Page 40: of Maritime Reporter Magazine (June 1986)

U.S. MERCHANT

SHIPBUILDING

M. Lee Rice

Editor's note: The following re- port is reprinted from the 1985

Annual Report of the Shipbuild- ers Council of America that was released in April, 1986.

U.S. SHIPBUILDING OUTLOOK

Maritime Policy—1980-1985

By M. Lee Rice, President

Shipbuilders Council of America

When the Administration as- sumed office in 1981, the shipbuild- ing industry understood that it would be challenged to meet the performance and cost objectives of an expanded naval construction program. Further, the shipbuilding industry knew that performing the backlog of commercial and Navy work, on hand in 1981, would demonstrate that the industry's ongoing investment in facilities and new production methods and pro- cesses provided lower shipbuilding costs and more rapid shop deliver- ies. The industry was poised to build badly needed new navel ves- sels and to respond to all require- ments to build commercial vessels.

That the Administration placed highest shipbuilding priority on naval combatant vessels in its 1981 and 1982 budgets was understood and strongly supported by the in- dustry. The industry did not agree, however, that the series of decisions that resulted in the near abandon- ment of commercial domestic ship- building were based on sound analy- ses of the requirements of national security. In our view, it is a responsi- bility of industry to highlight errors or misjudgments in national policy development when they occur.

As indicated in the Message from the Chairman (following this arti- cle), we believe that our industry has acted responsibly and effective- ly to the demands of a changing business environment and that the

Administration has made good pro- gress in enhancing our naval war fighting capabilities at costs that are fiscally sound.

Today, however, the status of the overall maritime capability of the nation is much less sound than that of the Navy. During the Presidential campaign in 1980, then-candidate

Ronald Reagan issued a state- ment entitled "A Program for the

Development of an Effective Mari- time Strategy." The President's statement included the following definitive program: "We must develop and undertake a maritime policy that will (1) demonstrate our understanding of the importance of the seas to Ameri- ca's future; (2) reestablish the U.S.- flag commercial fleet as an effective economic instrument capable of supporting U.S. interests abroad; and (3) demonstrate America's con- trol of the seas in the face of any challenges. "A specific naval-maritime pro- gram must be developed that will: "1. Provide a unified direction for all government programs affect- ing maritime interests of the United

States. We must insure that there is active cooperation between the

Navy and the Merchant Marine and the government departments re- sponsible for each. We must see that long-range building programs for naval and merchant ships are estab- lished and carried out without fall- ing victim to petty bureaucratic jea- lousy. This is the role of the Presi- dent, and I shall see that our mari- time policy is coordinated to insure that it achieves the objectives we set for it. "2. Insure that our vital ship- building mobilization base is pre- served. It is essential that sufficient naval and commercial shipbuilding be undertaken to maintain the ir- replaceable shipbuilding mobiliza- tion base. Without this nucleus of trained workers and established production facilities, we can never hope to meet any future challenge to our security. "3. Improve utilization of our military resources by increasing commercial participation in support functions. The Navy today is facing a critical shortage of trained person- nel. With the commercial industry assuming increased responsibility for many auxiliary functions, sub- stantial cost savings can be achieved and a large reserve of manpower can be released to provide crews for a growing naval fleet. This is an exam- ple of the means by which we can increase defense mobilization with- out adding burden to the taxpayer. "4. Recognize the challenges created by cargo policies of other nations. The United States has tra- ditionally espoused free trade. How- ever, the international shipping trade is laced with a network of for- eign governmental preferences and priorities designed to strengthen foreign fleets, often at the expense of U.S. maritime interests. We must be prepared to respond construc- tively for our own interests to the restrictive shipping policies of other nations. A major goal of the United

States must be to insure that Ameri- can-flag ships carry an equitable portion of our trade consistent with the legitimate aspirations and poli- cies of our trading partners. "5. Restore the cost competitive- ness of the U.S.-flag operators in the international marketplace. It has been American policy since 1936 for the additional costs of building and operating U.S.-flag ships to be borne by a system of subsidies to help insure the competitiveness of

American importers and exporters.

But our parity system failed in the mid-1970s because most foreign governments moved to protect their own vital maritime interests after the shipping collapse of the mid- 1970s. We must now take corrective action to make certain our merchant fleet and our shipbuilding industry survive and grow. "6. Revitalize our domestic water transportation system. The inland water transportation system pro- vides an economic and energy-effi- cient method of moving goods and commodities of the nation between all parts of our country. It also pro- vides a vital link in our international trading effort by tying the ports of our four seacoasts, which includes our Great Lakes, to the producing heartland of the nation. Again we are paying a high price for the absence of any coherent national policy. "7. Reduce the severe regulatory environment that inhibits American competitiveness. As foreign compe- tition on the maritime scene has increased, so have the operational and regulatory restrictions on U.S. shipping and shipbuilding. Many of these restrictions increase costs and, in some cases, simply prevent our ships from competing with foreign ships. There is rarely, if ever, any commensurate benefit from these restrictions. Accordingly, we will carefully and rapidly review the ef- fect of these restrictions, and spon- sor appropriate actions. "In carrying out these expansive programs, a coordinated effort will be undertaken to create new jobs for

American seamen, shipyard work- ers, and the thousands of workers in related industries. These maritime industries, which are vital to our national well-being, in the past have had an outstanding record of pro- viding not only employment but the training to enable minorities and the disadvantaged to obtain contin- ued advancement. "This seven-point program will be carefully developed and it will be carried out. We cannot expect oth- ers—either allies or adversaries—to respect our interests if we show no respect or concern for them our- selves. The failure to develop and carry out an effective naval and maritime program will deny the use of the seas to the United States and eventually, to the Free World."

Is the seven-point program in place and functioning? To deny that 1 40 Maritime Reporter/Engineering News