tion and attempted to market these to the coal companies in the United States. In many cases there was considerable interest. We have not developed them yet.

I might say in regard to the bulkers, I did some thinking about this over lunch. One of the problems that Americans have in getting bulkers is that the best that the program will do is put them on a competitive basis with their foreign counterparts.

I believe that they probably have a great deal of difficulty getting a long-term charter from anyone because traditionally the charters are essentially short term, and I do not think the American banks even with title XI, are that anxious to put up the necessary capital on ventures which appear to be short term or if the operators have to play the spot market. I think that is one of the impediments.

On the other hand, the same phenomenon exists in Europe and Japan and I am still bewildered why we cannot build some bulk carriers in this country.

Mr. DOWNING. Mr. Oberstar, as you know, there is a rollcall and we must go to the floor. So we will have a recess again.

[Short recess.]

Mr. DOWNING. The committee will come to order.

Mr. Oberstar, you may resume the questioning.

Mr. OBERSTAR. Thank you, Mr. Chairman.

I have generally two or three subject areas further that I would like to cover, Mr. Secretary.

One deals with transportation economics, the other would deal with the shipbuilding abroad, and the third area would deal with the tanker surplus.

In the area of transportation economics, we have talked in these past several weeks in our oversight hearings about population growth and distribution shifts in various parts of the world and have devoted more attention to that in another committee on which I serve.

The growth of technology in the shipbuilding field and the question of economics in subsidies, construction differential, operating differential, so on. We have seen testimony showing the use of very advanced technology.

In fact, one of our witnesses some weeks ago said, "We in the United States develop the highest technology in the world and then the other countries come along and copy our technology and build ships cheaper than we do and compete with us."

Now, is there a possibility that our advanced technology is driving the qualifications for crew members upward and thereby that we might be in the long run pushing the cost of technically expert crews up higher and pushing us back to a point where we were some years ago, as you testified earlier this morning; that we have overcome this question of high-cost crews? Is not this technology again pushing us in a direction that we have not paid attention to? Is this a serious enough question for us to be giving some consideration to and, finally, as we diminish the number of seamen, from your own figures of 68,000 and 25,000, as we diminish the number of seamen, as we diminish the number of professionally trained people from our merchant marine academies, do we then pose a problem, sometime in the future, when we may need to reactivate the national defense fleet?

You may not be able to take all those questions up.

Mr. BLACKWELL. I think

Mr. OBERSTAR. I can come back to them for you.

Mr. BLACKWELL. I do not believe that the introduction of new and sophisticated technology on U.S. ships is bringing our costs up in terms of the crew or anything else, except the investments. I think it is in fact bringing it down. In terms of numbers of people, they have obviously been reduced.

Mr. OBERSTAR. Do you have any figures on costs or could you supply that for the record?

Mr. BLACKWELL. Oh, no question; yes.

Mr. OBERSTAR. Good. I think that would be helpful. [The material referred to follows:]

CREW COSTS

Overall, automated dry cargo vessels have average crew costs of $123,201 per month, while crew costs for non-automated dry cargo ships average $107,276 per month. Automated tankers average $79,662 a month in crew costs, while non-automated tankers average $88,074. The differences are attributable to a variety of factors, with no discernable trend towards higher costs in the case of the automated vessels.

Automated tankers average around 25 crew members, while the non-automated tanker average is 40-44. On automated dry cargo ships there are 32-40 crew members and there are 40-49 on non-automated dry cargo ships. In general, rates of pay increase with the size and power of the vessel, and there is a 10 percent bonus for licensed crew members and some unlicensed crew members of automated ships. In addition, rates paid for the same duties vary, depending upon which unions are involved. Similar vessels working in different areas can have different crew costs.

The modern, high technology vessels tend to be larger and more highly powered than the previous generation of simpler ships, which generates upward pressure on crew cost, but this is offset by the reductions in crew sizes made possible by automation. Despite the bonuses that accompany automation, there is no evidence of significant overall crew cost increases attributable to modern ship technology as such.

Mr. BLACKWELL. As I indicated this morning, the unions have been quite conservative in demanding wage increases from management. The latest contracts are front-ended at about 12 percent and are in the area of 8 percent for the next 2 years. That is a pretty reasonable level of wage increases, compared to comparable skills in the United States, but particularly so abroad.

