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By Robert H. Pouch
Merchant Mariners had two reasons to feel pride in 1991: the dedication of the U.S. Merchant Marine Memorial! which honors the mariners who died in World War II, and for their accomplishments in Desert Shield and Desert Storm, as they supported one of history’s most extensive logistical operations.
On Tuesday afternoon, 8 October 1991, a large crowd began to assemble in Battery Park in downtown Manhattan. The harbor waters sparkled in the sunlight, and the Statue of Liberty stood impressively in the distance.
The people had come to witness the dedication of the U. S. Merchant Marine Memorial, a dramatic statuary, built just offshore of the park seawall, depicting the rescue of merchant mariners from a sinking lifeboat during World War II.
The dedication ceremonies, led by Rear Admiral Tom King,
U.S. Maritime Service (Retired), former Superintendent of the U.S. Merchant Marine Academy at Kings Point, were the culmination of a national fund-raising effort to honor sailors who lost their lives in World War II.
In fact, many of the honored guests at the dedication were Merchant Marine veterans and survivors of voyages—some successful, some unsuccessful—to places like Normandy and Murmansk. Participants could overhear their dramatic stories of grueling wartime trips on freighter and tanker convoys—stories that often ended with torpedoing, sinking, casualties, and, for the lucky ones, with rescue and survival.
The tales of these mariners, who came to pay tribute to their lost comrades, were touching, especially for anyone who has sailed on board a merchant vessel. The moment was even more dramatic because the U.S. Merchant Marine recently had been required, once again, to call “All hands on deck,” to support Operation Desert Storm.
As the Navy and Maritime Administration activated their Reserve fleets, seafarers poured in from all over the country to fill positions on newly activated ships. There were young people recently graduated from maritime training schools and senior veterans from World War II, some in their 70s, who had not been to sea for years. These sailors answered the call and went to sea.
All of these images were brought together as the maritime industry paused to honor its heroes at the Battery Park seawall. It is fitting to dedicate 1991 as the year of the American Mariner.
Maritime Industry Overview
In a nation struggling to shake itself out of economic recession, the Merchant Marine is another example of an industry with a long tail of ancestral problems. High construction and operating costs, generally unsatisfactory levels of freight, an unsuccessful program of government subsidies, and a series of built-in governmental, regulatory, and tax disincentives continue to present major obstacles for U.S.-flag ship owners.
The shipyard industry, which has relied on naval shipbuilding orders for the past two decades, expects to see that market decimated within a few years. A major rationalization is indicated for this sector.
The challenge facing the maritime industry will be to remain competitive in the marketplace or join those who have abandoned U.S.-flag based shipping to build and operate overseas. In fact, many overseas nations have welcomed the development of a maritime investment and service infrastructure. They have lured U.S. investors with a number of attractive incentives. Regrettably, the U.S. regulatory system has placed a number of very serious regulatory, tax, and environmental disincentives in the path of U.S. maritime companies.
When the high level of investment and the risks of operating a business become too burdensome, investment moves elsewhere. The lack of any coordinated policy approach, either at the governmental level or within the maritime industry itself, does not provide for much optimism among investors. The challenge will be to work for incremental changes that will improve the competitiveness of the system at many levels.
Status of the Fleet
In 1991, the privately owned U.S. fleet consisted of 475 vessels—398 oceangoing vessels and 77 Great Lakes carriers—
of about 20.3 million tons deadweight. This represents a decrease of one million gross tons from 1990 levels. There were three commercial ships under construction and two additional vessels undergoing conversion. This fleet provided an employment base of approximately 11,500 unlicensed mariners and 5,345 licensed officers.
By contrast, the world merchant fleet stood at 436 million gross tons, a 12.4 million ton increase from 1990. More than 65% of the combined world fleet is at least ten years old, and 15% is more than 20 years old, according to Lloyd’s Register of Shipping and the Maritime Administration.
