Page 7: of Maritime Reporter Magazine (November 1993)

THE PRESIDENT'S PLAN:

President Clinton Proposes How The Maritime Industry Can Convert

From Defense To Commercial Production "Strengthening America's Ship- yards : A Plan For Competing In The

International Market" is the title of a report prepared by President

Clinton's National Economic Coun- cil. The following is excerpted high- lights from the report giving an as- sessment of the market, as well as specifics on the action needed to bring commercial business to U.S. yards.

The Outlook

There are four possible markets for U.S. shipbuilders in the future: the commercial market (both do- mestic and international), U.S. na- val vessels, foreign naval vessels and non-shipbuilding markets. Of these, the international commercial market offers the most significant prospect for expanding production.

The Commercial Market

The commercial market consists of both the domestic market (pro- tected by the Jones Act) and the international market.

The Jones Act market is expected to remain small through this de- cade. Demand for new ocean-going vessels for the Jones Act fleet is estimated to be at most two to three vessels a year. These numbers re- flect a decline in demand for tank- ers due to a projected reduction in

Alaskan oil shipments and changes in trading patterns. They take into account the requirement in the Oil

Pollution Act of 1990 (Public Law 101-380) that single-hulled tankers be phased out beginning in 1995 according to a schedule based on age and capacity so that all tankers will have double hulls by 2015. By contrast, the already-sizeable de- mand for new vessels in the interna- tional commercial market is ex- pected to grow significantly in the coming decade. Drawing on a vari- ety of analyses, the Maritime Ad- ministration (MarAd) estimates that 7,300 to 9,900 large ships (of which half will be tankers) will be built between 1992 and 2001. Three- quarters of this new construction is expected to occur in the second half of this period. Most will result from the need to replace aging vessels, not to accommodate trade growth.

U.S. Naval Vessels

The U.S. Navy will continue to provide a market, albeit a much smaller one, for U.S. shipbuilders.

The Navy has about 100 ships on order or under construction, three quarters of which will be delivered after 1994. Although the details of the defense program for FY '95-FY ' 99 still are under review, the De- partment of Defense (DoD) projects that it will order on average eight new ships a year (including sealift ships) in those years. In the follow- ing decade, replacement of aging military vessels may require some modest increase in construction.

DoD does not now plan any addi- tional sealift procurement, however.

Thus, while the total requirements remain uncertain, DoD does not believe that its annual need will increase significantly.

Foreign Military Vessels

The market for foreign military vessels probably will remain rela- tively small. Most countries with significant blue water fleets pur- chase naval vessels from their own yards, although nations with pre- dominantly coastal fleets are likely to continue to purchase certain classes of small vessels abroad.

Non-Shipbuilding Markets

In slack periods, shipyards have engaged in non-shipbuilding projects, including the construction of railroad cars, under-river tunnel sections, wind tunnels, prison barg- es, offshore oil rigs, and marine equipment. Quasi-shipwork projects including methanol plant barges and power plant barges (about 40 of which are now in operation) also present a potential source of business.

Competing Internationally:

Leveling the Playing Field

Two steps will have to be taken for U.S. shipyards to compete suc- cessfully in the international mar- ket. • Step 1: Eliminate Subsidies: Many foreign yards have benefited from substantial shipbuilding subsidies.

In July of 1993, MarAd published a "Report on Foreign Shipbuilding

Subsidies" describing current gov- ernment programs for assistance to shipyards in 31 nations and the Eu- ropean Community, as well as indi- rect support, as exemplified by

Japan's home credit schemes. Sub- sidies must be eliminated if there is to be a truly competitive interna- tional market in which U.S. ship- builders can compete. (Continued on page 11)

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