Mr. DREWRY. Therefore, if Bethlehem says, "I am a profitmaking organization. I would like to operate under the American flag but I am going to make a buck on it, and if I can't be put on parity, then I will build abroad." The loser in that case is the United States, not Bethlehem.

Mr. SCHULTZE. I am not sure I agree with that, Mr. Drewry. In the context of the present program, while it is clear that such a ship would improve productivity if what you do is simply add the ship, you have to remember that in the case of a $20 million ship, the taxpayer is paying $10 million of it, and you have to evaluate it in a sense. I don't think it could be done piecemeal. I don't think that it would be in the interest of the public as a whole, considering costs against benefits. I would not say there would not be benefits, but you have to balance the benefits against the costs involved.

Mr. DREWRY. Back to the spottiness again. A little while ago you mentioned the flags of convenience, the flags of necessity, runaway flags, or whatever under the concept of effective U.S. control, we recently wrote a letter to the commander of MSTS to ask for a report on what he was doing with regard to meeting requirements after closure of the Suez Canal, and Admiral Ramage wrote back on the 3d of July:

On the denial of our normal Middle East sources in the Persian Gulf in early June, it became necessary to implement contingency plans to replace these losses with procurements from the United States and the Caribbean. As a result the Defense Fuel Supply Center placed requirements on Commander, Military Sea Transportation Service (COMSTS), to arrange for a one month lifting during the month of June. In order to meet this requirement COMSTS solicited the Maritime Industry requesting offers of both U.S. and foreign flag capability. The only U.S. flag tanker that responded was immediately chartered and after exhausting this capability the voyage chartering of foreign flag tonnage became necessary.

He winds up by saying that to date MSTS has chartered 33 tankers, and if this situation is not clarified, they will continue to charter through the month of July if necessary, and they attach a list of 33 tankers. It adds, to me, up to 31, but we will not worry about that. This is the rundown:

U.S. flag, one; Liberian, three; Norwegian, 11; Greek, four; Panamanian, one; Finnish, three; British, one; Columbian, one; West German, one; French, one; German, one; Italian, one; Swedish, one; and Monacan, one.

Out of that whole mess of ships the effective U.S.-control vesselsLiberia and Panama-added up to four. So I just wonder how much we really are relying on something there. That is one point.

The other is that at a time of national emergency, No. 1, there hasn't been sufficient planning on the part of the military to know where they are going to get the ships and, No. 2, that the United States does not itself have enough capability to provide any more than one ship in an emergency situation.

Mr. SCHULTZE. There is where I again disagree. The United States clearly has the capability, as I understand it, and I do not know all the details. But the Defense Department has accepted and used all tankers voluntarily offered for charter. There are two problems involved, as I understand it. We have plenty of capability. We are not

using a very substantial proportion of it right now for the military, but it is either voluntarily offered, or you have to declare a national emergency. The same thing applies to berth liner service. Here you have the situation in which under voluntary offering, foreign flags offer a much larger proportion than U.S. flag, but it is not a question that we have exhausted our U.S.-flag tanker capacity and had to turn to foreign. It is a question of voluntarily offering.

Mr. DREWRY. This is the sort of thing that Secretary McNamara talks about when he says we have plenty of ships. He means we have plenty of ships for running Vietnam and any other military contingency that he can foresee. He also means that we can do it by stripping the American economy, all of the rest of the nonfighting portion of the American economy.

Mr. SCHULTZE. On that, Mr. Drewy, my recollection of this is that the maximum need for direct military use that the Defense Department would have is about 210 T-2 equivalents. The total T-2 equivalent of U.S. flag plus effective U.S. control is about 1,000 giving you some 800 for other uses. Now, admittedly in the present case with effective U.S. control just as in the case of the U.S. merchant marine there is no real mechanism under present policy to get at these gradually under voluntary offerings. It is either all or nothing.

