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In addition, Congress, in 1996, when it enacted the Maritime Security Program, specifically allowed documentation U.S. citizens to participate directly in the Maritime Security Program. In other words, a maritime labors proposal is needed and an unprecedented attempt to allow documentation United States citizens to operate U.S. flagged vessels commercially or for the military or an unprecedented attempt to open the Maritime Security Program to documentation United States citizens.

As I said, Congress has already enacted laws that authorize those operations.

On the other hand, maritime labors proposal is an attempt to reflect the current ownership structure of the American maritime industry and to incorporate these changes into the law, as already enacted by the Congress. We suggest that for only existing Maritime Security Program vessels the distinction between certain documentation United States citizens companies and Section 2 United States citizen companies be eliminated. In all other circumstances under the Maritime Security Act, our proposal would retain the system as enacted by Congress in 1996.

I appreciate the opportunity to appear before this panel on behalf of the Masters, Mates, & Pilots, and I will try to answer whatever questions you may have for us.

Mr. HUNTER. Thank you.

Mr. RODRIGUEZ. Thank you, sir.

Mr. HUNTER. Captain Rodriguez.

Mr. McKay.

Mr. MCKAY. I do not have a prepared statement. I agree with everything this panel has just said. We do believe

Mr. HUNTER. You know, that is some of the finest testimony I have ever heard. [Laughter.]

Mr. MCKAY. You like that, huh?

Mr. HUNTER. Yes. Was that Gordon Spencer's idea? [Laughter.] Mr. MCKAY. No. [Laughter.]

Mr. MCKAY. Though I will give him credit for it, no. I think it is a long overdue need for this new maritime program. Like anything, it can always be improved. And I think this is a step in the right direction.

Mr. HUNTER. Okay.

Well, let me kind of summarize what I have heard. Gentlemen, it is this, that you see the American crewing and the American flagging as the paramount goal here. And that if we had some type of a-as long as we had an American directorship, from your perspective, an American directorship of these companies, the need to have the class 2 citizen, the so-called middleman that we have, is in the present structure, would not be necessary.

You could live with the proposal that has been endorsed, I believe, by Maersk and the other owners that would have an American directorship in the companies, but not necessarily an American ownership.

Is that right?

You could live with it? Let me ask you one other question. The one difference there, though, major difference we have talked about maintaining the American interest and control-is that ultimately the stockholders, as I pointed out to one of the gentlemen

who was here in front of us, ultimately the stockholders could make a decision.

And if you do not own the stock in the company that maintains control, you do not really have control. But it is true the directors can, they can go against the stockholders until the next meeting is held. And that is about as long as they can do it. And at that point, the stockholders control the company.

So you would still have a company which would be controlled by the stockholders. And, therefore, perhaps, not meeting all of the goals in terms of having an American interest being served, maybe, in time of conflict.

The one thing that was just going through my mind as the testimony was going on, and I was thinking about the situation in Taiwan with China, with the other shipping companies, all the global shipping companies having major stakes and major interests, because of the massive China trade and shipbuilding and other economic interests.

And if it came time for them to choose up between Taiwan and China, well that is almost a choice that we cannot make, as an American government. And if you watch us tap dance on these issues, now, that becomes very apparent.

So it would be, maybe, a bridge too far for a global shipping company to make that choice in terms of going with the United States interests over those of China and seeing wealth of investments in China and strategic and economic relationships evaporate.

So this is, I mean, this is a difficult choice that this panel is going to have to make if we, in fact, change this. And I would hope you can appreciate that. And I just wondered if you had any comments on that.

Yes, sir?

Mr. DAVIS. Mr. Chairman, it was not that long ago when the United States had American merchant mariner companies, liner companies, that had around-the-world services. Back in the 1980s, I worked for U.S. Lines. U.S. Lines went around the world. We had infrastructure around the world.

Recently, there was APL, a wholly-owned American company, and Sealand, a wholly-owned American company. But it is gone; those are gone.

What we also realize is that in the interest of national defense and what we are hearing from the other government agencies is that it is very important to have infrastructure.

Mr. HUNTER. You know, that is true. And, incidentally, Mr. Taylor and I and Mr. Saxton have been worried about China Ocean Shipping Corporation, COSCO, having infrastructure around the world and not only trying to get the Navy base at Long Beach, which we were successful at stopping, but now having terminals on both ends of the Panama Canal.

