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Mr. WHEELER. Well, really I think they are both interrelated, sir. Mr. RUPPE. What is the goal?

Are the Navy's goals in this study those that you have indicated? Mr. WHEELER. Yes, I think the goals are to determine whether the shipbuilding industry is capable of supporting the United States in time of war.

Mr. RUPPE. Well, is there a connection between the stated health and size of the shipbuilding industry and the capability of the Merchant Marine to support the services in time of war, recognizing the time frames are a good deal different?

There must be one, but I would like to get at the connection. What type of shipbuilding industry do you feel is necessary for this country to have in terms of supporting a military effort?

Mr. WHEELER. Well, I think first of all what is actually taking place at the moment within DOD with MARAD's cooperation, is to determine the circumstances under which we would have to have this shipbuilding support given.

One of the recommendations that came out the Seapower Subcommittee was that the Department of Commerce and the Department of Defense should get together and determine the basis for this study. This study is now going on.

Mr. RUPPE. When will it be completed?

Mr. WHEELER. The first portion has, I believe, just been completed. It has not been issued yet and the longer range program which will examine requirements over a long contingency period will probably be out later this year.

Mr. RUPPE. When do you think the short form report will be available to this committee, sir?

Mr. WHEELER. I would say probably August or September, within that time frame.

Mr. RUPPE. But do you see in this report a determination that, indeed, there is a close connection between our shipyard capacity and our ability to service the needs of the military in time of war? Mr. WHEELER. I would say very definitely.

Mr. RUPPE. Will they come up with any statistical or any other type of analysis as to what type of shipbuilding capacity we should have?

Mr. WHEELER. This is also being done.

Mr. RUPPE. There will be some firm recommendations in this study? Mr. WHEELER. Yes, sir.

Mr. RUPPE. In terms of our national shipyard capacity and the level of that capacity to meet DOD needs?

Mr. WHEELER. Very much so.

Anytime the Department of Defense goes forward with a shipbuilding program in today's context we have to assess the capability of the shipyards to handle that program.

You know, this is constantly going on, Mr. Ruppe, in real life today, and so you start in working with MARAD in their potential programs and you have to make a determination as to whether the capabilities will not only handle DOD, but MARAD's projected

programs.

From there, you attempt to determine whether the industry then can handle contingencies on up to a long-term war.

In other words, this is a long range of studies that you make of the industry.

I might say, not only is this done in shipbuilding, but ship repair capabilities which are a very important part of this.

Mr. RUPPE. I note on page 4 your reference to the shipbuilding capacity being presently and over the years developed by the Russians. Is that shipbuilding capacity designed to expand Russian trade and if you will, Russian influence worldwide, or do you see it as an expansion of capacity to, in the long term, offer Russian competition. for world cargoes?

Mr. CARL. It certainly is both parts that you mention.

The expansion of the Russian merchant marine has been very large in the last few years and the Russian bloc countries now, those that are capable, all have shipyards and they are producing a great deal of merchant ships that are becoming competitive with U.S. flag by undercutting rates.

Mr. RUPPE. Are the Russian ships actively fighting with U.S.-flag ships in the terms of reaching for world cargoes?

Mr. CARL. Oh, yes.

I am sure Mrs. Bentley of the Federal Maritime Commission would give you a great deal more information on this, but from our knowledge there is a considerable rate cutting of some of the Russian ships. Mr. BENNETT, Could I add one thing to the last question that you asked, Mr. Ruppe?

One of the questions that has come up that we are vitally interested in, in terms of the shipyard capability, is our ability to build, revitalize and modernize our current Navy combat capability.

The question comes up whether we can build to a 550-ship Navy or a 600-ship Navy, and what-have-you.

I would just like to add for the record that we believe the shipbuilding capability that exists will meet our Navy shipbuilding requirements for fiscal year 1975 and fiiscal year 1976.

Mr. CARL. One other thing I think in this latest issue of the "Defense Transportation" magazine, I note in here that there are 80, Madam Chairman, that is 80 passenger ships in international trade that the Russians have.

Mr. RUPPE. Do the Russians Armed Forces and the Russian Navy use the merchant marine as an adjunct or support for the naval forces? Do they look at the merchant marine in terms of international trade, international competition or in terms of a direct support force to the Russian Fleet?

