CAN WE KEEP A MERCHANT FLEET?
Security demands that we do not let our war shipping fleet vanish but it will cost taxpayers money to keep Canada’s flag on peacetime trade routes
WHEN war broke out Canada had 37 oceangoing merchant ships. Today we’ve built ourselves 400. Some of them are out on Mutual Aid, and of these we may contribute some to help re-establish the war-destroyed fleets of our Allies. Others will be sunk, in one ocean or another, before the Axis goes down forever. But with all that we still can count on having about 250 to 300 ships when war ends, most of them 10,000-ton freighters.
We used to have about 1,400 officers and men in our merchant navy. The men were underpaid, by Canadian shore wage standards. For the officers, peacetime employment was so scarce that in most years you needed a master’s papers to get a berth as third mate; actually to be a master you needed the seniority of Methuselah.
Now we have 12,000 officers and men in our manning pool, continuously employed. Probably about half as many again are going to sea in Canadian ships, without having signed up for the two-years-orduration that the manning pool requires in exchange for its guarantee of job security. Two training schools, one on Nova Scotia’s coast and another on Lake Ontario, are turning out more seamen and apprentice officers in half-year batches. Every ship’s officer is getting the full benefit of his seniority and status —standards have even been relaxed a bit to fill the desperate needs of war for trained personnel. And on top of this reservoir of manpower, half of the Royal Canadian Navy’s 90,000 men are getting sea experience, and some may want to become peacetime sailors
What are we going to do about all this? Shall we treat our three million tons of ships as expended munitions, to be sold or scrapped, and our wartime
seamen as demobilized men? Or shall we, as the world’s fourth trading nation, set up a permanent merchant marine of our own?
Nobody knows the answer yet. The Government, busy helping to win the war, hasn’t made the key decisions. There’s plenty of time, anyway—all maritime members of the United Nations (except Russia) have agreed to continue international control of shipping until six months after the end of the war with Japan, which means we shall all be doing as we’re told. Even after that ocean shipping will still be scarce, and there’ll be lots for everybody to do. Our problem doesn’t begin until the war boom ends and there’s a glut of ships.
But the broad outlines of that problem are clear enough now. Maybe now is a good time for the ordinary voter to take a look at the issues involved, think over the various policies we might adopt and what each would cost us, and decide what he’d like the Government to do.
Reasons in favor of having a Canadian merchant marine are economic, political and military, and by far the greatest of these is military. So we’ll look at those reasons first.
Canada was caught short in 1939. We had next to no navy, next to no merchant marine, next to no shipbuilding industry, and war created an urgent simultaneous need for all three. We were able to build them all up this time, but only because Britain
screened us for years while we slowly raised our sea power from nothing to something.
Nobody suggests we ought to dispense with that screen altogether. We’re a small nation; we’ll never be able to defend our enormous coastline without help from somebody, presumably Britain in the Atlantic and United States in the Pacific, or perhaps both in both. But if we’re going to accept the responsibilities of a middle-sized world power; if we’re going to maintain a navy of our own, as most people believe we shall and should, then we’ll have to maintain at least some merchant shipping to support it.
A merchant navy is an invaluable, almost indispensable, reserve of manpower for a fighting navy. For its postwar needs the RCN first estimated that a fleet of 100 seagoing ships, added to our lake and canal boats, would give us the required backlog of trained officers and men. Lately this estimate has been scaled down—responsible Navy people admit they’d be reasonably content with a seagoing fleet of 60 to 75 ships.
But a navy also needs supply and auxiliary vessels. So the RCN stipulates that out of the 60 to 75 ships three or four ought to be suitable for conversion into aircraft carrying escort vessels; a couple for conversion into oil supply ships; half a dozen convertible into auxiliary cruisers—actual warships, that is—and another half dozen into supply, repair and maintenance thip~.
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Can We Keep A Merchant Fleet?
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This means we would need 18 or 20 vessels that we haven’t yet got in our present merchant fleet. Naval auxiliaries have to be of good size—say 10,000 tons or better—and fast, 15 or 16 knots. Our 10,000-tonners make only 11 knots. These auxiliaries would be useful as purely commercial craft in peacetime, but they might be more expensive than peacetime use would justify. Therefore the Navy suggests
that the extra cost might be charged to national defense by the Government.
