Manual of Ship Subsidies / An Historical Summary of the Systems of All Nations

There is no competition in the letting of the French mail contracts. They go to four steamship concerns. For many years more than one half of the total steam tonnage of France has been owned by these four subsidized lines: the Compagnie Générale Transatlantique, the Compagnie des Messagéries Maritimes, the Chargeurs Réunis, and the Compagnie Fraissant.^[CG]

The great ship-yards have developed a capacity for building steamships of the largest class. The tonnage since 1881, when it had fallen to 914,000 tons, had increased only to 1,052,193 tons in 1900. By 1910-11, it had reached 1,882,280 tons.^[CH] The total mail subsidies average, in round numbers, five million dollars a year, while the construction and navigation bounties amount to three and a half million dollars additional.

Practically every French vessel floating the French flag and engaged in foreign trade either receives or has received subsidies, or bounties, from the Government.^[CI]

FOOTNOTES:

CHAPTER IV

Germany was a close follower of France in the adoption of the direct ship bounty system. Only two months after the promulgation of the initial French law of 1881, Bismarck brought the question before the Reichstag, with an exhibit of this act. In an elaborate memorial (April 6, 1881) he reviewed the general subject of State bounties and subsidies to shipping in various maritime countries, and closed with this pointed declaration: "It is deserving of serious consideration whether, under the circumstances as given, German shipping and German commerce can hope" for further prosperous developments as against the competition of other nations aided by public funds and assistance.^[CJ]

At this time the German marine was represented by a substantial fleet of merchant steamships, but all were foreign-built, mostly from British ship-yards. The Government was paying only a postal subsidy of about forty-seven thousand dollars—a sum in proportion to the weight of the parcels forwarded—in the overseas trade to the participating German steam lines. A first step had been taken indirectly in favor of domestic shipbuilding six years earlier (1879), when Bismarck, in introducing the general protective system, exempted this industry, and free entry was permitted to German ship-yards of materials used in the construction and equipment of merchant as well as of war-ships, which then were only on the domestic stocks.^[CK] Bismarck's proposal of 1881, to meet French subsidies with German subsidies, was avowedly with the single object of promoting with State aid a German mercantile marine.

The project was brought before the Reichstag early in 1884 and warmly discussed. Earnest protests were raised against it by shipping merchants of the chief German seaports;^[CL] while earnest support came from other merchants and varied interests. The initial proposal was for the establishment of a subsidized mail service by German steamships. It contemplated an annual subsidy of four million marks, with fifteen years' contracts, for such service between Germany and Australia and East Asia. The measure was defeated in the Reichstag that year. Brought forward the next year (1885), and in a new form, it was finally enacted in April and went into effect the following July.

This law increased the annual subsidy from four million marks as first proposed to four million four hundred thousand marks, of which one million seven hundred thousand was offered for the East Asian line, to China and Japan; two million three hundred thousand for the Australian line, and four hundred thousand for a branch line connecting Trieste with the Australian line at Alexandria. The contracts in accordance with it all went to the North German Lloyd Company, of Bremen. The convention between the Government and this company required that the new vessels to be furnished must be built in German yards and of German material. The coal supply was, as far as practicable, to be of German product. The chancellor was empowered to take over all the company's steamers for the mobilization of the navy, at their full value, or on hire at proper compensation. The sale or loan of a steamer to a foreign power could be made only by permission of the chancellor. The number of voyages to be made on each line yearly, and the rate of speed, were set down in careful detail. Failure to observe the table of voyages, without sufficient reason, subjected the company to heavy penalties. All persons employed in connection with the mail service were, if practicable, to be German subjects. All officers in the service of the empire, relief crews, weapons, ammunition, equipments, or supplies for the imperial navy, were to be carried at twenty per cent under the regular tariff.^[CM]

Subsequent laws made additions to the free list of raw and manufactured shipbuilding material; and preferential rates on the State railroads were arranged for the transportation of steel, iron, timber, from the interior, where these are found at an average distance of some four hundred miles from the coast, to the ship-yards.^[CN] Speedily large and superior steamships were designed and turned out from the enlarged ship-yards, the first ocean flyer being the Auguste Victoria for the Hamburg-American Line. In 1890 a subsidy of ninety thousand marks annually was granted for an East African line on a ten-years' contract. Within less than six years the establishment of a fortnightly Asiatic service was agitated; and in 1896 a bill granting a yearly subsidy of one million four hundred thousand marks therefor, was brought before the Reichstag. If this were forthcoming the North German Lloyd agreed, besides furnishing the fortnightly service, to increase the speed of their steamers, to send ships direct to Japan, and to meet all requirements of the Admiralty with respect to ships and crews.^[CO]

