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

CHAPTER VII

Early after its establishment in 1861 the Kingdom of Italy adopted a subsidy system with the object of reviving and upbuilding the then languishing Italian merchant marine. This policy was instituted in 1866 with the grant of premiums on the construction of wooden ships. At the same time materials used in the construction, repair, or enlargement of ships were made duty-free.^[DP]

For a while under these conditions, before iron ships had come much into use, the merchant marine prospered. Then it again began to languish; and in 1881 the promulgation of the French general bounty law was made the special occasion for considering the adoption of a similar measure.^[DQ] The draft of a bill modelled after that law was promptly introduced in the Chamber of Deputies, in February. But with its consideration such perplexities arose that at length the whole subject was referred to a commission of inquiry, to investigate and report a more satisfactory one. The result of this inquiry was a bill which became law December 6, 1885, to continue in force for ten years.

This law provided for general construction subsidies, on the following scale: for steamers and sailing-ships built of iron or steel, sixty lire ($11.58) per gross ton; for steam or sailing ships built of wood, fifteen lire; for galleggianti (floating material: the term signifying merchant ships navigating the Italian seaboard, rivers, and lakes, but not provided with certificates of nationality), of iron or steel, thirty lire; for construction and repairs of marine engines, ten lire per quintal; for marine boilers, six lire per hundred kilograms of weight. These bounties were to be increased from 10 to 20 per cent (according to the degree of speed and other desirable qualities shown) for steamers built on plans approved by the Government engineers as to be convertible into cruisers, showing a speed of not less than fourteen knots an hour, and with sufficient coal-carrying space to steam four thousand miles at ten knots. The law was applicable to ships bought abroad as well as those of domestic build. But it forbade the sale or charter to a foreigner of any steamer upon which the bounty had been paid, except by Government permission. The laws of 1866 granting premiums and free entry to shipbuilding materials were suspended during the ten years' term of this act.^[DR]

In 1888, a new tariff of the previous year (July, 1887) having increased the customs duties on shipbuilding materials, additional bounties on construction and repair were granted by a royal decree to offset these disadvantages to the shipbuilders. A provision was added for the payment of fifty lire per gross ton for construction of war-ships, and eight and a half-lire per horsepower for engines, nine and a half lire per quintal for boilers, and eleven lire per quintal for other apparatus, to be used in war-ships. Navigation bounties were also added to Italian ships as follows: 0.65 lire per gross ton for every thousand sea miles run beyond the Suez Canal or the Strait of Gibraltar to or from ports outside of Europe; the same for ships sailing between one continent with its adjacent islands and another continent with its adjacent islands, outside the Mediterranean. Sailing-ships of above fifteen years of age were ineligible to these bounties; so also were mail-route steamers.^[DS]

In 1896, after the expiration of this law, a new law was enacted (July 23) closely modelled upon it. The construction subsidies were the same, except that war-ships built for foreign countries were debarred from receiving bounties. The navigation subsidy per gross ton for every thousand sea miles sailed beyond the Suez Canal and the Strait of Gibraltar was increased to 0.80 lire, the rate to be diminished by ten centimes for steamers and fifteen centimes for sailing-ships every three years. An important addition was the reënactment of the customs rebates on shipbuilding materials. This law was also to be in force ten years.^[DS]

In 1900 (November 16) a royal decree was issued modifying the law of 1896 in several particulars. No bounty was hereafter to be allowed to vessels built in Italian yards for foreigners. The customs drawbacks were abrogated, and in place of them was granted a bounty of five lire per quintal of metal used in repairs. A bounty of fifty-five lire per gross ton was offered for iron or steel steamers showing a speed of above fifteen knots; fifty lire, for steamers speeding twelve to fifteen knots; forty-five lire, for steamers or sailing-ships with speed below twelve knots; and thirteen lire per net ton for modern hulls. The navigation subsidies per gross ton per thousand miles, were thus fixed: for steamers, forty centimes up to the fifteenth year after construction; for sailing-ships, twenty centimes up to the twenty-first year after construction. The yearly distances run for which the bounties were to be paid were limited to thirty-two thousand miles for a steamer below twelve knots; forty thousand for one of twelve to fifteen knots; fifty thousand above fifteen knots, and ten thousand for a sailing-ship. All Italian ships were eligible to this bounty; foreign ships were debarred. The maximum expenditure for all the bounties was limited to ten million lire ($2,000,000) a year.

