OMNIBUS MARITIME BILL THURSDAY, NOVEMBER 29, 1979 HOUSE OF REPRESENTATIVES, COMMITTEE ON MERCHANT MARINE AND FISHERIES, Washington, D.C. The subcommittee met at 10:17 a.m., in room 1334, Longworth House Office Building, Hon. John M. Murphy (chairman) presiding. Present: Representatives Murphy, McCloskey, and Melvin H. Evans. Staff present: Larry O'Brien, Gerry Seifert, Peter Kyros, Tom Kane, Paris Russell, Steve Little, Bob Devoy, and Jack Sands. The CHAIRMAN. The subcommittee will come to order. This morning the subcommittee continues its consideration of H.R. 4769, a bill to revitalize maritime policy, reorganize certain Government agencies, and reform regulation of maritime affairs in the United States. This is the 20th day of hearings on this legislation. We will continue with testimony from Mr. Luther H. Hodges, Jr., Under Secretary of Commerce, Department of Commerce, whose views on the reorganization proposed under H.R. 4769 will be of great interest and assistance to the committee. Further, we will receive testimony today from Mr. Ron C. Lord, general manager, Pacific Cruise Conference; and Mr. Paul J. Tierney, president, Transportation Association of America. Secretary Hodges, it is a pleasure to have you here before the committee today. Your name, of course, is well known throughout this Nation. Your father, of course, being one of the great Secretaries of Commerce, and I had the great pleasure of serving in the Congress when he was Secretary, and we welcome you today. STATEMENT OF LUTHER H. HODGES, JR., UNDER SECRETARY OF COMMERCE, U.S. DEPARTMENT OF COMMERCE, ACCOMPANIED BY SAMUEL B. NEMIROW, ASSISTANT SECRETARY FOR MARITIME AFFAIRS, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE Mr. HODGES. Thank you very much, Mr. Chairman. Gentlemen, I am very pleased to have the opportunity to appear before you to present the views of the administration on its proposals for reorganizing maritime policy functions and on those set forth in title V of H.R. 4769. I believe you have copies of my testimony. I will summarize it quickly. I believe the Carter administration has responded effectively to the problems of our merchant marine through the interagency task force, which was the first major initiative in the maritime field by any administration since the 1970 act was implemented. The results of the task force study were set forth in the July 20, 1979, letters from President Carter to you, sir, and Chairman Inouye which, as you know, presented a number of major policy recommendations, including enactment of the administration's dry bulk proposals. The President's letter also clarified the process of administration policymaking in the maritime area. The primacy of the Federal Maritime Commission over the regulation of liner shipping was reaffirmed. Importantly, the Maritime Administration of the Department of Commerce was designated as the administration spokesman in maritime matter but, of course, the views of other agencies on maritime matters will continue to be coordinated through the established policy process. Mr. Chairman, it has been argued that the principal significance of maritime policy today is its relationship to U.S. trade, and certainly there is overlap between trade and maritime policies. However, there are also differences between trade and maritime policies, especially in the regulatory area. The maritime industry needs long-term stability and an even-handed administration of regulatory policies, and it would not be appropriate or effective to tailor our domestic regulatory policies to international trade negotiations. Where adjustments have to be made, they can often be handled through international agreements negotiated by other agencies. These differences are also apparent in the maritime programs of the Maritime Administration. Defense and national security considerations are vital elements in our maritime promotional policies. Their relevance for trade policies, although strong, is less direct. The implementation of our maritime promotional programs involves making judgments in such specialized areas as ship design, liner operation, and corporate finance of a highly specialized and relatively small industry. As a result, expertise in the administration of general trade promotion programs and in international commercial negotiations would not carry over to the maritime area. Placing both functions under the same roof, we feel, would adversely affect our ability to carry out either of them efficiently. Yet the relationship between our maritime development programs and the overall trade policy of the United States is strong enough to keep the lead responsibility for maritime policymaking in the Department of Commerce. Only then will the Maritime Administration, which has operational responsibility for our promotional programs, continue to work closely with the agencies in the Department which will have primary responsibility for trade implementation. Only by keeping the administration of MarAd and International Trade Administration separate within the Department, however, will