considering this Government's recent policy with regard to Taiwan, and considering what appears to be a deteriorating situation in Korea and the removal of our support there, does it not appear to you, as it appears to me on the surface, that our capability of acquiring foreign-built ships from these two large producers could, in the future, be put in peril and that it is essential that we have the capability, and maintain the capability, in this country of our own production in the time of national crisis?

Mr. CALDWELL. I think that is the only secure production that you have anywhere. The fact of the matter is that you can probably construct trains that are cheaper in Taiwan and you can do a few other things cheaper in Taiwan, but if we base the economic living standard of the United States strictly on what you can get the Liberians to manufacture something for and you applied it to any industry across the board, it doesn't seem to me that that is what we are really what we are here for or in business for.

Mr. SNYDER. Given the world conditions, our only dependable source is here.

Mr. CALDWELL. That is correct.

Mr. SNYDER. Thank you.

Mr. CALDWELL. Thank you.

Mr. DONNELLY. Thank you very much.

Capt. Allen C. Scott, international executive vice president, Masters, Mates & Pilots International.

STATEMENT OF ALLEN C. SCOTT, INTERNATIONAL EXECUTIVE VICE PRESIDENT, MASTERS, MATES & PILOTS INTERNATIONAL, ACCOMPANIED BY JULIAN H. SINGMAN, WASHINGTON COUNSEL

Captain SCOTT. Mr. Chairman, International President Lowen had planned and looked forward to appearing before the committee today. However, he has been unavoidably delayed on the Pacific coast and, along with International President Gleason, he has authorized me to represent our organizations here today in their stead.

Mr. Chairman, my name is Allen C. Scott, international executive vice president of the International Organization of Masters, Mates & Pilots, ILA, AFL-CIO.

My colleagues here today are Mr. Singman and Mr. Garmatz. I am pleased to state that I am authorized to appear before this distinguished committee to present the views of both the International Longshoremen's Association, AFL-CIO, and our organization with respect to H.R. 2462.

Please accept my thanks for your invitation to be here today. The statement I have to make this afternoon, Mr. Chairman and distinguished members of the committee, is brief and simple. We wish to make plain that both the ILA and the I.O.M.M. & P., which represent most of the seagoing masters and deck officers aboard U.S. flag ships, nearly all of the locally licensed harbor and maritime pilots in the United States and the Panama Canal, and many crewmen aboard tugs and barges throughout the inland waters of the United States, strongly support this Maritime Appropriation Authorization Act for fiscal year 1980.

We urge this committee to approve this bill as it stands, although we would be less than candid if we did not state that we devoutly wish that the proposed program were somewhat more ambitious than it is.

Others before me, particularly the Assistant Secretary of Commerce for Maritime Affairs, have told this committee in detail why the amounts mentioned in section 2 of the bill are necessary for continued operation of the U.S. maritime program. There is no need now for me to repeat these explanations or arguments.

We would like to point out, however, that the $101 million authorization for construction subsidy is only about two-thirds the amount authorized and appropriated last fiscal year, when the amount was $157 million, and we should also mention that the $256,208,000 authorized for operating differential subsidies is somewhat less than the $262,800,000 authorized by this committee for last year.

While we recognize the pressures on all Government agencies to cut expenditures, we cannot pass up the opportunity to deplore any diminution in what we already consider to be an inadequate maritime program.

Mr. Chairman, I would like to make one brief point for this committee to consider, not only as it studies this bill, but as it proceeds through the coming year and the coming congressional session on other legislation affecting the U.S. merchant marine.

The thought is not a new one, nor is it a revolutionary one in scope. The simple message I would like to leave with this committee today is that our organization believes in the U.S. maritime subsidy program only as one of a number of necessary costs to the United States for the advantages which a merchant fleet provides this Nation.

We believe that there are other ways to build and support an American merchant marine vital to our national security. Although some Government subsidy may be inevitable so long as our standard of living is higher than that which exists in most other countries and so long as we demand that certain essential trade routes be served, such subsidies can be, and we believe ought to be, minimized with the help of other support.

