RELATIONSHIP OF CURRENT VESSEL REPLACEMENT REQUIREMENTS AND P
CONSTRUCTION PROGRAM

There are approximately 600 ships in the American merchant marine present time that need replacement because of obsolescence and age. ment ships are larger and more productive. Thus about 200 modern vessels represent the equivalent of this obsolete tonnage.

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Over the first five years of the proposed program, it is contemplated ships a year would be built in the United States under construction abo and that a lesser number would be built abroad. If the ratio of dos foreign were 2.5 in the United States to 1 abroad-and this ratio is for illustrative purposes only-a maximum of 12 ships each year would abroad for the first five years. During the second five years 25 ships es would be built in the United States, and on the basis of this same ratio 1 each year would be built abroad. For the 10 years, this would total 38 Over the 10-year period of the program, other ships in the domestic and trade in addition to the 600 will need replacement. Moreover, during this p there will be substantial growth in our trade which will require more US ships if our participation in this trade is to expand. In addition, the extension of construction subsidy (and building abroad privilege) to b riers to increase our participation in this trade will create a demand for tional vessels. The Great Lakes operators are also anxious to replace | obsolete tonnage; tankers engaged in the domestic oil trade also must be repo* Modernization of the U.S. flag fleet will depend not only on Government sub but also on the availability of private capital to finance replacements in the sidized and nonsubsidized fleets. The inability of certain operators to replacement capital at the level required to construct tonnage in U.S. the costs of which are double world market costs-could substantially res modernization unless the build abroad program is adopted.

Mr. LENNON. Don't we have but one copy of the transcript, Chairman? I wonder if the Secretary could be furnished with Secretary BoYD. I should explain, Mr. Lennon, that immedi after completing my testimony on Thursday I departed Washin for the west coast and I arrived back here after midnight last Mr. LENNON. Well, I didn't have quite that hard a weekend had some problems, too.

Secretary BOYD. There are no transcript available at the time I to my knowledge.

Mr. LENNON. I am sure that the committee would be happy to vide you with a transcript in order that you might be able to specifically the questions that I have raised because they are of cern to your friends or should I say the supporters of your pro I happened to have a little meeting yesterday afternoon with." of them and this question arose. That is the reason I got into night.

Mr. EDWARDS. Will the gentleman yield on this one point?
Mr. LENNON. Yes, Mr. Edwards.

Mr. EDWARDS. Concerning this 2.5 to 1 ratio which you are ta about, is it fair to say that what you are talking about is some in the nature of a 30-ship program here and a 12-ship program shr or is the 2.5 to 1 within the 30?

Secretary Bord. Well, I haven't really run the figures one on Mr. Edwards. What I was trying to do was point out alternative of approaching this whole matter and I have not done the arith on it.

Mr. EDWARDS. What I am trying to get in my mind, if the gent will vield further, is that when you talk of 30 ships are part of 30 ships as you see them built in foreign yards?

Secretary BOYD. No. No.

Mr. EDWARDS. The 30 ships are built here?

Secretary BOYD. Yes, sir.

Mr. EDWARDS. And the 12 or whatever

Secretary BOYD. Whatever.

Mr. EDWARDS. Would be in addition? That is what you are talking bout being built in foreign yards.

Secretary BOYD. That is right, sir.

Mr. LENNON, I would like to make a point that I made the other day and you may have missed it in the transcript. That is we are talking about two different things in this whole discussion of a program. We are talking, No. 1, about a strong U.S.-flag merchant marine. We are alking, No. 2, about a strong domestic shipyard industry. I try to keep these two separated because they are distinguishable in my mind. Mr. LENNON. The estimate you made was in your prepared statement. It wasn't in answers of the witnesses and it is found on page 9 your prepared statement in which you say, "An example of limited foreign building which I am proposing combines with building 30 ships a year in U.S. shipyards for at least 5 years. Foreign shipbuilding versus U.S. shipbuilding on a ratio of 2.5 to 1. During the first 4 months of each year contract for a unit of 10 ships to be constructed in the U.S. shipyards, and then, authorize up to four ships to be constructed in foreign yards-repeat same during the second and third 4month period during each 5 years."

of

So that that would total 42 a year over the 5-year period and you indicated of course that at the end of the 5-year period then the Congress would make the decision hopefully as to whether or not it would want to continue the participation in foreign yards in the program thereafter we had a chance to evaluate it.

