ments and foreign commerce policy, the nature of its competition from foreign sources, do you not think that this industry could properly be considered apart from most, if not all, of the parts of our trans portation system?

Secretary CONNOR. Well, I think that the merchant marine is an important part of our entire transportation system, Mr. Chairman, and I think that it will have a very important continuing role.

I think that international trade is to be considered just in its infancy. I think that there will be a tremendous expansion in our exports and imports in the next 10 or 20 years, and I think that a large share of this expanded trade will be carried in mechant ships.

I personally think that an appreciable percentage should be carried in U.S.-flag ships, and I think that we have to have a national policy that will make this possible.

The CHAIRMAN. I don't think that quite answers my question, Mr. Secretary.

I am trying to bring out this point: Do you not think that this industry could properly be considered apart from most, if not all, of our transportation system?

Secretary CONNOR. No, sir, Mr. Chairman: I do not. I think that it is an integral part of the entire transportation system, and should not be administered separately.

The CHAIRMAN. Mr. Clark?

Mr. CLARK. Mr. Secretary, yesterday I stated at the Rules Committee that we have had to draw since World War II, and especially just in the last couple of years, World War II ships out of, you might say, mothballs, at the cost of over $400,000 apiece per ship.

That is almost a half million dollars, and probably by the time they get on the seas, it would be a half million dollars.

Now, this is why so many of us have been very much interested in seeing that the merchant shipping is a separate agency, that the mer chant marine is a separate agency, because we have not been able to see what this administration is doing at the present time to alleviate the situation in replacement of ships.

Right now, we are behind over 90 ships in the replacement of World

War II vessels.

The administration has not come up with anything, as far as I can see, to make the merchant marine a first-class merchant marine shipping agency, and so, unless you can show us that the administration will get a topnotch man that knows something about merchant marine administration, I cannot see how this committee at any time would ever be able to say that we are for the bill that you are talking about, now or ever, because we feel that there is one time in the history of this country that we have got to stand together as a Merchant Marine Committee, and that is to try to make a strong merchant fleet.

We are not going to do it if they are No. 3 or No. 4 in the giving out of funds from the budget, or from the administration saying, "We are going to give so much to transportation, and merchant shipping would get 15 or 20 percent.

I would like to have you comment on what you feel you can do as an agency of one of four or five in your transportation agency.

Secretary CONNOR. Mr. Clark, I don't think an apology is needed for the fact that over a hundred ships have been brought out of the reserve fleet, and have been reconditioned, and are now in active service, carrying goods and materiel of various kinds to Vietnam.

I think that was the purpose of the reserve fleet, and it is the reason why this Government has spent millions of dollars through the years, since the end of World War II to keep those ships in being and available for this kind of emergency service.

So I think what has been done in the last 18 months is completely consistent with the policies of Congress in making this possible.

I think it has been a very sensible thing, very effective and I think that it has met the need, and, with the additions to the active fleet that are now in contemplation and planning, this provides the kind of service that was contemplated at the time the legislation was adopted.

Now, it is true that the number of new ships constructed in the last year or so has not been as large as was authorized, but in an emergency situation like Vietnam, this Government is not able to provide the funds for everything that might be desirable, and this is one of the areas where there has been an accommodation.

Because of the fact that the reserve fleet was available, and the ships have been taken out at cost, as I have indicated, of about $50 million, the administration has not proposed the construction of as many ships as would be needed to come up to the original contemplation of the legislation.

Mr. CLARK. This is true. This is why I feel so strongly about this bill.

You have not come up with anything to correct the deficiencies of our merchant marine fleet, and not only that, but we authorized many more ships than you built, and as far as I can see, when you are authorized to build so many ships, you are authorized 10, and you build one-I am not saying you, not only this administration, but the one before it, and the one before that, and the one before that-they are all the same.

They have all been doing the same thing. They have been letting our merchant fleet go down to not only a third-class merchant marine but to become almost nonexistent.

