The Alarming Decline of The AMERICAN MERCHANT FLEET
Eugene M Walter
WHY is the U.S. merchant fleet deteriorating at such an alarming rate? Why — while the USSR is fast becoming the world's No. 1 sea power? Where is this ominous trend leading? What does it portend for America's future — and for your personal way of life?
THE security of America is at stake. President Nixon is alarmed. The reason: the American merchant marine is faltering. Ships flying the American flag carry but a paltry six percent of the U.S. import-export trade! Even more alarmingly, 66 of the 76 raw materials recognized as strategic must be imported by the U.S. from overseas areas. Only four percent of the total volume of these strategic materials arrives at American ports in American ships. Ninety-six percent arrive in ships flying flags of other nations! These facts are shocking — frightening! Not only is America dependent on foreign nations for raw materials, but we are even dependent on the ships of other nations to bring these critical resources to our shores.
The Lifelines of America
For many decades the U.S. produced more raw materials than its growing industrial complex could consume. But this is no longer true. It is a harsh but unavoidable fact of life that America is no longer self-sufficient. Almost half of the free-world mineral production is channeled to the needs of the American industrial machine. America today is a nation deficient in raw materials — and dependent upon shipping to bring these materials to her. Though he probably doesn't give it much thought, the average American is literally surrounded with goods and services which use materials that have been imported by ship. If you are an American, here is a small sampling of the imported materials you use in your everyday life: The chromate for your toaster's heater element, nearly half of the 38 raw materials in your telephone, the morning coffee, cobalt for quality steel in your car, tin for your toothpaste tube, bauxite to make aluminum for pots and pans, copper and mica for your radio and TV receivers, tungsten for electric light bulbs — and the list goes on and on. And this is to say nothing of the needs in making American military hardware — the missiles, rockets, jets and other sophisticated weapons of modern warfare. If the supply of critical imported materials were impeded or stopped, the American economy would be shattered and our industry would grind to a chaotic halt. Our defense posture would be radically altered and our national security would be in jeopardy. The sea lanes are the very lifelines of America! Yet the American ships transporting critical materials through these lifelines are pitifully few and shamefully obsolete. Will an inadequate merchant fleet slowly but surely force the nation to turn the control of these lifelines over to others?
A Fleet of "Rust-buckets"
President Nixon has said, "Our merchant marine has been allowed to deteriorate. Now there are grave doubts that it is capable of adequate response to emergency security needs. The United States has drifted down from first place to sixth place in the world in the size of its merchant fleet." From a fleet of some 5,000 ships totaling 50 million deadweight tons at the end of World War II, the U.S. merchant fleet has deteriorated to about 1,000 ships aggregating less than 15 million deadweight tons. And even more shocking, some 80 percent of the ships in the American fleet are 25-year-old obsolete "rust-buckets"! Because of high operating and maintenance costs and the inability to compete against modern, fast, foreign-flag vessels, most of these ships must be scrapped or laid up in the next four or five years. The American Great Lakes fleet is in even worse shape. The average age of the more than 150 bulk carriers in this fleet exceeds 45 years! What will happen when almost the entire American merchant fleet becomes inoperable in just a few years?
"The United States... has sunk to an ignominious position.... " EDWIN M. HOOD, PRESIDENT, SHIP-BUILDERS COUNCIL OF AMERICA
The American shipbuilding program will not supply the need — at least not the way it is going now. It is a shameful fact that the U.S. — the world's richest nation — now ranks twelfth in the world in the construction of new merchant ships! Even tiny Denmark is ahead of the U.S. Listen! "The United States, which emerged from World War II as the supreme maritime power, in terms of merchant ships, shipyards, skilled manpower — seagoing and shore-side — has sunk to an ignominious position," states Mr. Edwin M. Hood, president of the Shipbuilders Council of America.
The Russians, Meanwhile...