In 1910 (May) a new subsidy bill was enacted providing for the continuance of the arrangement under the measure of 1900, with a few immaterial modifications.^[DT] Early in 1911 the Government was reported to have in readiness ten bills looking to the support of domestic shipping and shipbuilding. Eight of these had relation to the increase of subsidy on the Italian mail and cargo service of the Mediterranean. Other routes subsidized included lines to Central America, Chile, Canada. Domestic shipbuilding was to be aided to the extent of twelve hundred and forty thousand dollars.^[DU]

Italy's mail subvention system dates from 1877, when the Italian steamship companies by a convention (July 15) consolidated with the Government.^[DV] All the lines receiving the mail subsidy came to be owned by a single powerful corporation, the Italian General Navigation Company. While the rates paid per mile are not so high as those paid by several other countries, the requirements as to size of vessels, speed, and amount of service to be rendered, are less exacting. Accordingly these subventions are in fact, as Professor Meeker recognizes them, "partly in the nature of concealed bounties." In 1879 the Government spent in these subventions a total equalling $1,593,214. By 1889 the total had only slightly increased, the amount that year being $1,849,392. In 1908 the total was $2,328,917. The mail steamships are required to carry government civil and military employees at half price.

Previous to 1896 the Italian General Navigation Company owned more than half of the Italian steam tonnage, and most of the large steamships.^[DW] After 1896 the sail tonnage steadily increased. In 1905 it was recorded that "the Italian flag now flies over some of the best modern transatlantic liners in the port of New York; the Mediterranean is full of Italian ships; and the Lloyd Italiano has five new ten-thousand-ton steamers nearly ready for service in South America."^[DX] Between 1890 and 1910 the Italian gross tonnage increased from 809,598 tons to 1,320,653 tons.^[DY]

FOOTNOTES:

CHAPTER VIII

Under the contract of 1886 (ratified by the Cortes in 1887) the company were to furnish all the mail steam communication between the Peninsula and the colonies and possessions, and foreign ports, for a total maximum subvention of 8,445,222 pesetas ($1,689,044) annually. The subsidy was calculated on the number of nautical miles run. The total sum was distributed among the budgets for the Peninsula and the several colonies.^[DZ] In 1909 the subvention was redistributed over the various lines, the total amounting in round numbers to $1,665,600. The contract went as a whole also to the Spanish Transatlantic Company, to run for twenty years. A particular requirement was that the company must favor Spanish trade in every possible way.^[EA]

The first construction subsidy law, that of 1880 (June 25), granted a bounty of forty francs ($7.72) per measured ton of 2.83 cubic metres on all ships built in Spain. All tariff duties paid on imported materials for building, careening, or repairing ships or their machinery, were to be refunded by the Government.^[EB]

During the decade between 1880 and 1890 the Spanish marine slowly increased. Further to foster it, in 1895 a more general subsidy law was enacted. This act granted a construction subsidy of forty pesetas ($7.72) per gross ton for wooden ships; seventy-five pesetas ($14.48), for iron and steel steamers; and fifty-five pesetas ($10.62), for ships of mixed construction and for sailing-ships of iron and steel.^[EC]

The year following the passage of this law was marked by rapid expansion in the national marine. Then came a more rapid decline. This was due, it is assumed, to increased taxes, and business depression occasioned by the colonial wars, involving enlarged Government expenditures and the cutting off of much colonial trade.^[EC] During the war with the United States (1898) Spain lost eighteen large steamers of 31,316 tons. After that war, with the development of her national resources, the Spanish marine again began rapidly to grow.^[EC]