Mr. CARL. Yes, they do.

Mr. RUPPE. Skipping over to page 17, you indicate that mobility studies and analysis indicate that various resources are inadequate for a major contingency and require the NDRF and allied vessels.

Do you consider the NDRF and the allied vessel fleets a viable and capable reserve, in view of the fact that your other assets, as you identify them, are not totally adequate?

Mr. BENNETT. I would have to say we do not consider the NDRF as a complete answer, but we do consider it filling an essential need. We have some limitations there, the ability to get ships out within the first 10 days, and the ability to have newer ships like the Mariner.

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Mr. RUPPE. Have you actually made any assessments as to the capabilities of that fleet and the availability of allied vessels, so that you would have some specific recommendations to make to the Congress in terms of evaluating the need for new or additional reserve fleet vessels? Mr. BENNETT. Yes.

Mr. RUPPE. Do you take into account in those studies the numbers and availability of allied vessels at the same time?

Mr. BENNETT. That assessment has been made by the Navy in part of our program in budgeting this year.

The Navy will make a recommendation. That recommendation is essentially over the next 5 years, to spend approximately $25 million to bring 30 ships up to a state where they could be brought out in 5 to 10 days and be used immediately to help us in any contingency. Mr. RUPPE. If that operation were carried out, do you feel the reserve fleet, plus allied shipping available to the United States is sufficient, then, with our other assets, to meet national emergency needs?

Mr. BENNETT. No.

Mr. RUPPE. What additional assistance would you have to have for additional ships in a reserve fleet potentially available to you to actually meet the goals that you have set for yourselves?

Mr. BENNETT. I have directed my staff to answer those types of questions.

I think that it is very timely for us to do that now, and I think the motivation essentially for us to do that is the ending of the Vietnam conflict in which we are now going to have to turn some ships back from our MSC Fleet. There is a whole series of interrelated factors that have to be considered.

Mr. RUPPE. You also indicate that the control fleet should not be considered a substitute for U.S.-flag shipping.

Do you consider it as much of a substitute or readily available today as it might have been 5, 10 years ago, or, let us say, in 1941?

How would you assess your ability to put a reach on those ships today as compared to past years or past emergencies?

Mr. CARL. Conld I ask, sir, which specific fleet?

Mr. RUPPE. Well, you can start with the two or three largest.
Mr. CARL, Could we reach them?

Mr. RUPPE. Well, I am saying, the control fleet is not, as you indicate, a substitute for U.S. shipping.

I am saying, is it more or less a substitute?

Is it more or less reachable, or controllable today than it was 10, 15, or 25 years ago?

Mr. CARL. The controlled fleet, and I am assuming we are talking about the nucleus fleet.

Mr. SHAROOD. He is referring to the so-called effective force.
Mr. CARL. Is it reachable?

That is an awfully hard question to answer for a few reasons, Mr. Ruppe.

There was uncertainty. for instance, as to the availability of Liberian ships during the latest Mideast crisis, in view of a Liberian executive order issued at that time. On the transfer of all these ships that come from the United States to foreign-flag, they have a provision that in theory they do come back to us. That is merely theory.

If we are in an unpopular action that the rest of the world does not approve of, no, they may not be available to us, and another point is that a large part of the effective controlled fleet, and I am not downgrading its importance, but many of those ships are just not the type of ships the military can use.

They are tankers, and they are bulk carriers; so that is the problem. And, in addition, some of the effective controlled fleet would not cooperate, I am sure some would, but we do have those two problems.

Is the country they are carrying the flag of on our side in the first instance; and, secondly, are the ships of the types that we could use in the military?

Mr. RUPPE. Do you know if Liberia did it for economic reasons, the threat of a cutoff of national assistance or oil supplies, or was it a political decision made to perhaps play, on their part, a role in the Mideast, to give political support for one side or the other?

Mr. CARL. Probably political; but I am not sure.

Mr. RUPPE. In this day and age, with Third World countries showing more independence, I would guess you would not agree that the so-called controlled fleets would probably not be available to us as they might have been in the past, perhaps when these countries did not identify themselves in playing a role in international affairs, or being called upon for ideological purposes for taking a side.

Mr. CARL. Yes, sir, I agree with you.

