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The concepts and attitudes which were held in the mid-Thirties, when the Magnolia State lifted her cargo of cotton on a littered Galveston pier, no longer bear any relationship to the container-dominated maritime industry of 1979. Nowhere is this manifested more clearly than in the merchant marine’s role as a potential military auxiliary.
Since 1936, when the Merchant Marine Act of that year was signed into law by President Franklin D. Roosevelt, the declared policy of the United States concerning its merchant marine has been embodied in these words of the opening section of that law:
“It is necessary for the national defense and development of its foreign and domestic commerce that the United States shall have a merchant marine (a) sufficient to carry its domestic waterborne commerce and a substantial portion of the water-borne export and import foreign commerce of the United States and to provide shipping service on all routes essential for maintaining the flow of such domestic and foreign water-borne commerce at all times, (b) capable of serving as a naval and military auxiliary in time of war or national emergency, (c) owned and operated under the United States flag by citizens of the United States insofar as may be practicable, and (d) composed of the best-equipped, safest, and most suitable types of vessels, constructed in the United States and manned with a trained and efficient citizen personnel. It is hereby declared to be the policy of the United States to foster the development and encourage the maintenance of such a merchant marine.”
GALVESTON WAREHOUSE
In 1979, this policy no longer has the impact it did when it was hailed as the “Magna Carta of the American merchant marine.” There is more than one reason for this loss of potency, but perhaps the most important is the tremendous technological revolution which has swept through the world’s maritime transportation industry since 1956.
Very briefly described, this revolution has changed the technique of the shipping business. The familiar “break-bulk” carrier was a ship into which were stowed literally thousands of individual boxes, bags, bales, and barrels. It took days of arduous labor by large numbers of men to unload and load a ship. Abruptly, all this was changed in 1956 when Mal- com P. McLean, a former truck-line executive, proved that it was feasible to stow cargo aboard ship without removing it from the huge container in which it had been hauled from its inland point of origin directly to the ship’s side. Instead of days, the ship’s time in port was reduced to hours, and enormous machines took the place of the hundreds of longshoremen who had handled the thousands of packages in which cargo was encased for the overseas voyage. Marine terminals in major ports such as New
One of the world’s largest (946 feet) and fastest (33 knots) containerships, the Sea-Land Commerce can transport as much cargo per year as five nou-ohsolete “break-bulk” carriers. Modern containers carry up to 20 tons of cargo; they are lifted onto the ship, stacked, and locked in place for voyages to all parts of the world.
York, New Orleans, and San Francisco (to name only American cities) were characterized by enormous hard-surfaced areas which had been laid out expressly to accommodate the containers.
Speed became the watchword and the essential feature of modern steamship operations. New container-carrying ships were designed and built to travel routinely at speeds which two decades earlier were attained only by a very few express passenger liners making exceptional efforts to capture speed trophies. The normal procedure in port today calls for round-the-clock working of cargo, which means mechanically handling the 20- and 40-foot-long containers. These boxes are accounted for and their whereabouts made known by elaborately complicated computer control systems. The entire operation, both terminal and watercrossing, is integrated into one enormous, complex, and meticulously coordinated transportation system in which the ship is the critical and indispensable element. A corollary of these developments is that one big, fast containership can transport as much cargo in a year as five of the now- displaced “break-bulk” carriers.
It follows logically that the concepts and attitudes which were held in 1936 concerning the employment of merchant vessels no longer bear any relationship to the maritime industry of 1979- Nowhere is this manifested more clearly than in the role of the merchant marine as a potential military auxiliary. In 1936, f°r example, there were more than 1,000 oceangoing break-bulk carriers of U. S. registry engaged >o
the foreign, inter-coastal, and coastwise trades of the nation. Today, the dry-cargo coastwise and intercoastal trades have been almost totally extinguished, driven out of business by the ubiquitous trucks and the railroads’ unit trains. The active fleet of seagoing U. S.-flag merchant ships consists of 577 vessels of all types. In 1936, it was true that in time of need short of a national emergency (when all ships would be requisitioned by the government), the owners of commercial ships were able to provide a substantial number °f vessels for military use. Ships could be, and in the 1939-1941 period actually were, taken out of liner service without seriously disrupting the overall schedules. This was achieved by the owners adjusting their sailings by increasing (where feasible) the cruis- lng speed of the remaining ships to shorten the dura- tton of voyages; by operating marine terminals 24 hours a day rather than the pre-emergency program 12 to 18; and perhaps by increasing the time between departures by a day or two. In 1979, none of these expedients is feasible, because there is no flexibility in the highly demanding and rigid schedules of che modern containerships. Every “slack” minute al- teady has been eliminated. Only by requisitioning l^hich would cause a wide variety of fiscal and commercial problems) can any significant number of ships be provided in the future for military auxiliary Purposes. Rather than attempt to adapt or to amend and ad- )Ust the 1936 policy to present circumstances, the tlrne has come to draw up a completely new national