Further, I would reiterate our hope that this subcommittee, during the days which lie ahead for the 96th Congress, would commit itself to the concept that if we are truly to develop a merchant fleet commensurate with our commercial and defense requirements, we must exert all of our efforts to develop programs of assistance for the fleet either as adjuncts to the subsidy program or, possibly, eventually in lieu of it. During the last Congress, as you know, amid the welter of bills which were considered on such matters as trade malpractices and third-party competition, there was one piece of legislation introduced which would have provided a positive inducement to the building and operation of U.S. ships by assuring cargo. That measure was not enacted. But there are other devices which could provide cargo for U.S. vessels. For example, as you know, there recently has been considerable attention paid, both in industry and Government circles, to the desirability of bilateral shipping arrangements, and this is one approach I believe the subcommittee might take under advisement. Finally, and I think this is of great importance, I would hope that the subcommittee, insofar as it is able to exert any effectiveness in this area, would take steps to maximize the participation of U.S. ships in new markets which are opening up for us. What I have in mind specifically, of course, is the recent recognition of the People's Republic of China. Thus far no bilateral shipping agreement with China has been negotiated, as was done with the U.S.S.R., and I would certainly hope that an agreement is concluded. It is my view, however, that the U.S.S.R. agreement brought only minimum returns to the U.S. fleet; and, in one respect, at least, positive harm. And I therefore would urge the subcommittee, to the extent that it has any jurisdiction in this sphere, to attempt to assure that any United States-China trade agreement negotiated will indeed bring positive benefits to U.S. vessels. Mr. Chairman, that concludes my statement. I thank you. In what respect did the U.S.S.R. agreement with the United States harm us? Mr. MASKIN. Harm us? Mr. DONNELLY. Yes. Mr. MASKIN. By opening up U.S. ports to Russian ships. We all know what happened to our liner fleet as a result of that. We had to pass legislation to deal with the problem, and at the moment we still do not know whether that legislation is going to deal effectively with the problem or not. Mr. DONNELLY. That is on page 5, what you are referring to? Mr. MASKIN. Yes. Mr. DONNELLY. Thank you. Minority counsel? Mr. LOSCH. Thank you, Mr. Chairman. Mr. Maskin, where are your members having their ships constructed? Mr. MASKIN. Virtually all that are being constructed on the bulk side are constructed principally for operation in the Jones Act trades and they all have been built in U.S. yards. 46-188 O- 79 20 Now, on the liner side, most of the ships that are operating today have also been built in U.S. yards. However, some of the newer ships that are being built now as replacements for those older vessels are being built abroad. Mr. Losch. Mr. Leggett mentioned that there should be some additional incentives to assist in the construction of Jones Act vessels. Do you agree with that? What particular incentives do you suggest or do your members believe would be appropriate? Mr. MASKIN. I am not so concerned at the moment with additional incentives. What I am concerned about are attempts to erode the protections of the Jones Act and to deprive American ships of cargo that they are entitled to by law. During the past, I would say about the past 7 or 8 years, unsubsidized operators who have been building completely without Government subsidies of any kind and investing their own money, put about a billion and a half dollars into building tankers for the Jones Act trades, principally to carry Alaskan oil. Now, for example, as a result of a loophole in the Jones Act which permits foreign-flag ships to serve the Virgin Islands, we are losing about 100,000 barrels a day of Alaskan oil. In addition to that, there are indications that our Government may be contemplating the export of Alaskan oil or a swap arrangement with Mexico and this will deprive us of more tonnage. It is this kind of thing. It is the erosion of the Jones Act provisions which bothers us. Mr. LosCH. Do you have any figures on the average age of the Jones Act fleet? Mr. MASKIN. The average age of the Jones Act fleet, I would say roughly, is 14 or 15 years. But you know, we have a great deal of new tonnage. As I have said, since about 1970, when the 1970 amendments to the 1936 Act were passed, and even though those amendments provided subsidy for the building of tankers, unsubsidized operators, without subsidy, have built over 50 tankers for the Jones Act trade, over 4 million deadweight tons. So we have very good tonnage although the average age of