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Mr. SNYDER. And if it does, to give us the benefit of it. I have been given to understand that this gentlemen who I do not know and, to the best of my knowledge, have not met, has undertaken a study or is attempting to develop a program which would involve two things: One, a top to bottom union for deep draft vessels; and, second, would look toward reducing manning levels in order to encourage the increase of the U.S. merchant marine by helping to reduce U.S. costs, sort of in line with previous questions that I propounded about the Norwegian experiment.

And if you could give us any additional input along that line, I would appreciate it.

Captain Scott. I will certainly personally check it out and respond one way or the other, sir.

Mr. SNYDER. Mr. Chairman, I thank you.
Mr. DONNELLY. Thank you, gentlemen.
[The following was submitted:)

SUPPLEMENTAL INFORMATION PROVIDED BY CAPTAIN ALLEN C. SCOTT At the March 7, 1979 hearing Congressman Donnelly, acting as Chairman, asked Capt. Scott for the total membership of the Masters, Mates and Pilots (page 44, lines 3-4) and the total of those members who are employed on U.S.-flag merchant vessels (page 44, lines 7-8).

The total membership in good standing of the International Organization of Masters, Mates and Pilots on January 31, 1979 stood at 8,118. Of that number, 5,007 were members in good standing of the Offshore Membership Group, which includes masters and licensed officers of ocean-going vessels of U.S. flag. In addition to those active members, there were 550 formal applicants for membership who, although not entitled to all of the perquisites of full membership, are permitted to take employment with signatory companies of the IOMM&P where full members are unavailable for such assignments. These applicants are in the process of being accorded full membership rights.

Mr. Donnelly also asked, with respect to the retired membership, how many are at an age where they could be recalled during a national emergency, how long it would take to notify them that their services are again required, and how in our judgment they would respond to such an appeal (page 44, lines 17-20, 22-25).

As of February 28, 1979 there were 2,506 members of the IOMM&P Offshore Membership Group who had been retired and were receiving pensions from our MM&P Pension Plan. We do not maintain age schedules for our retired members, but we have been informed that if it became essential it might be possible to extract that information from the computerized records of our Offshore Pension Plan, which is administered by a joint labor-management board of trustees. In our opinion, however, age is not necessarily the most significant question in determining the likely response to a recall to duty in the event of a general mobilization. There are and have been active shipmasters in their sixties and seventies. As pointed out by Capt. Scott at the hearing (page 45), one of the more critical questions is whether or not these retired members have maintained valid Coast Guard licenses. Many have not. Thus, before they could return to active duty, some kind of licensing procedure would have to be developed and followed. Because, as indicated above, our Pension Plan records are computerized, the retired members could be notified of the need for their services very promptly indeed—in a matter of days at most-provided only that the joint labor-management trustees agreed to participate in such a program.

On the likely response to such an appeal, our judgment is that in the event of a general mobilization most of our retired members who are in good health would respond positively, as indeed they did during the Viet Nam war.

Congressman Snyder asked Capt. Scott for a response to the observation that cargo-preferenced rates are about twice what the free-market prices are (page 47, lines 6-10).

The rates charged for cargo-preferenced cargo do in fact involve two separate and distinct rates. One is a so-called "free" rate reflecting the rate at which any vessel anywhere in the world owned by anyone in the world would be willing to carry cargo-preferenced cargo on a paid basis. The other rate is the one for which only U.S.-flag vessels capable of carrying such cargo are eligible to bid and is the rate at which such carriers would be willing to carry that same kind of cargo. Those two

rates float separately and distinctly from each other depending upon the supply of space available within the two markets and the demand for such space. At the present time the divergence is great (the U.S.-flag rate being between 2 and 242 times the “free” rate) because of a number of existing economic factors. At other times the differential could be and has been smaller.