Policy which relates to the modern-day American shipping industry. Innovative thinking, a willingness to abandon traditional attitudes, and a broad jmderstanding of the methods used by the steamship business are vital to the successful drafting of this Policy. An example of what must be taken into account is Pfovided rather dramatically in the matter of logistic support for a future overseas military operation. In past, the military services have made their plans 'o the secure knowledge that merchant-type shipping should be provided from these sources: ^ The liner-service fleet, which would offer the fewest and most efficient vessels * The tramp segment, which would make available obsolete but still useful tonnage The National Defense Reserve Fleet maintained 7 the Maritime Administration for emergency requirements and capable of reactivation in from 10 to 30 days. ^s already explained, the liner fleet, now altogether c°tnmitted to container systems, is no longer a de- | pendable resource. The tramp segment disappeared as its World War II ships became sea-weary and were consigned to the breakers’ yards following withdrawal from Vietnam. The National Defense Reserve Fleet contains only a score or two of usable ships, the once-large number having been reduced by attrition of age and the onward progress of technology. In the future, therefore, military planners will have to establish what they need in the form of merchant-type shipping, then will have to work with the appropriate departments of the government to assure that these ships will be available. Set in specific terms, this means that the Department of Defense must determine fairly precisely the numbers and types of ships it will require to support a campaign in the Pacific of approximately the scale of the Vietnam operation. Because sea distances are shorter and more ports are in existence, a separate calculation for a major commitment on the European continent also must be made. To illustrate this point, let us assume that military requirements, superimposed on the normal needs of the maritime industry to maintain business at peacetime levels, are significantly above anything that can be supplied from the merchant fleet as now comprised. (The likelihood of an “all-out” war which would involve mobilization and total requisitioning of ships may be discounted; current military thinking does not foresee such a military eventuality.) If adequate logistical support is to be provided from the private commercial sector, a shipbuilding program will have to be initiated. The policy must be developed, therefore, so that this “reserve” capability can be acquired and kept available at minimum cost. Ideally, the policy would establish the means by which these ships could be used by commercial carriers rather than lying idle until the alarm bell is sounded. A major worry for all interested in the welfare of the merchant marine is the fact that since the termination of the boom of early post-World War II days, the proportion of foreign import and export trade carried in ships of U. S. registry has declined to the lowest point in history. This has come about despite an elaborate and expensive system of construction and operating differential subsidies and a certain amount of cargo being set aside for transportation in U. S. ships exclusively. Over the years since 1936, it would appear that the initial objective of the subsidies has been forgotten. The purpose was to bring American costs down to foreign levels so that operators of U. S.-flag ships could compete on equal terms—and obtain a growing share of the import and export trade through superior service—at freight |
Jj 0c©edinp*K / Ffibrnarv 1979 | 45 |
rates fixed by lower-cost foreign carriers. Given the fact that the national share has declined year by year, it is time to revise the system. It should provide for incentives to augment the proportion of American- carried trade and penalties to be imposed when that proportion is permitted to drop.
A hypothetical situation may be described by way of clarification. On its allotted trade route, a fleet of subsidized U. S. ships currently lifts 12% of the total liner-type cargo. The operating subsidy amounts to $2 million a year. The proposed incentive would offer an increase in subsidy of 5% for each half of a percentage point by which the subsidized carrier increased the American proportion. On the penalty side, a loss of 2% of the subsidy would be charged against the carrier for each half of a percentage point by which the American share declined. It should be noted that the incentive-penalty provision applies not to an absolute number of tons of cargo but to a proportion. This is important, because if there is a recession in which the tonnage drops, the operator should not be penalized for something beyond his control. The proportion, however, can be controlled, and the incentive offers adequate inducement to meet the minimum.
Critics of the subsidy system contend that it should be abolished. In their view, subsidy protects a segment of the privately owned American merchant
marine from the effects of competition and thereby encourages inefficiency and complacency. To bolster their argument, they cite the case of Sea-Land Service, Inc., which never has been subsidized, and United States Lines, which currently is operating without subsidy. Both these companies maintain service on only major trade routes on which there is a continuous and heavy flow of import and export traffic. Other American steamship companies link the United States with areas where the available cargo tonnage is considerably less and direct competition from foreign carriers is keen and unrelenting. Without the support of subsidy, there are grounds for believing that these operators could not survive.
If the premise is accepted that the existence of a U. S. merchant marine is in the national interest, and that this merchant marine should link the United States with its principal trading partners, then the conclusion follows that subsidy is a necessary and valid investment of public funds. That every inducement should be offered to assist carriers to become independent of subsidy is a reasonable goal of national maritime policy and should be so stated.