the fleet is down. Mr. LosCH. Your members who are engaged in foreign commerce, are they approaching vessel replacement? Mr. MASKIN. Well, Sea-Land is our largest. They have to replace many ships. Mr. LOSCH. Do you see many of your other members following Sea-Land's lead and going for foreign construction? Mr. MASKIN. Not really, because next to Sea-Land, our biggest liner company member, as I have indicated here, is Delta Lines. They are a subsidized company and they are obligated to replace their fleet in U.S. yards. The rest of the ships are tankers and bulk carriers and they are principally interested in the Jones Act trades and must, by law, build in United States yards. Mr. LOSCH. One final question, and this goes to the issue that we raised regarding hiring halls. Do your members see a substantial benefit in that type of arrangement as opposed to a "team" crewing concept which would allow a group of crew members to stick with a particular vessel and not be rotated from vessel-to-vessel and company-to-company? Mr. MASKIN. Well, our members have been using union hiring halls for many years. I am not in a position to generalize about this. But my personal view, based on conversations I have had with our members, is that the hiring hall has provided them with a prompt and efficient means of obtaining personnel, shipboard and I have heard no adverse comments expressed about the hiring hall. Mr. LosCH. Thank you, Mr. Maskin. I thank you, Mr. Chairman. Mr. DONNELLY. Thank you very, very much. As usual, counsel will be submitting questions to you in writing. Mr. MASKIN. Thank you. [The following was received for the record:] Hon. PAUL N. MCCLOSKEY, Jr., AMERICAN MARITIME ASSOCIATION, Ranking Minority Member, Committee on Merchant Marine, Longworth House Building, Washington, D.C. DEAR CONGRESSMAN MCCLOSKEY: I have your letter of March 19 in which you request the views of the American Maritime Association on your proposal to terminate the construction-differential subsidy program and permit subsidized U.S.-flag steamship companies to purchase vessels in the world market. Your letter does not so specifically state, but I assume that your intention is to allow those operators who acquire vessels abroad, and presumably place them under the U.S. flag, to retain their operating-differential subsidy and the other benefits of the direct subsidy program. The program of direct construction and operating subsidies, as you know, was established by the Merchant Marine Act of 1936, and sets forth certain requirements with which the recipients of such subsidy must comply, including the requirement that they build their vessels in U.S. shipyards. Implicit in the Act, however, is permission-indeed, certain protections which constitute an incentive to do so-for those U.S. operators who do not desire subsidy to operate in the U.S. foreign trades without subsidy and without the legal restrictions which attend the receipt of subsidy. These freedoms include the right of non-subsidized operators to have their vessels built abroad (while retaining the right to register them in the U.S.); and, as you also know, a number of unsubsidized operators have availed themselves of this privilege. What you are proposing now consititutes a drastic revision of the Merchant Marine Act of 1936 and questions a basic assumption of the Act-namely, that the United States must maintain a private shipbuilding capability, essentially for reasons of national defense. Moreover, this proposal would affect not only the subsidized ship operators to whom it is principally directed, but also unsubsidized U.S.-flag operators who compete with the subsidized ones on many U.S. trade routes, as well as seagoing personnel, the shipyards, and the shipbuilding work force. Because of the far-reaching implications of your proposal, and its impact upon so many sectors of the U.S. maritime industry, it is not possible for the American Maritime Association to provide you with definitive views within the very brief time frame you have allotted to us. I would say, however, that we of the AMA long have held to the view that cargo is the most essential ingredient of a viable merchant marine and maritime industry; and that if we are able to solve the problem of providing adequate amounts of cargo for U.S. ships, at fair rates, other considerations will fall into place. As an example, I might cite the fact that, because American tanker operators felt that they were assured of Alaskan oil cargoes under the provisions of Section 27 of the Merchant Marine Act of 1920 (the Jones Act), they responded to the demand created by the opening of the trans-Atlantic pipeline by building a sufficient volume of tanker tonnage to meet that demand-and the fact that the Jones Act required these vessels to be built in U.S. yards proved no impediment to their construction. During the period between passsage of