Since this section of the public members report was approved by a majority of the Maritime Advisory Committee, and that majority comprised four of the labor members, it is even more noteworthy as these conclusions are contrary to the positions taken by them prior to this time.

I would like to make one other suggestion addressed to the owners of the "effective controlled fleet", independent and proprietary alike, and to the American users of this fleet. This suggestion is made to those who own both domestic trade trankers and "effective controlled tankers" and to those American companies which can use both. I suggest that if the program recommended by this document is adopted, we should consider on our own the movement of a greater portion of imported oil in United States flag vessels. Each company, in the light of its own situation, should make that decision. It is my understanding that 65,000 to 70,000 d.w.t. tankers, built with foreign construction costs but automated and manned with United States crews, can save enough as against present coastwise costs in a six months' period to offset the differential in costs between that vessel and a foreign flag vessel in a six months' period. This would mean that over the period of a year, if that vessel ran six months in the United States trade and six months in foreign trade, the cost for the year would be the same as present costs. To the extent it ran a greater portion of the year on the United States coast, its total cost for the year would be less than present cost. It would seem to me that the inherent advantage in the flexibility of such a vessel should encourage the building of more vessels for the coast. I recognize that the number of ports on the coast capable of accepting such a large tanker would have to be increased over what they are today. This may be feasible.

VI. PORT FACILITIES

Although the majority report of the Maritime Advisory Committee made no reference to the subject of port facilities, I believe that no document on the merchant marine is complete without a reference to this important factor affecting the growth and well-being of a strong modern merchant marine. By port facilities I include, among other conditions, the following: (a) depth of water at the various ports and at the various loading and discharging facilities; (b) storage facilities; (c) loading and discharging facilities; (d) physical capability of the port and the loading and discharging facilities which limit the size of the vessels that can be accommodated.

As I have pointed out above, in addition to construction and crew costs, rates for bulk carriers in the coastwise and foreign trade are substantially affected by the size of vessels, speed of vessels, fuel consumption and port time. The larger the vessels that can be accommodated and the less time they spend in port, the lower are the charter rates. The higher the capital cost and the higher the operating cost, the more important it is to save port time. Each day saved or lost on a new United States flag automated 15,000 d.w.t. vessel, built in a foreign yard without construction subsidy, or built in an American yard with a construction subsidy, but operated without an operating subsidy, amounts to ap proximately $2600 (if constructed in an American yard without subsidy, it amounts to $4600 per day). Each day lost or saved in the case of a 25,000 d.w.t. vessel amounts to approximately $3100 per day (if constructed in an American yard without subsidy, it amounts to approximately $5200 per day). As pointed out above, the difference in cost between a 10,000 d.w.t. liberty and a 25,000 d.w.t. dry bulk cargo vessel on the run between Houston and Baltimore is $3.23 per ton of cargo carried and results in a difference in cost over fifteen years of $28,391,700. Of course, the larger the vessels that can be accommodated, the lower the costs involved unless the turn-around time is greatly increased because of the inadequate port facilities.

Many of the port facilities located on the United States coast are inadequate with respect to the size of the vessels they can accommodate, storage facilities and loading and discharging equipment. There are many receivers or shippers today who are incapable of accepting dry cargo vessels in excess of 10,000 tons, and there are many more receivers or shippers who cannot accept dry cargo vessels or tankers in excess of 20,000 tons.

Therefore, whatever can be done to make port facilities, including storage and loading and discharging facilities, adequate to take large vessels would be of great help to the American merchant marine and would result in substantial savings to those industries which must, or could, use the domestic fleet to carry their bulk cargoes. As I have stated above, I believe that the ports and the industries which ship or receive bulk cargo will, if the cost of the vessel move

ment is reduced enough, make the capital investments necessary for these improvements since they can recoup their investment in such facilities in a relatively short time in the reduction in rates they will receive. I also believe that it would be to the interest of our government to examine into this problem and to give what help is feasible to improve these conditions.

The other comment that I would like to make on port facilities is with reference to the Public Law 480 program involving the shipment of surplus agricultural products to foreign nations. As I understand it, the agricultural products moving under Title I of that Act are sold to the recipient countries for currencies of the recipient countries. The greatest part of the funds received by our government for the sale of these agricultural surpluses must be kept by our country and used in the recipient countries. In some countries these funds have reached substantial amounts. I recognize that care must be taken not to use these funds to such an extent that the use of these funds would create inflation in the recipient countries, thereby hurting the economy of the countries that we desire to help. However, within the limit of this restriction and any other that may exist, I would suggest that the United States use some of these funds to improve port conditions in the non-Communist recipient nations. Since our government pays a portion of the United States flag rate in moving this Cargo Preference cargo, an improvement in the port facilities in those countries would permit the use of larger vessels, and result in quicker turn-around time for such vessels. Our government would then have a direct benefit in the savings resulting from the reduced rates. It would also be beneficial to the recipient nations which pay all the cost of transportation on foreign flag vessels and a portion of the cost of transportation on the United States flag vessels, i.e., that portion which corresponds to the foreign flag cost.

VII. THE LINER FLEET & THE PASSENGER VESSELS

I have very little, if any knowledge of operations of the liner fleet and the passenger fleet. There were not enough facts submitted to the members of the Maritime Advisory Committee to enable one not familiar with liner or passenger ship operation to make a knowledgeable recommendation with respect to trade routes, conferences and parity unless he was in possession of those facts prior to becoming such a member. The future of the American merchant marine and the nature and extent of public support for that merchant marine is too important to assume knowledge that is, in fact, not present. Since I have not sufficient awareness of the conditions surrounding the operation of that fleet and the problems that affect that segment of the fleet, I neither concur nor dissent in that portion of the majority report of the Maritime Advisory Committee with respect to trade routes, conferences and parity.

