the preceding paragraph they do not propose to restrict the through traffic carried on American ships. But they are not prepared to see the situation continue under which, by reason of subsidies paid by the United States Government, the most valuable part of the local traffic between Australia and New Zealand is diverted from the unsubsidised Australian and New Zealand lines. In the circumstances they feel that the Matson Line should meet them on the third of these points to the extent of withdrawing voluntarily from the purely local trade between Australia and New Zealand. In that event it can be anticipated that the Australian and New Zealand Governments would not proceed further with the application of the legislation under reference.

Washington , June 16, 1937.

98. Joseph Kennedy.