The New Zealand statute and the proposed Australian legislation, if
put into effect, would by its discriminatory provisions divert a
disproportionate flow of passenger business to the new liners which
the British are contemplating building for the south trans-Pacific
service. The British memorandum states that the Australian
Government now proposes to introduce amendments to the pending
legislation to insure that it will not affect through-traffic on the
Matson Line. While in view of the present itinerary of the Matson
Line, no American line would be affected by the restriction in the
New Zealand statute it
[Page 99]
would
be desirable as pointed out in the enclosure, that the New Zealand
statute be similarly amended.
With respect to the suggestion contained in the British Embassy’s
memorandum that the Matson Line withdraw voluntarily from the local
trade between Australia and New Zealand, in which passengers only
are carried, the enclosed memorandum also sets forth reasons why
such action is deemed inadvisable.
The Commission now is effecting the change from the mail contract
disbursements as a means of assistance to American merchant vessels
to payments under operating differential contracts under the
Merchant Marine Act of 1936,1 and it is probable that
under the new plan there will be no grounds for allegations of
discrimination and unfair competition due to the amount of
Government-paid subsidy. The proposal that the Matson Line withdraw
from the Tasman Sea trade is one with which the Government is
concerned both as a matter of policy and in connection with the
maintenance of an essential trade route. Of course, the Matson Line
is vitally concerned due to the fact that the Tasman Sea route
constitutes an important branch of its south trans-Pacific service,
built up over a considerable period of time.
[Enclosure]
Observations Upon a Memorandum From the
British Embassy Dated June 16, 1937, Entitled “Shipping
Situation in the Tasman Sea”2
The expressed purpose of the British Embassy’s Memorandum is to
make clear to the Chairman of the United States Maritime
Commission “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.” The legislation of New Zealand referred to
was enacted in October 1936, and, upon the issuance of an Order
in Council, would prohibit (with heavy penalties for violation)
the embarkation or disembarkation of passengers under certain
circumstances, by vessels of the foreign country to which the
Order in Council would apply. A similar act has been introduced
into the Australian Legislature, but is understood not to have
been enacted as a law, up to the present time.
At a recent conference with representatives of the British
Embassy, the Chairman of the Commission pointed out that the New
Zealand law and the proposed Australian law were both so phrased
that, if an Order in Council were issued, the laws might very
readily be interpreted as prohibiting the embarkation of through
passengers from
[Page 100]
either
country in American vessels if stops were to be made in the
other. Such a situation would constitute a serious restriction
upon the operation of American vessels in foreign trade. On that
point, the Embassy’s memorandum contains the following
paragraph:
“4. 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 realized 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.”
With respect to the last sentence of that paragraph, it should be
pointed out that the provisions of the New Zealand statute are
identical with those of the proposed Australian law and that
whereas the New Zealand law would not create the difficulty
mentioned under the present itinerary of the American line
serving New Zealand and Australia, the difficulty would arise in
case the itinerary were changed or extended. It would appear to
be essential that there be no question whatever but that the
laws in question should not “restrict the through traffic
carried on American ships,” as the Embassy’s memorandum states
“they do not propose” to do.
The explanation offered as to the reasons impelling the two
governments in question to enact the legislation in question
appears to be summarized in the following portion of the
Embassy’s memorandum:
“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 realize 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
unsubsidized Australian and New Zealand lines.”
In regard to first point mentioned therein, it may be pointed out
that New Zealand and Australia cannot logically be considered in
the same category as Hawaii and the mainland of the United
States. There is certainly a difference between coastwise
traffic within actual administrative territory of one country
and between two political entities each of which is a
self-governing unit and each of which has
[Page 101]
a mutually exclusive set of
coastwise and tariff regulations. New Zealand is understood to
have coastwise laws which do not permit the carrying of cargo or
passengers between any ports of that Dominion except by New
Zealand shipping. Australia has similar laws which include also
the Island of Tasmania. The Matson Line is excluded from that
service, and has never carried any local cargo or passengers
between the ports of Sydney and Melbourne. There does not exist,
so far as is known, any restriction against the carriage of
traffic between different dominions, commonwealths or colonies
of the British Empire in any part of the world, and such traffic
is continuously engaged in by ships of all nationalities. On the
other hand, the extension of the coastwise laws to Hawaii was
the natural consequence of the annexation of Hawaii to the
United States. It is in the same status with respect to
coastwise shipping laws as the Island of Tasmania is to the
mainland of the Australian Commonwealth.
