now be accommodated and to reduce port time for such vessels. (b) Consideration should be given to using funds generated from Title I of Public Law 480 to improve port faciilties in non-Communist recipient countries to permit the acceptability of larger vessels than can now be accommodated and to reduce port time for such vessels. H. Flags of Necessity Fleet.-The concept of the "effective controlled fleet" should be encouraged because of the real benefits derived by our government from the existence of this fleet and because no benefit will result to anyone other than foreign nationals from its destruction. Due consideration should always be given to the charter and financing commitments of the owners involved. I. Import Quotas.-No import quotas should be established requiring the movement of a percentage of import commercial cargoes on United States flag vessels. To provide otherwise in the long run would bring substantial harm not only to the United States shipping industry but also to other industries in the United States. I believe that these recommendations will produce the following results: (1) A substantial increase in the number of modern vessels in the United States fleet. (2) No decrease in employment opportunity for United States seamen below that which would occur under the Maritime Advisory Committee recommendations. (3) A reduction in cost for those segments of our economy which must, or could, use the domestic fleet at no cost to the United States government. (4) A reduction in cost for the American consumer at no cost to the United States government. (5) No increase in expenditures by the United States government over and above that which it is now programmed to make for the United States merchant marine. (6) A decrease in expenditures by our government for Cargo Preference cargo. Also, the charter rates for these new vessels will be so close to foreign rates that they will not adversely affect any sales of agricultural products under programs other than Title I of Public Law 480 if the cargo resulting from such sales is required to move on United States flag vessels. (7) The United States flag fleet's expansion will not be limited by annual appropriations and not affected by other essential national requirements. (8) No decrease in United States shipyard construction of commercial vessels below that which such yards can expect under present programs. The yards should benefit through the mobilization base concept and because of the additional repair work for the expanded fleet, particularly that segment engaged in the domestic trade. (9) No decrease in shipyard employment below that which can be expected under present programs. In fact, these shipyards employees should also benefit from the mobilization base concept and the additional repair work for the larger United States flag fleet. (10) A modernization of United States shipyard capability thereby reducing shipyard costs. (11) A program which is in the public interest. It is consistent with the requirement that in the light of the great demands now being made in the Federal budget, programs should be supported only to the extent that they are essential and necessary. DECEMBER 17, 1965. H. LEE WHITE. NEW YORK, N.Y., December 21, 1965. Hon. JOHN T. CONNOR, Secretary of Commerce, Washington, D.C. DEAR SECRETARY CONNOR: After I sent out my dissent (dated December 17, 1965) to the majority recommendations of the Maritime Advisory Committee, I realized that I should have covered one other point. One of the basic conclusions of my paper was that once a determination has been made as to the amount of shipyard construction to be earmarked for United States shipyards and subsidized through construction subsidy (however high that amount be), over and above that level the owners be permitted to build vessels in foreign yards. In view of the present United States problem on balance of payments, some might contend that building in foreign yards by United States citizens would have an adverse effect on our balance of payments. This would not be true for the following reasons: 1. Almost all of the foreign yards will permit payment for the vessels on delivery of the vessels. Under current conditions, delivery occurs approximately 2-12 years after the date of the execution of the construction contract. A new statute would have to be enacted by our Congress in order to permit foreign building along the lines recommended by me. If we assume that such a statute would not become law until July 1966, it would mean that no United States dollars would leave the United States for the purpose of acquiring foreign built vessels until January 1969, or 3 years from now. I do not believe that any of our voluntary programs extend that far in the future. If for some reason there is a feeling that even that date would not be adequate, further protection could be secured under paragraphs 2 and 3 below. 