Secretary CONNOR. Well, Mr. Clark, as I have indicated, I think the merchant fleet that has been built under the subsidy program is a fine fleet. It is not large enough, in my opinion, but, even if the Maritime Administration were an independent agency of Government, it would still be subject to the appropriations procedures within the administration.

It would have to submit its budget proposals through the Budget Bureau to the President, and the President in turn to Congress, so that, in a situation where there has to be some discipline about the use of the amount of taxpayers' funds available, there is no assurance that the Maritime Administration as an independent agency would have received more appropriations than has been the case in the last several

years.

Mr. CLARK. NOW, Mr. Connor, you said transportation involves $15 billion of public investment per year. Of this, maritime only involves less than how many, $300 million per year, which is really 2 percent. Can we depend on the fact that this balance will change in the future if the new transportation bill goes through?

Secretary CONNOR. For the fiscal year 1966, the total appropriation requests were over $300 million, as you indicate, for the subsidy programs. I don't know what the share for the merchant marine would

be of the Government's total transportation appropriations in future years.

I do think that a strong merchant marine is essential, and I think that there is a feeling in the administration generally that this is so. I think that there is a feeling in Congress that it is so.

I think that if the feeling is a general as I think it is, then certainly the share of the merchant marine in the total Government transportation picture would be adequate to fulfill the policy objectives that are established.

Mr. CLARK. Could you tell this committee that the new Administrator for this program, or the Administrator for the transportation agency, would be a man that knows anything about ships, or the merchant fleet?

This is, I think, the real problem.

Secretary CONNOR. Well, Mr. Clark, I don't know who the new Secretary of Transportation is going to be, except that I am sure I am not going to be it, so that I can speak objectively.

I would certainly try to persuade that gentleman or lady that a competent Maritime Administrator should be nominated by him to the President, and I would certainly try to be persuasive with the President that the person selected should be one that is thoroughly competent in this field. I hope that such a man would be confirmed by the Senate.

Mr. CLARK. Thank you, Mr. Secretary.

The CHAIRMAN. Mr. Secretary, just one question: You say we are doing a very good job with the so-called reserve, “rust bucket” fleet in the Vietnam situation.

What position would we be in if this conflict should spread out into other territories? How would we get the men there?

Secretary CONNOR. We would have difficulties.

The CHAIRMAN. We would be in pretty bad shape, would we not? Secretary CONNOR. We would be pressed, because we have had all we could do to get out of the reserve fleet, get conditioned in the shipyards get active and get manned the number of ships that have now been put into service.

The CHAIRMAN. We are short of ships, and we are short of men. are we not?

Secretary CONNOR. We are at the moment; yes, sir.

The CHAIRMAN. We are in bad shape?

Secretary CONNOR. I would not say we are in bad shape. We are able to take care of the needs of the country at the moment, but if those needs redoubled, then this would be a very difficult situation.

The CHAIRMAN. I agree with you 100 percent, that we would be in a very difficult situation.

Mr. Mailliard.

Mr. MAILLIARD. Thank you, Mr. Chairman.

Mr. Secretary, following on Mr. Clark's discussion, and referring to your statement, on the bottom of page 3, in a sense I think you have inadvertently pointed up the thing that so many of us find disturbing. That is that, as is the case now within the Department of Commerce, and as clearly would be the case in the Department of Transportation. the maritime part of it is so very small and very different in the nature of its problems and so on from the other activities administered

by yourself now, and which would be administered by the Secretary of Transportation.

I think while you have made a good case for the Department, and I personally don't disagree with most of what you have said in the broad transportation policy matter, that nowhere here do you get at the points of concern that the members of this committee have expressed, and both labor and management in the industry have expressed. Looking at the record I think justifies our concern; namely, that when the 1936 act was put on the books, we were at a point in time and situation very similar to where we find ourselves now, where a war-built fleet had become obsolescent, and we were sort of disappearing off the seas.

The corrective action that was taken at that time was to create an independent Federal Maritime Commission, and things began to get better.

I think so much of this is a matter of conjecture, because if World War II had not come along, we can only guess what might have happened under that type of law, and that type of administration.