But while America has been allowing its merchant fleet to deteriorate, Russia has been striving to become the world's dominant sea power. Admiral Thomas H. Moorer, USN, Chief of Naval Operations, said: "In a mere ten years, the Soviet Union with a dedication of purpose, huge outlays of funds, and with priorities equivalent to or even surpassing their space program, has transformed itself from a maritime nonentity to a major sea power." And again quoting Edwin M. Hood of the Shipbuilders Council of America: "If one were to assess worldwide maritime developments of recent years, the phenomenal growth of Russia's merchant fleet would take top honors as the most notable achievement. And, if one were to designate the greatest maritime calamity of the same period, the dubious award would have to go to the United States — in accurate recognition of the steady decline of the American merchant marine to a third-rate status." Look at what the Russians have done: In 1950 the Russian merchant fleet consisted of only 432 ships (1,000 tons or over) totaling 1.8 million deadweight tons. Most of these vessels were relatively small, slow and old. In fact, the best vessels in this fleet were the 100 or so Libertys, tankers and other ships which the U.S. donated to the USSR as a part of the Lend-Lease Program. By 1958 the Soviet fleet had doubled to 3.6 million tons. This same year, however, the Russians embarked on an ambitious shipbuilding program. This program has been so successful that by 1970 the Soviet Union will have a merchant fleet of more than 1500 vessels totaling about 14 million deadweight tons. And by 1975, according to the Leningrad Marine Transport Institute, the Soviet fleet will total 18 million tons. Looking at it another way, between 1950 and 1966 the Soviet Union added 8.6 million deadweight tons and nearly 1,000 vessels to its fleet. During the same period the U.S. active fleet suffered a loss of more than 800 ships of a total 7 million tons. Small wonder the Russian merchant fleet today outnumbers the active U.S. fleet! But far more significant than mere numbers alone, about 80 percent of the Russian fleet is less than ten years old. In sharp contrast, some 80 percent of the American merchant fleet is about 25 years old! In recent years the Russians have been spending between $600 million and $750 million annually in building ships. The U.S., on the other hand, has been geared to a program in which the Federal Government spends about $100 million annually. This is why the Russians have been and are taking delivery of seven or eight ships for everyone the U.S. delivers. But why are the Russians so interested in sea power? What do they hope to gain?
The Lesson of History
Sea power has been important down through the ages. In ancient times the Phoenicians, the Romans, the Greeks and the Vikings — to name a few — built ships to trade with distant lands and to protect an integral part of the economic and defense stature of these ancient nations. Throughout history, whole societies found their environments sharply altered by rare innovations in ships, naval warfare and commercial marine activities. Then, as now, the vigorous nations flourished, while the complacent fell behind. The importance of sea power was proved again during World War II when the U.S. built and operated the world's largest merchant fleet and naval fleets and succeeded in gaining full military control of the seas and denying free access of them to the enemy. The significance of sea power is also illustrated by the fact that Britain's eminence as a world power has diminished almost in direct proportion to her demise as a sea power. On the other hand, the Soviet ascendency to world power status has been accompanied by a spectacular increase in her naval and maritime strength. The Russians believe in the historically proved axiom that control of the 70 percent of the earth's surface that is water is an important means of controlling the 30 percent that is land. Americans believe in this axiom, too. Admiral David L. McDonald said: "Nations, and ours certainly is no exception, must view strength at sea — or the lack of it — as a large portion of national posture." President Kennedy observed: "If there is any lesson of the 20th Century, and especially of the past few years, it is that in spite of the advances in space and in the air... this country must still move easily and safely across the seas of the world." And President Johnson stated: "All through our nation's history the prosperity of our people and their safety have been tied very closely to the role we play on the seas of the world. That is a role we can never wisely or safely neglect." But today America is neglecting that vital role! The nation gives lip service and says it believes in sea power. But believing and doing are two different things. The Russians don't just believe in sea power — they are actively, vigorously doing something about it. In a report issued by the House Committee on Armed Services less than one year ago, a detailed assessment of the Soviet's sea power development and its significance to the U.S. and the free world was given. This disquieting report pointed out that "The naval forces now being created by the Soviet Union and the uses of sea power now being made by the USSR are part of the overall Communist design of total victory in the struggle against the United States and other free-world nations." The report continued: "It is not enough to consider the construction and deployment of warships. The USSR's maritime strategy also involves the build-up of a massive merchant fleet. This merchant fleet makes possible the leapfrogging of Soviet power from the contiguous land masses to countries that are dependent on sea transports, such as Cuba and North Vietnam." The report emphasized that "to contemplate a loss of U.S. naval supremacy is to contemplate disaster on an epochal scale. The freedom of the United States and its allies is anchored in control of the oceans... In order to prevent the Soviets from realizing their ambitions at sea; the United States will have to move aggressively in the next few years in a crash build-up of all sea-based strategic forces." But will the U.S. embark on such a crash program? Or will she lose control of the seas?