A shibboleth of some advocates of the U. S. merchant fleet is that the government should reserve a certain percentage of the national import and export trade for American-flag ships. The argument regularly advanced is that this action will result in the
building of new ships, creation of more seafaring jobs, and the bringing of a modicum of prosperity c° the American shipping industry. Some skepticism concerning these claims is permissible in light of the history of cargo preference. In 1904, military cargoes were restricted to “ships of the United States or of United States registry,” when available. The promise was that, with this assurance of business, better ship5 would be operated, and improved service would be
offered to American importers and exporters. As a matter of fact, no new ships were built. Service was °ot improved. If any profits were earned from the Military cargoes, they went into corporate treasuries, father than to upgrading the fleet.
In 1954, Congress passed legislation which channeled one-half of government-financed cargo into S. ships. The freight rates paid for transportation such goods were to compensate the owners for the high cost of operating American-flag ships. The same Promises were heard in 1954 that had been expressed a half-century earlier, with remarkably similar remits. The non-subsidized carriers, offering ships acquired at bargain prices from the war surplus fleet, rernained in business only until these ships had to be scrapped and then went into other fields of enterprise. They did not build any new dry-cargo ^hips, nor did they improve the transportation serv- 1Ce between the United States and foreign regions, ^he ironic proof of the failure of the “Fifty-Fifty
of 1954 to encourage the growth of the American merchant fleet was presented in 1976 and 1977. Although 40% of the wheat sold to Russia in those years was reserved for ships of U. S. registry, there were not enough ships to lift the full American
share.
instead of cargo preference, the national policy Were to offer subsidy to all ships of American regis- tr7 "'liners, tramps, dry-bulk carriers, and tankers wouid be p0SSible for these vessels to com- l^e on the world market for employment. In all Probability, the cost to the government would be no greater than the present expensive cargo preference ^stem, with its cumbersome bureaucratic adminis- ^tive machinery. It also would be possible, under hls enlarged subsidy program, to audit accounts of ^friers to assure that there was no profiteering. This •seal supervision appropriately should be a function 0 Che General Accounting Office. In those cases ^ere profits (including subsidy payments) exceeded SOtlle reasonable figure, a portion of those profits 'v°uld revert to the federal treasury.
. Anally, in considering the problem of how to re- v‘talize the U. S. merchant marine, it must be rec- ^>nized that never has there been a high-level agency the government charged with ensuring that the ^Icy was carried out and was kept current with echnological developments. To assign the administration of the subsidy program to the Maritime Administration is entirely proper; it was created for this Repose. To expect that the Maritime Administra- °n will report objectively on the effectiveness of the tional policy concerning subsidy is, at best, naive n°t futile. What is needed is a National Merchant
Marine Policy Board, comprised of the Secretaries of State, Defense, Treasury, and Commerce, and the chairmen and ranking minority members of the Senate and House committees dealing with the merchant marine. This board should meet at least three times a year, with the named officials (not their deputies) in attendance. Ten calendar days after each meeting, a report of the findings and recommendations would be submitted to the President of the United States. Within 20 working days of receipt of that report, the president would be required to make his own recommendations (based on the board’s report) for appropriate action to ensure that the merchant marine policy was carried out in the national interest.
These suggestions are not definitive, but they point the way toward the formulation of a new national policy concerning the American merchant marine. A program of the sort outlined in this essay would accomplish many things. It would assure that the military auxiliary status of the merchant marine was a reality, not a convenient device to try to obtain appropriations from a reluctant Congress. It would end the controversial cargo preference program and would substitute for it a new system of subsidy. It would provide a tangible incentive for American ship operators to increase the proportion of the import and export trade of the nation which is carried in their ships. For the first time, it would prescribe penalties for slothful performance on the part of shipowners who failed to exert adequate efforts to meet foreign competition. Finally, it would establish a high-level monitoring agency which would ensure that the merchant marine policy was being carried out in the best interests of the entire nation.
A native of New Orleans, Colonel Kendall accepted assignment to active duty in the Marine Corps in 1939, for which he resigned his position with W. R. Grace & Co. He was released from military service in 1946 and immediately joined the staff of the U. S. Merchant Marine Academy, Kings Point, New York, where he served on the faculty for 14 years. He was head of the Academy’s Department of Ship Management from 1950 to I960, when he accepted the position as Commercial Shipping Advisor to the Commander Military Sea Transportation Service (now the Military Sealift Command). He remained active in the Marine Corps Reserve until 1961 and was retired in 1972. He earned B.A. and M.A. degrees from Tulane University and did additional postgraduate work at the University of California (Berkeley) and Princeton University. He is the author of The Business of Shipping, published in 1973 (2nd edition, 1976), and a large number of monographs and articles which appeared in the maritime press and the Proceedings. In 1975, he received the Naval Institute’s Special Award (Authors) for his contributions to the Proceedings and the Naval Review over a period of 36 years.