Maritime Industry-Related Jobs
In addition to shipboard jobs, vessel-related maritime workers, such as longshoremen and shipyard production personnel, accounted for another 92,000 employees in the maritime industry labor pool at the Atlantic, Gulf, Pacific, and Great Lakes ports.
Maritime Safety and Environmental Issues
No issue in recent memory has ignited more debate and generated more hysteria within the maritime industry than the Oil Pollution Act of 1990 and the number of similar environmental statutes enacted by individual U.S. coastal states. The fear of oil pollution—triggered by the Exxon Valdez accident in Alaska and heightened by a number of other dramatic and well-publicized spills on the West Coast, the Gulf, and the Atlantic coast—launched an unprecedented wave of legislative and regulatory action.
Some international owners have refused to send their tankers to U.S. ports, asserting that absurdly written laws and unlimited liability exposure could ruin them. There also has been speculation that the new laws will encourage risk-takers whose only corporate assets are substandard ships—possibly the only ones willing to serve the U.S. tanker trade.
The net results of this recent lawmaking activity are not all negative, however. Companies involved in the transport and handling of oil and chemicals have in some ways benefited from a national environmental consciousness-raising. Issues °f quality, safety, and personnel training— formerly considered burdensome back-of- f'ce costs for ship and terminal operators— nave assumed a higher priority.
While there are many overage tankers ®nd bulk carriers still trading all over the
world, many nations, classification societies, ship owners, cargo interests, and insurance companies now are realizing that unsafe or poorly maintained overage ships need to be filtered out of the world fleet. In a beleaguered tanker industry, which has been in a state of constant pain for the past 20 years, everything used to be negotiable.
Now, as a result of the Oil Pollution Act of 1990, there is a general consensus that quality and safety are no longer negotiable items. Nations are beginning to clamp down on lax shipping registries and substandard ships.
In a maritime industry, which is international in scope but basically unregulated, these new environmental laws have brought about improvements in the industry’s overall safety and quality standards.
Because of all of the recent environmental publicity, consumers are more receptive to the higher costs associated with increased safety and quality, and clean operation both at sea and ashore.
U.S. Liner Trades
While the recession has taken its toll on the U.S. economy, international imports and exports of cargo through U.S. ports have seen modest growth. This is partly attributable to the Gulf War. However, the favorable exchange rate of the dollar, and more price-competitive U.S. manufacturing industries are playing a growing role in expanding overseas markets for all kinds of U.S. products.
Thus, some major container trade lanes are looking at modest growth during the coming year. U.S.-flag operators, such as American President Lines, SeaLand, and Overseas Shipholding (Central Gulf-Waterman), have continued to improve their business infrastructure and have emerged as leaders in innovation and service within a very competitive industry.
The major problem in the liner trades continues to be overcapacity on most trade routes. This has led to predatory pricing and erosion of profits. In some cases, revenue per container is well below cost, in spite of the fact that many carriers belong to conferences that can establish pricing with specific antitrust immunity.
Late in the year, Farrell Lines negotiated with the Maritime Administration for a $20 million forgiveness of debt in return for a curtailment of its subsidy contract by three years. Lykes Lines chartered four Panamanian-flag ships, formerly operated by Nedlloyd Line, for its service between Africa and Atlantic and Gulf ports.
A Presidential Advisory Commission on Conferences in Ocean Shipping has been examining what steps, if any, should be taken to overhaul the Shipping Act to create a more equitable working envi-
In the wake of defense cuts, future Navy ship construction—here, the guided-missile cruiser Shiloh (CG-67) nears completion at the Bath Iron Works shipyard—is expected to sustain only one or two major shipyards and one or two smaller yards in the United States. Unable to compete with subsidized foreign competitors in the commercial marketplace, private U.S. shipbuilding could cease to exist.
ronment within the liner trades. Its report is scheduled for release in the first half of 1992.