the specialized requirements of maritime and trade policies each continue to receive full attention. Implementation of the administration's Reorganization Plan No. 3 will strengthen the coordination of maritime and trade policy development. The broader responsibilities for overall trade implementation, which will be given the Department, will insure that all ramifications of trade and maritime issues can be explored, and that coherent policies can be developed and enforced. The capacity of the Department to monitor commercial conditions abroad, including conditions in shipping, will be strengthened by the transfer of responsibility for commercial attachés to the Department. Passage of the reorganization plan will also enhance coordination between agencies in the Department of Commerce, including MarAd, and with the Special Trade Representative. The broad responsibilities granted to the reorganized office of the STR, the new U.S. representative, under section 301 will insure that negotiations over problems in world trade in services, including shipping, are coordinated on the basis of an overall trade policy framework. It has been suggested that maritime policymaking should be included within the scope of the President's Trade Reorganization Plan No. 3. In effect, this would give the Special Trade Representative substantial authority over interagency coordination of maritime policy as well as control over any international negotiations concerning maritime matters. In our view, any such reorganization would impede, not enhance, maritime policymaking. The U.S. trade representative is not an appropriate agent for the formation of maritime policymaking. That office would lack the resources, expertise and continuity needed to develop ongoing maritime programs. These resources are better supplied in a Cabinet office. It has also been suggested that MarAd be merged into the international trade agency within the Department of Commerce. We also believe that the Maritime Administration should continue as a separate agency within the Department. So long as there is an Assistant Secretary concerned only with maritime promotion, maritime interests will be presented vigorously within the Department. The Secretary of Commerce has traditionally worked closely with the Assistant Secretary for Maritime Affairs to insure that maritime interests are considered at the Cabinet level. Where there is any overlap between maritime interests and the activities of the U.S. trade representative, maritime interests will be expressed through the Department of Commerce, which will be on the Trade Policy Committee established by the Trade Reorganization Plan No. 3. Moreover, we oppose any change in the role of the FMC in maritime matters. The FMC is a quasi-judicial, regulatory agency. It was not intended to make maritime policy but rather to oversee the impartial application of the shipping laws. It should continue to be free of the Executive policymaking process in its oversight of liner shipping in the U.S. trades, in accordance with congressional mandates. The U.S. trade representative should not be given any authority to review the decisions of the FMC, as has been suggested in title V of H.R. 4769. This would impair, not enhance, the primacy of the FMC in regulatory matters. It would also be a step back from the development of more rapid and efficient adjudicatory procedures. Finally, the granting of such responsibility to the U.S. trade representative would unnecessarily burden that office and would impair policymaking functions on maritime matters within the Administration. This concludes my prepared statement. I appreciate the opportunity to present those prepared remarks and would be happy to answer any questions along with Mr. Nemirow. The CHAIRMAN. Thank you, Mr. Secretary. We certainly appreciate your statement. The Maritime Administration originally was an independent agency and when the Department of Transportation was formed, the original organization plan at the time had the Maritime Administration going into the Department of Transportation. The Secretary, when questioned as far as his philosophy and feelings about maritime programs, made the statement that, well, all the U.S. needs is 250 ships to handle its foreign commerce. Well, that comment so inflamed the industry and the labor areas involved with the industry that they came to the Congress and said we do not think that the maritime should be in the Department of Transportation under that type of philosophical leadership. We feel that it should be in the Department of Commerce, and the Congress responded to that entreaty and maritime, even though it, by any yardstick, is a transportation mode, is in the Department of Commerce today and not in the Department of Transportation. And we see certain offices being set up under the Secretary's level in DOT consistently, let us say, eyeing the dearth of Commerce as far as maritime is concerned with probably the intent at some time in the future of trying to move maritime into the Department of Transportation. But