Now the advocates of further subsidies maintained that the policy instituted with the law of 1885 had proved its effectiveness. The indirect advantages from the subventions were claimed to be quite as great as the direct. While before 1885 all large ships for German companies had been ordered in England, now all large ships for the German transatlantic lines were built in Germany.^[CO] This condition, the increasing activity in domestic shipbuilding, and the steady growth of the empire's commercial marine, were presented as conclusive evidence of the law's effect. Germany was now pressing into sharp rivalry with England, and turning out larger and speedier steamships.^[CP] The increased subsidy for the China service was especially urged upon these grounds: the importance of placing the German mail service in the East on a par with the services of England and France, the benefits to commerce, and the aid of the national defence.^[CQ]

The measure met opposition at the session in which it was first introduced; but at the next session (1898), after amendment, it became law. By this act the subsidy was fixed at one million and a half marks a year for the extension of the East Asiatic service to China direct, and for making the whole service fortnightly; and the contract was extended for another fifteen years. It was conditioned that if foreign competing lines should increase the speed of their ships the North German Lloyd must do likewise, and without additional subsidy, unless the foreign companies should receive extra payments.^[CR]

The total annual subventions for the Asiatic and Australian service had now reached five million five hundred and ninety thousand marks ($1,330,420). After January, 1899, under a contract between the North German Lloyd and the Hamburg-American Line then made, a part of this subsidy went to the latter. In 1901 the subvention to the East African line was increased to one million three hundred and fifty thousand marks. Thus Germany's grand total of annual payments in postal subventions had reached six million nine hundred and forty thousand marks.

Besides these postal subventions and the free entry to materials used in ship-construction and equipment, and the preferential railway rates on long hauls of the heavy domestic materials, barely covering the cost of handling and transportation,^[CS] the Government bestows a special form of indirect bounty upon the subsidized steamship lines in the shape of largely reduced through freight rates. These include substantial reductions on merchandise exported from inland Germany to East Africa and the Levant. Thus the combined land and sea through rates are brought considerably below those in force on goods sent to German ports for direct importation.^[CT]

Under these and other favoring conditions the German merchant marine has advanced in total tonnage from an insignificant place in 1880 to the third in rank among the maritime nations in 1911. Between 1885 and 1900, a period of only fifteen years, its growth was tenfold.^[CU] In 1890 the gross tonnage stood at 928,911 tons: in 1900 it had reached a total of 2,159,919 tons. Steamers and sailing-ships were nearly equal in tonnage. German-built steamships had won the speed record in ocean liners. Thereafter the output of steamships became much the larger, and in 1906 the Government was taking measures to revive the sailing-ship trade, because of its value as a training-school for seamen for the navy.^[CV] In 1910-11 the total tonnage was recorded at 4,333,186 tons.^[CW]

The other influences contributing to this extraordinary growth are variously stated according to the observer's point of view. The United States consul at Hamburg sees them in the "rapid transformation of the country from a non-producing nation into one of the foremost industrial powers of Europe, a large available supply of excellent and cheap labor, and the geographical situation of the empire."^[CX] The historian of Modern Germany sees them in German business methods:

FOOTNOTES:

CHAPTER V

The home Government of the Netherlands gives neither construction nor navigation bounties. Only subventions to steamship lines for carrying the mails are granted. The single purpose of these subventions is declared to be to secure the prompt and effective furtherance of the mails at reasonable cost.^[CZ] The contracts are not publicly let, but go to the several steamship lines plying to foreign ports and to the Dutch colonies. The amounts fixed by contract are at a given rate per voyage. The cost of the subventions to the Dutch East Indian lines is divided equally between the home and colonial Governments. Independently of the home Government the Dutch East Indian Government grants general mileage subventions for the maintenance of lines making regular communication with the various ports of the East Indies.^[CZ] Holland's gross tonnage in 1910 had reached the respectable total of 1,015,193 tons,^[DA] ranking her eighth among the maritime nations.