And, in light of the testimony that has gone before, there is a great deal of wisdom in their strategy, because it has now been pointed out very clearly that simply having controls of the ships is not even half the ballgame. You have got to have control of the infrastructure and the intermodal capability to move cargo once it gets to the shore.

And so the China Ocean Shipping Corporation is, for practical purposes, totally owned by the Politburo in China—in Beijing. They are looking at this thing in terms of a total package. And that is why they go out and buy terminals and/or rent them or control them. And why Hutchinson Whampoa now has facilities at both ends of the Panama Canal. They are not simply moving to control bottoms or ships, but to control systems.

And so that points out, I think, for us, as Americans who want to guarantee the ability to move cargo from point A to point B, whether it is in Afghanistan or some other theatre, is that even controlling the ships, we are halfway home, but not all the way home.

And so you have posed this really major problem to us. Because I presume that the American President Lines and Sealand, in the old days, had the total system, did they not?

Mr. DAVIS. If it is that even controlling the ships, we are halfway home, but not all the way home.

And so you have posed this really major problem to us. Because I presume that the American President Lines and Sealand, in the old days, had the total system, did they not?

Mr. DAVIS. Yes.

Mr. HUNTER. And today we do not have it.
Mr. DAVIS. That is correct.

Mr. HUNTER. And so, to some degree, we are at the mercy of the world-the community that now controls it and has the pink slip to those operations.

Mr. DAVIS. You are absolutely right, Mr. Chairman. American used to have economic control of the seas, of the world's oceans, economic control and control of moving the cargo around the world. We do not anymore. And we have to realize that. We have a wonderful Navy out there that can, through force, do things. But as far as the economic control, as far as passenger, carrying cargo from port to port around the world, carrying military cargo when it is needed, we no longer have, we no longer control the seas.

Mr. HUNTER. Okay.

Mr. DAVIS. And we all know that a nation that controls the seas is always in much better shape than one who does not.

Mr. HUNTER. Mr. Taylor.

Mr. TAYLOR. No questions, Mr. Chairman.

Mr. HUNTER. Mr. Saxton.

Mr. SAXTON. Mr. Chairman, I think I will follow Mr. Taylor's example. We have a meeting with the chairman of the full committee here in less than 10 minutes.

Mr. HUNTER. Okay.

Well, thank you, gentlemen, for being with us.

Well, gentlemen, you have laid out very clearly the position, I think, very precisely the position of your organizations on this proposed compromise language.

What I would ask you to do and also have-do we have anything for the record, here?

Okay, we got a letter from the American Shipbuilding Association that we will, without objection, we will take into the record. [The information referred to can be found in the Appendix on page 104.]

Gentlemen, what I would like to ask you to do is, if you have any additional comments or recommendations-—and we will try to stay in contact with you as we try to see if we cannot put together a package that solves this problem, while maintaining America's interests so if you have any, we will try to be in contact with you and have the staff working with you.

If you have any additional thoughts or reflections on these things, we will keep the record open and get them to Mr. Johnston. But, thank you so much for being with us today.

Mr. TAYLOR. Mr. Chairman.

Mr. HUNTER. You have laid a very difficult-we have a very difficult policy decision here at our feet.

Mr. TAYLOR. Mr. Chairman, real

Mr. HUNTER. Yes, sir, Mr. Taylor.

Mr. TAYLOR. One of you gentlemen talked about 12 vessels being taken out of the fleet in the past couple of years.

Mr. DAVIS. I did.

Mr. TAYLOR. You said some were scrapped, some were reflagged. Mr. DAVIS. Yes.

Mr. TAYLOR. What was the ratio?

Mr. DAVIS. The ratio of those 12 vessels, between scrapping and reflagging? I do not know what-I would say 50-50, but I do not know the exact numbers.

Mr. TAYLOR. Could you get that number for me, please?

Mr. DAVIS. We could get that for you, yes.

Mr. TAYLOR. That is the only question.

[The information referred to can be found in the Appendix beginning on page 109.]

Mr. HUNTER. Okay.

Thank you very much for your testimony. And maintain some contact with Mr. Johnston. Flood him with information so that he has little time to do anything else.

All right. Thanks.

[Whereupon, at 3:54 p.m., the panel was adjourned.]

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