Besides the need for supporting our Navy, there’s another angle to this matter of security, one that involves our economic welfare. In war, who’s to carry our exports if we don’t do it ourselves?
In some wars, of course, the answer would be found in the belligerents’ own fleets. We’re an exporting nation, and we never have such a good market as during wartime; our goods are in demand and the nations that need them will often come and get them. But it’s not difficult to visualize a situation wherein, with shipping rela-
lively scarce, we might lose a valuable market because belligerents’ ships were engaged carrying someone else’s goods. Any time there’s a shortage of ocean transports, it’s as well for a nation that lives by foreign trade to have ships of its own.
So much for security as a motive for keeping up a merchant fleet. What about the others, the political and economic?
Prestige Costs Money
Well, one important factor in both these fields is national prestige. Anyone who remembers the arrival of the first ships from Poland, after the armistice had re-created the Polish state and given it an outlet on the Baltic, will realize how effective a medium of national advertising a ship can be. It’s worth something to us, not only in national pride but in dollars and cents, to have the Canadian flag flown in all the harbors of the world.
Another point, both political and economic, is this: World shipping is
now under international control and will remain so after Germany falls. There’s a possibility that this control may be extended into peacetime after Japan is defeated. If it is there would be some advantage for Canada as a trading nation to have a seat and a voice in the controlling councils of world shipping. Most of our exports are low cost, heavy bulk goods—wheat, flour, lumber—on which freight rates are of vital importance. We’d have an essential interest, for example, in any international arrangement for the stabilization of rates.
These are indirect advantages of a merchant marine. The direct advantages, economically, are just about nil.
No Canadian exporter would pay one cent more per ton in ocean freight for the privilege of having his goods carried in Canadian bottoms. Exporters want the best service they can get for their money, no matter who gives the service or what flag he flies. And in ordinary times there is never any scarcity of ocean transport. Our big problem has always been to find markets for our goods, not ships to carry them there.
In fact, so far as markets are concerned, a fleet of our own may even be a disadvantage. Britain has already indicated pretty bluntly that she’ll trade only with countries that buy enough British goods to pay for what Britain buys from them—it will be a straight bilateral quid pro quo, unless something revives the dimming hope for a multilateral trading system. This will be a hard situation for Canada; we’ve always had a surplus of sterling and a deficit of U. S. dollars, and we’ll have a lot of trouble making our trade with Britain come out even. One way to help balance the account would be to use British ships for our exports to Britain. Every penny our exporters pay to a British shipping line would be, directly or indirectly, a penny to help pay for the goods we’re selling. If we use Canadian ships we cut down our potential trade with Britain by the amount of the shipping charges.
This point would have some validity even if a Canadian merchant fleet were able to operate profitably without state aid. But it won’t be able to do that. All surveys of the postwar situation are unanimous in concluding that if we’re to keep ships afloat under Canadian registry on any long-term basis we’ll have to subsidize them.
A very careful breakdown of shipoperating costs in normal times has been made by an interdepartmental committee of senior civil servants to help the Government in determining merchant shipping policy. They find that where a 10,000-ton British ship
can operate for $333 a day, the same ship under Canadian operation would cost $450 a day. This doesn’t count interest on capital, either—another breakdown of cost factors shows that the whole differential, $42,000 per ship per year, goes into higher wages, victualling and stores.
On this basis the Navy’s original estimate of 100 ships as the ideal peacetime merchant fleet would cost us $4.2 millions a year in subsidies. Even the more modest 60-ship fleet would cost an annual $2j^ millions, and that’s assuming the ships could find enough business to keep them all busy.
Would they, in fact, find enough business? That’s another $64 question.
Before the war the whole world had about 72 million dead-weight tons of shipping. After the war the five leading maritime powers of the United Nations —Britain, the United States, Norway, the Netherlands, Canada—alone will have more than the world had before. United States, which used to have less than 12 million tons all told, will have 48 million tons—more than all five countries had before the war.
Burton Lewis and William Kroger, in a recent article in the magazine Canadian Shipping, sum up with the estimate that after the war total merchant tonnage afloat for the whole world will be at least 10 million tons above the 1939 level. Because these ships will be faster, on an average, than their predecessors, and because dock and loading techniques have been improved, the effective increase in capacity will be the equivalent of 24 million dead-weight tons.
