June 12, 1925 (14th Parliament, 4th Session)

LIB

William Duff

Liberal

Mr. WILLI AN DUFF (Lunenburg):

Mr. Speaker, in the absence of the hon. member for Brome (Mr. McMaster) I beg leave to present the sixth report of the special committee appointed to consider the resolution giving the government of Canada control over certain ocean rates.
The report is as follows:
The special committee to whom was referred the resolution of the House of Commons of date March 20, 1925, beg leave to present the following as their sixth and final report.
Your committee have held forty-six meetings, have heard thirty-six witnesses and have had produced before them a large number of documents of which one hundred and two were filed as exhibits.
Mr. Gordon W. Scott, C.A., has examined and reported upon the figures supplied him by the steamship companies and has also made certain test examinations of the books of the Canadian Pacific Railway steamships. The committee have had before them Mr. H. J. Symington, Iv.C., while the conference lines were represented by Messrs. A. W. Atwater, K.C., G. H. Montgomery, K.C., E. P. Flintoft, and C. Russell McKenzie; while Mr. H. H. Donald appeared on behalf of Sir William Petersen.
Without attempting to fully review the evidence which is produced herewith, it may be noted that the findings of the special committee on Agricultural conditions, which sat during the session of 1923, to the effect that a conference or combine of steamships trading in the north Atlantic existed, and that such conference or combine fixed rates, has been amply borne out in the course of the inquiry held by your committee.
Indeed, on the present occasion the steamship companies admitted the existence of such a rate-fixing conference, coupling their admission with the contention that the conference system was of public advantage, and that the rates charged under it were fair and reasonable to the shipper; indeed, contending that they were at this time too low to give an adequate return to the steamship owners.
Be that as it may, the following facts should be noted:-
Although fairness demands that it be admitted that operating costs of all businesses have greatly increased over pre-war levels, yet the increases which have been brought before us in the transportation costs of certain commodities show certain of these altogether out of line. Thus, although wheat and flour, constituting a preponderating proportion of the exports from Canadian ports, are now carried at rates closely approximating those which prevailed eleven or twelve years ago, although certain other rates show increases of 25 per cent, of 53 per cent, of 76 per cent, and others approximately 100 per cent, others again present increases which are startling. Thus, evaporated apples in boxes have increased 150 per cent; binders, cultivators, mowers, reapers, threshing machines, 249 per cent; hardware, 262 per cent; organs, 400 per cent; while packed meats, bacons, hams, etc., show an increase of 119 per cent; butter in ordinary storage of 170 per cent; butter in refrigerators, 181 per cent; eggs in ordinary storage, 214 per cent. The real reason for such extraordinary differences between the rates charged for grain and flour and those charged for other products above mentioned appears to lie in the fact that tramp competition is an important factor in the fixation of rates by the conference in regard to such products as grain and flour, while in respect to package freight, which as a rule cannot be shipped in entire cargoes, the liners in the conference enjoy a quasi-monopoly. The main object of this quasi-monopoly is to raise the level, or prevent the fall, of rates by united and uniform action, as admitted by the conference lines themselves.
The large shipper of grain or flour may and does employ tramp steamers to take entire ship loads of these commodities from north Atlantic ports to Europe or elsewhere. The shipper, be he large or small, of leather, butter, packed meats or manufactured articles, rarely has the relief which the tramp affords open to him, and therefore must pay the rates exacted by the conference lines, who, it is only fair to state, in return give to the exporter regularity of sailings and dispatch such as the tramp does not afford.
\ our committee spent a considerable part of their time in the examination of the question as to whether the rates charged by the conference lines were higher than they should be, as well as into the contention of the steamship companies that the rates at present in force and obtaining for the past two years, did not give them an adequate return on their investment. The auditor of your committee, upon figures supplied him by the steamship companies, presented a statement showing that in the year 1923 the cargo steamers engaged in the North Atlantic trade, before charging layup expenses and depreciation, made a loss of $929,963; while their passenger-cargo steamers in the same year, before charging lay-up expenses and depreciation, showed an operating credit balance of almost five and one half millions dollars; while during the next year the operating credit balance on the cargo steamers, before charging lay-up . expenses and depreciation, was $168,781; while in respect to the passenger-cargo
Ocean Shipping Rates

