What the Traffic Will Bear

Now that the U.S. has to pay closer attention to its foreign trade backing, some surprising facts are turning up. Example: it costs 50% more, on the average, for a U.S. exporter to ship his goods abroad than for a European or Japanese to bring the same products to this country. Not until President Kennedy's recent warning that this fact has begun to pinch U.S. exports did the Government start to do something about it. Last week, heeding Kennedy's call for "corrective action," both the Commerce Department and the Federal Maritime Commission began putting pressure on shippers to straighten out rates.

Losing "Third Markets." Partly be cause the U.S. has not been very export-minded until lately, few U.S. companies had even complained to Washington about the differentials. But the Congressional Joint Economic Committee got wind of the matter in May and tipped off Kennedy. The Congressmen --notably the committee's chairman, Illinois' Senator Paul Douglas--were shocked to learn that, for example, the freight for U.S. steel pipe and tubing outbound to Europe is $42.40 a ton, while the inbound rate is $22.62. Scotch whisky moves to New York at a shipping cost of 840 a case; U.S. bourbon heading in the opposite direction is nicked $1.35.

These discriminatory charges are one reason why U.S. exporters are also being nudged out of "third markets" by Europeans and Japanese who benefit from lower rates. Though Veracruz is nearly three times as far from Germany as it is from New York, a German exporter can ship plasticizers to that port for $43 a ton, v. $53.61 for an exporter from New York. The difference in charges is particularly damaging to U.S. exports of cheap, bulky products for which freight makes up much of the final price.

Rules of the Club. The rates are set by clubby "conferences" of ship lines, where less attention is paid to a cargo's weight and bulk or the distance to be carried than to what the traffic will bear. The conferences are dominated by foreign-subsidized lines, each of which is eager to promote its own country's exports. To discourage rate wars, the Commerce Department has insisted that its own subsidized lines adhere to the conference rates.

Ship-line executives concede that the rate schedule is "unscientific." But American President Lines Chief George Killion argues that the differentials on the Pacific are justified, because almost six times more cargo goes westward than eastward, and as a result there is hot competition between carriers for the small-scale eastbound Pacific freight. To Senator Douglas, this argument only proves that the conferences are cartels that hike their rates when effective competition is absent.

Douglas is notably disturbed that Maritime Commission Chairman Thomas Stakem has tolerated the differentials. By last week, Douglas had won a promise from the 15 U.S.-subsidized shipping lines to "study" the differentials, and was putting heavy pressure on the White House to replace Stakem. If he goes, a likely successor is retired Rear Admiral John Harllee, who was PT Boat Skipper John F. Kennedy's boss in World War II.

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