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

to replace break bulk freighters and first generation container ships.

If the current trend continues, our liner fleet will continue to shrink in size and job opportunity, while general purpose ships could well become a thing of the past. Existing bulk tonnage will be pushed far beyond the anticipated operating life and eventually phased out unless we develop a realistic cargo policy.

I shall confine the remainder of this statement to the various sacrifices the seamen have made in their acceptance of new systems and technology, and by reason of the fact that we have failed to give meaning and direction to our basic maritime policies by establishing a national cargo program. I also want to answer the criticism often raised as to the cost of seagoing labor.

A decade ago (1968) Marad reported 54,150 seagoing berths as compared with about 20,000 berths today. A few illustrations should suffice to show why this has happened. In 1968, U.S.-flag ships carried 25 million long tons of cargo, or 6 percent of our oceanborne foreign trade, whereas, in 1977, the latest figures we have available, we carried 34.8 million long tons. That increased cargo capacity of 9.8 million tons represented a drop to 4.5 percent of our trade.

Larger, faster ships with new technology (the container or LASH system) have reduced manpower requirements per ton of cargo carried. For example, a supertanker in the 250,000 deadweight range, with a crew of 30, compared with a T-2 tanker of 16,000 deadweight, or the jumboized T-2 of 22,000 deadweight, with a crew of 40, represents an enormous increase in productivity.

Similarly, the fast new container ship with a crew of about 37, depending upon size, can replace 5 to 10 C-2 type ships, each having crews of about 47.

The operator who is able to generate full shiploads of cargo does not worry about labor costs; whereas, the operator who is unable to generate adequate cargo must lay his ships up irrespective of labor costs.

We estimate that a modern tanker under U.S. flag can operate over a 350-day year at a labor cost of about $1.75 million. A container ship would be about $2 million a year. We would point out that the fuel costs, capital costs and interest, and certain other costs exceed that of labor and have changed the economics of the business. On an LNG at about $150 million cost (and it is going up) labor costs become insignificant.

Seamen's wages since 1968 have increased at a lesser percentage than those in the other modes of transportation.

Twenty-five years ago seamen's wages represented approximately 30 percent of the steamship's total operating expense. This compares with the labor cost of about 45 percent in the aviation industry, 65 percent in railroad, 43 percent in trucking.

Today, seamen's wages represent less than 20 percent of the total operating expenses, while the approximate cost in the railroad industry is 51 percent; airlines 41 percent; motor carriers 50 per

cent.

In summary, we believe the subsidy program has worked reasonably well. As we pointed out, U.S.-flag carriage has dropped from 6 percent to 4.5 percent; however, in the liner trades, where most of

the subsidized carriers operate, U.S.-flag carriage has increased from 11 million tons, or 24 percent, to 14.4 million tons, or about 30 percent of the trade.

We believe this demonstrates the need and value of the subsidy program.

From the seaman's viewpoint, the picture is quite different. We have lost ground. We have seen an absolute rise in total trade and liner cargo carried but have wound up with fewer ships and fewer jobs for seamen.

We in maritime labor have continued to measure our successes in terms of how little we lose rather than how much we progress. That is how we again characterize this year's budget request.

Thank you.

The CHAIRMAN. Thank you, Mr. Spector.

There has been some talk lately that subsidized operators are losing money, whereas, nonsubsidized operators are doing pretty well. Has this always been the case?

Mr. SPECTOR. No, sir, for every subsidized operator that is losing money, and the recent bankruptcies of two highlight (PFE and State Steamship), there are probably 100 or more nonsubsidized carriers in the last 30 or 40 years that have gone out of business.

I don't recall any liner operator, with the exception of Sealand, that has replaced a single ship. They have pushed their ships to the end of their life and then gone out of the American flag. I think of companies that were under NMU contract, such as States Marine Line with 25 ships, United Fruit with 19 ships, some of the larger fleets that we had under contract, that when their ships became rather ancient they merely transferred them to foreign flag or they scrapped them and they went out of the U.S.-flag operation.

I think for every casualty you find in the subsidized area you will find at least 10 or perhaps more-I don't know what the exact figure is. We could research it for you if you wish. We can check our own files as to the number of subsidized operators and the number of nonsubsidized operators we have had under contract since 1945 or 1946, if you wish, and show the number that have gone out of business and the number of ships that have disappeared in the unsubsidized area of the business vis-a-vis the subsidized area.

The CHAIRMAN. If a company agrees to a subsidy program are there such restrictions placed on it by the Maritime Administration that they are hurt competitively?

Mr. SPECTOR. I believe the answer to that is yes, sir.
The CHAIRMAN. What would you recommend?

Mr. SPECTOR. We have found that Sealand and U.S. Lines, for example, and Export for a time, gave up subsidy by reason, in my opinion, the onus requirements placed on it by Maritime; the essential trade route concept; the need to make a certain number of voyages a year whether cargo is available or not; the need to develop ports; getting involved in cargo development and port development in foreign countries as well as in the United States. On the other hand, if you give up the essential trade route you might well change the port concept in the United States. Various

ports may disappear that are now quite active. That could create problems also.

The CHAIRMAN. What is the total membership of your union? Mr. SPECTOR. 40,000, sir.

The CHAIRMAN. Would you supply for the record the same information that we asked Mr. Mollard of the Seafarers as to the retired personnel and their availability to the industry in case of a national emergency?

Mr. SPECTOR. I have the information with me, if you care to have it now.

The CHAIRMAN. Yes.

Mr. SPECTOR. We have in retirement at the present moment 13,619 seamen. I asked for an age distribution of these seafarers and, for the record, I will give you that distribution. I think it is important in terms of the potential availability of these people. There were 363 retirees under the age of 50. A number of those could well be disability pensioners. There were 4,357 pensioners between the ages of 50 and 59; 2,271 pensioners between the ages of 60 to 64; 6,616 aged 65 and over, and 12 we did not have any information as to their age.

As to their availability in the time of emergency, I would suspect that those in the lower age brackets are continuing to work in the maritime industry while drawing a pension from the National Maritime Union Pension Fund, so that they are in the industry now working, not necessarily in the deep sea part of the industry. They might be working for an Atlantic Richfield or in the offshore oil supply or in some other phase of the maritime industry. They could be working for the Military Sealift Command as civilian personnel. Many of them have ratings and qualifications which are valuable today and in short supply.

I believe that if a call went out, and we could do that almost immediately because we keep a list and we know where the checks go, so that we could ask them in the case of emergency to come back. And I believe that our response, as always, would be overwhelming.

These people who have gone out on pension and who are not working and who would be available would respond to the needs of their country. They have done it before. They have done it during World War II. They have done it in Vietnam. They have done it during the Korean war. And we see no reason not to believe they would not do it again.

In many instances they have done it at great sacrifice, but we think we know our membership and we believe it would be responsive to national need.

The CHAIRMAN. Of the 12 who wouldn't give their age, how many were women?

Mr. SPECTOR. No comment.

The CHAIRMAN. Mr. Snyder?

Mr. SNYDER. Thank you. Mr. Chairman.

Mr. Spector, you referred in your statement to productivity. Isn't the bottom line and whether they make this thing work or not, regardless of covious differing views on how it is going to work, more in direct relationship to profitability than it is to productiv

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