steamers for that year such balance, before charging lay-up expenses and depreciation, was $2,398,524. Upon the figures submitted, and taking the two years' operations together, the earnings realized would not be sufficient to pay an adequate percentage on the capital invested, together with proper allowances for depreciation. The differences of operating expenses brought out by Mr. Scott in his report (Exhibit No. 87, beg:nn:ng at page 897 of the printed evidence) were as follows:- Port charges varied from the maximum of 48.98 per cent to a minimum of 33.6 per cent of the total earnings; fuel varied from 28.7 per cent to 8.6 per cent; insurance varied from 10 per cent to 2.5 per cent; repairs varied from 9.2 per cent to 2.7 per cent; management, commission and brokerage, general expenses, etc., varied from 16.9 per cent to 6.8 per cent. These differences may be due in part to different modes of book-keeping pursued by the various conference lines, but may also be due to the presence in the trade of ships differing so widely in cost of operation as to suggest the probability that certain of the ships either through age or otherwise may be unfitted for the trade.
Without questioning in any way the good faith of the lines, it must be remembered that Mr. Scott in arriving at his figures had to depend, to the extent of about 95 per cent, upon figures submitted to him by the lines, without an opportunity of verification, _ except in respect to the Canadian Pacific steamships in connection with which certain test examinations were made which were found satisfactory. It is of interest to the government and people of Canada to know exactly why such variation should exist in the operating expenses of the various lines serving Canadian ports and further investigation is desirable, if not imperative along these lines.
In the course of the examination of Captain Hocken, Master of the ss. Rio Dorado, one of Sir William Petersen's corrugated ships, and in the evidence of Sir William Petersen himself, strong claims were made as to the efficiency and economy of operation of such ships. It is submitted, however, that one voyage, or rather the result of part of a voyage from Hull to Montreal and thence to Hamburg, cannot be taken as sufficient evidence on which to base a definite conclusion as to the superiority of Sir William Petersen's corrugated ships over vessels of similar size but of usual construction. Apparently expert opinion has as yet not been thoroughly satisfied as to the advantages offered by this mode of construction.
It would appear, therefore, wise to obtain further information as to the earnings of the conference lines and their cost of operation, as well as similar data concerning Sir William Petersen's ships before attempting to pass judgment upon the contract referred to this committee. It would therefore appear advisable that a further investigation be made into the situation in order that there may be presented to the government of Canada a true and exact representation of the situation as regards the earnings and operating expenses of the north Atlantic shipping trade, and that such further investigation should be made as may be necessary to verify the correctness of the claims made on behalf of Sir William Petersen's ships, and for this purpose that, their earnings and operating expenses be accurately determined.
Meanwhile your committee feel that the situation demands that something should be done for the relief of shippers who find their trade seriously hampered through unreasonable ocean freight rates. To such persons it is no consolation for them to learn that the conference lines state that they are not making money and that the rates charged by them are said to be due to the desire of the steamship companies to recoup themselves for losses incurred in the carriage of other products below economical rates. High freight rates may be due to entirely different causes such as the expense of operating ships unfitted by age or conversion or otherwise for the trade, as has