In 1909 (law of June 14) the system was extended with the addition of general navigation bounties calling for an annual expenditure of 2,750,000 pesetas ($530,750). For ships making monthly sailings to various named points, among them Brazil, Uruguay, and the Argentines, and semi-weekly sailings to Algeria, bounties were provided ranging from seven to seventeen cents per ton gross for every thousand miles run, to continue for a period of ten years. Spanish ships manned by Spanish crews and ranked by maritime agencies as first class were made eligible to them. All ships receiving these bounties must admit naval cadets and perform certain services for the Government. To shipbuilders, as off-set to the duties on imported materials which they must pay, bounties for port materials as well as for ships were granted by this law. The construction subsidies were increased to $13.84 per gross ton for wooden ships not possessing their own motor power, and $17.30 self-propelling; $20.76 for iron or steel ships without motor, $27.68 for ships for freight only, $29.41, freight and passengers; and $32 passengers only. Ten per cent of the bounties for passenger ships was to be added for each knot made above fourteen per hour. The sale of a ship to a foreigner within two years after the ship's construction was made invalid unless about a third of the bounty received be repaid. Ships built abroad for Spanish citizens were to be relieved of certain duties "provided it appears that it was absolutely necessary that they be built abroad."^[ED]

The total amount paid in mail subventions in 1910 was $1,858,186; in navigation subsidies, $1,291,826. The total Spanish tonnage the same year comprised 579 vessels of 765,460 tons.^[EE]

Portugal grants postal subventions of comparatively small amounts to three steamship companies which perform all her mail carrying. A move toward the institution of a general subsidy system was made in 1899, when a bill was before the Cortes providing construction and navigation bounties for the encouragement of domestic shipbuilding and ship-using; but this measure was not enacted. In 1911 the republic offered a subsidy of one thousand dollars per voyage in either direction for steamship service between Lisbon and New York, with call at the Azores, the contract to run for three years.^[EF] Portugal controls her shipping service with her colonies, the trade with them being restricted to the Portuguese flag.^[EG] Her total tonnage is small: in 1910 only 110,183 tons.^[EH]

FOOTNOTES:

CHAPTER IX

Denmark pays postal subventions to two steamship companies for carrying the mails to Sweden and to Iceland, and "trade" subsidies to other companies to encourage particularly the export trade. The latter are payments directly for reductions in freight rates, which are supervised by the Government.^[EI] The postal subventions are not large, and they are generally accepted as only fair remuneration for service rendered.^[EJ]

Norway and Sweden both give subsidies for mail carriage solely, and grant no direct bounties on shipping. Both, however, undertake the furtherance of commerce and navigation through "State contributions," in the form of loans to shipowners from Government funds.^[EK] Such aid has been granted to several steamship lines. In 1910 the Swedish Government granted a loan equivalent to half a million dollars American money toward the capital of a new line between Swedish ports and New York, Philadelphia, and Baltimore.^[EL] Shipping is exempt from taxation in both countries.^[EM] The Swedish tonnage in 1910 stood at a total of 1472 vessels of 918,079 tons.^[EN]

In Norway the laws put no restriction upon shipowners as to purchase in any market. Most of her steam tonnage is foreign-bought, and largely second-hand. Her merchant fleet, however, consists for the greater part, of wooden sailing-ships, and these are mostly of domestic build.^[EM] Besides the mail subsidies the Government grant "trade" subsidies to some forty Norwegian steamship companies to enable them to maintain routes to various foreign ports. These subsidies amount to about half a million dollars annually.^[EO] In 1910 Norway stood in tonnage fourth among European maritime countries: her total tonnage being 2,014,533 tons.^[EP] Norway has by far the largest percentage of sea-faring population, and her mariners are found in the crews of all nations in Europe and America.

FOOTNOTES:

CHAPTER X

In Russia steamship lines were early subsidized with mileage bounties, besides receiving postal subventions; and later the Government adopted the policy of returning the Suez Canal tolls to the subsidized lines. The mileage subsidies are direct bounties avowedly for the encouragement of Russian navigation, and are very large.^[EQ]

In 1898 a Government commission, appointed to consider and report upon the state of the empire's mercantile marine, declared that Russia was losing a vast sum annually through the lack of a sufficient commercial fleet of her own, and yet no progress seemed to be making toward increasing her tonnage. To remedy this unsatisfactory condition the commission suggested the removal of the duty on ships built abroad for Russia, and the free admission of all material necessary for ship construction.^[ER]

