NATIONAL SECURITY/ECONOMIC BENEFITS

FRIDAY, AUGUST 1, 1975

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON MERCHANT MARINE OF THE

COMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met, pursuant to call, at 10 a.m., in room 1334, Longworth Office Building, Hon. Thomas N. Downing (chairman of the subcommittee) presiding.

Mr. DOWNING. Good morning.

The subcommittee will please come to order.

This morning we continue oversight hearings with respect to the national security and economic benefits associated with the U.S.-flag merchant marine.

Today is the final scheduled hearing with respect to this element of the oversight hearings, and we anticipate commencing with the construction-differential subsidy element after the August recess. However, after we have had an opportunity to carefully review the voluminous record compiled to date, it may be necessary to recall one or more witnesses concerning their testimony on national security and economic benefits.

Provision will be made to hear such additional testimony as we proceed with these hearings.

This morning the subcommittee looks forward to receiving the views of the Maritime Administration and the Staff Officers' Association.

Our first witness is the Honorable Robert J. Blackwell, Assistant Secretary of Commerce for Maritime Affairs, and a frequent visitor and friend of this committee.

Mr. Secretary, other witnesses, and people in the audience, as you know, these are hectic times. We are proceeding while the House is in session, and from time to time we may have to recess in order to answer calls. I hope that you will understand.

All right, Mr. Blackwell, you may proceed. You have a fairly long

statement.

Did you want to read it all?

STATEMENT OF HON. ROBERT J. BLACKWELL, ASSISTANT SECRETARY OF COMMERCE FOR MARITIME AFFAIRS, MARITIME ADMINISTRATION, DEPARTMENT OF COMMERCE

Mr. BLACKWELL. I would like to start off with some bad news and some good news, Mr. Chairman.

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First of all, the statement is long. It is 69 pages, and there are included in the statement the answers to 15 questions that have been asked by the Chair to the Maritime Administration. The good news is that I do not intend to read it, but do have a shorter version of the primary statement.

With your consent, I would like to offer the primary text for the record.

Mr. DOWNING. All right, sir; the entire text will be printed in the record, and you may proceed with your briefer version.

[The full prepared statement of Mr. Blackwell may be found on page 368.]

Mr. DOWNING. You may proceed.

Mr. BLACKWELL. Thank you, Mr. Chairman.

My statement today will address the positive contributions that the U.S. maritime industry makes to the national defense and to the national security and to the economic welfare of the United States.

We will also report to the Chair and to the committee on the manner in which the Maritime Administration has implemented Congress' maritime program in the years since 1970.

The purpose of that program as set forth in the preamble of the Merchant Marine Act of 1936 is to further development and maintenance of an adequate and well-balanced American merchant marine, to promote the commerce of the United States and to aid in the national defense.

Title I of the act states that the United States shall have a merchant marine:

(a) Sufficient to carry its domestic waterborne commerce, and a substantial portion of the waterborne export and import foreign commerce of the United States, and to provide shipping service essential for maintaining the flow of such domestic and waterborne commerce at all times;

(b) Capable of serving as a naval and military auxiliary in time of war or national emergency;

(c) Owned and operated under the United States flag by citizens of the United States insofar as that may be practicable, and

(d) Composed of the best equipped, safest and most suitable types of vessels constructed in the United States, and manned with trained and efficient citizen personnel, and supplemented by efficient facilities for shipbuilding and ship repair.

Congress reviewed, and substantially amended this act, that is, the 1936 act in 1970.

The Congress saw fit not to change that declaration of policy except for the reference to shipbuilding and ship repair.

In our stewardship of the maritime program we have attempted to follow this congressional policy guidance, and before I summarize the results of our efforts, I would like to address your question, Mr. Chairman, regarding the definitions of national security, national defense, and national interest.

National defense has purely military significance. Thus, the national defense role of the maritime industries covers direct support of military forces in deployment and resupply of land-based forces, and support of fleet elements, and construction and repair of naval and military useful merchant vessels.

