I mean we were in a period of national emergency.

Mr. MCCLOSKEY. The control issue would not even come up until we declared a national emergency, would it?

Mr. MASKIN. We do have a national emergency. We had one at the time.

Mr. MCCLOSKEY. Do you mean the one that has been in effect since the Korean war?

Mr. MASKIN. Yes, the one that has been in effect right along; yes. Mr. MCCLOSKEY. Page 16 of your testimony, you mentioned that Saudi Arabia has actually decreed a 100-percent preference.

Is that being carried out at the present time?

Mr. MASKIN. They cannot carry it out entirely at the moment. What they have said is that if there is oil to be exported from Saudi Arabia and if a Saudi Arabian ship is available, it would get the preference over any other ship.

That is, in effect, a 100-percent preference. They cannot implement it completely, because they do not have sufficient tonnage. But they are in the market to buy tonnage, and as we pointed out, in today's depressed tanker market they can acquire tonnage very cheaply.

Mr. MCCLOSKEY. You state:

In the depressed tanker market these oil rich countries can acquire relatively new unemployed tonnage at 25 percent of current construction cost for a vessel under 100,000 tons, and 50 percent of the current construction cost of a VLCC— and there are plenty of such vessels available for purchase.

Under those circumstances, should we continue with construction of the two tankers off the Brooklyn Navy Yard?

Mr. MASKIN. Well

Mr. DOWNING. It would be a good point to adjourn the committee to answer this rollcall, and you and your colleagues can be discussing that question while we are gone.

Mr. MASKIN. If I might just answer Mr. McCloskey quickly.

I would say that one of the tankers, at the last report, when the yard was closed at that time, was about 80 percent completed, and the other about half completed.

Mr. MCCLOSKEY. Is your answer yes?

Mr. MASKIN. Yes, to continue. Yes. I think it would be economically wasteful not to.

Mr. MCCLOSKEY. This is the degree of completion that has been adopted?

Mr. MASKIN. Yes.

Mr. DOWNING. The committee will recess for 15 minutes.

[Short recess.]

Mr. DOWNING. The committee will come to order.

The minority counsel has a question for you

Mr. SANDS. I was interested in the statement that you made on page

23 of your prepared statement. It is:

If what the committee has in mind is maximum benefit to the economy as a whole, one may readily hazard that aid to sectors employing far greater numbers of men, and a far wider industrial base would provide a more immediate and perhaps more effective stimulation.

Now, I would imagine that you define national security in different. terms than Mr. Jantscher. But are you basically agreeing that the basic thing to look at in maritime subsidy programs is the national security.

issue?

Mr. MASKIN. Are you asking me if I am stating that the basic justification for the maritime subsidy program is the national security benefit? Is that what you are asking me?

Mr. SANDS. What I am asking you is should that be the predominant rationale?

Mr. MASKIN. It is the predominant rationale in our statement.

Mr. DOWNING. Mr. Maskin, are you saying on page 9 that the Department of Defense actively promoted the so-called container revolution?

Perhaps you would like to comment on that. That is a rather interesting point.

Mr. MASKIN. Well, I believe, Mr. Downing, that anybody familiar with the history of the Vietnam war, of the carriage of military supplies during the Vietnam war, would agree that the Military Sealift Command, at any rate, did actively promote the development of the container ship concept; yes, sir.

Mr. DowNING. On page 17 you say, "that the only safe standard of defense is self-sufficiency in shipping. The actual quantitative measure of that standard we must leave to others."

What do you mean by "self-sufficiency?"

Mr. MASKIN. Well, we did cite the percentage requirements that are implicit in the Merchant Marine Act.

Those percentage figures, while they are not specified in the act itself, do appear in the legislative history of the act. It has generally been assumed that we should have a capacity sufficient to carry 50 percent of our foreign cargoes in peacetime, and 100 percent of our domestic cargoes.

I think that our experiences during World War II indicated that we had to engage in crash shipbuilding programs and even so it took us about 2 years to achieve a level of carriage of 50 percent of our cargoes, which is what we needed in order to win the war.

Mr. DOWNING. Self-sufficiency, 50 percent of our domestic require ments in peacetime, and 100 percent of our military?

Mr. MASKIN. Domestic, yes.

Mr. DOWNING. Requirement.

The committee will suspend until Mr. McCloskey returns. [Short recess.]

Mr. DOWNING. The Chair recognizes Mr. McCloskey.

Mr. MCCLOSKEY. Thank you, Mr. Chairman.

Mr. Maskin, of the 128 American-flag ships operated by the company, how many are dry bulk cargo ships, the kind that DOD testified that it needed?

Mr. MASKIN. Well, 35 of our ships are tankers, so that would leave a balance of 93 dry cargo ships.

Mr. MCCLOSKEY. Thirty-five tankers?

Mr. MASKIN. Thirty-five tankers, so that leaves 93 dry cargo ships, of which about 58 are container ships.

Mr. MCCLOSKEY. Would you be able to submit us a schedule of the tonnage ships?

Mr. MASKIN. Yes, I will be glad to.

Mr. MCCLOSKEY. In the trade routes.

Mr. MASKIN. I would be glad to submit a complete listing showing the types of ships and the tonnage.