An Undeclared War
Admiral John S. McCain, Commander of U.S. Forces in the Pacific, says that the U.S. is presently engaged in an undeclared — but very real — war with the Soviet Union: "It is a war of design and construction, of manpower and national resources, of money, planning and organization — and the signs are that we are losing it." Those are frightening words — but true! This undeclared war is not yet directly military. Rather, at this stage it is largely psychological, political and economic. The psychological impact of seeing the stars and stripes flying above American vessels seemingly everywhere around the world cannot be overemphasized. But today, ever increasingly, the stars and stripes are being replaced by the hammer and sickle in world ports. The Russian merchant fleet is stealing the show in the Far East, Near East, Atlantic, Pacific, and around the world. The U.S. is losing the psychological part of this undeclared war. It is also losing this war economically. Since 1946 about 1,200 large commercial ships (more than 35 million deadweight tons) have been built in foreign shipyards for American companies or their affiliated interests. During the same period, slightly more than 400 ships of less than 8 million deadweight tons were built in U.S. shipyards for American-flag companies. The purchase of these foreign-made ships has cost the U.S. an estimated total of $6,000,000,000 in its balance of international payments. But while U.S. yards were operating at only partial capacity, the Russians were working at full capacity in their shipyards. They have been conserving critically needed foreign exchange. Foreign building was used only to supplement what they could not build at home with production at maximum capacity. Now that they have a substantial fleet, the Russians are further saving hard currency by transporting some 75 percent of their import-export trade in their own ships. By sorry contrast, the U.S. loses about $1.5 billion annually as it pays foreign bottoms to transport 94 percent of its import-export trade. U.S. international trade constitutes roughly one-fourth of the world total. This means that while the U.S. uses one ship in four in world commerce to carry its goods, it supplies only one ship in forty. And those that are supplied are mostly slow, small and obsolete. This causes a further drain on the dollar — a drain it can ill afford and a drain which can be avoided by having an adequate fleet. So America is losing the undeclared war economically, too. Will the nation continue in this state of decline until finally defeated militarily as well?