Many people hope that the total volume of world trade will be considerably higher alter the war than it was before. But how many people hope it will be that much higher? And don’t forget, either, that even before the war there were more ships than were needed to carry the trade of the world. In the past 20 years, in fact since the last war’s boom ended, there have never been less than two million tons of shipping laid up. One year the laid-up figure reached 12.7 million tons. Reason: overbuilding between the
wars. Total volume of world trade in 1939 had gone up 20% over 1913, but total shipping tonnage had gone up 50%.
If this picture Isn’t gloomy enough, there are still a couple of points we haven’t touched. One is the postwar shipping policy of the United States. Vice-admiral Emory Land, Chairman of the U. S. Maritime Commission and head of the Wartime Shipping Administration, has come out flatly for a subsidy policy whereby half of the United States’ foreign trade would be carried in American bottoms. Reasons for his view are, roughly, those outlined above in favor of a similar policy for Canada, plus the fact that the American public is in a mood to show its muscles these days. They won’t want to throw away a fleet that’s as big as the whole United Nations merchant marine was in 1939—they’ll want to operate it, at least for a while, no matter what it may cost them.
And that brings up another point. This fleet of ours, like that of the Americans, may be the biggest we’ve ever had, but ship for ship, how much good Is it? The answer seems to be, not much.
Among the huge mass of shipping that the U. S. has produced for war, about 3,000 are the so-called Liberty Ships, the 10,000-ton unspecialized freighters that Henry Kaiser turns out with assembly-line speed. Liberties are the one thing that even optimists in the United States know they won’t
be able to get rid of. Nobody wants any Liberties. Norway, according to Lewis and Kroger, has stated it will buy no Liberties—might charter a few. The Netherlands and Britain haven’t even gone that far. The only countries that have shown any interest in buying Liberties are Argentina, which can’t have them, and China, which can’t pay for them.
Now, our Canadian North Sands type freighter isn’t as bad as the Liberty — everyone says it isn’t, although it’s the same type of ship. It isn’t as bad, either, as the 66 moribund eight-knot war babies of 1914-18 that composed the Canadian Government Merchant Marine. We got rid of the last of these in 1936 with a net outlay (not counting interest) of $82 millions.
Today’s North Sands isn’t as bad as all that. But even its best friend has to admit there’s considerable doubt whether the North Sands will be of much use once the war boom has died out. The North Sands is a costly ship to operate—even the British have to spend twice as much to run a North Sands as they spend on a typical freighter, and Canadian costs are 50% higher again.
Too Slow or Too Big
North Sands and Liberty alike are too slow for their size or too big for their speed, whichever way you want to put it. They’re big 10,000-ton freighters with a deep draft—too deep for anything but the deepwater harbors of blue-ribbon freight runs. And for these runs they’re not good enough—only 11 knots instead of a 15 or 16, no refrigeration, no special facilities.
Americans know their 3,000 Liberties are mostly headed for the scrap heap. They have about 10 million tons of shipping, other than Liberties, ready for postwar foreign trade. But we in Canada, though we have a slightly better craft than the Liberty, have no such margin—of our 250 or more postwar ships, at least 200 are likely to be North Sands freighters.
So to come back to the question we started with, what are we going to do with them?
Well, there are a couple of silver linings we haven’t mentioned yet, and one is capital costs.
Last time, the Canadian Government Merchant Marine was saddled with the full war-swollen costs of building its ships. For purposes of depreciation those slow freighters were valued at their war peak of $203 per dead-weight ton. By 1921 replacement costs had sunk to $75 a ton and by 1930 to $10, but the C.G.M.M. boats still carried their original book value.
If present plans are carried out this won’t happen again. This time it’s proposed to apply surplus war earnings of our Government-owned ships against their capital cost—some of them may almost have paid for themselves by the time the Japanese war ends. Furthermore, for purposes of sale, the original cost of a North Sands type is to be computed not at what it actually was in a Canadian shipyard ($1.0 to $1.8 million) but what it would have been if the ship had been built in Britain, or about $950,000.
Further than this, definite decisions haven’t been made. However, wellinformed people in Ottawa think that a likely course would be as follows:
First, the Government would sell as many as possible of its ships to Canadian operators, basing the prices on the foregoing calculations. Even at these bargain rates it’s not expected that very many would be bought.