It is our firm belief-and I must remind this committee that the members of our organization who are masters have been in the top echelon of steamship management and understand the economics of ocean transportation as well as most steamship corporate executives that American ingenuity and technology can keep our merchant fleet flourishing with appropriate support from American shippers, particularly the U.S. Government. If the U.S.-flag merchant fleet were to carry its fair share of Government-generated cargoes we believe subsidies could be reduced and our fleet could be expanded.

We propose, therefore, that this committee undertake as an objective for this Congress that ways and means be studied and a program be implemented for increasing U.S.-flag carriage of Government-generated cargoes.

Loophcies that permit officials to ignore or flout the intent of our cargo preference laws should be plugged, new laws should be en

acted to supplement those that now exist, and new bilateral agreements should reserve cargoes for our fleet.

Congress should make it unmistakeably clear that our U.S.-flag merchant fleet has first call on Government-generated cargoes and that Government officials who ignore that priority do so at their own risk.

Again, Mr. Chairman, I thank you and this distinguished committee for the opportunity of presenting our views here today. Mr. DONNELLY. Thank you very much.

As I understand it, your statement has the complete support of the International Longshoremen's Association?

Captain SCOTT. That is correct, Mr. Chairman.

Mr. DONNELLY. What is the total membership of the Masters, Mates & Pilots Union?

Captain SCOTT. Approximately 9,000 to 10,000 active members. Mr. DONNELLY. How many of these active members are employed on U.S.-flag merchant vessels and how many are now retired? Captain SCOTT. The number I just gave you are all active members. I can't tell you how many are currently employed on U.S.-flag oceangoing vessels. I would say that it is approximately 5,000 off the top of my head. If this is important to you I am sure we can come up with accurate figures.

Mr. DONNELLY. How many of your members are retired?
Captain SCOTT. I don't have that number, sir.

Mr. DONNELLY. If you could supply the committee with respect to the membership that is now retired, how many are at an age where they could be recalled during a national emergency?

Captain SCOTT. I would be happy to do that.

Mr. DONNELLY. And, in a national emergency, how long would it take to notify these men that their services are again required and what would your opinion be on how they would respond to such an appeal?

Captain SCOTT. Mr. Chairman, if I may speak for myself rather than the organization, it is a difficult question to answer. No. 1, I don't know of any system that the government or we have to keep an accurate track of how many of our retired members continue to keep their qualifying licenses and certificates up to date so that they could immediately go to work. That, of course, would be one of the immediate criteria.

Another criterion is the ages which we can come up with for you from our records. Another criterion is the personal feelings of the individuals involved. As you can see, I have been in this industry since 1939, and all the seamen in the U.S. merchant marine have gone through cycles of boom and bust since World War II, Korea, Vietnam, so what the personal preferences of people are, unless you go into a draft situation, I think is going to be a very nebulous answer at best that you would get.

Mr. DONNELLY. On page 2 of your statement you state that: "We believe that there are other ways to build and support an American merchant marine vital to our national security." Would you embellish upon that statement briefly?

Captain SCOTT. We believe that one of the things that should be looked at and really worked on are bilateral trading agreements

where our flag ships carry a guaranteed percentage of the trade between trading partners.

We believe that the Congress ought to look at the tax laws of this country and make it unprofitable for American corporations and American international corporations to operate foreign-flag fleets.

Mr. DONNELLY. Thank you.

Mr. Snyder?

Mr. SNYDER. Thank you, Mr. Chairman.

Mr. Scott, first let me say that you indicated that you were accompanied by Mr. Singman and Mr. Garmatz. On behalf of the minority, let me say that we are glad to see our former chairman here again. I enjoyed service on the committee under his leadership. I never found myself at variance with him on blue water matters; after we finally were able to get the Delta Queen running on the brown water everything went all right.

It is good to see you here, Mr. Garmatz.

