Modernizing the Maritime

...Dozens of other obsolete industries are passing out of existence...

...It was too hot to handle...

...Joseph Curran, head of the National Maritime Union and a member of the President's Maritime Policy Committee, had protested when the 63-page report came before it, "I have been mousetrapped...

...Obviously, subsidizing the merchant marine means subsidizing an important element in the economy...

...The real test for Nicholas Johnson's proposals and the recommendations of the interagency report will come when Congress attempts to create a new national transportation policy...

...Then he spent some 18 months explaining his case to almost anyone involved who would listen...

...He did suggest, however, that the American taxpayer should not subsidize the luxury passenger liners, and he argued for greater efficiencymeaning more automation-in the operation of the general cargo ships receiving the major part of the subsidy...

...President Johnson has promised that he will seek a new policy, but the extent of the changes he will advocate are still undetermined...

...Seeking new ground, the industry now argues that the subsidy, rather than being dependent on national defense standards, should be determined by the need to carry a certain percentage of American goods in American boats...

...In contrast, during World War II, American shipyards built 5,592 merchant ships in four years, partly as a result of the construction potential created by the shipbuilding subsidy under the 1936 act...

...The young head of the Maritime Administration has never been very popular with the industry...

...Both Johnson and the interagency report advocate subsidizing the merchant marine only to the extent necessary for national defense...

...When the United States entered the conflict in 1917, it had to rely on hardpressed foreign ships to transport American fighting men to Europe...

...In the same period, the share of dry bulk cargo carried by American ships will drop from the current five per cent to an estimated one per cent...

...For example, because the cost of fuel is not subsidized, the production of faster ships, which burn more fuel, is discouraged...

...There are two ways to solve the problem,' he says...

...These recommendations, which will no doubt lead to more automation, are not binding-yet they will be very difficult for either side to reject...

...The present system thus permits the industry to make a reasonable income by going slowly...

...Not a single new tramp ship has been built since 1956," he points out, "and the cost of keeping the old ones in existence climbs higher and higher...

...After studying the operation of the merchant marine, Johnson charged that interlocking Federal subsidies restrict rather than promote its growth...

...A single ton of general cargo handled in a port generates between $15-$20 for the economy of the surrounding area, adding up to $1 billion worth of business for port communities...

...Once the report became public, congressmen friendly to the merchant marine even talked of legislation, in effect, to eliminate Johnson's job...

...The United States is the world's largest trading nation...

...There is general agreement that the American merchant marine cannot meet foreign competition at all without this operating subsidy, and Johnson did not challenge the principle behind it...

...Representative John J. Rooney (D.-N...

...Even before the interagency report came out, Joseph Curran was asking the President to remove Johnson because of his "negative approach" to the industry's problem...

...But the President's Maritime Policy Committee, composed equally of government, labor and management, studied the report briefly and dropped it as quickly as possible...

...During the long strike by the merchant marine this past summer, the Commerce Department moved into the contract negotiations by refusing to subsidize some new benefits agreed on by the disputing parties...

...The major portion of the government's maritime support$200 million-goes toward what is known as the "operating subsidy...

...The growing problems of government indeed demand new ideas from bright young men...

...There is still another factor that may persuade Lyndon Johnson to accept the ideas advanced by the head of the Maritime Administration and supported by the interagency report...

...The only improvement frequently urged by the industry has been an increase in the subsidy...

...A good case can be made for the argument that the merchant marine is necessary for national defense...

...And, he says, "I had seen a ship before...

...Labor men claimed his recommendations would sail the American merchant marine right out of existence...

...You, Mr...

...Johnson," the President said at the White House swearing-in ceremony, "represent, to my mind, the caliber of young men who infuse this government with spirit and energy and intelligent, common sense grasp of what needs to be done...

...Asserting that the merchant fleet was vital to national defense, he observed that there was no talk of America buying "foreign made space vehicles or missiles-or foreign made military aircraft for our defense establishment...

...The strike had been waged largely on the issue of automation, and it was ended when President Johnson asked union and management to leave that to him for settlement...

...One is to improve the old methods...

...You are a Phi Beta Kappa whose mind is swift and whose honor is high.' The youthful-looking Johnson assumed his new post with the slightly contrived yet contagious enthusiasm of a football cheerleader...

...Johnson would eliminate this subsidy and replace it by a construction and operating subsidy for a new fleet of fast, efficient and modern American tramp ships...

...The planes, according to their specifications, will be able to land on airstrips only 4,000 feet long...

...The cargo preference program requires that at least 50 per cent of government-sponsored cargoessuch as military aid, sales of surplus agricultural commodities and foreign aid-be shipped, with the difference paid by the taxpayer, on higher cost American ships that otherwise are not eligible for subsidies...

...If it is being spent under a system which could be improved, then that standard has not been met...

...tens of thousands of young men and women are unemployed in cities because elevators now are automatic...