[The following was submitted:]

Hon. PAUL N. MCCLOSKEY, Jr.,

AMERICAN MARITIME ASSOCIATION,
Washington, D.C., June 26, 1975.

Committee on Merchant Marine and Fisheries,
Longworth House Office Building,
Washington, D.C.

DEAR CONGRESSMAN MCCLOSKEY: In the course of my testimony on June 19th, during the Committee's oversight hearings on maritime policies, you requested that I provide you with a list showing the ships operated by AMA companies, their tonnages, and the trade routes they serve. (Tr, p. 305).

A list showing AMA's parent companies, their affiliated companies, the number and types of vessels operated by each, and their tonnages, is enclosed.

With respect to trade routes, I might note that four of the AMA companies listed here -Sea-Land, Seatrain, Waterman and Puerto Rico Marine Management-maintain regularly-scheduled liner services, utilizing containerships, LASH vessels and breakbulk dry cargo vessels.

These liner services are carried on between U.S. Atlantic, Gulf and Pacific ports and the North European, Mediterranean, Mideast, Far East and Caribbean

areas.

Our breakbulk carriers which are not in regularly-scheduled liner services, as well as our dry bulk carriers, operate worldwide, generally in the carriage of U.S. Government-financed cargoes such as P.L. 480, A.I.D. and military cargoes; while our tankers, in addition to carrying Government-financed cargoes worldwide, also operate, when cargoes are available, in the carriage of oil and petroleum products, under charter to oil companies or in the spot market, in both domestic and foreign commerce.

In response to another query. I offered to provide you with a list showing the chief executive officers of AMA's companies. (Tr, p. 310). This list is also enclosed.

Sincerely,

ALFRED MASKIN,
Executive Director,
AMA-Washington.

Enclosure.

AMERICAN MARITIME ASSOCIATION

DRY CARGO, CONTAINER, AND TANKER VESSELS, BY GROUPINGS AND AS REGISTERED BY MEMBER COMPANIES,

AMERICAN MARITIME ASSOCIATION-Continued

DRY CARGO, CONTAINER, AND TANKER VESSELS, BY GROUPINGS AND AS REGISTERED BY MEMBER COMPANIES MAR. 1, 1975-Continued

Mr. MCCLOSKEY. On page 11 you indicate between 60 million and 100 million tons of the world's tanker trade would be eliminated.

In view of this, do you think that there is a national security requirement in the United States to construct more tankers than are presently in existence or under construction?

Mr. MASKIN. Well, I certainly think that the security requirement, as we said in our testimony, continues unabated, that there is the need. Whether it is economically feasible in the present oil market to build tankers is another matter. It is not, of course, and this relates to your previous question about the "Seatrain" tankers.

I stand on my previous statement that I think it is worthwhile for us to complete the "Seatrain" tankers, since they are so well along

that it would be economically wasteful not to complete a national reSource which might have some value in the future.

But as far as other tankers are concerned, it obviously does not pay to build tankers nowadays in the world market or U.S. market, and in fact, tanker construction is being canceled in the United States, as well as all over the world.

Mr. MCCLOSKEY. When, in your judgment, did it first become apparent to you that further tanking construction should be curtailed or canceled in the United Statets? What date?

Mr. MASKIN. Well, shortly after the imposition of the Arab oil embargo when rates began to plummet very drastically.

Mr. MCCLOSKEY. What month would you give?

Mr. MASKIN. I would think about January of 1974, thereabouts. Excuse me, I would like to refer this to Mr. Goldstein.

Mr. GOLDSTEIN. As Mr. Maskin said, the market broke sharply during the embargo. It did recover a bit once the embargo was lifted, as the countries replenished their inventories, and the real collapse commenced in the fall of 1974, once the recession started to impinge upon the movements of oil.

So I would say around September or October of 1974.

Mr. MCCLOSKEY. September or October 1974.

I understood your testimony was January 1974.

Mr. MASKIN. That was my original answer, because the rates plummeted sharply after the embargo, about October of 1973, and by January of 1974 they were down to a very low point, but as Mr. Goldstein has added, there was a subsequent rise.

Mr. MCCLOSKEY. Well, is it then your opinion that between January and September of 1974 it was wisest to start the construction of new tankers?

Mr. MASKIN. Well, I do believe-do you care to answer that?
Mr. GOLDSTEIN. I think I should answer it.

I think there was sufficient uncertainty for a prudent owner not to order new ships during that period, although the market did improve. But I think most of the owners tended to lose hope around September and October. They were sort of unsure before then, but sure by the fall that the market was going to collapse.

Mr. MCCLOSKEY. You state on page 19 of your testimony, "I hone the country understands what will only be too evident to the committee: The Department of Defense has frankly revealed a dangerous gap in our defenses,which it evidently fears is tending to widen.

What do you suggest this committee do about that?

Mr. MASKIN. Well, one thing that we could do would be to try to stimulate the construction of additional ships, thus decreasing the gap, and our position has been that the best way to do that is to provide cargo for them.

Mr. MCCLOSKEY. So you would like the cargo preference law to stimulate the construction of more merchant ships?

Mr. MASKIN. Yes.

Mr. MCCLOSKEY. Does your association, either formally or informally, make any attempt to make contributions to political candidates? Mr. MASKIN. Our association does not make political contributions; no, sir.