National security includes all the concepts of defense, plus the support of our economy in wartime.

In peacetime, the merchant marine also contributes to national security, to the extent that it minimizes the economic and political pressures that the Nation could be subjected to if it were dependent wholly on foreign maritime powers for shipping services.

Finally, the national interest contributions of the merchant marine embrace both national security, with its defense component, as well as the general economic benefits that the industry provides in terms of commerce, employment, balance of payments and, indeed, taxes. The objectives of the maritime program are pursued largely through a system of subsidies to private industry. The subsidies cover no more than the differences between U.S. and foreign ship operating and construction costs so that U.S. ships and U.S. shipyards can compete on an equal footing with their lower cost foreign competition.

We, at the Maritime Administration, interfere as little as possible in shipbuilding and ship operating decisions that the industry must make in responding to forces of the marketplace.

At the same time, there is a need to provide for national defense and national security requirements. Mr. Chairman, these requirements, as you know, are not always totally consistent with the imperatives of the marketplace.

How well have we done in reconciling the sometime divergent interests in providing the well-balanced merchant marine called for in the act? Under the 1970 act there have been contracts for 58 ships with construction subsidies. Of these, 37, or 64 percent, can be used in direct support of military forces, and the Department of Defense has certified that 6 of the LNG's in the program can be used as military oilers. The Department of Defense has also stated that the larger tankers now under contract can also be used for military support when offshore deep water ports are available. When the 6 LNG's and the 12 large tankers are included, the total rises to 55 vessels, and the percentage rises to 95 percent. Furthermore, all of the ships contracted for under the 1970 act will contribute to national security by reducing American dependence on less reliable foreign-flag shipping services, and for moving essential imports in peacetime as well as wartime.

Moreover, Mr. Chairman, 132 of the 180 ships covered by operating subsidy are ideally suited for immediate support of military forces in wartime under Department of Defense criteria. Of these ships, 129 are break-bulk carriers, including barge carriers, and roll-on/roll-off vessels. Three are handy sized tankers. In addition, there are 45 container ships for efficient movement of military supplies in wartime, and 5 tankers and OBO's in the 80,000 ton to 90,000 ton range, potentially useful for military support, and immediately available for importation of strategic raw materials.

We believe that the program under the 1970 act has done reasonably well in reconciling the interests of commerce with national defense and national security. Moreover, to increase their usefulness and their survivability in wartime, all the ships built with construction subsidy have been fitted with certain national defense features as requested by the U.S. Navy. These national defense features are funded by the Maritime Administration.

Our concern for the national defense and national security also extends to the U.S. shipbuilding industry. Indeed, this is mandated un

der the terms of the act's declaration of policy, and more explicitly under the terms of section 210 of the act which calls for the creation and maintenance of efficient shipyards and repair capacity in the United States with adequate numbers of skilled personnel to provide an adequate mobilization base.

The shipbuilding program under the 1970 act has stimulated the investment of over $500 million in private capital to increase the efficiency of the shipbuilding industry. We are also working with the Navy to assist the shipbuilding industry with training programs to offset the effects of the debilitating high labor turnover rates that our yards today are experiencing.

For the maintenance of the shipbuilding mobilization base, however, the critical element is the shipbuilding program itself. Under modern defense planning assumptions, there will be little or no time to mobilize for war. In-being, active shipyards must be available. With the Navy, we are now studying wartime shipyard requirements, and there are preliminary indications that the adequacy of the present base would be just marginal. Yet, without the shipbuilding that is supported by the construction differential subsidy program, we estimate that 5 to 6 of the 13 major active U.S. yards might well be forced out of the shipbuilding business. Mr. Chairman, it is highly doubtful that the remaining capacity would be adequate for the mobilization needs of the United States.