the Merchant Marine Act of 1970 and the present day, in fact, unsubsidized U.S. tanker operators, responding to the Alaskan demands, built or contracted for over 50 tankers, of 4.4 million deadweight tons, at a total private cost of more than $1.5 billion-or, to put it another way, the assurance of cargo encouraged these operators to build more ships, in American yards, and to spend more money doing so, than did the subsidized operators and the Government together, under the subsidy provisions of the '70 Act, which provides no cargo guarantees. Thus, I believe it would behoove all of us to seek to improve the American merchant marine by concentrating our attention on ways of increasing the availability of cargo, and not on a proposal which would have the principal effect of enhancing the viability of foreign shipyards at the further expense of American ones. This is not to say, of course, that we should not concurrently seek ways to improve the productivity, cost effectiveness and delivery schedules of U.S. yards, and I feel certain that if we are able to do so, even those U.S. operators who now are constructing their vessels abroad would prefer to build American. Meanwhile, it is our view that it would be best to retain the present system under which those ship owners who desire subsidy should be prepared to abide by the requirements of the program; those owners who prefer to forego the subsidy should be free of restrictions, and the ultimate choice should be with the operator himself. Sincerely, ALFRED MASKIN, Executive Director. Mr. DONNELLY. Mr. William J. Benkert, president of the American Institute of Merchant Shipping and Mr. Earl Clark, codirector, Labor Management Maritime Committee will not appear, but will submit their statements for the record. [The following was received for the record:] STATEMENT OF EARL W. CLARK AND TALMAGE E. SIMPKINS, CODIRECTOR, THE LABOR MANAGEMENT MARITIME COMMITTEE The Labor-Management Maritime Committee appreciates the opportunity of presenting this statement in support of the Fiscal Year 1980 Authorization for the Maritime Administration in the Department of Commerce. First, a few words about our organization. The Labor-Management Maritime Commission was founded in June of 1950, and is approaching its 30th year of operation. It is the oldest maritime association in the operating field at the Washington level, and consists of major steamship lines and maritime labor involving subsidized and unsubsidized liner companies and liquid bulk carriers. The Labor membership includes the largest maritime union in the unlicensed category. The program of LMMC includes basically four principal programs and covers the fields of legislation, promotion, education and research. We thus have a most vital interest in the subject of these hearings. Ship construction subsidy The Administration is requesting only $101,000,000 for construction subsidy for fiscal 1980. This, with a carry-over of $23,000,000, will provide a total of $124,000,000 for such purpose. It is intended to cover construction subsidy costs for one LASH ship for Waterman Steamship Corporation and three dry bulk carriers. This is a far cry from the overall program level of $443,077,000 for fiscal 1979, which will provide construction subsidy for some 13 ships. It is a farther cry from the program envisaged by the 1970 Merchant Marine Act, which called for some 30 new ships a year for a ten-year period with the objective of constructing 300 new ships for our foreign commerce. Certainly, with commercial ship construction at one of its lowest ebbs in history, there would appear to be little question of the necessity for authorizing the comparatively modest $101,000,000 appropriation as proposed by the Administration. We certainly support its approval. On the more favorable side is the statement of the Assistant Secretary of Commerce for Maritime Affairs concerning our cargo-carrying capability. He noted that, on January 1, 1979, there were 745 privately owned deep-draft ships in the U.S. Merchant Marine, constituting 21.7 million deadweight tons, and that this was up by 1.3 million deadweight tons over the previous year. However, this relatively bright note is dimmed by the fact that, in terms of both numbers of ships and deadweight tonnage, our merchant fleet is far from adequate to meet the objectives of either the Merchant Marine Act of 1936 or that of 1970. The figures quoted by the Assistant Secretary of Commerce for Maritime Affairs encompass all privately owned deep-draft U.S. flag ships including the Great Lakes. Excluding the Great Lakes active deep-draft ocean-going U.S. flag ships shape us as follows: 572 (of which 26 are government owned); 234 in the domestic trade; 17 operating foreign to foreign; 73 operated by U.S. agencies of government; and only 248 in the foreign commerce of the United States. Let us compare where we stand