Some of the relevant economic factors are as follows: There is presently a deep depression in world shipping (although the upturn appears to have been reached). Ships of a type capable of carrying cargo-preferenced cargo (principally tankers) have been laid up all over the world, and consequently the owners of such vessels who are qualified to bid on carrying cargo-preferenced cargo are willing to do so even below cost in order to meet some part of their fixed costs in this very deeply depressed market. On the other hand, the supply of U.S.-flag vessels capable of carrying preferenced cargo is quite limited because of a national maritime program which has not encouraged the construction and operation of such vessels. Most such U.S.-flag vessels are built for the domestic trade, and their availability for foreign operation to carry preferenced cargo is very limited indeed. Moreover, most such vessels are unsubsidized, and therefore their costs of operation run about 242 times the costs of equivalent foreign flag vessels. At the present time most U.S.-flag tankers are heavily engaged in the Alaskan trade. Those that were marginally available to carry preferenced cargo in the past are now largely unavailable so that most such cargo is being carried by U.S.-flag liner vessels. The costs of operating such vessels generally are far in excess of the costs of operating tankers, so that the normal reasons for a differential between U.S.-flag and “free” rates have been exacerbated by the present strong demand in the Alaskan trade.

Finally, no consideration of this question of the differential between U.S. and “free” preferenced cargo rates can leave out what might be considered the "fringe" benefits to the United States and its economy that flows from the cost differential. Included among such benefits are:

1. The existence of cargo preference gives some encouragement to U.S. construction and operation of tankers and bulk carriers. This provides employment in U.S. shipyards, for U.S. seagoing workers, employees of U.S. shipping companies, etc. For every dollar paid by the United States in that rate differential to U.S.-flag operators the multiplier effect causes a significantly greater increase in national income and gross national product.

2. To the extent that cargo-preferenced cargo keeps U.S.-flag ships operating, it contributes to our national defense by keeping a pool of active vessels available for possible mobilization and a pool of U.S. labor available for the same purpose.

3. Part (at least 20 percent to 30 percent) of the rate differential comes back to the United States in the form of taxes paid by the U.S. employees of the shipping companies and even corporate executives. When such cargo is carried by a foreign operator, no such U.S. taxes are paid.

4. Carriage on U.S.-flag ships rather than foreign flag ships helps to ameliorate our balance of payments problems.

There are other benefits that flow from payment of this differential, but a full explanation of these would require an in-depth economic analysis which could not be prepared in the short time and space available.

Congressman Snyder also asked whether or not Capt. H. Nereaux, Vice President of the Masters, Mates and Pilots, or the Organization itself had made a study or developed a program concerning the reduction of manning levels under a single union from top to bottom and, if so, what the nature of such study is (pages 52-53).

While the MM&P and its various officers, including Capt. Nereaux, have done much thinking and studying on ways and means of reducing manning levels, no formal study or program has yet been developed to accomplish that, nor has any study been prepared concerning the use of a single union "from top to bottom” in order to accomplish such manning reductions. Neither Capt. Nereaux nor the Organization has prepared such a study.

INTERNATIONAL ORGANIZATION OF

MASTERS, MATES & Pilots,

New York, N. Y., April 17, 1979. Hon. M. GENE SNYDER, U.S. House of Representatives, Washington, D.C.

DEAR MR. SNYDER: I am happy to provide herewith answers to the questions in your letter of March 19 asking for additional information to supplement the record on H.R. 2462.

1. As stated in the supplemental material submitted to the Committee in connection with my oral testimony, the total number of MM&P members who work on U.S.-flag oceangoing vessels (larger than 1,000 GRT) is approximately 5,000.

2. There are approximately 400 U.S.-flag oceangoing vessels (larger than 1,000 GRT) under MM&P contract.

3. While it would be virtually impossible to estimate accurately the total number of MM&P retired or inactive members who would be recallable in times of national emergency because of the licensing problem explained in my supplemental remarks submitted to the Subcommittee, I can tell you that we have made a preliminary canvass of our computerized records and can report that as of December 31, 1977 there were approximately 1,355 retired members of the MM&P (out of a total at that time of 2,424) who were 69 years of age or less.