With respect to the second point mentioned in the paragraph
quoted above, that is that “Dominion shipping” is not getting a
“fair deal,” and is “seriously prejudiced” as a result of United
States subsidies, “not only in the trans-Pacific trade but also
in the Tasman trade,” the following important factors must be
taken into consideration. The present exchange of views on this
matter relates, of course, to the future. Such aid as has been
heretofore given to the Matson line by the Government of the
United States was terminated on June 30, 1937. The government
assistance available to that line after that date will be in
accordance with the provisions of the Merchant Marine Act of
1936. It is clearly laid down in that Act that the amount of an
operating differential subsidy shall not exceed the difference
in the cost of insurance, maintenance repairs, wages and
subsistence of crew, and such other items with respect to which
the American operator may be found to be at a disadvantage in
competition with vessels of foreign countries. The Commission
has every intention of granting financial aid to American
ship-owners only in strict accordance with the terms of the Act.
In these circumstances the suggestion that Dominion shipping is
discriminated against as the result of American subsidies, is
without foundation as to the future.
While the Matson Line will receive henceforth “parity” payments,
the Canadian-Australasian Line (which is engaged in the Tasman
Sea trade as well as the trans-Pacific trade) is understood to
be receiving fixed amounts of mail pay from New Zealand,
Australia, Fiji and Canada totaling substantial amounts.
In connection with the events leading up “to the present
situation” as contained in the Embassy’s memorandum,
consideration should be given to the fact that American
companies have been operating in the south trans-Pacific trade
route for many years, and almost continuously
[Page 102]
since 1885 have received
compensation for the carriage of mails either on a lump sum
basis or a fixed amount per mile. The value of the foreign trade
between the Dominions and the United States for the last sixty
years has shown a constant, large, and healthy expansion upward.
In 1880 the total of imports and exports amounted to $7,670,000,
in 1900 $33,427,000, in 1910 $55,692,000, in 1930 $134,889,000
and in 1935 $98,000,000. The southern trans-Pacific route is
considered an essential trade route and warrants adequate,
suitable, and modern ships. Figures indicate that the Matson
Line has not carried an undue proportion of the cargo business
available. Prior to the initiation of the new Matson service in
1932 the three American ships then in the trade were constructed
in 1900, while the four British ships were built in 1908, 1911,
1913 and 1924. It was inevitable that new and modern ships would
eventually be placed in service on this important route. It so
happened that the Matson ships were the first replacements.
The Matson Line has used every means to promote and cultivate
friendly relationships not only with the commercial interests of
Australia and New Zealand but with the competing British lines
serving that territory, and has consistently refrained from
quoting any rates or fares which could be construed as
endeavoring through these means to attract business away from
other lines. It has maintained its position in the shipping
conferences and has made rates, fares, rules and regulations in
cooperation with those interests. Furthermore, the Matson Line
vessels carrying passengers in the local trade make one round
trip only between New Zealand and Australia each month while the
Canadian-Australasian Line, Huddart Parker, Ltd., and the Union
Steamship Company, have a joint schedule in this trade with five
ships. Doubtless, much of the Tasman Sea passenger traffic
carried by the Matson Line, is created by the character of the
service rendered. The Thirty-fifth Report of the Imperial
Shipping Committee stated:
“The important fact to be borne in mind is that the
Matson Line has won its present position not by cutting
rates but by superiority of amenities and speed.”
The general tourist business built up by the Matson Line during
the last few years has been a distinct benefit to New Zealand.
While information regarding the total amount disbursed in the
Dominion is not available, this business is certainly of an
attractive nature, and indications from the Dominion point to a
full appreciation of its value. It is conceivable that the
Matson Line, as a result of a prohibition on the carrying of
passengers on their present itinerary, may find it necessary to
alter their service.
In view of the circumstances set forth above, especially the
change in the type of assistance provided for American vessels
by the provisions
[Page 103]
of
the 1936 Merchant Marine Act, the purpose of which is to place
the merchant fleet on a parity with foreign competitors, it
would appear to be unfortunate, in the interests of all
concerned, if the Matson Line were to withdraw from the
passenger service in the Tasman Sea, either voluntarily, as
suggested in the last paragraph of the Embassy’s memorandum, or
as a result of the application of law, as apparently
contemplated by the New Zealand statute and by the proposed
Australian legislation.
