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Principles of Ocean Transportation 1

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PRINCIPLES OF OCEAN TRANSPORTATION 1. American foreign trade is ocean borne.—Trade with Canada and Mexico, our immediate neighbors, is seldom included when foreign trade problems are discussed ; in trade, foreign is virtually synonymous with overseas. This is natural. The problems of foreign trade are to a large degree problems of dis tance, communication, time-consuming transactions. All these problems are emphasized when oceans are crossed.

In the United States the need for a sound national policy encouraging the development of American shipping is now thoroly recognized. Until the war, the attention of the American people has been directed inland.

Ocean transportation now looms up as a vital factor in the development of our growing inter national trade.

2. Ocean transportation.—While the railroad par takes of the nature of a monopoly, the ocean high ways are open to all. A ship can run from New York to South Africa or to Sweden in search of cargo. And the cost of equipping even a fairly large steamer is small when compared with the outlays required be fore a railroad train can begin its journey. Competi tion is therefore keen in ocean transportation and it follows that the tendency toward combination as a means of escape from the results of ruinous rate wars is strong.

It must not be assumed, however, that competition is wholly unrestricted. The ocean is free, but it is necessary for ships to have access to convenient and economically situated wharves. Control of terminal facilities constitutes, therefore, a means of obtaining monopoly control and the large transportation com panies have not been slow to seek some measure of control over them. Lighterage privileges, thru rate agreements, and a multiplicity of other methods are also open to them.

3. First costs.—The form which competition takes is largely determined by the cost of its elements. Every factor influencing the cost of performing a service offers an opportunity for changing the relative competitive position of those engaged in an industry.

Government aid, for example, may take the form of reducing a cost or excessive payment for supposed service rendered.

The cost of ocean transportation is influenced by several factors. The first cost of the vessel will figure in cost as a constant overhead of interest and depre ciation charges. The greater the first cost, the greater the overhead; in such case the ship owner must carry freight at any price rather than face the heavy expense of idleness.

4. Operating cost.—The operating cost of a vessel depends on the consumption and cost of fuel, the size of the crew, the rate of wages, and the rate of insur ance. With the exception of the item for fuel, prac tically all these factors remain fairly constant and continue whether the vessel is in use or idle. For this reason it is important to make the most complete use of the vessel during its lifetime. In order to operate economically, a vessel must be loaded to its full ca pacity, must complete its voyage in the shortest pos sible time and spend a minimum time in port.

Each of these elements of cost may become a de termining factor in the competition between indi vidual ships and between the merchant marines of dif ferent nationalities.

5. Tannage, gross and net.—The capacity of a ship is expressed in tons. A ton is held to be 100 cubic feet. We speak of gross tons or net tons. The fig ure obtained by dividing the capacity of the ship ex pressed in cubic feet by 100 is called the gross tonnage of the vessel. Net tonnage is the tonnage capacity of the vessel available for cargo or passengers.

The methods of ascertaining tonnage differ slightly in various countries.

It is asserted that American ships are under a dis advantage as compared with English ships because the American method of measuring results in a higher net figure. The disadvantage, if any, is over-rated, since most ships engaged in foreign trade carry docu ments indicating their net tonnage according to Brit ish as well as American practice.

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