Secretary BOYD. Yes, sir. However, I would emphasize that this analysis was by way of an example.

Mr. LENNON. Now, in your colloquy with the gentleman from Alabama which is found on page 722 of the transcript

Mr. EDWARDS. On page 8 of your statement you talked about 600 vessels as your projection and Mr. Grover

Another members of the committee

before he left did some arithmetic which indicates that it would take about 23 years to build those 600 vessels. Does that sound about right?

You responded

I wouldn't argue with that arithmetic. What I said was replace 600 vessels. We will not build 600 Liberty ships or C-2's or C-4's. The ships that we are talking about are ships which will have somewhere between roughly 21⁄2 and four times the capacity of the existing ships. So we are talking closer to 200 or 220 ships.

That gave me a little concern. It is related to your proposal to build 42 ships per year, 30 in American yards per year and 12 in the foreign yards for the first 5-year period and then to build approximately 25 per year for the next 5 years. When you say that "We are talking closer to 200 or 220 ships" because these ships will have 21⁄2 to four times the capacity of existing ships, do you mean by that that we won't get the ships that you indicate will be built under this program but only those ships in numerical numbers based on the replacement capacity of those that they are actually replacing?

Secretary BOYD. I don't follow your questions, Mr. Lennon. My tell you what I think is involved here?

Mr. LENNON. Yes.

Secretary BOYD. All right, sir. We have currently approximate 600 ships which are suffering from what is called block obsolescen Today we are building much larger and faster ships than those sh We expect to replace those ships as I said on page 9, "*** When have added the comparable tonnage of approximately 600 vessels* That is what we are talking about.

Mr. LENNON. Then we are not talking about approximately 360 sels in the first 5 years? We are talking about 200 to 220 vessels o a period of 10 years, aren't we?

Secretary BoYD. No, sir.

Mr. LENNON. What are we talking about?

Secretary BOYD. I am trying to get to this, Mr. Lennon.
Mr. LENNON. Thank you.

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Secretary BoYD. We are talking about three separate elements ( is replacement of the existing fleet which we assume is currently gaged in carrying cargo. We are also talking about an expansion world trade in which we hope to participate. This has been projecte by both economists and people who are in the shipping business that I think we can expect there will be an expansion in world tra and that the U.S. operators should be able to participate in it. We talking further about increasing the percentage of U.S.-flag par pation, primarily in bulk trade. These are the three elements wh.. go into the program.

Mr. LENNON. So when you say, Mr. Secretary, that your program visions building 42 vessels a year either in American yards or for yards in the ratio that you suggest for 5 years, and thereafter appr mately 25 per year with the division unless there is a congressi cutoff with respect to foreign building

Secretary BoYD. No; there would have to be affirmative cong sional action, Mr. Lennon.

Mr. LENNON. Yes. You are talking there in terms of those ships you are not talking about simply 200 or 220 ships to replace the capa of those 600 you intend to replace because of block obsolescen think you said.

Secretary Born. We expect to serve these three purposes.

Mr. LENNON. I think it is easy by reading what I quoted to! a few minutes ago the reference to your answers to questions to a little bit confused and when we get confused we get concerned.

I wonder why it isn't appropriate, in other words, what you s been asked, I assume, Mr. Secretary, is when you find a conse from labor and management and the Congress with respect to package deal with those four criteria in there that you said were negotiable then you will go back to the President, which of co includes, one of them, to go into the Department of Transporta foreign building and these others that you mentioned. T from there you submit to the Congress a legislative proposal for consideration and disposition which would necessarily have to be ticipated in both by the Congress and the President.

Is that what you intended to do, that when you find that the gress will accept your judgment and a sufficient number of the pe

at labor and management will accept it, then you will go back to ne President who will then authorize you to come officially with the ubstance of the proposal that you are making here to this committee? Secretary BoYD. I am prepared to say that when it appears that here is some possibility of getting this program through I am confient it will be submitted.

Mr. LENNON. Well, some of us seem to feel that you ought to come o grips with these issues by presenting your program in a legislative raft to the Congress for consideration no matter what individual embers of labor and management might say. Isn't that the usual hing that the President does when he sends a proposal to the Conress? Does he have a complete consensus of the Congress and everyne who may be affected by that legislation? Why aren't we entitled o have a draft proposal of the legislation before the respective comnittees in the House and the Senate and why shouldn't the Congress vork its will?

