by 31 percent. Today, some 92 percent of our waterborne commerce is carried aboard the vessels of other nations, and our own merchant marine carries a mere 8 percent. As this committee knows, this is the lowest we have fallen in terms of U.S.-flag participation in our foreign commerce since 1936-the year that we enacted the Merchant Marine Act to see to it that our ships carried considerably more, not less, of our trade that was moving by sea. In other words, through failure of the Government to administer the Merchant Marine Act of 1936 vigorously, our merchant fleet finds itself in a dilemma unmatched among the seagoing nations of the world. The 10 major free world maritime powers carry between 30 and 50 percent of their own national trade-while the United States carries less than 8 percent. If American-flag vessels aren't carrying our waterborne cargo, then who is? Well, at the head of the list is Liberia, with 28.4 percent of our trade. Liberia is the haven for ships which are running away from American safety and labor standards and from American taxes. It seems quite wrong to me that these ships should be rewarded for deserting the U.S. flag by being given the lion's share of our oceangoing business. In second place, Mr. Chairman, is Norway, with 16.6 percent of our cargo-more than twice what our own vessels carry. Slowly but surely, we are being banished from the high seas as the result of our Government's indifference and its neglect of our maritime interests. This does not make sense from the viewpoint of American prestige or America's defense posture. It makes even less sense in terms of the balance of payments-a problem with which succeed. ing Presidents have grappled for nearly a decade. A well-conceived maritime program would make a major contribution to correcting the balance of payments-yet no such program has been forthcoming. Each time a ship engaged in foreign trade sails into an American port, Mr. Chairman, several complicated transactions take place in the ocean transportation account of our balance of payments. Depending on whether the ship is carrying export or import cargo, lars in payment for goods and services flow into the United States or abroad. dol If the exports are carried in American ships manned by American crews, there is no question but that the balance of payments is improved as far as the United States is concerned. Just as obviously, if the goods are carried on foreign-flag vessels, manned by foreign crews, our balance of payments is further eroded. Because more and more of these ships have been of foreign registry, the outflow of dollars and gold has increased. That is why, since 1959, there has been a chronic deficit in the ocean transportation account. This, in turn, contributes to the deficit in our balance of payments, as a whole. Freight charges on export and import cargo, passenger fares, and port expenditures are the primary elements of the ocean transportation account. In 1963, receipts amounted to $1.58 billion, while pay ments were almost $1.64 billion-leaving a net deficit of $55 million. This was the fifth consecutive year of net deficit balances, and incom plete data for 1964 and 1965 indicates that the trend is continuing, if not accelerating. In other words, Mr. Chairman, despite its great potential for correcting the balance of payments, for strengthening our defenses in time of emergency, and for rebuilding American prestige abroad, the U.S. merchant marine continues to be treated as a step-child, or worse, by the Government. I think the reason is that it has been relegated to stepchild status within the heirarchy of Government. Instead of having the independence which maritime had at the time we passed the Merchant Marine Act of 1936, this important agency has been made a ward of the Department of Commerce. Even worse, the Department has allowed other agencies and departments to make maritime policy in their handling of cargo-preference laws, in making decisions about maritime's defense role, in the handling of oil imports, and the like. We have had compelling evidence, Mr. Chairman, that putting maritime in a Cabinet-level department simply will not work-and I believe that would be as true with respect to the Department of Transportation as it has been with the Department of Commerce, for both are catchall agencies with far too many matters on their agendums ever to give proper attention to our merchant marine. I welcome the opportunity to be one of the cosponsors of this legislation, Mr. Chairman, and I look forward to early and favorable action. The CHAIRMAN. That was a very fine statement, Mrs. Kelly. Are there any questions? Thank you. Mrs. KELLY. Thank you. The CHAIRMAN. Our colleague, Mr. O'Neill of Massachusetts is here to testify. fit. Mr. O'Neill, you may present your statement in any way you see STATEMENT OF HON. THOMAS P. O'NEILL, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS Mr. O'NEILL. Mr. Chairman, I am sure that I will be neither the first nor the last Member of Congress, in the course of these