in terms of competing with the U.S.S.R. fleet. As of the same date (January 1, 1979) the U.S.S.R. deep-draft ocean-going fleet consisted of 17,025 ships with 18.4 million deadweight tonnage. This is ocean going only and does not include any river fleet or Caspian Sea fleet. Furthermore, testimony before this committee by the Under Secretary of the Navy clearly revealed that appropriate inter-agency planning had not been achieved to determine a commercial shipyard and merchant marine base adequate to serve the nation and meet its military needs in time of war or national emergency. This failure had transpired in spite of recurring requests by the Congress for such a determination. At the same time, it has been amply testified on numerous occasions that our merchant fleet is inadequate to fulfill its defense responsibilities in case of an international confrontation of any magnitude. This raises the very pertinent point of what's to be done about it. It seems patent that even if the Department of the Navy and the Department of Commerce had fully discharged their full coordinative responsibilities in this regard, the solution would have only been partly addressed. In short, you can build all the ships necessary to achieve a given objective, but, if they cannot be commercially employed in peacetime, they are left to deteriorate or be placed in the Reserve Fleet to languish at great expense to the government. Actually, the answer to the matter of building and sustaining an active merchant fleet capable of its defense or national security responsibilities, is Cargo. The solution to the Cargo problem is also the answer to meeting ship construction needs. In this connection, it should be observed that the world appears to be rapidly moving toward a practice of "Controlled Cargo"; be it in the form of bilateral agreements, equal access agreements, cargo sharing or cargo preference. The developing nations are fast moving in this direction. In the liner trade, such practices were given impetus by the development of the Code of Conduct for Liner Conferences by the United Nations Conference on Trade and Development (UNCTAD). It will come into effect when at least 24 countries, whose fleets represent a minimum of 25 percent of the world liner gross tonnage, ratify the Code. It is anticipated that it will be adopted shortly. The Code calls for 40 percent of Cargo for each of two trading nations and 20 percent for third flag countries. In an addendum to a recent publication titled "The United States Merchant Marine A National Asset" by Irwin M. Heine, the controlled cargo practices of the various nations in both the government and commercial fields are outlined in great detail showing the rapidly increasing worldwide trend in this regard. If these trends continue, it seems obvious that the United States would be courting disastrous effects if it failed to move with this tide of world shipping practices, particularly in the area of bilateral agreements, if not, indeed, expanded cargo preference as well. It seems obvious that keeping pace with world cargo trends is the only viable solution to expanding our U.S. flag fleet and keeping it operative and ready to serve both our commercial and national defense needs. Only when we address ourselves adequately to the cargo problem can U.S. flag shipping move to meet the full program envisaged by Section 101 of the 1936 Merchant Marine Act and its supporting legislation. Meanwhile, the $101,000,000 requested for construction differential subsidy should be authorized. Operation differential subsidy The Administration's needs for operation differential subsidy for fiscal year 1980 are $306,714,000. This is required to cover total estimated ODS needs for existing and/or anticipated contractual obligations for this item. The above figure consists of a requested appropriation of $256,208,000 and an estimated carry-over of some $50,506,000, the latter resulting primarily from removal of certain ships from the service and thus also from subsidy, during 1979. This is some $30,000,000 less than the request of last year and reflects a decling condition in our merchant marine. The amounts requested to be authorized are principally for the liner trade as tanker participation in the U.S./U.S.S.R. grain trade was reduced due to demand elsewhere in oil transport. We are advised that total ODS funds are deemed sufficent for the operation of 159 liner vessels and 21 bulk ships during the coming year. We have no way of detailing these ODS requirements, but the statements of the Assistant Secretary of Commerce for Maritime Affairs are convincing and we accept their accuracy. We support the request for ODS authorization in the amounts recommended, including an authorization for $256,208,000. We hold that these funds redound appreciably to the U.S. economy aside from the Merchant Marine and national defense factors. |