4. Although the answer to your question No. 4 is not an easy one, and there are conflicting interests of all types, in general the MM&P favors the expansion of the U.S. fleet by allowing the U.S.-reflagging of foreign-built vessels for operation with ODS and preference cargo. We would not want to see our nation's shipbuilding capability lessened, but we do believe that such a policy, carefully implemented, could expand our fleet, increase job opportunities for U.S. seafarers, strengthen our national emergency potential and benefit the nation generally without seriously injuring our shipbuilding industry.

5. The TAGUS reduced manning experiment seems to us to be an interesting concept. We have studied it carefully ourselves and, while we are not prepared to embrace it in entirety, we do favor from the licensed officer standpoint the use of automated bridge controls and the reduction of manning through automation, increased reliability of systems and simpler repair mechanisms. Indeed, we note that the TAGUS manning scale calls for much higher reductions in manning for seamen than for the higher skilled officers and consists largely of a licensed officer crew. We have engaged in extensive discussions with other American unions and Scandinavian unions about this concept and would be ready to participate in any similar experiment in the United States should that become possible. It is our belief, however, that at present such an experiment is not feasible because of strong opposition not only from some other unions but from ship operating companies as well. Indeed, some American ships today have automated bridge control equipment which stands idle because of such opposition.

6. There are approximately 4,000 MM&P members who are enrolled in our MM&P Health and Benefit Plan.

7. Enclosed are copies of the two most recent audits of that Plan.

8. In our opinion, the obligation of the United States to provide U.S. Public Health Service care for merchant mariners is a longstanding and sacred commitment. There is no inconsistency whatsoever between government support for Public Health Service hospitals and medical services on the one hand and operating subsidies paid by the United States on the other hand to U.S.-flag maritime operators, part of which may ultimately find its way into labor-management jointlytrusteed health and benefit plans. It is well first of all to bear in mind that payments by operators into the MM&P Health and Benefit Plan are made on a "benefits basis” so that they are correlated with the actual costs of the service. To the extent that members of the MM&P, for example, use Public Health Service facilities, the labor-management MM&P Health and Benefit Plan pays nothing for those services. There is, accordingly, no double payment. On the other hand, the availability of Public Health Service facilities insures that merchant mariners will at least receive first quality medical care when they need it in the limited areas where it is now still available without going through the preliminary procedures of complying with MM&P Health and Benefit Plan regulations. Moreover, the existence of the MM&P (and other) labor-management health plans does not insure merchant mariners of the existence of hospital or medical services; it merely insures that if such care is available and if they can secure it, at least part of the cost of that care will be reimbursed. Finally, it is well to remember that PHS hospitals provide medical care for others (including several categories of government employees) in addition to merchant mariners.

9. Copies of the two most recent audits of the Joint Employment Committee Trust Fund account are enclosed.

10. No MM&P research center has yet been established, and therefore no audit has been made of such funds.

If you have any additional questions, please don't hesitate to let me know.
Best regards.
Sincerely yours,

Capt. ALLEN C. SCOTT,
International Executive Vice President.

Mr. DONNELLY. Mr. Eugene Spector, research director, National Maritime Union, and Mr. Talmage Simpkins, executive director of the AFL-CIO Maritime Committee.

STATEMENT OF EUGENE SPECTOR, RESEARCH DIRECTOR, NATIONAL MARITIME UNION OF AMERICA, ACCOMPANIED BY TALMAGE SIMPKINS, EXECUTIVE DIRECTOR, AFL-CIO MARITIME COMMITTEE

Mr. SPECTOR. Good afternoon, Mr. Chairman, gentlemen.

The CHAIRMAN. Mr. Spector, Mr. Simpkins, it is a pleasure to have you with us and, if you would, proceed.

Mr. SPECTOR. Mr. Wall, the president of the National Maritime Union, asked me to express his regret. He couldn't personally appear today due to a prior commitment in Boston where he is giving a speech, making it impossible for him to be in two places at once.