people, knowledgeable people and interested in maritime matters, felt that in Commerce, maritime would be buried or probably served or not served and wind up in a tertiary role behind railroad, truck, airline interests which are so much vaster in their political and economic significance in our national scene. We look at our budget-what did we come in with? Under $500 million in the whole subsidy program for maritime. Well, that is about half of what DOT sends up to help run the New York City subway system every year. So, in comparative areas, maritime today is a neglected area and we found that we have not heard the Secretary of Commerce at the Cabinet level speak out forcefully for maritime interests. I think the reorganization elements in 4769 reflect back that the voice of maritime has not been adequately expressed through a Secretary of Commerce, and I think that is why we find the special trade representative's office as almost a compromise between different voices on this committee in the intent of having someone at the Cabinet level fully speak for and raise the level of significance of maritime affairs to the President and not be subverted by the interests of the State Department, the Treasury Department, the Justice Department and some other departments. We certainly feel that we should have allies at the Cabinet level in labor, in trade and, of course, we should certainly be the prime, say, concern of the Department of Commerce because I think, in effect, the Maritime Administration is probably the largest agency within the Department of Commerce. That is one of the problems that this committee has seen over the years is that visibility and that forceful voice at a Cabinet level that is not placed so far down in the priority area, and that is why probably my first question to you would be do you not think that if maritime was put in with trade, even though under Reorganization Plan No. 3, you feel that the Secretary of Commerce is recognized, but we feel that that visibility question, that prominence question, that priority question as to who will be the spokesman and whether Commerce can do it or whether the recommendation of 4769, that it be a policy function of the special trade rep? Mr. HODGES. Your points are well made, sir. I am here because of my concern as today, Acting Secretary, our concern for interests and support of the Maritime Administration and maritime policies. I believe the Secretaries in the past have spoken out on critical issues. I am pleased that the decisions were reached to leave the Maritime Administration in the Department of Commerce. I think it is related obviously to many commercial activities of our country and to trade, as you point out. I think there is much that we can do together, and I intend to see to it that we work in that direction. Your points about the trade representative of the U.S. Trade Representative, not unlike those made by others who wanted to form a new trade department or wanted to expand the Trade Representative's Office dramatically with the transfer of Treasury functions and other matters because the Commerce Department had not been aggressively involved. I think that the Commerce Department will, under the new reorganization, be a very vigorous and effective spokesman on trade matters. I think it is very important that we enhance, as is being done in the trade organization legislation, the Department of Commerce overall, and it will speak forcefully on trade matters. I do not think our problem is international per se. I think our problems relate to domestic business, all businesses, and the rebuilding of domestic business which is the concern of the Department of Commerce. So I feel that the trade reorganization is a major step forward for the Department of Commerce and for this country's economic development. I think that we, the Department of Commerce, can continue its close role with the Maritime Administration and be the effective, vigorous, prominent spokesman that you desire, and that I recognize continues to be needed. The CHAIRMAN. The President's letter of July, which you referenced in your opening remarks is, of course, well received by the committee because it really does get into the policy areas of maritime. How do you feel about the question of cargo preference? Mr. HODGES. I am aware of the debate. Certainly I share the opinion expressed by the President on bilateral negotiations that we should be certain not to be taken advantage of, we should not turn to it necessarily. But they are appropriate in some instances but not as a general policy. The CHAIRMAN. Well, in your remarks you said that the President's letter was really the first statement of policy and movement to affect maritime since the 1970 act. Yet the 1970 act was only half an act. It was an act to build ships, 30 ships a year for 10 years, in effect, but we did not have any mechanism to insure cargo for those ships. Here we are in a world whose competitive nature has forced countries to adopt cargo preference or cargo reservation policies, |