already been suggested. The fact that the west bound traffic offers cargoes on the whole of less than 25 per cent has, of course, a tendency to raise east bound rates.
Various commissions and committees who have looked into this subject have expressed themselves as being alive to the danger to the public interest which arises through an uncontrolled monopoly.
If the conference system is to be tolerated-and effective action to restore open competition appears only possible by the united action of all the maritime powers of the world-some means of control must be sought.
The question of how such control is to be secured is not easy of solution. The placing of unduly onerous burdens upon ships trading to Canada might drive them to other ports. The legal power of Canada to legislate in respect to ships other than of Canadian registry is at best doubtful. It is to be remembered, however, that the foreign trade of Canada is of large actual, and of very great relative importance. Few nations have greater interest than ourselves in the obtaining of fair and reasonable rates for ocean carriage of our products to the markets of the world. The growth of our country in no small measure depends on our success in this direction and few other than ourselves are more interested in this growth than the steamship companies who now trade to our Canadian ports.
Your committee, therefore, in view of the foregoing and before pronouncing themselves either favourably or unfavourably on the contract would sum up their recommendations as follows:-
I. That the examinations into the books of the conference lines by Mr. Gorden W. Scott, C.A., be continued in Britain and elsewhere in order to determine whether the rates now charg d are excessive, to explain discrepancies in operating costs, to verify the figures submitted and in short to prepare an accurate representation of the north Atlantic shipping situation, the conference lines having declared their willingness to submit to such examination.
II. That he also be instructed to make like examinations into the books kept by or in connection with the ships of Sir William Petersen who has declared a like willingness, and that he should report his conclusions to the government on both phases of his enquiry.
III. That Sir William Peterson should be given an opportunity, if he so desires, of substantiating the claims made by him in respect to his ships.
IV. That to this end tests should be made of the actual performance of these ships in the north Atlantic Canadian trade under careful and expert supervision both of the earnings, operating costs, managerial expenses and performance at sea and in port of such ships.
V. Inasmuch as it is in the public interest that these tests should be made, and that they should be effective and fair to all parties, Sir William Petersen should be given the opportunity to demonstrate the economies of his ships under conditions which will ensure freedom of competition in the obtaining of cargo.
VI. That all members of the north Atlantic or other conferences trading to Canadian ports be required to file with the Board of Railway Commissioners all conference agreements, freight rate schedules, and such other information as may be desired, and that the board be constituted a tribunal for the hearing of complaints, and the recommendation of maximum rates.
It is to be noted that publicity is in itself a
strong remedial instrument for the correction of in-

Further Legislation
justice and unfairness. Great transportation companies, strenuously competing in respect to service for Canadian overseas trade, cannot afford to flout Canadian public opinon. It cannot be doubted that a great institution almost national in character, such as the Canadian Pacific Railway, should and it is believed would loyally comply with the recommendations of the Board of Railway Commissioners. Such action, coupled with similar action by the Canadian Government Merchant Marine would almost inevitably force the other lines trading to Canadian ports also to comply, and thus a reasonable effective measure of control might be looked for with some considerable degree of confidence.
VII. In order to ensure harmony in the control of shipping throughout the British Empire and that Canadian autonomy in all matters pertaining to shipping within the territorial waters of Canada be preserved beyond perad venture, your committee beg to recommend that the alleged conflict between the Merchants Shipping Act and the British North America Act shall be the subject of conference between the Canadian Government and the British Government at an early date.
VIII. It appeared in the course of your committee's investigation that a ship-owner desiring to obtain British registry for his ship need only present a Lloyd's certificate in order to establish the seaworthiness of his vessel, but that if he desires to obtain Canadian registry the ships must undergo an examination or survey by the Canadian government as well as that conducted by Lloyd's or some similar institution. Thus a very substantial and altogether unnecessary expense is placed upon the ship-owner desiring to obtain Canadian registry for his vessel and your committtee recommend that the Canadian regulations should be amended to remove this disadvantage.
IX. It would also appear that co-operative action among shippers to retain space would effect a substantial reduction in freight rates. This is exemplified in respect to cold storage for butter. The conference lines who charge almost as much to carry butter from Montreal to Liverpool as they do from New Zealand to Liverpool complain that their refrigerator space is made full use of for only a comparatively short part of the season, and that were they assured of adequate demands for their space, they could substantially cut the rate. It would appear that co-operation between shippers who could take firm a large portion of the refrigerated space offered, would obviate the difficulty in which the lines find themselves, and should greatly inure to the benefit of both parties. This solution would appear to be open to the produce exporters of this country, were the necessary faith in each other essential to successful co-operation present.
X. Your committee further recommend that the order of reference, reports, proceedings and the evidence given before the committee, together with a suitable index to be prepared by the clerk of the committee, be printed as an appendix to the Journals of the House of the present session and that 750 copies in the English language and 250 copies in the French language be printed in blue book form for distribution.
Your committee submit herewith for the information of the House a copy of their proceedings, the evidence given before the committee and also certain -documents filed with the committee.
All of which is respectfully submitted.
Andrew R. McMaster, Chairman.

Topic:   OCEAN SHIPPING RATES
Subtopic:   REPORT ON, AND ACTION CONCERNING, NORTH ATLANTIC STEAMSHIP COMBINE THE PETERSEN CONTRACT
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