On page 3 of your statement you speak of the cargo preference problems, the loopholes. I was one of the few minority members who supported cargo preference in our ill-fated attempts last year. I believe in the principle.

I do have some problem with the practical application. I also think that we need the principle but I think we need full cooperation from all of those people who are going to benefit. And this leads me to ask you, can you give us any comparison between the rates charged for preference cargo versus the free-market rates? Captain SCOTT. I don't have those figures with me, Mr. Snyder. I have seen them published periodically in reputable publications in the country and I am sure we can supply them to you.

Mr. SNYDER. Let me suggest to you that I have been advised that the cargo-preference rates are somewhere near twice what the freemarket prices are. If I am in error, or whether I am or am not, would you respond to that observation for the record as to whether or not it is accurate or not?

Captain SCOTT. I can't really speak as to the accuracy. I am sure that within the ball park you are accurate, Mr. Snyder. I would like to comment though that the seamen who are sailing these U.S.-flag ships where the cargo is costing twice as much to transport is probably, right off the top, committing back to the U.S. Government 30 percent more of their earnings in the form of income taxes.

So, the illustration of twice as much is really not a fair comparison, and that is not taking into account the American produce, the American workman, the backup force in the hinterlands of this country that sail that ship.

Mr. SNYDER. I am not representing those facts. I am representing that that has been represented to me.

Captain SCOTT. Thank you, sir.

Mr. SNYDER. And I think that if that has been represented to me as a member of the committee it has probably been represented to other members of the committee who are bound to have the same concerns, and any information, or rebuttal, or justification of that observation, if it be true, would certainly be of benefit to all of us.

Captain SCOTT. Again I say that in the baseball field, your comment is probably correct. It may well cost twice as much to transport cargo on an American-flag vessel as you indicated, but when you look at the overall cost to the country, to the citizens of this country, I would challenge the thought that it does, in fact, cost more than transporting cargo on a foreign-flag or runaway ship. Mr. SNYDER. I understand what you are saying, but my understanding is and what I am talking about and what has been represented to me has been-U.S. rates under cargo preference versus U.S. competitive rates: those people who would give the lower rates, are also paying the same taxes—we are talking about conference rates.

And if I am in error, certainly I want to give you the opportunity to correct the record.

Captain SCOTT. May I do so by having the organization research it and respond?

Mr. SNYDER. That is what I am asking you to do, sir, because, as I have said so many times, I don't profess to be an expert in the field. But I am sitting on the committee as ranking minority member on this subcomittee and there are people who are attempting to give their input to me and to other members of the committee and I think it is only fair that those people who might have a contrary view know what the input is and be given the opportunity to say, yes, it is right or no, it is wrong. That is what I want you to do, if you would.

Í don't want to have the wrong impression or reach the wrong conclusion by virtue of only part of the information.

Captain SCOTT. We would be most happy to respond and I would like to ask Mr. Singman, if you would, if he can respond.

Mr. SNYDER. Certainly.

Mr. SINGMAN. Mr. Snyder, I think I would just like to point out that although we would be glad to provide the information, and we will provide the information, that we should raise a cautionary note, or several cautionary notes, and I think Captain Scott has already raised one, and that is, that although the price in dollars may be significantly different from the price of what you have referred to as a free-trade price or a free-market price, that that extra price does include some additional benefits or additional commodities, if you want to call them that, that are not provided by the so-called free-market price.

But, in addition to that, in analyzing the price of anything you have to consider that it is the end product of a supply situation and a demand situation. In a given market situation where you have a very small supply of U.S. bulk carriers that are available to provide the space for cargo preference cargo and, at the same time, you have an over tonnaging in what might be considered general cargo space, world cargo space that is available, that that differential in price may become quite substantial.

At other times, where there may be a shortage in the world space available, the differential could be much smaller. Now, to the extent that an American merchant marine policy could develop a substantial number of U.S.-flag ships providing a substantial quantity of cargo-carrying capacity for this kind of cargo, then that also would tend to reduce that differential in price because you would