Favoring laws followed. By a measure of July that year (1898) ships bought abroad, if destined for the foreign sea-borne trade, were exempted for a period of ten years from the heavy duties levied on such vessels. The next year (1899) the coasting trade, reserved exclusively for Russian ships, was extended to include navigation between any two Russian ports in any seas; and, further to restrict this trade to subjects of the empire, it was enacted that ships engaged in it must be manned exclusively by Russian officers and seamen.^[EQ]

At this period Russia's shipping industry, outside the Government works for the construction of battle-ships, was of comparatively little consequence. In the few extensive ship-yards river steamers, tugs, and other small craft, built from Russian materials and by Russian workmen, were chiefly turned out. The materials could be bought cheaper abroad, but Russian labor was cheaper. According to the United States consul at St. Petersburg, the wages of common workmen were then from fifty-one to sixty-four cents a day, while skilled workmen were receiving but seventy-seven cents to one dollar a day.^[ES]

In the decade 1890-1901 the amount of subsidies expended directly to encourage shipping increased rapidly, and the tonnage increased in extent and importance. In 1890-91 the total tonnage stood at 427,335 tons of which 156,070 were steam and 271,265 sailing ships. In 1902-03 a total of 800,334 tons was reached, of which 556,102 were steam and 244,232 sailing ships.^[ET]

In 1902 the granting of bounties in the form of loans to ship-owners was proposed, with the object of inducing them to buy Russian ships built of Russian materials instead of foreign product. The scheme contemplated a mortgage on the finished ship at fifty per cent of the actual cost, without interest, to cover a period of twenty years, the loans to be in equal yearly payments. The amount of the bounty was to depend upon the difference between the cost of home-built and foreign-built ships. The loans were to be made only on first-class sea-going steamers. The plans and specifications were to be approved by the minister of finance before building; and steamers of over one thousand tons register must show an average speed of not less than ten knots on a six hours' trial; those under one thousand tons, of not less than eight knots. In addition to the loans the Government was to bear part of the expense of insurance. To facilitate the export of Russian goods in Russian-built ships, a rebate was allowed of half the expense of Russian coal used in steamers carrying less than three-fourths of a full cargo on export, and one-half cargo on import. It was estimated that this scheme for fostering domestic shipbuilding would entail smaller drafts on the national treasury than would the granting of direct construction and navigation premiums.^[EU]

Progress was checked appreciably by the war with Japan (1904-05). But the year after, the empire was active again in advancing her interests in the East, by systematically granting subsidies to steamship lines to various Asiatic points.^[EV] By 1909 the tonnage had been brought to a total of 700,959 tons, approaching that of the year before the war. Of this total 443,243 was steam tonnage. The greater part of the steam fleet was foreign built, only 167 of the total, 898 steamers, being of Russian product. The largest number were built in England (341). Others were obtained from various European yards. More than ninety per cent were of iron and steel. Of the sailing-ships, ninety per cent were home product.^[EW] In 1910 the total tonnage stood at 887,325 tons.^[EX]

The mileage subsidies in 1910 were going principally to eleven steamship companies; the postal subventions mainly to four. Those receiving the mileage subsidies carry the mails and Government passengers free. The largest mileage subsidy goes to the Black Sea Navigation Company, the oldest and most important of the subsidized lines (founded in 1856, with Government aid).^[EY] In addition to the subsidy the Government pays back the Suez Canal tolls. The Russian Volunteer Fleet stands second on the list of subsidy receivers. This is practically a Government affair. It was created in the war-time of 1877-78, by private subscription, as an auxiliary war fleet; and was reorganized for general service in 1892. The members of the board of managers are State nominees, and the officers and crews are regarded as employees of the crown.^[EZ] The subsidy is fixed at six hundred thousand rubles ($309,999) a year; and the refunded Suez Canal tolls amount to another six hundred thousand rubles.^[FA]

The mileage subsidies, given directly to foster shipping, increased rapidly from year to year after 1890, while the postal subventions, for mail carriage chiefly, remained practically constant.^[FB]

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