However, starting with Reorganization Plan No. 21 in 1950, which partially destroyed the independence of the Maritime Administration, but not wholly, because the Board was still relatively independent, and then progressing to Reorganization Plan No. 7, of 1961, the agency's independence became progressively less. And, if you would look at the things that were said then in favor of Reorganization Plan No. 7 of 1961, they are the same promises that you offer us in your statement, but it has not happened that way.

So that, as the degree of independence has lessened between 1936 and 1966, we have seen less and less of the policies laid down in the law actually come to fruition.

I think this is the basis of our concern, and you sort of reinforce it by showing what small potatoes our particular share of this is.

And I just wonder what the basis is for your contentions that we can expect better things in the future, when we don't change the basic situation.

Secretary CONNOR. Mr. Mailliard, I am sure that neither of us would consider Federal expenditures of over $300 million a year to be small potatoes, except in a relative sense, of looking at much larger expenditures for other functions.

But this is an appreciable program that the Federal Government has right now, and under the present conditions, the operating subsidies for the ships in being will increase year by year, as their costs increase, and therefore I think it is very timely to take a look ahead to see just what the program should be, and how much it will cost over 10 or 20 years, taking into consideration the technological innovations that undoubtedly will be in use by then.

Mr. MAILLIARD. This competitive position, though, I think, is not one that you can just sweep under the rug. If we compare either the proportion of transportation money, as you do in your statement, that is allocated to the maritime part of transportation, or if you take maritime's share of the total budget, we have been in a position of constant decline over recent years.

I cannot interpret this as anything but a deemphasis; in other words, that it is low on the priorities' list, and there is competition for funds. in the budget. Nobody knows that, I am sure, better than you do.

Maritime gets a shorter and shorter piece of the stick, year by year, and I can find no comfort in the proposal of maritime's position under the Department of Transportation.

I can find no basis for optimism that that is going to improve the situation.

I think the planning and all this part of it, to have a national transportation program, that is all inclusive, is fine but there are some discrepancies in here.

For example, let's take the subsidy side of the program, which is unique to the maritime end of it. The only other subsidy program that I know that is a direct subsidy program is not included in the new Department of Transportation areas of responsibility- subsidy to the airlines. But, the bill does not put that in the Department of Transportation. It leaves it with the CAB.

I don't know whether you have had an opportunity to review any of the hearings that this committee has held recently, but there have been questions raised as to whether in subsidy contract situations the present arrangement, or the arrangement that is contemplated, really allows the contractors due process on questions that have to be decided involving differences of opinion, or interpretation of the subsidy law.

I don't get the logic of saying, "Well, now, with airline subsidies they should have these determinations made by a quasi-judicial body established by the Congress, but with maritime subsidies, which are far more significant, they can be decided arbitrarily by an adminis trator or as they are now, under authority granted to us as Secretary of Commerce."

Secretary CONNOR. Mr. Mailliard, you have raised several questions. First with respect to subsidies, under the new Department of Trans portation, I would like to point out that the present subsidy level in the public roads program is approximately $4 billion a year.

Now, it is true that this money goes through the States in the form of grants to the States for their administration, but it is a subsidy program. It is just in a different form.

Mr. MAILLIARD. That is not comparable, because there you do not make determinations. You apportion to the States. Secretary CONNOR. That is true.

Mr. MAILLIARD. Under a formula established by law.

Secretary CONNOR. But it is a subsidy of a form of transportation by the Federal Government, and there are other comparable subsidies for other modes of transportation.

You have raised another question about the administration of the maritime subsidy program through the Subsidy Board.

Mr. MAILLIARD. The Subsidy Board is nothing but your creation to discharge your responsibilities. Its members are just advisory. They don't have any statutory authority. They only have whatever authority you give them.

Secretary CONNOR. I will say frankly that I am not satisfied with the way the Subsidy Board is set up, and has been functioning, particularly the composition in the sense of the Administrator and two other officials of the Maritime Administration who report to him being the three members, and, as a matter of fact, I have that under study right at the present time.