But the Maritime Administration's responsibilities in areas of national defense and national security are not limited to just ships and shipyards. The maritime program also encompasses training of personnel, maintenance of the National Defense Reserve Fleet, emergency planning, and a readiness to assume control of wartime maritime activities.

The U.S. Merchant Marine Academy, under Maritime Administration guidance, provides military as well as technical professional instruction, and its graduates receive commissions in the U.S. Naval Reserve.

The National Defense Reserve Fleet, which we have carefully husbanded over the years, is now, despite its age, the only reserve of dry cargo shipping available in this country to meet the surge demands of military contingency operations without significant interruption of

our commerce.

Furthermore, we maintain an extensive emergency planning operation in anticipation of national defense and security needs in time. of war. This operation is coordinated with the Department of Defense, the U.S. Navy, and the Federal Preparedness Agency. Like the Department of Defense, we are now updating our plans to meet the pressing demands of war without warning. This is essential, because under existing laws and existing Executive orders, we must be prepared to assume operational control of the U.S. merchant fleet and the ports of this country as well as other aspects of maritime activity in wartime.

What is the capability of the U.S. merchant fleet in wartime? We have rigorously analyzed the wartime requirement for shipping and determined, along with the Department of Defense, that the U.S.flag fleet is only marginally adequate, with foreign-flag shipping expected to be available, to meet U.S. military and economic require

ments in a major war. Some 900 to 1,000 ships would be needed, depending upon operational circumstances, including several hundred NATO-flag general cargo ships and a small number of vessels from the so-called effective U.S.-controlled tanker fleet.

Our analysis shows that without the U.S.-flag ships that are supported by operating-differential subsidy, there would be a significant shortfall in wartime deliveries, even with full utilization of foreignflag assets expected to be available. It also should be noted that we would not automatically, and we cannot automatically, depend on shipping assistance from our NATO allies, except in a NATO war.

Mr. Chairman, I do not wish to belabor the subject of national security and national defense, but I do feel it is important to make it clear that we have at the Maritime Administration these responsibilities under the current law.

The Merchant Marine Act of 1970, which was passed with only two dissenting votes, explicitly extended these responsibilities, and the Maritime Administration, with considerable success, I believe, has endeavored to meet them.

Mr. Chairman, as you know from your many years on this committee, the relationship between our merchant fleet and our national defense and national security is not a new subject.

In the United States it has been studied and, indeed, debated since the early days of the Republic with consistent emphasis on the linkage between commerce and defense.

In 1793, Thomas Jefferson wrote to the House of Representatives, and I quote:

As a branch of industry, our navigation is valuable, but as a resource of defense, essential.

In times of war-that is to say, when those nations who may be our principal carriers shall be at war with each other-if we have not within ourselves the means of transportation, our produce must be exported in telligerent vessels, at increased expense of war freight and insurance, and the articles which will not bear that must perish on our hands.

Mr. Jefferson went on to say:

But it is as a resource of defense that our navigation will admit neither neglect nor forbearance. This can only be done by possessing a respectable body of citizen seamen and of artisans and establishment in readiness for shipbuilding.

Since Jefferson's time, we have become, in effect, an island nation. Today we would place greater emphasis on imports than exports in the context of war.

Otherwise, little has changed since Mr. Jefferson made that state

ment.

He did not address the means by which to secure the needed U.S.flag capability, and the subsidy system as we know it today was not established until 1936.

However, in 1922, Senator Joseph E. Ransdell of Louisiana stated effectively the case for subsidy, and I would like to quote. He said:

Whatever our prejudices may be against the word “subsidy" and the policy it stands for, is there any alternative? I know of none. The United States is the only maritime country in which this question of subsidy is ever debated. It is the only maritime country that has ever hesitated to employ a subsidy policy commensurate with its means and opportunities. Every nation in the world that has a merchant marine worth considering has, in some way or another, included subsidy with other forms of national aid. This is the fully established practice of all seafaring peoples.