Subsidies
The administration has stated its plans to terminate all construction differential subsidies in 1996-97. Similarly, international negotiations are taking place to seek an end to government subsidies of shipyards worldwide, in an effort to level the playing field for the construction of new ships. There has been no consensus on whether these negotiations will be successful. or be implemented, in practical terms.
The Cruise Industry
A number of spectacular new cruise vessels, which will operate from U.S. ports, were introduced in 1991. Market
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the country’s ability to operate commercial ships and shipyards and to maintain an experienced maritime industry labor pool, which potentially sets the stage for a further decline of the commercial merchant marine.
Such a policy is not in harmony with prior naval theory and doctrine, which advocates that a strong merchant marine, engaged in free trade and international commerce, is a cornerstone of freedom of the seas and world peace. The absence of a national maritime policy does not help to
Spurred on by the Exxon Valdez accident in Alaska, oil pollution and environmental legislation surged. Unlimited liability exposure has scared off some international trade, but not all of the effects have been negative. Quality, safety, and training standards have improved.
projections indicate that only a small percentage of Americans have ever taken a cruise, and cruise operators are betting that beautiful new ships, with high standards of decor, cuisine, and activities—all at a fixed price—will lure many new first-time customers. Almost all of these vessels are operated under various international flags, in what has been a rapidly growing business, largely based out of Florida and California ports.
The world fleet is growing older. The breaking up and sinking of some 30 bulk carriers in 1991 has caused classification societies, insurers, and governmental agencies to focus on the adequacy and material condition of the world fleet of bulkers, many of which are overage.
Once again, the problem facing this industry is pricing. Freight rates just barely support the present operations. It is out of the question for owners to order new ships when the likelihood of ever being able to pay off the mortgages is nil. Thus, the old ships continue to sail, some having benefited from service-life extension programs. Over the next few years, replacement tonnage will have to be ordered. This is just beginning to happen.
Navy-Merchant Marine Relationship
While the Merchant Marine has often been described, with much justification, as the nation’s fourth arm of defense, there has been a perceptible shift of policy within the Navy to gain control of its own fleet of military transport ships. The implication is that it is becoming more difficult for the Navy to rely on the Merchant Marine to meet its surge shipping needs when trouble breaks out and specific types of ships are needed quickly. This was demonstrated in Desert Shield and Desert Storm, when the Military Sealift Command was required to charter a substantial number (approximately half the fleet) of foreign-flag ships to meet its transport commitments.
The trend toward greater sea transport control also is seen in the Navy’s 26 August 1991 Navy Strategic Sealift Implementation Plan to build its own fleet of roll-on/roll-off prepositioning ships, and in its desire to take control of the Ready Reserve Fleet from the Maritime Administration. It seems logical that the Department of Defense should control the assets it must use for national defense purposes. It is responsible for maintaining military supply lines. However, the complete segregation of Navy and Merchant Marine policy also raises unsettling questions. It is especially threatening to resolve this issue.
In 1991, the United States took great pride in its merchant mariners of all ages, from all over the country, who supported one of history’s fastest and largest military mobilizations and logistical operations. The year also witnessed a significant reduction in ship accidents, oil spills, and other casualties.
While the overall economic performance of the Merchant Marine and maritime industry improved slightly, the problem of high fixed costs and unsatisfactory levels of freight rates remains. The pressure on earnings is a major obstacle to replacing older ships, and to bank financing to secure new shipbuilding contracts. Nevertheless, a number of operators have found profitable market segments for themselves. They have demonstrated that companies employing ingenuity and hard work can be successful in a very challenging and competitive marketplace.
Robert Pouch is a consultant with Barber International a firm engaged in ship management and marine consulting for a fleet of 175 commercial vessels. Mr. Pouch served in the U.S. Naval Reserve as a commissioned officer in positions involving Naval Control of Shipping, Military Sealift Command, and amphibious warfare. He is a graduate of the Maine Maritime Academy.