hearings, to relate them to the Soviet challenge that faces us on the oceans of the world. If one were to assess worldwide maritime developments of recent years, the phenomenal growth of Russia's merchant fleet would take top honors as the most notable achievement. If one were to designate the greatest maritime calamity of the same period, the dubious award would have to go to the United States-in accurate recognition of the steady decline of the American merchant marine. From its inception, Russia's ambitious fleet expansion program has been, and is, unwavering and sustained. Back in 1950, the Russian merchant fleet comprised only 432 ships of 1,000 tons or over, aggregating 1.8 million deadweight tons. 83-195-67-12 The great majority of these vessels were relatively small, slow-speed ships of ancient vintage. In fact, the best vessels in the fleet were the 100 or so Liberty's, tankers and other types of ships the United States gave to the U.S.S.R. during the World War II lend-lease program. By 1958, the Soviet fleet aggregated 3.6 million tons. In that year, Russia formulated an ambitious, long-range fleet expansion program with shipbuilding tonnage priorities detailed by a 7-year plan1959-65. The basic goal of this plan was to double 1960 fleet tonnage by 1965. In 1960, Soviet fleet tonnage amounted to 4,940,000 deadweight tons, therefore her objective was a 9.8-million-ton total by the end of 1965. By 1963, the "hammer and sickle" fleet was expanding at an annual rate of 100 more ships and 1 million deadweight tons. This growth rate was maintained in each subsequent year, and Russia's 1965 target was met only a few months off schedule. Currently, Russia's expansion program is governed by a 5-year plan-1966-70-programed to provide a fleet of 15 million deadweight tons by the end of 1970. This goal requires annual additions of 1.2 million deadweight tons over the next 4-year period, and there seems little doubt that it will proceed on schedule. The following points, Mr. Chairman, put in clear perspective the differing priorities which the Soviet Union and the United States have assigned to their maritime programs: 1. Russia's merchant fleet already exceeds the active U.S.-flag fleet. The Russian fleet numbered 1,400 large merchant ships as of the first of 1967, whereas our active fleet-even though bolstered by reactivated reserve fleet ships for Vietnam service-numbered only 1,040. 2. For the past several years, new ship deliveries to the Soviet fleet have outpaced U.S. deliveries by a ratio of 8 to 1. 3. Russia's November 1966 backlog of ships under construction or on order exceeded the U.S. total by a ratio of 11.5 to 1 in numbers of ships, and 7 to 1 in terms of tonnage. 4. Russian shipyards-and those of most of her satellite nationsare operating at close to 100 percent capacity. These figures demonstrate, Mr. Chairman, that the Soviet Union is well on the way to becoming a dominant-if not the world's leading maritime power. All of this aggressive, precisely planned activity is 100 percent subsidized by the Kremlin." It requires heavy commitments of hard-pressed foreign exchange and domestic resources, at the expense of providing consumer products for the Russian proletariat. And as the Russian fleet expands and is able to dominate the sea lanes, many believe the shipping fleets of other nations will be squeezed out. As other fleets vanish or are unable to compete with freight rateswhich the Soviets can easily manipulate the Russians would be in a position to force many countries to use Communist-bloc shipping. The potential danger of such dependency would be that the Communists could withhold ocean freight services from any nation out of favor with Soviet policies, or could increase rates to make these services prohibitive. U.S. industrial and military might is dependent on 77 strategic materials, 66 of which must be imported. At this moment, more than 96 percent of the tonnage involved in these 66 materials is brought to our shores by the ships of other nations. It takes little imagination, Mr. Chairman, to conclude that if the Russians should control the trade routes by which these critical materials come to us, we would be dependent on those who have sworn to "bury" us. Then would the Russians bring those materials to us? No, Mr. Chairman. We would be under their thumb without a missile having been fired. I submit, Mr. Chairman, that the Soviet Union has been able to advance on this vital frontier through our own indifference and apathy, and the confusion and expediency of our Government. For years, we have not had an agency with the authority to promote our merchant marine. The Maritime Administration is charged, by law, with promoting our maritime interests. But the Department of Commerce, through legislative reorganization, has been given veto power over that agency. What's more, it has exercised that veto power with such a degree of regularity that the agency's decisions have been nullified and its powers to act on behalf of the industry have been reduced to