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marine which is aggres
“American Merchant Marine operators ... do not exaggerate when they say frankly: ‘Without government assistance and a long-range government shipping policy, the American flag must disappear from the seas.’ ” — Second Lieutenant Lane C. Kendall, U. S. Marine Corps Reserve, April 1938 Proceedings.
Our U. S.-flag merchant marine is experiencing heavy weather for reasons economic, political, and international. Beyond these perceptible Jasons, there is another, over- °°ked but possibly paramount.
Some ships of U. S. registry receive support in the form of subsidy front the U. S. Government. "Sub- s|dy” is defined as “monetary as- s>stance granted by a government to a Person or a private commercial enterprise.’’ Note that the definition d°es not state the purpose of the Snant. The difficulty in which the u- S. merchant marine finds itself °day seems to stem from a similar ack of statement of purpose in our nafional policy.
. A pertinent example is the often- cited “Declaration of Policy’’ intro- Ucing the Merchant Marine Act,
36, which says: “It is necessary 0r 'he national defense and development of its foreign . . . commerce at the United States shall have a erchant marine (a) sufficient to ,arry • • . a substantial portion of e water-borne . . . foreign comaerce • . . , (b) capable of serving s a naval and military auxiliary in fre of war or natjonai emergency. o' ■ Even granting the importance 'he word "necessary,” there is 0 affirmation in crystal-clear, in- °ntrovertible language, of exact p,,rPose.
y}} is altogether appropriate to ask: Pat purpose justifies channeling th°ney from the federal treasury to ye Privately owned, profit-seeking tin ^ maritime industry, or any por- a 'hereof? If the answer discloses ^ alid purpose, then every effort st be put forth to achieve it. jn Pen there is a marked disparity 'raH°StS between the ships serving a Cos 6 route- survival for the highest- the*^661 's mac*e possible only by mfusion of government funds. bee PUrPose of this infusion should m exPressed clearly as support of a sive, competitive, and able to carry a significant share of the available commercial cargo.
A collateral purpose of the subsidy is to assure that ships operated with government aid are designed, built, and maintained so that they require a minimum of conversion if requisitioned for military use. The law authorizing the subsidy, therefore, should provide that the features needed for national defense be installed in the ships and maintained at the expense of the government.
While it is possible to draw inferences that the framers of the Merchant Marine Act. 1936, which is the cornerstone of the entire structure of ship subsidy, intended certain objectives to be attained, these objectives do not stand out as positive declarations of what must be done. Three major deficiencies deserve special scrutiny.
First, the stipulations concerning the portion of shipbuilding costs to be paid from federal funds are so restrictive that they do not equalize U. S. and foreign costs. As a consequence, the shipowner must operate under the disadvantage of paying higher annual amortization and interest charges than his competitor.
Second, there are no provisions to encourage greater efficiency and more effective employment of the merchant fleet.
Third, the act contains only the generalized statement that vessels built with construction differential subsidy “shall be suitable for eco-
nomical and speedy conversion into” military auxiliaries.
Is there an explanation for these deficiencies?
One explanation lies in the fact that relatively few U. S. citizens (including congressmen) understand the economic importance of a merchant marine. When the Merchant Marine Act was written, attention centered on developing the mechanics of a system to subsidize the U. S. merchant fleet, and an expression in clear and simple terms of the purpose of the subsidy program in all its components was omitted. Curiously, despite the many amendments to the act, this deficiency never has been remedied.
If the premise stated in the Declaration of Policy is accepted, and a U. S.-flag merchant marine is acknowledged to be necessary for our international trade, it follows that the fleet must be modern, competitive, and efficient. Each of these adjectives should be defined in the statute with meticulous care.
The United States, as the major marketplace of the world, attracts to its ports the ships of every maritime nation. Rivalry among these carriers
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lngs / October 1981
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for the favor of U. S. merchants is intense, and is evident in their employment of the most modern ships and the most innovative techniques of operation. Importers and exporters do not patronize inferior or obsolescent ships; they choose ships
which give the best results at lowest cost regardless of nationality. U. S. shipowners, therefore, must be in the position to respond quickly to challenges, especially when new ships are placed in service by the foreigners.
At present, the act specifies that the amount of subsidy for new construction shall be the difference between the cost of building the ship in a U. S. yard and building that same ship, to the U. S. specifications,in a foreign shipyard, but in no event shall the subsidy exceed one- half of the U. S. cost. This provision creates a formidable, multi-faceted obstacle to achieving the purpose of establishing and maintaining a modern merchant marine. There are, for instance, the requirements of those U. S. agencies which supervise shipbuilding. These are higher and more inflexible than those of many other maritime nations. It is unrealistic to expect, as the act does, that a foreign corporation would build a ship to meet U. S. standards and thereby increase its costs. U. S. shipowners point this out in their complaint that the limitations on construction differential subsidy deny them full parity with foreign ship operators.
It also is a fact that there is keen competition among the world’s shipbuilders, and unexpected low prices often may be obtained by systematic canvassing of qualified yards. This cannot be done under the U. S. system. The Maritime Administration makes every effort to determine accurately what the lowest foreign building cost may be, but its procedures are, at best, only estimates made in Washington, D.C. These are very different from evaluation of bona fide proposals from competing yards to build one or more ships in conformity with carefully prepared plans and specifications. U. S. shipowners reinforce their plea for genuine parity in ship acquisition costs by referring to the fact that construction subsidy awards are predicated upon these theoretical calculations.
The search for ways and means to increase efficiency of men and machines is, and has been for generations, almost a crusade on the part of U. S. business. The Merchant Marine Act, however, contains no provisions for encouraging greater efficiency in the management and use of the merchant fleet, nor does it reward superior achievement.