The Japanese and the British wage increases are running 30, 40 percent a year. They are raising their annual wages at what we would consider to be unconscionable levels. There is still a gap between our wages and theirs, but that gap is rapidly closing. So I do not think that is a factor.

I think, Congressman Oberstar, it works just the other way.

Now, as fars as the ability to provide manning, in emergency or in a state of war, particularly with regard to the 130 National Defense Reserve fleet ships, I think that is a good question.

Most of our men sailing today, both officers as well as unlicensed, are on some type of a rotation basis. So for every job being actively pursued at sea, there is another, an equal cadre or pool of maritime manpower, ashore. So for that type of surge capacity, there would be at least 25,000 men available to take jobs which would be more than

we would need to break out the reserve fleet or indeed to break out the reserve fleet and the callup of some other units, say from the commercial liner fleet.

It would give us the time then if we needed additional men for the maritime schools, Kings Point and for the unlicensed schools as well as for the licensed schools run by the unions, to turn out the manpower that we need.

I do not believe that is a problem; this is not something that is coming off the top of our heads. We have looked at this very carefully as well, as late as a week ago; and we are convinced that the manpower resources are there. We are concerned about the median age of the crews, as I mentioned in responding to Congressman Emery this morning. It is fairly high; it is in the mid-40's for both licensed and unlicensed seamen. I think it is probably too high.

Mr. OBERSTAR. Careful; you are getting close to home.

Mr. BLACKWELL. It certainly means that I cannot qualify for a job. But I think we have to bring newer, younger men on who have the particular training for some of the sophisticated equipment that is coming aboard the ships. They are exposed to the new equipment in the schools and they are more adaptable to change than the older men

are.

Mr. OBERSTAR. Thank you. I think that is very reassuring and helpful information.

We have also had some information in our hearings and from other outside sources which I have been reading and looking into on the spread of shipbuilding facilities to-what you might call the less developed countries.

To what extent does the Maritime Administration follow such developments and what are those implications for our own shipbuilding programs and competitive posture?

Mr. BLACKWELL. Well, until 1970, we were not particularly concerned; because in this country we built mostly smaller tankers. Most of the yards that you are referring to are tanker yards. Before 1970, we built basically small tankers for our domestic commerce. The foreign yards that got into this business of building supertankers, are in Spain and Taiwan, in Korea, Portugal, places like that.

I was concerned with that phenomenon because when the 1970 act was passed, it permitted us to use the construction subsidy program to build tankers. There was such a demand for orders abroad, as well as here, that there was no competitive impact that I could determine. There was a lot of additional capacity coming onstream.

What has really happened is that the push by the Koreans and the Taiwanese and perhaps the Spanish as well, is now over and they are having a hard time. They have good order books but with the demise of the large ship in terms of potential building programs, it is going to be real tough for those yards to sustain their levels of employment and their shipbuilding activity.

Now, I do not worry about that in terms of tankers because I do not think anybody is going to build tankers except for basically handy tankers or product carriers. The concern that I have is the impact that it will have on the rest of the program.

As these yards lose their big ship orders, they will push to get anything into the yard at any price.

Mr. OBERSTAR. That is what I am concerned with.

Mr. BLACKWELL. And most of Western Europe, as well as Japanand I think this would be true for Korea-I cannot speak for Spainhave either a national policy, or the inclination to keep on a permanent basis the work force that they have employed. It is considered to be against public policy to let people go, to discharge them. So all these yards, with, I am sure, cooperation from their respective governments, will be attempting to find ship orders to supply jobs.

Now, we are very concerned that these prices may be below cost; and if that does occur-we think that perhaps they will do it on a shortterm basis-the yard itself will absorb those losses or perhaps over a longer period of time, the government would share in those losses.

The concern to the Maritime Administration is that our subsidy rates now are at 35 percent and there are not reductions in cost occurring in the U.S. economy that I can detect. There may be a slowdown, but costs are still going up.