2. Provision could be made in this program requiring Maritime Administration approval before building abroad for United States registry. Maritime Administration would then be in a position to disapprove such application if it believed that the acquisition of the vessel and payment therefor at the time contemplated would adversely affect the United States balance of payments problem. 3. As pointed out in the dissent, the primary sources of funds for such building are United States banks and insurance companies in the form of loans. These financing institutions are subject to the voluntary balance of payments program, and this will work as a brake on the owners who will be borrowing from these financing institutions. 4. Many owners require when they are having vessels built in foreign yards that certain equipment for those vessels be acquired in the United States. In vessels built for my companies it has run from 10% to 25% of the total price. This might have a favorable effect on our balance of payments since these expenditures for United States purchases are made at least a year before the delivery of the vessel, and, therefore, the flow of dollars to the United States would precede the flow of dollars out of the United States by at least a year. I request that this letter be considered a part of my dissent dated December 17, 1965. Sincerely yours, H. LEE WHITE. STATEMENT BY J. ANDREAE Before the MARITIME ADVISORY COMMITTEE MEETING ON NOVEMBER 30, 1965 Mr. Chairman, this Committee was appointed by Executive Order of the President to recommend to you a program to revive our sagging merchant marine to the extent required by the national interest. All of the members have endeavored to do this. However, some of the actions and statements of members have naturally been influenced by their desire to best serve the interests of their constituents. Report and prior At our last meeting we received the Interagency Task Force to this meeting the report of the public member subcommittee. not to accept the Task Force Report, I feel certain that all members are thoroughly aware of its contents. Both reports contain some proposals which I would support and some which I would not support. Both also leave some questions unanswered. Without going into the details of either report, I believe that they embrace two conflicting basic philosophies. In my view the Interagency Report endeavors to create a strong, competitive merchant marine based on the concepts of private initiative and free enterprise which have made our country the leader in world commerce. On the oher hand, the public member subcommittee report is basically a defensive, protectionist document which would further compound the present inadequacies of the merchant marine. The subcommittee report appears to reflect the views of the labor movement members, those management members who are either labor or subsidy oriented, and apparently a majority of the public members who may or may not have special interests. This group collectively, I am certain, constitutes a majority of this Committee. The report appears to advocate operations under a protective umbrella in the form of fixed subsidy payments, conferences, protected trade routes, cargo preference, agreed or arbitrated manning scales, elimination of labor disputes through a labor-manage uncil, mandatory oil imports, and protection of the presently subsidized lines from the presently unsubsidized lines. They want a strong merchant marine but think of it only in terms of U.S. foreign trade. They apparently give no consideration to competing in the worldwide shipping market on the basis of the concept of free enterprise or any other truly competitive basis. The report appears to give undue concern to the subsidized lines, as have most of the deliberations of this Committee, even though this group constitutes only a minor portion of U.S. flag shipping. The national unions with whom they are associated encourage his approach. The report makes no mention of domestic shipping. It also appears to ignore the opinions and concern expressed by the Departments of Defense and State. Finally, it would considerably increase the burden on the taxpayer. The Task Force recommendations, on the other hand, prescribe a way of life based on truly competitive conditions, with the opportunity and incentive for efficient shipowners to survive and profit without the benefit of artificial props. I know there are those who will say it is all very well for a proprietary carrier to talk this way, but I assure you that we are really affected by industrywide conditions and must be competitive in every way. Similar to the non-subsidized independent owners, we operate in worldwide trade and are not concerned only with domestic trade and U.S. exports and imports. Mandatory import quotas would only serve to interfere with owners' flexibility of operations and their ability to compete in the trades in which they operate. Such owners want assistance only to enable them to meet their foreign competition and other than that they want to be free of artificial restrictions to operations. They are accustomed to operating in the competitive market and I believe the Task Force recommendations provide for this. Now just a word about my own company, to put some of what I have said in a more definitive light. At our June 21st meeting this year I said, "It is my Company's feeling, and I am sure the other oil companies share this feeling, that they would prefer to move their imports in U.S. flag tankers, provided they could do so on an economically competitive basis with international shipping." That opinion has not changed in any way. For several years, on a continuing basis, we have been studying this possibility and the Task Force recommendations, if adopted, would just about close the gap. It would require two things: 1. World market construction and repair costs. 