Government loans for ship construction and through 
Federal loan guarantee programs. After major wars, 
Federally-owned vessels have been provided to pri- 
vate operators at bargain prices yielding a form of 
Federal aid identified by the Joint Economic Com- 
mittee as a benefit-in-kind subsidy. Discriminatory 
duties on foreign-built vessels during our early his- 
tory and the restriction of domestic waterborne com- 
merce to carriage only by vessels registered and 
built in the United States are two examples of regu- 
latory subsidies which have been provided. And 
finally, purchase subsidies, which accrue when the 
Government buys goods and services at higher prices 
than necessary, have been made available through 
Government mail contracts and through U.S.-flag 
preference requirements associated with the trans- 
portation of Government-sponsored cargoes. 
Thus, while the motivations for Federal assistance 
to the merchant marine have been numerous and 
varied, so have the programs through which such 
aid has been administered. In the rest of this section 
many of these programs and activities are described 
in greater detail in the context of their historical 
development. 
Maritime Aid Before 1936 “ 
For much of the first century of our history, Fed- 
eral aid to U.S. shipping and shipbuilding was con- 
fined primarily to indirect assistance provided 
through such devices as discriminatory duties on 
exclusively to vessels built in U.S. shipyards. This 
law, which was originally designed to protect the in- 
fant U.S. shipbuilding industry, remained in force for 
well over one hundred years before it was repealed 
in 1912. 
To aid the emerging ship operating industry in the 
early period, discriminatory tonnage duties were im- 
posed on all foreign vessels engaged in the US. 
coastal trades. This form of limited domestic trade 
protection continued into the early 1800s, but it 
was soon supplanted by more restrictive legislation 
enacted in 1808, which, for the first time, excluded 
foreign vessels altogether from participation in the 
carriage of U.S. coastal commerce. Cabotage laws 
reserving U.S. domestic commerce exclusively for 
vessels built in the United States and operated under 
U.S. registry have since been a consistent feature 
of U.S. shipping policy, although it was not until 
1920 that the noncontiguous domestic trades were 
included in these restrictions. Under the terms of 
Section 27 of the Merchant Marine Act of 1920, 
trade between the United States and its offshore 
territories and possessions (except trade with the 
Virgin Islands) was also reserved for vessels built 
in the United States and operated under U‘S. flag. 
The 1920 Act, commonly referred to as the Jones 
Act, is the legislative authority for contemporary 
cabotage restrictions. 
Before the Civil War, cabotage and U.S. registry 
restrictions were the primary forms of Federal aid 
46 Samuel A. Lawrence. United States Merchant Marine Pol- 
icies and Politics. Washington, D.C., The Brookings Institution, 
1966. This source has been used extensively in developing mate- 
tials for this section and many of those which follow. In many 
respects much of the material presented here constitutes a 
summary of the detailed account presented by Lawrence of the 
history of U.S. shipping policy. 
provided to the U.S. merchant marine, and, under 
these limited protections, the U.S. shipping and ship- 
building industries grew and prospered. During the 
first half of the 19th century, the United States at- 
tained a position of great prominence in shipping 
which reached its peak with the introduction of the 
famous clipper ships in the 1840s. But in the after- 
math of the Civil War the U.S. position rapidly 
deteriorated with the conversion from sail to steam. 
During the war, many U.S. merchant vessels 
were lost in action and many more were transferred 
to foreign registry by their owners in order to avoid 
involvement in the hostilities. Together these occur- 
rences substantially diminished the U.S. merchant 
fleet and, after the war, inflated U.S. prices and 
high taxes seriously hampered U.S. fleet recovery. 
In this same period England attained a substantial 
technological lead in steamship development. The 
ready availability of abundant coal close to the sea 
and the availability of a substantial pool of skilled 
iron workers provided Great Britain with unique 
advantages as merchant shipping entered the steam 
age. Although it had been the U.S. vessel Savannah 
which had made the first steam crossing of the Atlan- 
tic in 1819, England attained clear superiority in 
steam propulsion by mid-century, building iron and 
steel-hulled steam-powered vessels and replacing 
paddlewheels with more efficient screw propellers. 
To counter the U.S. shipping decline following the 
Civil War, a new federal subsidy program was in- 
augurated that authorized several U.S. lines to be 
operated under Government contract. The program 
soon collapsed, however, when it was learned that 
one of the major Government contract holders had 
expended large sums in lobbying for higher contract 
payments. Although bribery was never proved, the 
distaste for direct Federal assistance to the shipping 
industry persisted for many years after the 1872 
scandal.*” 
By the turn of the century, U.S. shipping had 
slipped to the point where ships of American registry 
47 Tbid., p. 35. 
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