I, however, do dissent with respect to the recommendations as to the number of vessels to be built and to the fact that they all must be built in American yards. For the reasons stated in the earlier part of this paper, I believe that support of our government in the form of federal funds to any industry should be restricted to our national needs. I do not know what the requirement is that represents our national needs for liners. That is for our government to determine. It may well be somewhere between the forty liners recommended by the Task Force and the one hundred liners recommended by the Maritime Advisory Committee. Whatever it is, the liner fleet should not be restricted in size solely by the amount of funds made available each year by our government for construction subsidy. Once the number of vessels required has been established, a larger number of vessels can be built in foreign yards and subsidized through operating subsidy than can be built if the annual appropriation must cover all the vessels for both construction and operating subsidy. Or, to say it another way, if the program now in existence would result in the building of seventeen vessels per year in United States yards with construction subsidy, then any number required over and above those seventeen vessels should be built in foreign yards and permitted to have operating subsidy, provided the mobilization concept is put in effect to maintain the appropriate shipyard capability.

VIII. SUMMARY AND RECOMMENDATIONS

A. Size of Fleet.-The United States flag fleet should be permitted to grow to the extent feasible without subsidy. Our government should provide a subsidy only for that portion of our fleet necessary to meet our emergency requirements, i.e., our military needs plus our urgent civilian needs. The subsidy burden should

not be related to carrying an artificial quota of cargo which bears no relation to our national needs. The subsidy funds available should be utilized in the most efficient manner to produce the largest number of vessels and the most suitable types of vessels. This can best be done by reliance on foreign construction to a large extent and utilizing the available funds for operating subsidy. The size of the fleet in being should not be restricted by the desire to support shipyard capability and to the availability of large annual appropriations in the light of the other urgent calls on the national budget. Such a policy would result in a fleet larger than that possible under present programs and could well lead to the creation of a fleet somewhere between that recommended by the Task Force and that recommended by the Maritime Advisory Committee at substantially lower cost than would result from following the Maritime Advisory Committee recommendations.

B. United States Shipyards.-The Department of Defense with the aid of other cognizant government agencies should determine the shipyard capability that should be maintained for emergency needs, i.e., the mobilization base. It should be the responsibility of the Defense Department to provide these yards with sufficient defense procurement when added to the recommended 17 commercial vessels (to be built with construction subsidy) in order to maintain this capability at the proper level. If possible this procurement should be so pro grammed over such a period of time that the yards concerned will reasonably be able to forecast their level of work. This should encourage these yards to make the capital investments necessary to modernize their yards. One of the considerations in determining such capability could be a consideration of the willingness to so modernize. Shipyard employment should be no less than under current programs and probably would be greater because of the repair work for the expanded fleet.

C. Tramp Bulk Carriers, Liquid & Dry.-No distinction should be made in the formulation of policy between dry cargo vessels, on the one hand, and tankers, whether oil or non-oil carriers, on the other. Vessels engaged in the foreign trade should be permitted to be built in foreign yards and operated under United States flag with an operating subsidy. The types and sizes of the vessels to be subsidized should be those most suitable for competing in the foreign trade for cargo. In the early days of the program, the operating subsidy should be restricted to 5 vessels per year to test the advisability of the program and so as not to adversely affect the funds available for liner subsidy since liner type vessels are the most essential to our defense requirements in situations like Viet Nam. The requirements set forth on page 20 [paragraph (5)] for foreign building should be included among any requirements established for such permission to build abroad.

D. Liners. There should be only added to the liner fleet vessels sufficient to meet our national needs. To the extent of the number of vessels needed to supplement Defense Department procurement in order to maintain the mobilization base, they should be procured in United States yards. Beyond that amount, they should be permitted to be built in foreign yards and operated with an operating subsidy. Present non-subsidized liner companies should be permitted to enter this program. In the event it is decided that our national needs require the addition of more than the 40 liners, as recommended in the Task Force report, it should be done only through foreign construction and operating subsidy in order to secure such expansion at the lowest cost possible. The requirements set forth on page 20 [paragraph (5)] for foreign building should be included among any requirements established for such permission to build abroad.

E. The Domestic Fleet. This fleet should be encouraged to expand by permitting vessels for this fleet to be built in foreign yards and registered under United States flag with coast-wise privileges. Only vessels built without a construction subsidy or operated without an operating subsidy should be permitted in the domestic trade. This fleet should also be allowed to carry Cargo Preference cargo. The requirements set forth on page 20 [paragraph (5)] for foreign building should be included among any requirements established for such permission to build abroad.

F. Cargo Preference.-Government generated cargo should continue to move 50-50 on United States flag vessels at fair and reasonable rates. These fair and reasonable rates for the new modern bulk carriers should reflect the owners' reduced costs (building or operating). There should be a different fair and reasonable rate established for vessels operating with an operating subsidy from the rates established for those which have no subsidy.

G. Port Facilities.-(a) Every effort should be made to improve port facili ties in the United States to permit the acceptability of larger vessels than can

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 facilties 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 2-2 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 Presi dent 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.

At our last meeting we received the Interagency Task Force Report and prior to this meeting the report of the public member subcommittee. While we agreed 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 other 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-management council, mandatory oil imports, and