2. Agreement to realistically reduce crew complements in line with full automation while still paying U.S. going wages. I am not talking about the recently publicized ELIZABETH LYKES, which I understand has a crew of 34. I am referring to a truly fully automated and simplified 80,000 DWT tanker with a crew of 12 to 15 men. Once permission is granted by the authorities we can handle the crew reduction just as our employees handled Jimmy Hoffa's bid to take over our fleet last week, and other national unions have tried to do in the past. Our future plans depend upon freedom from government intervention in our operations, thus enabling us to compete under the free enterprise system. Mr. Chairman, in view of what I have said, I do not support the public member subcommittee recommendations, and you can use these remarks, which will be recorded in the transcript of this meeting, as a dissenting opinion. HUMBLE OIL & REFINING CO., Hon. JOHN T. CONNOR, SIR: In order to make my position as a member of the President's Maritime Advisory Committee clear, I would like to restate certain fundamental views. I am wholeheartedly in favor of an expanded, vigorous and efficient American Merchant Marine, not only adequate for national defense and essential nonmilitary requirements, but also to carry an increased portion of our domestic and international commerce. This should be accomplished on the three following bases: 1. Without undue burden on the taxpayer 2. Without violating treaty obligations 3. Within the concept of the free enterprise system on a truly competitive basis. In order to be competitive, the American shipowner must be able to acquire and repair his vessels at world market prices. To the extent that shipyard subsidies are not available in the United States, the shipowner should be permitted to utilize foreign facilities for vessels flying the American flag in both domestic and foreign trades. I believe that in many respects the recommendations submitted by Mr. H. Lee White and by the Interagency Task Force go a long way toward accomplishing these objectives. Yours very truly, JOSEPH ANDREAE. STATEMENT OF DEANE W. MALOTT CONCERNING THE REPORT AND RECOMMENDATIONS OF THE PUBLIC MEMBERS OF THE MARITIME ADVISORY COMMITTEE I regret very much that a mission to Antarctica with the United States Navy has prevented my participation in the Subcommittee assignment given to the public members of the President's Maritime Advisory Committee. However, I have now studied the report, and wish to present the following comments. It should be made clear that I start with the following premises: (a) I do not feel bound in my thinking by the Merchant Marine Act of 1936, nor do I feel our assignment to be confined within either the basic philosophy or specific provisions of that Act. To effect a strong merchant marine today will inevitably require an over-hauling of the Act itself. (b) I am unwilling to challenge the statement of the Secretary of Commerce and other government authorities and departments as to the adequacy of our existing maritime facilities and ships. These authorities have access to far more meaningful analyses than can be made available to our committee. Hence, I do not argue the question of the adequacy of our merchant marine or the posture of allegiance of our "flags of convenience." I am concerned only with such policies as will assure a strong merchant marine in future years. (c) I desire to protect, just as far as possible, free enterprise in our merchant marine, and to eliminate regulations wherever feasible. Within the framework of the above premises, I am therefore led to the following conclusions: (1) I am not convinced hat reliance cannot be placed on "flag of convenience" vessels, although I subscribe to the inauguration of policies (not prescriptions) to strengthen the number of American-flag ships in our merchant marine. (Recommendation, p. 6) (2) I agree with the subcommittee's Report that the cost-equalization parity concept of operating subsidy payments be continued, because of the absence of any better concept, and because of the strengthening of the subsidy mechanism through the Secretary of Commerce's action, taken on July 23, 1965. (Recommendation. p. 12) (3) I agree in the trade route concept to guarantee continuity and reliability of service. Completely free and untrammeled competition