Belgium had a subsidy system for shipbuilding before 1852. At present neither bounties to domestic shipping nor postal subventions are paid by the Government. Subsidies, or premiums, however, are given to certain foreign steamship lines to encourage the commerce of Antwerp. These include an annual payment of eighty thousand francs ($15,440), and the refunding of lighterage and pilotage dues, to the North German Lloyd on their East Asiatic and Australian lines; and fifteen hundred francs ($289.50) to the German-Australian line for each call to and from Australia, the maximum subvention limited to thirty-nine thousand francs ($7527). A Danish steamship concern is also exempted from lighterage and harbor dues and granted other facilities, but receives no money premiums.^[DB] Belgium tonnage in 1910 comprised only 165 steam and sailing ships for a total of 299,638 tons.^[DC]

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CHAPTER VI

The Imperial Government of Austria-Hungary spurred by the action of Germany, instituted a direct subsidy system, also modelled after that of France, in 1893, when the Austrian merchant marine was languishing.^[DD]

A postal subsidy had long been in operation, the subsidies being all awarded to a single steamship company—the Austrian Lloyd, earlier the Austro-Hungarian Lloyd. They were practically mileage and speed bounties,^[DE] increasing with the extension of service. Ten-years' contracts were at first made with this company. The contracts, executed in 1888, particularly guarded domestic interests. In the purchase of materials it was required that preference be given to Austro-Hungarian industries. The coal used must be bought from Austro-Hungarian subjects in the proportion of two tons from Austria and one ton from Hungary, provided that "the price is not greater than foreign coal, and that the steam-producing power of the native coal is equal to at least eighty-four per cent of that of foreign coal." In the building and repairing of their ships, or parts of ships, and engines, the company must also favor home interests. Ships, engines, or boilers could be ordered abroad only with the consent of the foreign office when shown that the work cannot be made in Austria within proper time, or that the want can be supplied by a foreign country on more favorable terms.^[DF]

By a law of July, 1891, the rates for mail-contract steamships were fixed as follows: for fast lines, making above ten knots, a maximum rate of seventy kreutzers per nautical mile; for slower lines, fifty kreutzers a mile. The total amount of mileage bounty payable each year was limited to two million nine hundred and ten thousand florins. But in addition to this bounty the Government agreed to pay the Suez Canal tolls. To encourage the Austrian Lloyd to build larger and swifter vessels the Government further agreed to advance the company one million and a half florins. This was to be furnished in three equal payments yearly (1891, 1892, 1893), and was to be repaid in five equal payments of three hundred thousand florins each, beginning in January, 1902. The company's ships were to be exempted from consular fees, "the same as vessels of the imperial navy"; and were to be at the disposal of the naval and military departments in case of war. All the officials of the company were to be Austrian subjects, "naval officers either active or retired to be given the preference"; and there was to be an administrative committee of eight members, the president appointed by the Emperor and two other members by the ministry of commerce, the intention of this provision being to give the Government control over the company's affairs.^[DG]

The general subsidy law of 1893 (November 28) was the outcome of the deliberations of a special Parliamentary committee appointed that year; and its declared object, as set forth in this committee's report, was "to put a stop to the decline of our merchant fleet, to allow it to cope with foreign competition, and to secure for the inhabitants of our coast needed employment and profits in maritime pursuits."^[DG] Three years before (1890), with the same object in view, a preliminary step had been taken in the exemption of all iron and steel steam and sailing ships from trading and income taxes while engaged in ocean voyages.^[DG]

The law provided two classes of subsidies—a trade bounty and a navigation bounty. They were to go to all steamers and sailing-ships engaged in the deepseas trade or long-coasting trade, and not receiving mail subventions. At this time a large percentage of the Austrian steam tonnage was receiving the postal subsidies, and most of this tonnage was owned by the Austrian Lloyd Company.^[DG] The trade bounty was for ships making long voyages; the navigation bounty for those engaged in coastwise voyaging. Ships entitled to the trade bounty were required to be owned at least two-thirds by Austrian subjects, to be not over fifteen years old, and registered A1 or A2. The rates were thus fixed: for the first year after launching, iron or steel steamers, six florins ($2.44) per ton, iron or steel sailing-ships, four florins and fifty kreutzers; wooden or composite (part iron) sailing-ships, three florins. After the first year the rate was to be reduced five per cent annually till the end of the fifteenth year. As an inducement to employ home work and to utilize home materials, the bounty was to be increased by ten per cent for iron or steel sailing-ships built in the Austrian ship-yards, and by twenty-five per cent if at least one-half of the materials used in the construction were of Austrian origin. If more than one year had elapsed since the launching of a ship otherwise entitled to a bounty, a deduction of fifteen per cent was to be made for each year that had passed. The navigation bounty was fixed at five kreutzers per net ton of capacity for every hundred nautical miles sailed. The exemption from the production and income taxes, granted in 1890, was extended for a term of five years from January 1, 1894. The law was to be in force for ten years.