Now, comparing the relatively high costs here, with what would amount to a dumping ship policy abroad, we may find it extremely difficult to meet the 35-percent rates. We have just reviewed a great many numbers in connection with some of the contracts we contemplated executing before June 30, last fiscal year; and we probably could have squeezed by in terms of satisfying the statutory norm for a 37-percent differential.

I cannot charge or declare that this is the policy in Europe or in Japan or in other places; but there are indications that this might be occurring. I think we probably need 3 or 4 more months to take a hard look at the foreign market.

Most of the yards still have a very significant order book, but they have to start accepting contracts now and do the engineering so that they do not have a gap and have to lay off a great many people between the period that they finish their present orders and start new ones. That is a real concern.

Yesterday, when the Secretary of Commerce asked me what were some of the problems in the industry we see coming up, this was the first thing I mentioned.

Mr. OBERSTAR. That is very interesting.

I feel very much reassured knowing that the Maritime Administration is on top of this, following it and very much current. This does shed some perspective, Mr. Chairman, on some of the criticisms that the program has had from those who are opposed to subsidies.

It further emphasizes what the panel of American Institute of Shipping experts told us about the growth in Russian fleet production: that other nations, third-world nations, are willing to subsidize to a very heavy extent shipbuilding capacity because they see this as a tool of national economic expansion, internationally and domestically, and as a policy of domestic economic stability, and I think that we ought to be following that same policy.

Mr. BLACKWELL. It is very interesting to hear critics in the United States complain about the direct subsidy program which is aboveboard. It is there for all to see, all our decisions are published; everyone knows how we calculate differentials and what have you; and there are many Americans that criticize the program on the ground that it is not needed to build ships for this country and yet the French have

a special provision for French shipyards, which are quite full and are real competitors in the LNG business. When they build for export, the French Government gives them an insurance policy that, above a certain cost, the French Government will pick up all the escalation on the vessel.

It eliminates a lot of the risk, both for the purchaser and the yard, and that helps to induce the yards in France, to upgrade their shipbuilding capacity, to increase their technical promise, all things that you have mentioned.

Mr. OBERSTAR. In taking this one step further, with the indulgence of the Chair, in a period of a growing world recession, continuing at least, not growing but certainly continuing world recession, and this kind of shipbuilding activity in essentially low-labor-areas which then are further subsidized by their national government, how are we going to be competitive with shipbuilding unless we have a more intensive and more active Federal Government posture in the shipbuilding industry?

Mr. BLACKWELL. Well, there has been a tremendous infusion of new funds into the shipbuilding industry. After all, looking back to 1970, what did the administration commit itself to and what did Congress endorse? Basically a 10-year, a decade-long shipbuilding program-a definite U.S. Government commitment to shipbuilding and ship operation. We hardly got the program off the ground and here they are beginning to criticize the program on the ground that it has not built enough ships, next year, it built too many ships, and then it did not build the right kind of ships.

There is nothing wrong with hearings of this type. It is part of our system and it is very, very healthy; but when we get critics who are irresponsible, they turn people off in the United States, in the infrastructure of the shipbuilding and the finance community.

We have tried for years to get the American banks to take an interest in shipbuilding, and in financing ships, and we have had considerable success. With leverage leasing the title XI, they are able to make very attractive arrangements for financing in this country in terms of effective interest rates. But the banks, particularly, pick up messages; they are very sensitive to changes in national policy.

Now, the banks are kind of holding back, saying, "Hey, let us see what happens in Washington. It may not be wise to put our moneys into shipbuilding or to provide loans." The shipbuilders that have to go out and also borrow money, essentially from banks or other types of financial institutions, have the same problem. They may have a perfectly sensible, rational, economic proposal for shipbuilding, enlargeemnt of a yard, in making it, in terms of productive facilities, more competitive. The banks, even though they are only taking about a 122-percent risk, if they are putting up the equity-some of them do not even do that-we are taking more of the risk-but the banks will still shy away and say, "that program is under analysis in Washington: it may be eliminated; it may be totally revamped. Let us wait and see."

It is the uncertainty about the commitment that really causes the concern. There is no need really for Congress or anyone else, if they made a commitment 10 years ago or 4 years ago, not to reexamine it. I think that is sensible. But there are people who have been probing