is not possible under the complications of modern society. (Recommendation, p. 19) (4) I agree that the conference system should be continued, to provide an orderly service to the shipping public. (Recommendation, p. 25) (5) I do not agree that to be eligible for an operating or construction subsidy operators should divest themselves of all flag of convenience operations. If the subsidy is adequate and intelligently administered. I believe there will be a marked increase in American flag operations. (Recommendation 4, p. 26) (6) I agree with the recommendation that the government commit itself to a construction subsidy program for U.S. ship yards, for a dry bulk fleet, but without present stipulation of any percentage figure for this commerce. (Recommendations 1 and 2. p. 31) (7) I agree with the subcommittee's recommendation that application for vessel construction include assurance of manning agreements (Recommendation 4, p. 32), and that the operating cost-parity principle be extended to American bulk carriers. (Recommendation 5, p. 32) (8) I further agree with Recommendations 6, 7, and 8, p. 33, and with Recommendation 9, p. 34. (9) I adhere only to Recommendation 3, p. 37 and, as indicated previously. do not favor a specific percentage requirement for our liquid bulk tankers under American flag auspices. (10) I agree with the prestige value of an American passenger fleet, and endorse the Recommendations 1 and 2, p. 41, but would oppose regulations against foreign flag cruising from American ports. (Recommendation 3, p. 41) (11) I agree to the Recommendations (p. 43 and p. 44), in regard to construction differential subsidy. (12) I support the Recommendations (p. 46) having to do with research. (13) I am not too optimistic about the results of the establishment of a permanent Labor-Management Council (Recommendation, p. 55), but believe it is worth a try. I would prefer, however, to see it under the Maritime Administration (with the Secretaries of Labor and Commerce, and representation from labor, industry, and the public), where all the forces at work in the building of our maritime strength are appropriately brought to bear. (14) In regard to the Recommendation (p. 60 and p. 61) pertaining to dry and liquid bulk carriers, I reject the conditions precedent to government support and would allow the normal course of the competitive advantages of the American flag operation to work for the gradual elimination of "flags of convenience." As previosuly stated, I am against any fixed percentage (p. 61 and p. 62) but would rely upon the extension of construction and operating subsidies to bring about the desired results. (15) I agree wholeheartedly with the concluding comments in the Subcommittee Report. CORNELL UNIVERSITY, Ithaca, N.Y., January 3, 1966. Hon. JOHN T. CONNOR, Washington, D.C. DEAR JACK: I have been giving some serious thought to Lee White's dissent paper and obviously am not knowledgeable enough to know of the validity of the figures and some of the arguments which he makes. However, I am persuaded of the soundness of what he has to say about the shipbuilding problem and I would, therefore, like very much, if it were possible to do so, to add a sixteenth paragraph to my report to you, which would read as follows: (16) I have had the opportunity to study Mr. Lee White's dissenting report, and I am in full accord with his persuasive argument that shipbuilding and ship operations constitute two separate problems; and that ship operators should be free to build in foreign shipyards, as well as to take advantage of any ship construction subsidy which may be available, without any disqualification in eligibility for operating subsidy or any disqualification in engaging in domestic commerce. I hope, as I say, that this can be added as a part of my dissenting report to you. Cordially, DEANE W. MALOTT. NEW YORK, N.Y., December 23, 1965. Hon. JOHN T. CONNOR, DEAR MR. SECRETARY: I have spent much time these last two days going over Mr. Lee White's December 17 dissent to the majority report of the President's Maritime Advisory Committee. And this letter is to tell you that, by and large, I subscribe to his report in toto. I do not have Mr. White's expertise in many of the points covered, nor have I checked his arithmetic on the various coastwise proforma voyages he uses by way of illustration. But I believe the principles he is talking to are valid, and I believe these same principles, on realistic net balance, offer more for the future of the United States Merchant Marine than does the bulk of the majority report. I myself have always believed that the United States Government must ultimately decide what size fleet and what shipyard capacity this country should have to protect and maintain its national interest, be that interest defense, economic, prestige or what you will; and having decided, should pay for it. I believe, further, that the national interest, particularly in today's world, calls for a very large U.S. Government commitment, and I hope it gets it. 67-225-66- -10 |