As the end of the term of this law was approaching ship-owners began agitating for its renewal with an increase in the subsidy. Since its enactment the production of steam tonnage had been accelerated, and the decline of sail tonnage had been checked; but no marked change in the merchant marine generally had been manifest.^[DH] Of the bounties paid the Austrian Lloyd had received a large share in behalf of their ships which were not directly under contract for the mail service. The remainder went to the various companies controlling the coast and river trade. The ten to twenty-five per cent addition to the trade bounty for ships built in domestic yards and from domestic materials, finally went for the most part to a single large building concern at Trieste. While most of the Austrian tonnage was yet of foreign build, mostly constructed in British yards, the increase in the proportion of domestic build was considerable after 1893. The greater part of the materials used was Austrian product. Consequently allied industries increased with this increased output of home ships.^[DI]

At length in 1907 (February 23) a new law was enacted increasing the navigation and construction bounties. For the navigation subsidies, to go to shipowners according to the tonnage of the ships and the number of miles run, allotments were thus made: for the first year, $852,600; for 1908, $893,200; 1909, $954,100; 1910, $1,015,000; 1911, $1,075,000; and for the five years remaining of the term, of the law—which ends December 31, 1916—$1,136,800 a year. The construction subsidies were raised as follows: for ships launched after July 1, 1907: steamers built of iron and steel $8.12 per gross ton, sailing-ships of iron and steel, $2.84; for marine engines, boilers, pipes, and auxiliary apparatus, $1.62 per 220.46 pounds. To entitle a ship to these bounties fifty per cent of the materials used in its construction must be home product.^[DJ]

This year (1907) also the annual postal subventions to the Austrian Lloyd were increased $1,486,586, for a further period of fifteen years. This contract called for an increase of speed to the Levant and the Orient. The Suez Canal tolls were to be paid by the Government as before.

The Kingdom of Hungary grants bounties to Hungarian ships, or ships owned in greater part by Hungarian subjects, independently of the Imperial Government. Her first general bounty law was also enacted in 1893 and was limited to ten years. The subsidies granted were of two classes—premium on purchase, and a mileage bounty. The purchase subsidy was based on net tonnage and was payable for a term of fifteen years from the date of the ship's launching, reduced each succeeding year by seven per cent; the mileage subsidy, for the same term, was in proportion to the length of the voyages made "in the interest of national commerce whether to or from Hungarian ports." The premiums on purchase were thus fixed for the first year: for vessels employed in long-distance coasting trade—sailing-ships, six krone (each 20 cents); steamers, nine krone per ton; employed in deep-sea trade,—sailing-ships, nine krone; steamers, twelve krone per ton. Iron or steel ships rated first class were entitled to these bounties. The mileage subsidy was fixed at five hellers per ton, per hundred nautical miles run. It was offered only for voyages "to places where no company in receipt of State subsidies is obliged to maintain regular communications;" and it was not to be given for "petty coasting trade."^[DK]

This law was succeeded by an act of 1895 granting construction bounties, with the intent of fostering domestic shipping and the use of domestic material. The rates were proportioned according to the amount of foreign or domestic material used, construction with domestic product receiving the highest bounty. These rates were: for iron or steel hulls, thirty to sixty krone per ton; for wooden ships, ten to twenty-five krone per ton; for engines and auxiliary machinery, ten to fifteen krone per ton of materials used; for boilers and pipes, six to ten krone per ton of material. The total amount to be paid out yearly was limited to the modest figure of two hundred thousand krone ($40,600).^[DL]

The law of 1895 in reality was not effective, for ships of the Hungarian merchant marine continued to be built in foreign parts—mainly in British yards;^[DK] and while the carrying capacity had considerably increased, the tonnage had continued to decline.^[DK] By 1904 the situation had become so unsatisfactory that, as the American consul at Budapest wrote, the passing of a new navigation-development law by Hungary's Parliament had, it was believed, become a pressing necessity.^[DM]

In 1909 the Austrian Government guaranteed a maximum sum of one million crowns (approximating $200,000) annually to the Austro-American Shipping Company for their service between Trieste and Brazil and Argentine ports. Should the service tend successfully to promote home industries and agriculture, this subsidy was to be increased, the amount of increase to depend upon the amount of cargo carried in excess of a certain minimum. The contract was to run for fifteen years from January 1, 1910. The service, beginning with sailings three times a month, was to become weekly on January 1, 1911.^[DN]

The total Austria-Hungary tonnage in 1910-11 was recorded at 779,029 tons.^[DO]

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