zero. As one of the cosponsors of this legislation, Mr. Chairman, I believe that maritime independence-total, complete, and final independenceis the only solution. We must have an agency that is free to plan, and free to act; one that has the ear of the President and of the Congress; one that has the confidence of the industry and the public. This is the way to meet the threat of foreign shipyards and foreign shippers; this is the way to reduce our reliance on foreign-flag vessels and put our dependence, once again, on ships that fly the American flag; this is the way to reinforce our defense efforts and our economy; this is the way to restore our prestige and to restore a favorable balance of payments. I commend the committee for its ceaseless efforts on behalf of our merchant marine. Enactment of this maritime independence bill will move us closer to the goal this committee has constantly striven toward-a strong and vital merchant fleet. The CHAIRMAN. Are there any questions? Mr. O'Neill, the committee thanks you for a very helpful statement. Mr. O'NEILL. Thank you. The CHAIRMAN. We will now hear from Mr. Gallagher, our colleague from New Jersey. Mr. Gallagher, you may proceed. STATEMENT OF HON. CORNELIUS E. GALLAGHER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY Mr. GALLAGHER. Mr. Chairman, we face today a most alarming situation. We are engaged in a major military operation in a distant land separated from the United States by thousands of miles of ocean, and, yet, we continue this engagement with little heed to a threatened break in our chain of communication to that war. We are well equipped in men, in materiel, in leadership, in desire, in industrial capacity, and in scientific knowledge, but we are sailing along or not sailing along-on a sixth-rate merchant marine fleet, compounded by a national policy of neglect. Mr. Chairman, the present job our merchantmen are doing in the Vietnam effort is remarkable-undermanned and decrepit as many of the ships are. The men who sail those ships deserve our admiration and very special thanks for the thankless task they are performing. But our national security demands more. The bill I have introduced, and which this committee is considering today, would force a national emphasis on the sad shape American shipping finds itself today. I hope that creation of an independent Maritime Administration will spur the National Government and industry to bring the American merchant marine back from the cellar to the top where it belongs. The power of the United States in world commerce is inseparably tied to our merchant marine. Without a strong and growing fleet, the maritime position of the United States becomes increasingly and dangerously dependent on foreign vessels, which in some cases are directly controlled by foreign governments. We should not depend on our friends of today being our friends tomorrow. We cannot depend on our goods of tomorrow being carried in the ships of our friends of today. In addition to seriously affecting our national commercial security. a weak and small merchant marine increases our balance-of-payments problems by forcing American exporters to pay foreign shippers rather than keeping the money within the American economy. We also fail to provide foreign exporters any alternative to using foreign ships. The United States is, in effect, granting a monopoly in transocean shipping to foreign nations. While we in the United States have shut our eyes to the plight of our maritime fleet, the Soviet Union, Japan, and other nations have emphasized efforts to gain supremacy of the seas. At the end of World War II we had a fleet of 5,000 merchant ships. Assuming the average life of these ships to be 25 years, the number of merchant ships in the United States fleet will drop from 935 today to 620 in 1970 and to 354 in 1974. If we develop no further effective policy and if we continue to neglect our maritime responsibilities, this will be the result. Meanwhile, the Soviet Union is in the process of adding over 450 new oceangoing vessels to her fleet. The United States has the technological know-how to build the best ships in the world-and the most. What we have not had are direction and policies that look to the future. Mr. Chairman, the status of the American merchant marine has an additional impact of direct importance to the people of the 13th Congressional District of New Jersey. Last year the total ocean-borne imports and exports flowing through the Port of New York amounted to almost 55 million long tons, valued at over $13 billion. American ships with American crews carried very little of this total. In 1966, 24,271 ships moved in and out of the Port of New York. Of this total, only 8,409 were American. During the same time period a total of 2,167 ships came into Ports Elizabeth and Newark. Of these vessel movements, it is estimated that only 700 were American-flag ships. If we had an effective and realistic maritime policy which could build our fleet to where it should be in the world, there would un |