Mr. Chairman and members of the committee, I am Eugene Spector, research director of the National Maritime Union of America. Accompanying me is Talmage Simpkins, executive director of the AFL-CIO Maritime Committee.

The NMU appreciates the opportunity to testify before the subcommittee in support of H.R. 2462, the maritime authorization request for fiscal year 1980.

We continue to believe that the legislative change in 1967, which gave this committee annual review of the policies and programs of the Maritime Administration in fulfilling the authorization requirements, is necessary. It gives your committee an opportunity to equate the money request with the real world.

Provision for $101 million for ship construction over the next fiscal year represents a sharp drop over prior years and even with the $23 million carryover, will not allow for more than four ships to be constructed in fiscal 1980.

This is a far cry from the 30 ships per year envisioned in the 1970 act and, in our opinion, reflects the depressed state of the maritime industry.

The operating differential subsidy request of $256 million, with a projected carryover of $50 million, for a total of $306 million is about $30 million less than the request for 1979. It is our understanding that this is the result of the removal of 12 ships from service in 1979, 10 of which relate to the financial difficulties of the Pacific Far East Lines and States Steamship Co.

We support these and other requests for Federal funds to assist the American merchant marine as necessary to carry on existing programs. It should be noted, however, that these programs by themselves have only been able to keep our merchant fleet 10th in the world. It is quite obvious to us that at current levels of support, the future of the American merchant marine looks very bleak.

We noted with great interest the testimony of the Department of Defense last week which seemed to say that they do not know what is needed in terms of U.S. shipbuilding capability. This, in conjunction with a warning bell sounded earlier that the current U.S.-flag

fleet is inadequate for defense purposes and that even in a limited engagement it would only be adequate in the initial phase of operations, should create a real concern in every citizen.

The appropriation requests in question merely reflect the current state of the development of the American-flag merchant marine. Without these funds, we would lack even the rather limited capability that we now possess.

We are the only maritime nation in the world today that continues to function under the traditional concept of "commercial freedom of the seas.” Most maritime nations reserve cargoes in one form or another to sustain their merchant marines to include such tools as bilateral agreements, equal access agreements and cargo preference.

They also provide direct and indirect economic assistance. Recently, the Senate Commerce Committee noted the level of aid granted to various national flag merchant fleets per capita as follows:

The United States repeatedly gives it maritime industry about $2.47 a year per capita in total assistance and aid to operating-differential subsidy, constructiondifferential subsidy, and financing assistance. Norway, on the other hand, gives assistance to its maritime industry equal to $78.86 per capita; Sweden spends about $15.90; and Great Britain gives $5.81 per capita in total assistance and aid. Our program to promote the U.S. merchant fleet is vital to the nation's economy and security.

Our latest efforts to reserve cargoes failed in the Congress. We find it quite interesting to recall the debate over the cost implications per gallon of gasoline which ranged between 0.2 cent and 2 cents per gallon depending upon who did the calculation and the method of calculation.

Since then, prices at the pump have risen about 16 cents per gallon and oil companies are pushing hard to achieve decontrol. We now hear prophecies of $1 a gallon without the creation of a single job or any contribution to the national economy or security. Such a move will further add to the fuel of inflation.

We bring this point up to support our position that cargo availability is the key to any merchant marine program or policies. Public policy calls for 50 percent of our foreign waterborne trade to move in U.S.-flag ships. Yet, in the liner trade we have traditionally moved between 20 to 30 percent and in the bulk trades, less than 3 percent.

At today's costs, capital will not be freely invested in new bottoms without cargo availability over the 20-year life of a new ship. A number of supertankers were built on the assumption that cargo preference legislation would be enacted.

In today's depressed world market, there is little business available for these ships and a number have sought entry into the Alaskan trade. For the time being, the Alaskan oil movement and the strategic storage program are keeping our aging tanker fleet fully employed. But the ultimate construction of a pipeline for Alaskan oil will reduce tanker demand as will the fulfillment of the strategic storage program.

Future building without a realistic cargo program will only result in a limited replacement program of high technology ships

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