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Subj:

Summary Record of Meeting between Mrs. Kreps, Secretary
of Commerce, and Mr. Claytor, Secretary of the Navy,
5 January 1979

1. The meeting was held beginning at 1530 in Mrs. Kreps' office, Room 5851, Department of Commerce Building. The following individuals were present:

Commerce

Mrs. Juanita Kreps, Secretary of Commerce

Mr. Robert J. Blackwell, Assistant Secretary
of Commerce for Maritime Affairs

Navy

Mr. W. Graham Claytor, Jr., Secretary of
the Navy

Mr. Everett Pyatt, Principal Deputy
Assistant Secretary of the Navy (Logistics)

Mr. William W. Kinkead, Director, Transportation

2. The purpose of the meeting was to discuss matters of mutual interest related to ocean shipping, shipyards, and related maritime matters. There was no formal agenda. A summary of the matters discussed follows.

3. The general condition of the industry was reviewed including the shipyard order book, the condition of berth line operators, and the constrained Navy budget. The contingency needs of the Navy were generally reviewed with respect to RO/RO ships and vessels for the carriage of non-self deployable aircraft.

4. Plans for the Ready Reserve Fleet (RRF), a portion of the National Defense Reserve Fleet (NDRF), were reviewed. The possibility of the addition of some 4 newer break-bulk ships to the RRF on the West Coast was considered.

5. The authority for the inclusion of National Defense Features (NDF) on ships constructed with Construction Differential Subsidy (CDS) was discussed. Broadening of the CDS authority to include retrofit and stockpiling of materiel was considered.. MARAD is preparing proposed legislation which will be supported by the Navy. In the meantime, satellite and high frequency communication equipment capability is being specified where authorized as NDF.

6. Mrs. Kreps and Mr. Claytor agreed to meet at approximately six-month intervals to review the progress of the NavyMaritime Policy Board as well as matters of mutual interest and concern. These meetings would of course be in addition to the quarterly meetings between Mr. Claytor and Mr. Blackwell.

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Attachment #2

Navy/MARAD Studies of Shipbuilding Mobilization Base

The following paragraphs present the background and status of the studies cited above.

There have been two Navy/MARAD studies of the U.S. mobilization base for shipbuilding. The first was promulgated in April 1978. The second, which was an update of the first and done as a part of the President's Interagency Maritime Study, has been completed and forwarded to the coordinators of the Interagency study for review. Although the input data for the second study was slightly changed, the basic overall conclusions remain the same. Essentially the studies indicate that current available U.S. Navy and private U.S. shipyard and labor resources would be marginally adequate to meet requirements during a 90-day intensive NATO-Warsaw Pact War. Drydock availability would be the constraining factor. Steel availability would not present a problem. In the case of a 90-day intensive war followed by 33 months of stalemate with low-level conflict, the studies indicate that shipyard labor and steel could be augmented to meet estimated demands. Facilities, principally building positions, would be a problem. There would be inadequate shipbuilding facilities to accommodate a workload similar to that generated by these assumptions.

The two studies are final for the specific assumptions addressed. However, the Navy has recently completed additional work that will further refine the basic data concerning shipping loss rates. Navy and MARAD are prepared to use the new data in accomplishing a joint revision of the study. Due to the complexity of the problem, we currently estimate that the revision may be completed by 1 October 1979. For your information enclosed is the most recent "Annual Report on the Status of the Shipbuilding and Ship Repair Industry of the United States."

Attachment

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. There are 12 sians votre cazarity for the construction of major ships for the tery. I are now in or rare previous y uit major ships for the lg. These ares cersitate cu ament na er peacetime base:

1. Avordale Shipyards, 10., la reats, A
2. Bath Iron wris, :0., dati, e
3. Bettieren Size' ccrocation, Scamows Point Ward,

Baltimore, WC
4. Gereral yeanies Sectre sca: risica, Sreten, ci
5. General ansiosor, iacy, WA
6. Ingalls Soccusing Sasir, Pascagua, NS
1. Locceed Shrecut and ensuction Company.

Seattie,
8. National Steel are Scousing company, San Diego, CA
9. Newport Vers Sa cou:9, Vecc- VENS, 11
10. Sun Sc:cout an Cry Cock Company, D'ester, P4
il. Tood Pac:fic Seipyaris sacratior, los Argeles

Division, C1 12. Todd Pacific Shig arts erecration, Seattie

Division, In addition, to the 12 maar sprievarts, there are several smailer shipyards periodically incives in new construction se crit for the Navy. These yards typically buiti tugs and wrx bcats, patre: scars, and amphibious trooc carriers.

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*National Energency requirements decent con tre nature and duration of the emergency. in any protracted emergency, tre 12 shipyarts cited in Attachment 3 will be essential to meet anticipated vary sin construction requirements. Regard ng Navy ship recairs, tre initial ressense will be met by our & naval saisyarss. The sarai sripyards which fuifiil these mobilization needs, are as foliows:

Norfolk
Portsmouth
Philadeionia
Charleston
Long Beach
Mare Isiand
Puget Sound

Pearl raroor A protracted emergency will necessitate additional recair cacacity. Such additional requirements will be net by calling upon private incustry, including both those 12 shipyards previcusiy cited in Attaciment 3 (depending upon the mix of new construction and recair needs as cictated by the nature of the emergency) and the numerous other private snipyards presently engaged in Navy repair work.