Second, the Government would invite Canadian shipping firms to operate Crown-owned ships on a man-
agement fee basis. Ownership would remain in a Crown company, such as Park Steamships Limited, which has title to our war-built ships now. It’s recognized that this, too, would absorb only part of our shipping surplus at best.
Third, any non-Canadian companies that might want to operate our ships on a management fee basis would be welcome to do so.
As a fourth and last resort the remaining ships would be sold on the open market. Care would be taken to prevent possible competitors of Canadian shipowners from acquiring ships at scrap prices, then putting them into competition with ships already sold to Canadian operators at higher prices. Some ships might even be laid up for a while, if this should appear advisable.
Opinion is unanimous that the Government should not go into the shipping business itself, as it did last time. Keynote of the policy will be to encourage, and if necessary assist, private enterprise to maintain a merchant navy of “moderate” size.
For this subsidies will be necessary, but subsidies are nothing new in Canadian policy. In the 10 years 1929-39 we paid out more than $14 millions in subsidies, mostly to nonCanadian ship operators (Canadian Pacific ships are of British, not Canadian, registry). We spent $3.6 millions to maintain service between Canada and the United Kingdom, $5U> millions for services to China and Japan, smaller amounts for runs to Australia, New Zealand, South Africa, Brazil, Uruguay and the Argentine.
Of course if we decided to pay these subsidies to Canadian operators, they’d have to be higher—it’s accepted that under present conditions, at least, Canadian ships could not be operated as cheaply as British, Scandinavian and Dutch ships. In the case of Britain this is mainly due to lower wages and living standards of British seamen.
Far from attempting to match these cheaper conditions, Canadian ships will have to maintain and even improve present standards if the really important objective—maintenance of a sound and skilled personnel — is to be achieved. Before the war the seaman operated under many disabilities that the landsman did not suffer. A seaman couldn’t get workmen’s compensation, for instance—compensation acts are provincial, and no province has jurisdiction on navigable waters.
His employment, too, was peculiarly insecure. If he should fall sick at sea he might be left in a foreign port, jobless. Worse, he’d suffer the same fate if his ship were wrecked. No matter how long he worked for a shipping line he never got any seniority rights, for he signed on for one voyage and his employment terminated at the end of it—hence, no pension. If he had no job for a while he couldn’t claim unemployment insurance.
And wages were low, even if they were higher than those of some other sailors. In 1940 an able seaman’s basic wage was only $52.50 a month—war bonus brought it up to $65.62. It has more than doubled since then; last year the wage was $89.93, the war bonus $44.50, and income tax provisions so arranged that few noncommissioned seamen had to pay any tax.
Plans for Seamen
Some of those gains will have to be held, in the postwar, and some of the other disabilities removed. Work Is being done right now, for instance, on a Federal law of workmen’s compensation for seamen. Unemployment risk will probably be mitigated, at least in some degree, if the Navy carries
through its plans for peacetime training —Royal Canadian Naval Reserve men would do a spell of active duty from time to time, and these spells could be made to coincide with slack times in the merchant trade.
All this, of course, will cost a certain amount of money, but it won’t be a big item in a moderate defense budget —and it’ll be a sound defense expenditure.
As for our ships, the outlook there isn’t as black as it might seem at first glance. With a realistic price policy, added to the fact that our North Sands is a better ship than the Liberty anyway, we have a reasonable chance of selling our surplus of 10,000-tonners. Moreover, just lately we’ve started to build a new modification of the North Sands ship—stripping her down to 7,500 dead-weight tons and powering her with Diesel engines good for 15 knots. Finally, we have an overlooked asset in our 4,700-ton freighter, of which we have built 31.
Lewis and Kroger found opinion unanimous among British and American shipping men that this smaller craft is Canada’s best bet for postwar trade. She’s free of most of the drawbacks of our 10,000-ton freighter— cheaper to run, has a small enough capacity to be profitable for the secondary runs, and a shallow enough draft for little harbors. And she’s within the capacity of Canadian shipyards to build efficiently—right now we’re building some for Brazil.
Most shipping men think that if we go cautiously, spend our subsidy money on routes essential to Canadian trade or on pioneering new ones that might help it, and concentrate on the type of ship best suited to our needs and capacities, Canada will be able to maintain the kind of merchant fleet she needs, without entering a subsidy race. In time, in a modest way, we might even build up a merchant navy that could operate without help.