The third, and from the military viewpoint, most critical deficiency in the act lies in the failure to specify
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Proceedings
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the purpose of incorporating ”na' tional defense features” in sh'Ps built with construction subsidy- lessons emerge from history. One that it is possible to develop a s,n* design which fits the ship almost perfectly to the needs of commef and many of the major requireme of the Navy. The example of the , ships of the Cimarron class shou not be forgotten. These tankers built by the Standard Oil ComPan (New Jersey) in 1938. The 0'vl?er£|y naval architects collaborated clos with the design teams of the NaV, Department and the original Mae time Commission (now the Man
Administration), and embodied at government expense many desirable —and as they later proved, vital— national defense features. The result was extolled as the finest commercial tanker built in the United States UP to that time. All 12 of the Cimar- r°n class were absorbed into the Navy; 8 were quickly converted into fleet oilers and 4 became small aircraft carriers.
The other lesson is that national defense features must not become a means by which the government ab- s°rbs more than the statutory limit one-half the U. S. building cost, "hen the United States was under construction in 1950-52, many “adjustments” in the government’s share were made to keep the price wdhin the amount the operator was wdling to pay for the ship. Because he “Big U” never was used by the department of Defense, there is still no answer to the question whether jhe “adjustments” served the na- 'onal interest. What is obvious, owever, is that the purpose of na- '°nal defense features must be so clearly set forth in the statute that dere is no room for either question- • e “adjustments” or excuses for 'gnoring the requirements in future
instruction.
r Relatively few ships under U S. egistry today have the genuine ca- ^ ability to meet military needs. Con- 'nerships, with rare exceptions,
.|e n°t equipped with cranes to han- ^e'r car8°es- Their military use- ^ ness depends upon the availability adequate cranes at the objective or helicopters able to lift 30 or ty'ir,6 t0ns’ Heavy-lift ships—vessels ' h booms and winches with single- ble Capacity °A 200 tons —are desira- ,0 handle military equipment. ofefe are two of these ships, each about 2,700 tons deadweight ca- under the U. S. flag. Break- in th S^'ps—vessels of proven value the C military support role because odd^ han accePt *fle assorted and ditj Saaped impedimenta of an expe- nuaary force—are decreasing in r0l)er as more and more trade i?e .es are converted to container- thes tra^C- The military need for mi-^ps, however, remains undi-
ba^ar8e’ and lighter-carrying ships So ? n°t been tested in time of war, au ,eir true usefulness as military 1 'aries has yet to be demonstrated. They appear to have great potential, especially in their ability to deliver loaded barges or lighters and to depart before they attract the enemy’s attention. Roll-on/roll-off ships can accommodate large numbers of outsize vehicles, and can deliver them to any harbor where they can drop their stern ramps to a platform. There are, unfortunately, very few ships of these types in the U. S. fleet.
All these vessels were designed to meet commercial requirements.
When the plans were finished, the Navy was invited to inspect them and to make recommendations as to the national defense features desired. The lesson of the Cimarron- class tankers appears to have been overlooked or forgotten, possibly because the purpose of the national defense features is not set forth in positive terms in the act. If the full potential of the U. S. merchant marine as a military auxiliary is to be realized, those features of design and construction which have only military value must be incorporated in the design by joint action of naval architects representing the owners, the Maritime Administration, and the Navy.
Shipowners have resisted the installation of equipment of potential use by the military, such as evaporators and generators exceeding commercial requirements, even when the initial cost is absorbed completely by the government because the expense of operating and maintaining such equipment, once installed, is not included in the operating differential subsidy. Preparedness for war is an expensive matter. A ship well adapted to serve as a military auxiliary might never be called upon to perform in that role. Should the need arise, however, the fact that the ship had all the equipment installed and in use could save much time and effort, as well as the problem of procurement on an emergency basis.
Absent a specific statement in the act concerning the purpose of including national defense features in the design of ships built under subsidy, the resistance of the owners has met with sympathetic acceptance by both the Department of Defense and the Maritime Administration. The initiative in the design of ships has been left to the merchant
marine industry. Only after the design is completed does the Navy have the privilege of studying the plans and specifications, but by then the opportunity to incorporate major adaptations has been lost. The result has been that less and less has been demanded, until such minor items as foundation plates for an engine to be made of steel rather than cast iron may constitute the whole of the national defense requirement.
This situation will not change until the act is amended to state positively the purpose of the national defense features, possibly in these words:
“The purpose of this provision is to assure that there will be available to the military services in time of war or national emergency a fleet of modern and efficient ships designed to perform as an auxiliary force, and available with a minimum of conversion or modification, outfitted with equipment regularly inspected and updated to meet the military requirements. The cost of installing and maintaining these national defense features shall be charged to the budget of the Department of Defense.”
Subsidy is condemned in some quarters on the grounds that it insulates the beneficiary from competitive pressures, reduces the need to be aggressive in the pursuit of business, and discounts efficiency in performance. In fact, by offering a reward for increased efficiency in management and operation, the incentive is established to be aggressive in seeking new ways to meet the commercial objective. By making it possible for U. S. shipowners to acquire ships built in U. S. shipyards, to U. S. standards and specifications, but sold at prices which grant true parity with foreign shipowners, fair costs, competition on even terms, and aggressive performance can be demanded. By stipulating the underlying purpose of installing national defense features in ships, the potential role of the merchant marine as a military auxiliary in time of war or national emergency can become more significant, and of enormously greater value. By these measures, subsidy can be used to benefit the nation as a whole as well as the merchant marine industry.
b'oce.j.
u,gs / October 1981