...The second way is to back off and study the problem in its most basic fundamentalswhat is the end result you're trying to achieve...

...While granting the need for the operating subsidy, the report recommended that its method of payment be modernized and made more equitable...

...Shipyards employ 100,000 workers...

...Y.), chairman of the House Appropriations Subcommittee that rules over the funds for Johnson's agency, has said of the Johnson ideas: "Some of the proposals now being advanced seem to be directed toward the demise of the merchant marine rather than to its promotion...

...Behind the enthusiasm, however, was the cool, methodical approach of the lawyer...

...A young lawyer from Iowa via the University of Texas, he taught administrative law at Berkeley for three years before joining Washington's prestigious law firm of Covington and Burling...

...This approach troubles the industry because it is being suggested at a time when the Pentagon is relying increasingly on airplanes rather than ships...

...An editorial last summer in The Seafarers Log, the official publication of the Seafarers International Union of North America, agreed with that estimate and continued: "The state of maritime when [Johnson] took over the agency was such that it was necessary that the waters be churned, that every aspect of maritime policy and operation, so long in stagnation, be exposed to the light of day and examined, and discussed and debated...

...Johnson argued that this requirement places a lid on the number of new ships entering the American fleet...

...Although most of the benefits disallowed were later reinstated, the Department promised to cast a critical eye on future costs...

...Still, the capital's other Mr...

...wage standards, to compete with foreign shipowners...

...A shipbuilding executive, for example, conceded that "In recent months, the full spectrum of United States maritime policies, programs and problems has been given more public airing than at any previous time in the last decade...

...After finishing his usual recitation of compliments at the swearing-in of Nicholas Johnson, the President said: "As we advance on the problems that this government faces, we are going to need other Nick Johnsons in other high places in the government service...

...NEW POLICY FOR AN OLD SUBSIDY Modernizing the Maritime By Leonard Baker Washington When 31-year-old Nicholas Johnson was appointed head of the Maritime Administration by President Johnson, he took on a government bureau almost unknown to the general public...

...But that argument embodies a different concept and raises a painful question: Should a dying industry be perpetuated by subsidy to protect a segment of the economy...

...I think that $380 million is a substantial sum,' he said, "and, as Maritime Administrator, I feel an obligation to insure that it is spent in the most productive way possible...

...While this cargo preference program was designed to encourage the expansion of the American tramp fleet, not eligible for operating subsidies, to Johnson it has been "a miserable failure...

...the rest subsidizes some 300 general cargo merchant ships, owned by 15 companies, which ply regular routes...

...A good case can be made for this argument also...

...Somewhat ecstatically he calls surface effect ships "a fantastic achievement that could perhaps make general cargo displacement ships obsolete.' Current experimentation with surface effect ships is being done primarily by former airplane manufacturers seeking new products as the missile replaces the war plane, rather than by the traditional shipbuilders...

...But Nicholas Johnson has now proposed an improvement in transportation...

...A strong suspicion has developed in recent years that this subsidy, while adequately compensating the industry, is so constructed as to actually harm transportation...

...Cheaper to operate, these could capture more of the dry bulk cargo for the U.S...

...Entire areas of the nation are destitute because coal mining is dying as an industry...

...The interagency report largely accepted this idea too...

...and thousands of skilled workers are walking the streets looking for any kind of work because the Defense Department has stopped buying military planes in large quantities...

...Of the total, $40 million subsidizes the operating costs of 13 passenger liners...

...The words sent a shudder through the maritime industry-a conglomeration of shipbuilders, ship lines and union leaders-which has been living off the government for almost 30 years without serious challenge, despite its steady decline...

...few were even aware that the agency had been without a head for four months...

...It also supported Johnson's attack on the $100 million shipbuilding subsidy...

...Johnson brought what seemed to be barely relevant qualifications to his first government assignment...

...The interagency report accepted these ideas...

...But if the "other Nick Johnsons" see the efforts of this one rejected out of hand in favor of interests fighting to maintain a 30-year-old dole, they will turn to other fields...

...Another reason for the conflict between Johnson and the shipbuilding industry is his belief that the traditional ocean-going ships built in American shipyards are out of date-in fact, that the ships of 100 years ago went as fast at times as today's...

...Johnson notes this critically...

...Although ships can and are being built to carry larger loads, no ship could carry the same amount of material as fast and as cheaply...

...The 15-18 new ships a year subsidized by the $100 million are enough to completely replace the American fleet of 300 ships every 20 years, but not enough to expand the fleet...

...On September 30, it placed a contract for 58 giant jet transports that could carry a quarter-million-pound load or 500700 fully equipped troops 8,200 miles...

...The federal government has assumed an obligation to help the technologically unemployed by preparing them for tomorrow's occupational needs, not by perpetuating yesterday's outmoded industries...

