FOREWORD

Important developments affecting ocean freight rates have been taking place in many countries since the outbreak of war in Europe late in 1939. These developments have taken the form mainly of state control, since it has become imperative for the governments of belligerent states, and of neutral states in some instances, to assume emergency control over rates, at least on commodities essential to the life of those states, carried in national vessels.

It is the purpose of this handbook to summarize what has taken place in the principal countries of the world for which data have been obtainable, and thereby to supplement Trade Promotion Series No. 185, issued in 1938, dealing with peacetime control.

This study has been made in the Bureau under the general supervision of Thomas E. Lyons, Chief of the Transportation Division. JAMES W. YOUNG, Director, Bureau of Foreign and Domestic Commerce.

JULY 1940.

WARTIME CONTROL OF OCEAN FREIGHT RATES

IN FOREIGN TRADE

SUPPLY OF SHIPPING IN RELATION TO DEMAND

The basic factor-supply of shipping in relation to demand— influences the freight market in wartime as well as in peacetime. Naturally, it is moderate in its effect during periods of tranquillity, but precipitate in its action during periods of conflict. Ship space normally undergoes a process of continually adjusting itself to trade requirements, though it is impeded somewhat in this process by measures of political expediency, more notably subsidies. This tendency toward equilibrium is upset by the shock of war. With little or no notice ships are diverted or displaced from their usual routes and services. Belligerent countries use them for both military and commercial purposes, and are circumscribed in operating them by the extent to which one or the other belligerent controls the seas in particular areas. Nonbelligerent countries, moreover, often place restrictions on the employment of their ships-for instance, barring them from combat areas, as did the United States by its Neutrality Act of 1939, or requisitioning them for the carriage of essential national supplies, as did a number of European countries following the outbreak of war in that year. There may be, also, the occupation or invasion of neutral countries by belligerent forces, with consequent change in status of neutral shipping, affecting its operation in international commerce. In addition to all these disruptive influences there are the actual losses through warfare and the reduction in effective carrying capacity because of delays at contraband control stations and the use of the convoy system. Finally, any attempt to appraise the net effect of a given situation must take into account such counterbalancing factors as the amount of new-ship building, the rate of old-ship scrapping, and the degree of utilization of available ship space.

SHIP LOSSES AND SHIPBUILDING

During the early stages of a large-scale war there is a tendency for commercial shipbuilding on the whole to decline, for a number of reasons: First, in belligerent countries, there is apt to be an increased demand upon the yards and their personnel for naval work; second, in nonbelligerent countries, there are likely to be rising costs of construction, difficulties in obtaining materials and general uncertainties, all of which may tend to reduce output, at least of unsubsidized shipping.

It is not the object of this chapter to attempt a detailed analysis of the effect of the present European war on the supply of shipping in

1 Carrying capacity is reduced, moreover, by diversion to longer routes-such for instance as from the Suez route to the Cape of Good Hope route, the distance being about 2,400 miles farther from New York to Calcutta via the latter route than via the former.