Mr. DREWY. That is certainly one area that we have to get to work on. It has been done with aircraft.

Mr. SCHULTZE. That is right.

Mr. DREWY. It has worked very well on a voluntary basis where the industry has been told there is an emergency as far as shipping is concerned. The trouble is we have not admitted we have an emergency in this one.

Back early last year Senator Magnuson requested the Maritime Administration, the AEC, and the Department of Defense for a report on a nuclear merchant ship, and I understand that he has not yet gotten that. I don't understand that he has not yet seen it because there was some release recently in which he seems to have gotten hold of a copy and in his announcement on the floor of the Senate he was going to have a committee print made of it. Can you tell me anything about that situation of the ship?

Mr. SCHULTZE. Two things, one official and one personal.

Officially, clearly the whole research including nuclear is, I think, part of an overall revision of maritime policy, and that whole complex is part of and has to be looked at in the context of what we do generally on maritime policy. That is the reason it hasn't gone forward to him yet. We are searching for final agreement on the overall maritime policy.

My own personal view is that research and development in the area of nuclear power should be continued and probably expanded. I have some grave questions, how far we should go, if at all, in building prototype nuclear merchant marine ships at the present time. This construction, you know, is part of the whole controversy.

My own personal view of research needs is much more heavily weighted toward containerization and the interface between the modes. In any event the key point is that it is part of the whole maritime policy consideration.

Mr. DREWRY. I have very great difficulty in seeing these various points that are in the so-called Boyd program which so far I can't get my teeth into. I see the areas that he wants to talk about, but I cannot see why we have to continue falling behind while we wait for a bunch of more or less unrelated things to get together.

Mr. SCHULTZE. I do not believe and I do not think Secretary Boyd believes that they are unrelated. I believe that is the key. They are not unrelated.

Mr. DREWRY. On the question of the interface, I was talking this morning about the close relationship between the transportation modes. It seems to me that perhaps the transportation message got things in reverse, that instead of positively keeping the regulatory agencies out of some kind of coordination into a single department that it should have been the other way around. You mentioned containerization just a minute ago. Containerization is the finest example of the revolution that has taken place in the world shipping, and containerization means that for maybe the first time we are going to see a pipeline approach possible for break-bulk goods so that the guy who put his manufactured typewriters or tractors or whatever in a container in Denver will pay a single price and over it will go, and you won't have to worry about it.

It may go intermodal, but this seems to me to get more into the field of regulation than anything else, so that the creation of a single promotional department may possibly hinder the modes in their further development through the competition that there would normally be not only between the modal manufacturers and carriers but the modal Government agencies. What is going to happen when the containerization comes a little further along and the problem of through rates and things like that comes up? Where can a man go to find out just how much it is going to cost him on a single bill of lading?

Mr. SCHULTZE. Let me first plead some ignorance.

Mr. ASHLEY. You better plead it briefly. I have to get to the floor and vote.

Mr. SCHULTZE. I will have to quickly plead ignorance on the details. It seems to me that having all transportation modes in one department, you can have a central place where proposals and presentations and briefs could be presented to the various regulatory commissions to get at this.

Mr. ASHLEY. Mr. Schultze, you made a perfectly splendid witness. I can't think of a more articulate spokesman for the administration than you in your testimony before us today. You may not have persuaded each and every member of the committee, but I can assure you that the committee has great respect for the candor, honesty, and splendid cooperation involved. Thank you very much.

The committee will stand adjourned until Monday at 10 o'clock. (Whereupon, at 4:40 p.m., the subcommittee recessed, to reconvene at 10 a.m., Monday, July 17, 1967.)

INDEPENDENT FEDERAL MARITIME ADMINISTRATION

MONDAY, JULY 17, 1967

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON MERCHANT MARINE, OF THE

COMMITTEE OF MERCHANT MARINE AND FISHERIES,

Washington, D.C.