...A ship built in an American yard costs more than twice as much as a similar ship built in a foreign yard, again principally because of higher wages...

...The difficulty that Hood and other industry spokesmen have with this argument, however, is that Nicholas Johnson and the reformers of the merchant marine have adopted it as their own...

...Leonard Baker, a former Newsday correspondent, is writing a biography of Lyndon Johnson as Senator...

...But Nicholas Johnson soon made it clear that he had a different concept of his job...

...That means enough ships to keep America supplied with raw materials and to move troops and supplies in time of war...

...Some interest has been shown in these planes by commercial sources as well...

...Writing the Merchant Marine Act in 1936, Congress well remembered that after World War I broke out, American goods piled up on docks as European ships were withdrawn from normal trade routes...

...The chief concern of previous administrators was to avoid rocking the boat-to insure that the agency ran smoothly and quietly, that $380 million in annual Federal funds was passed out equitably, and that the Merchant Marine Academy on New York's Long Island continued to graduate sailors...

...And Edwin M. Hood, president of the Shipbuilders Council of America, told an industry meeting, "I have never been able to understand why it is that our shipbuilding industry is a favorite whipping boy -a favorite target for elimination...

...Gradually, his evangelistic fervor began to shake up the industry...

...Shortly before his assassination, the late President Kennedy was pressured by Meany into agreeing that 50 per cent of any wheat sold by private companies in this country to Russia must be carried in American ships...

...There's a fundamental difference in thinking between those who try to improve ships' hulls and those who try to move ocean cargo competitively...

...In and out of its ports go more than 300 million tons of goods a year...

...And it meant that the recipient nation would have to pay the higher cost of transporting the wheat on American ships...

...Russia has refused to buy the American wheat with its higher transportation costs and instead has spent hundreds of millions of dollars for wheat from other Western nations...

...The Federal government, though, has shown a more hard-nosed attitude toward the industry in recent months...

...If it is producing one less ship than it could, and I remain silent, I am not doing my job...

...Greater automation of American ships should be encouraged, even to the extent of Federal compensation for workers as jobs for sea-going seamen are cut almost in half over a 20-year period...

...The fleet has decreased by one-fourth in the past 16 years, and the one-third of the United States' general cargo trade this year carried by American merchant ships is expected to shrink to one-fifth in 20 years...

...The shipbuilders and lines earn a profit because the government subsidizes them, and the union leaders also do well because the government pays three-fourths of the American merchant seaman's salary...

...Johnson proposed to continue the shipbuilding subsidy at its present rate...

...Nicholas Johnson's strongest objections, though, have been to the other two subsidies: the $80 million "cargo preference" subsidy and the $100 million shipbuilding subsidy...

...The subsidized passenger fleet, it said, should be "phased out...

...After it is used up, he would allow American shipowners to purchase ships in foreign yards without losing their operating subsidy, thus encouraging fleet expansion...

...Once the construction subsidy is exhausted no general cargo line can afford to build a ship in an American yard, and to build a ship abroad means losing the operating subsidy...

...The result was different, however...

...From where we sit there is no question but that Nicholas Johnson accepted the challenge...

...These figures have been less disturbing to the industry than might be expected, for the Federal government's complicated system of subsidies has adequately shored up the income of each sector of the industry...

...To help keep the shipyards operating, the government requires that each subsidized general cargo ship be replaced in 20 years by a new ship built in an American shipyard, and it pays 55 per cent of the cost...

...Rooney's constituency includes the Brooklyn waterfront and its dock-workers, who depend upon the heavily subsidized merchant marine for their livelihood...

...A massive shipbuilding effort began, but almost none were delivered before the War's end...

...These usually are dry bulk boats operating without regular schedules, commonly called "tramp" ships...

...This was the first time that the cargo preference system had been extended to a non-Federal program...

...Johnson gave him a big send-off when he took on the Maritime Administration last March...

...This enables American shipowners, whose high operating costs are due primarily to U.S...

...The merchant marine, moreover, has not been in particularly good standing in Washington of late for other reasons...

...This obscurity was a credit to bureaucratic inertia...

...Meany made the demand to increase business for American ships and to increase jobs for the members of the maritime unions...

...Industry insisted the intention of the report was to change the entire concept of the merchant marine...

...Johnson's 18 months of proselytizing came to fruition this past fall, when a study group made up of representatives from the Budget Bureau as well as other Federal agencies, including the Maritime Administration and its parent Commerce Department, produced a 63page report that closely paralleled his proposals...

...The President was certainly right...

...Six out of each 100 workers earn their income by producing goods for export...

...This makes for a more efficient operation, but not for any great breakthroughs...

...He emphasizes research for surface effect ships-vessels buoyed by air that travel above water at great speed...

...He then asked Secretary of Labor W. Willard Wirtz and AFL-CIO president George Meany to study the issue and make recommendations to him...