46-188 - 79 - 3

The CHAIRMAN. Ms. Mikulski?
Ms. MIKULSKI. Thank you, Mr. Chairman.

I just want to reclaim my time to make the statement, and perhaps if the Secretary would care to comment, fine.

I would like to associate my remarks with both you, Mr. Chairman, and Mr. McCloskey, as to the issue of a strategy for both shipbuilding and repair, in terms of our naval and merchant marine fleets. The point that I am making is that I have not been here as long as the chairman or the ranking Republican member. I have been here 2 years, and what shocks me, though, is that in those 2 years I have heard nothing but promises of a coherent comprehensive strategy, to number one, build ships, or repair ships, to manage our national security, and in the process of that stimulate the employment of American workers, and I know that the Carter administration campaigned on those two issues.

They campaigned on national security, they campaigned on full employment, and quite frankly, instead of inventing gimmicks that I read about in the Washington Post, about banks, and this economic development strategy, the shipyards of this country are located in mature cities of this country, where you talk about, you hire 3,300 people, or stimulate 3,300 jobs.

We laid off more people than that, Mr. Secretary, and we are threatened with laying off more people. Now, I feel, quite frankly, that the administration has to get its act together, and both the Department of Defense and the Department of Commerce have to sit down and develop a strategy in terms of national security for our naval fleet and for our merchant marine fleet, No. 1 and, No. 2, develop the contracting procedures that would insure that quality work was being done in areas where there is high unemployment.

I would like to see that happen. I do not think that is too much to ask. It has been promised to us time and time again. I believe it is in the chairman's memory as well as in my own, and I would like to see it. I have been waiting 2 years for it.

2 Mr. McCLOSKEY. Would the gentlelady yield at that point? Ms. MIKULSKI. Yes, I will gladly yield.

Mr. McCLOSKEY. Mr. Secretary, just to buttress what the gentlelady asked, let me read to you from the White House veto message on the maritime bill, dated November 5: “I commit my administration to work with the next Congress to develop a comprehensive maritime policy for the United States."

The question, very simply: is the Navy working on the development of a maritime policy proposal at the present time?

Mr. Woolsey. I believe we are, yes, Congressman.
Mr. McCLOSKEY. Who works on it in your office?

Mr. KINKEAD. I represent the Navy on the interagency maritime study.

Mr. McCLOSKEY. How close are we to the administration's presentation of a comprehensive new maritime policy to this committee, as Ms. Mikulski asked?

Mr. KINKEAD. I am not certain, sir, but it would seem to me that we are at the point where something would go forward to the President within a month or so.

Mr. McCLOSKEY. Within a month?

a Mr. KINKEAD. Yes.

Mr. McCLOSKEY. We could have your assurance then, that the President, by the end of March, March 31, will receive the Navy's recommendations as to a comprehensive maritime policy?

Mr. KINKEAD. Mr. McCloskey, I cannot give you that assurance, of course. I know that you can rest assured that the Navy's comments have been made to the group that is chairing the Interagency study.

Mr. McCLOSKEY. Do the Navy's comments include the number of shipyards that it deems necessary for a viable shipyard base?

Mr. KINKEAD. Not as such, sir.
Mr. McCLOSKEY. Pardon?
Mr. KINKEAD. Not as such.

Mr. McCLOSKEY. It does not? How can we have a comprehensive maritime policy without some knowledge as to the number of shipyards that we need?

[Short pause.] Mr. MCCLOSKEY. May the record show the silence? Mr. KINKEAD. I am not sure that I can answer that. Mr. McCLOSKEY. Can anybody in the Navy answer that? How can we have a maritime policy that is predicated on an adequate shipyard base, without an idea of how many shipyards we need?

Mr. WOOLSEY. Congressman, I think the problem is no one has any difficulty saying that the 26 or 27 private yards that are now doing work for us, is barely adequate as a mobilization base. But the precise number of yards depends upon some very long range projections with respect to construction. That depends on matters other than those under the Navy's control. It depends on the vitality of the shipbuilding industry.

Mr. McCLOSKEY. Mr. Secretary, as you pointed out, the vitality of the present shipyard construction program is a matter of great dismay to you

Mr. WOOLSEY. That is correct.

Mr. McCLOSKEY. I just want to again express the hope that when the President used the words "comprehensive maritime policy," that the Navy will fully participate. Everything has been under study for the first 2 years of this administration, and while I value your right to make a full study before you come up with comprehensive recommendations, it seems to me, that we need your comprehensive recommendations in the first 3 or 4 months of any new Congress, if we are to act on those comprehensive recommendations.

It seems to me, Mr. Chairman, that these statements and promises that have been made by MA and the Navy repeatedly over the past 2 years. I believe we are running out of time.

We, in this Congress, would like to respond to the Nation's needs. We would like a viable, strong, competitive U.S. merchant marine; however, all of the statements in your testimony, Mr Secretary, point to your recognition that these do not exist today.

It would seem to me that a maritime nation like the United States, dependent on a U.S. merchant marine, for our foreign

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