The gentleman that you represent in the White House is the greatest conciliator and negotiator that this Nation has ever known. Some refer to him as a wheeler and dealer. I don't. I think he is a skilled negotiator but I think you and the President are doing the American nerchant marine a disservice to wait until you get this total consensus which I don't think will ever come until we have hearings on the legislative draft that is sent up here to the Congress and then let us see if we can arrive at a consensus that is in conformity or harmony with the Chief Executive.

This is doing it in a little bit different way from what I have experienced in the past, going out to get everybody in total agreement and then we will bring you a proposal.

Would you comment on that just for the philosophy of the thing? Maybe counsel for the Maritime Administration would like to help you out on that.

Secretary BOYD. Mr. Chairman, I certainly don't want Carl Davis to be tarred with the same brush that is tarring me. He is here at my request.

Mr. LENNON. I am not tarring you, sir. I have a high respect for you just as the gentleman from Virginia and other members of the committee have. I want you to know that I long recognized a need for bringing together the various facets of transportation. I favored it. If we could have gotten any assurance and if we didn't have the hostility of the administration at that time against the so-called annual authorization bill for ship construction differential and operating differential and R. & D. I might have gone along, but we were trying to trade too. We were trying to trade.

I believe in the Department of Transportation. I do think this is a very unique industry, different from any others; that is, so far as ocean foreign shipping is concerned; but you have made out a pretty good case.

How do we have any assurance? We let you know that we are about to capitulate and you go back and how do we know that we will have any assurance that there will be a legislative proposal that we can accept?

I think there has to be some negotiating and trading and not necessarily in the fundamentals. I read your speech which you made up in

Baltimore some 2 months ago and I told two prominent shippers that I read it, that I thought it was well timed then and I even made the suggestion that the chairman of this committee and the members of the Maritime Subcommittee meet with you privately and explore the possibility of your speech to see if we couldn't reach areas of agreement, but nothing was done about it.

I don't know whether you got the message or not because I am not on that subcommittee.

Secretary BOYD. I want to make one statement for the record, Mr. Lennon, and that is that I have tried in every way I know to talk to everybody who expressed any interest in discussing this program wita me. My door has been open to everybody and it continues to be.

Mr. LENNON. Well, my door is open too. I have an open-door policy. I will come over here at the drop of a hat if something on this comes up. But I do wish you would seriously consider suggesting to the Pres ident that he send his legislative proposal up here. It won't be the first time if it happens that he doesn't get everything he wants, but we have to make a start.

Usually if you folks come with the impression that there is no hope of a compromise then we are in status quo. Then I think it is the responsibility of this committee to write its own legislation. The CHAIRMAN. Mr. Ashley.

Mr. ASHLEY. There has been nothing to prevent us from doing so for the last 2 years.

Mr. LENNON. We have been waiting for you to write a bill.

Mr. ASHLEY. You have been talking plenty of time. I didn't see any legislation from the gentleman.

Mr. LENNON. I did last year.

Mr. ASHLEY. I am surprised that you couldn't get this committee to hold hearings.

Mr. LENNON. That is all.

The CHAIRMAN. Mr. Pollock.

Mr. POLLOCK. Mr. Secretary, I really hope you won't presume that we are tarring and feathering you here. I very much appreciated your presentation the other day, and I would like to say that I respect your courage and forthright candor. It is rather refreshing. I just happer to disagree with some of the statements that you made as I think is obvious with some of the other members.

Mr. Secretary, I think we both agree that the maritime industry very badly needs a Cabinet-level advocate to impress the President with what I think is the extreme seriousness of our maritime objective vis-a-vis the other nations.

I think you would be a very strong and forthright advocate befor the President. However, it seems to me that we have to decide on one of two integrated programs and they are mutually inconsistent. Either we have to have a so-called transportation system which embodies of involves the transfer of the maritime industry to your Transportatio Department, or we have to have something quite different, something I think is an imaginative and aggressive approach, such as a new ari very separate Cabinet-level Department which involves a total oc system, an omnibus approach, if you please, which would embody t merchant marine and this includes construction and transportation.