Mr. BENNETT. I would also agree.

I think the trend is in that direction.

We can see such actions such as the possibility of Portugal denying Lajes to us as indicative that we can probably expect more of that in the future.

Mr. RUPPE. One or two more question, if I might, Mr. Chairman. We all have to work on the assumption that the U.S. merchant fleet is available to the military in time of war. But would you estimate or would you accept the thesis that I might offer that probably more of our merchant shipping today is involved in bringing raw materials to this country and resources to the United States upon which our factories depend, and we have this dependency on imports of trade much more than we had, let us say, in World War II or at the beginning of World War II? This leads me to wonder whether indeed a major portion of U.S. merchant shipping would be available to the military as it was in 1941, without perhaps curtailing U.S. industry in terms of availability of raw materials or other essential

resources.

Mr. BENNETT. I think that is a logical conclusion. That is closely related to a conclusion that we reached in the strategic materiels area study that we now have going on.

Mr. RUPPE. Will you reach the point as to how much of the merchant marine fleet could be separated out from its normal or commercial carriage?

Mr. BENNETT. No, the other study that I was referring to is a Joint Chiefs of Staff study relating to how much critical materials we could release and sell back to the economy.

We were not addressing that particular question there, but we did get into the shifting of more dependence, that is, more and more dependence on external materials over a period of time.

We could extend in that particular area.

I think it would probably be a good idea to try to answer that question later.

Mr. RUPPE. I think it would be interesting to know how much of the merchant shipping would be available without really crippling some of the essential lifelines to the United States.

Admiral MOORE. One thing we have to consider in addition to your comment is the current makeup of the U.S.-flag fleet as compared to prior years. We have fewer ships. However, they are very productive and cost effective.

The very modern U.S.-flag ship has in itself the capability of doing what six general cargo ships did in 1941. Maybe that is not an accurate comparison, but they are much more productive, much more costeffective ships; but fewer in number.

You have a number disparity when we start trying to allocate parts of ships. We have to take a whole ship or nothing. So it becomes really a serious problem when we look at fewer numbers in trying to determine how many ships are going to be diverted to defense use and how many will remain in the commercial trade. The type of ships and the environment in which they are used are also vital considerations.

Mr. RUPPE. But since each ship is a very important unit in your calculations, you almost, of necessity, have to come up with those calculations, do you not? Will they be part of the study to which you referred?

Mr. BENNETT. We can provide that kind of information, and we will take a look at it and provide you the best information that we can later.

[The following was submitted:]

IMPACT OF DIVERSION OF U.S.-FLAG VESSELS

In response to your series of questions regarding impact of diversion of U.S.flag vessels, a differentiation must be made between a major war and a relatively minor contingency. Further, in either situation the distinction must be drawn between general cargo ships and the carriers of petroleum and dry bulk products such as ores and grain.

In a major war situation the impact of direct defense shipping requirement is on general cargo ships. Conversely, we believe that the most critical U.S. civil requirements would be in the area of bulk imports, requiring ore carriers and tankers. Direct defense shipping requirements would not compete with civil requirements for dry bulk shipping, and recent projections have indicated sufficient U.S.-flag tanker tonnage to accommodate defense and essential civil import needs. The domestic offshore trades would require general cargo ships for their essential needs. It is our understanding that these needs can be deferred to some extent in the earlier stages of a war. In the later stages, the very substantial allied or neutral general cargo fleet would probably be available, directly or indirectly, to provide this shipping.

In a minor, nonmobilized contingency, the problem is entirely different. Defense requirements would not compete with civil requirements, but a different kind of problem would exist. As far as U.S. foreign trade is concerned, this would probably be a business-as-usual period. The U.S.-flag general cargo ships we would need are normally fully employed on regular trade routes in competition with foreign flag ships. If the U.S.-flag ships were diverted to solely defense needs, their places would be taken by the foreign flag competition, and the U.S.-flag ships might find it difficult to regain their competitive position. This, of course, is the problem with activation of the Sealift Readiness Program, and the severity of impact would vary with the volume of foreign trade. We do not see this as an insurmountable problem, but we must satisfy the industry, the Maritime Administration and ourselves that all possible steps are taken to protect the competitive position of the U.S.-flag ships.

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