The subcommittee met at 10:20 a.m., pursuant to recess, in room 1334 Longworth House Office Building, Hon. Edward A. Garmatz (chairman of the committee) presiding.

The CHAIRMAN. The committee will please come to order.

The meeting today is a continuation of hearings started last week on H.R. 159, and similar bills, to amend title II of the Merchant Marine Act, 1936, to create an independent Federal Maritime Administration, and for other purposes.

Thus far we have heard from a number of Members of Congress from among the 104 authors-testifying in favor of the legislation. On Thursday of last week we heard from the Honorable Alexander Trowbridge, Secretary of Commerce, and Honorable Charles L. Schultze, Director of the Bureau of the Budget.

Their testimony was in opposition to the legislation.

We hoped to hear from the Honorable Alan S. Boyd, Secretary of the Department of Transportation, but unfortunately, time did not permit his appearance.

Due to conflict in Mr. Boyd's schedule, he will be unable to appear until next week.

There are several major labor and management witnesses who wish to be heard, as well as several more Members of Congress.

We will start off this morning with Congressman Lloyd Meeds of the State of Washington. Congressman Meeds, you may proceed in any way you see fit.

STATEMENT OF HON. LLOYD MEEDS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. MEEDS. Mr. Chairman, I am pleased to add my statement of support to the proposal for creation of an independent Federal Maritime Administration. I, along with many other Congressmen, have sponsored such legislation.

I have done so because of my strong concern for the Nation's merchant marine and because of the ever-increasing danger to the maritime industry.

It appears obvious and certain that the maritime industry-both shipping and shipbuilding-contributes positively to the national

economy. And it seems just as certain that the merchant marine is essential to the national defense.

For too long our merchant marine has been neglected. The Federal Government has been reluctant to more fully finance ship construction and ship operation. Our Nation's merchant marine has fallen from first to sixth place in terms of world shipping. The Nation has dropped from first to 15th in terms of shipbuilding.

This rapid decline may well be accelerated even more if our dependence for ship construction is shifted to foreign shipyards, as has been suggested.

Construction of U.S.-flag vessels in foreign shipyards would mean a loss of jobs not only for American shipyard workers but for dozens of allied industrial workers here who provide the raw materials and the finished equipment for ships.

Foreign construction of American vessels quite possibly could fall under a cloud in the event of further world crises. Thus the United States might not be able to count on production of vessels in foreign yards just when the need for those vessels would be the greatest.

None of us should have to be reminded of the role of the American merchant marine in the two World Wars and the Korean conflict. The U.S. merchant marine-or what is left of it-is struggling with a mighty task during the current Vietnamese conflict.

We should not hamstring our fighting men overseas; we should not endanger our future defense, and we should not add harm to our domestic economy.

Your committee, Mr. Chairman, has an enviable record of concern for the merchant marine. I sincerely hope the full Congress will match that concern and act to guarantee a long-range program for growth of the merchant marine. I feel convinced that necessary to such growth is legislation aimed at Maritime independence.

Formation of an independent Maritime Administration would be, in effect, a rifle-shot approach rather than a shotgun blast at the problems of the American merchant marine. This zeroing in on merchant marine ills could accomplish much more in a shorter period than any other remedy.

Unless attention is focused on merchant marine weaknesses, those deficiencies will increase. Instead of scuttling our merchant marine, we should put a strong independent commission skipper at the helm and order full steam ahead.

Thank you.

The CHAIRMAN. Thank you, Mr. Meeds, for giving your time to appear before the committee. Are there any questions?

Mr. MEEDS. Thank you.

The CHAIRMAN. We will now hear from your colleague, Congressman Charles H. Wilson of California, the author of the bill H.R. 1446. Mr. Wilson.

STATEMENT OF HON. CHARLES H. WILSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. WILSON. Mr. Chairman, I appreciate this opportunity to make a brief statement to this committee relative to H.R. 159, introduced by the distinguished chairman, and to my own bill, H.R. 1446, calling