The High Risk of Relying on Others
Here is a striking example of the dangers confronting America by relying on others because of the inadequacy of the U.S. merchant fleet: "Once again the United States has been reminded that it cannot depend on foreign ships to transport its cargoes. "This time it was the West German Government which refused to grant permission for one of its merchantmen to transport M-60 tanks to Iran though there was a plea of urgency attached to the request. "If West Germany, considered one of the United States' staunchest allies, rejects such a request, then the people of this country can rightly ask whether there is anyone other than ourselves on whom we can depend... "As a result of West Germany's rejection of the request, the tanks ultimately were shipped on two American World War II built Victory ships and one Norwegian vessel chartered by an American steamship line. All the tanks had to be loaded and discharged by special cranes. And they arrived in Iran more than a month later than they would have on the Wallenfels... "Undoubtedly Germany had her own reasons for not granting permission," the article continues, "She certainly is entitled to them. But the United States should not be in the position of having to embarrass her friends with such requests because her own merchant fleet is inadequate (not a single heavy lift in it) and, in turn, be embarrassed because of their rejection" (Los Angeles Times, Nov. 20, 1967). What a disgraceful state of affairs! This same article listed five other incidents involving ships flying the flags of Mexico, Greece, and Britain — the latter with Indian and Chinese crews — which refused to transport U.S. military cargoes to Vietnam. And this was in 1967! A number of similar incidents have occurred since that time — and will continue to occur. Right now about one third of the U.S. merchant fleet is involved in carrying supplies to Vietnam. And Vietnam is just a "limited" war. What would happen if another war started in a different part of the world? Also, American-owned ships flying "flags of convenience" are presently carrying about 40% of oil and bulk commodities. These flags-of-convenience ships (ships registered for economic advantages in other nations and flying their flags) constitute a larger fleet than the U.S. flag fleet. But one must never forget that these are ships of convenience. In a real national emergency they might not necessarily deem it "convenient" to carry our goods. Dependence on the uncertain service of ships not under our flag is a tenuous thread on which to predicate national survival! How did the U.S. ever manage to get into such a bind? And will the nation be able to get out of it before it is too late?
A Question of National Will
As stated in an interview following this article, the U.S. maritime fleet is in its present sad state because of expediencies — because of taking, what temporarily was, the easy way out. Because other more urgent problems demanded national attention, it was easy to neglect the maritime industry. Further, since building ships in foreign yards costs about half of what it costs to build in U.S. yards, this, too, seemed expedient. But shipbuilding and shipping are unique. They are among the few national activities in which a direct confrontation occurs between U.S. and foreign wage scales. This is because a ship is its own means of transport, requires no special packaging, etc. These factors make the maritime industry extremely vulnerable to low-cost foreign competition. So unless shipping and shipbuilding are embarked upon in a vigorous national program — with high priorities and adequate funds — this industry in the U.S. will continue to lose out to foreign competition. During the past year the author has visited leading shipyards in England, Italy, Sweden and Germany. A number of shipyards all over the U.S. have also been visited. The American shipbuilding industry is not technologically inferior to that in foreign countries. One new plant on the Gulf Coast — costing $130 million — will probably be the most efficient and advanced shipyard on earth when it is shortly completed. New techniques of multiple or series construction can help build a new fleet at great savings. Officials at every American yard which was visited all pointed out that there is no doubt about America's ability to become a maritime leader again. But there were grave doubts about the national will to do so. Yet, "Unless greatly enlarged shipbuilding programs are generated in the years immediately ahead, the United States could find itself inferior to the Soviet Union in naval strength, and for all practical purposes could cease to exist as even a fifth-rate maritime nation" (Statement from Shipbuilders Council of America 1968 Yearbook). In the decades since the close of World War II, more has deteriorated in America than just the merchant marine. Something has also been eroding away in the American character and sense of values. The U.S. is still strong and powerful, but for some reason, the nation seems to have lost the pride in its power. (Our book, The United States and British Commonwealth in Prophecy explains why — and where this trend is leading. Ask for your free copy) Will America recapture the pride in her power before it is too late? Will she rebuild her merchant fleet? Or will the U.S. continue to neglect it until the nation has lost control of the seas — and control of its destiny?
"Why is the MERCHANT MARINE so important to the national interest?"
Suddenly a new crisis has hit America. Officials have become painfully aware of drastic deterioration in the U.S. merchant fleet. To bring our readers an in-depth report The PLAIN TRUTH sent one of its editors to Washington, D.C. for a personal interview with Edwin M. Hood, President, Shipbuilders Council of America.
QUESTION: Mr. Hood, what is the present condition of the U.S. merchant fleet?
ANSWER: The American merchant marine is in a deplorable state. This isn't just my opinion, this is the description applied to it by the Maritime Administrator. It is the opinion of a majority of the Congress.
QUESTION: Why is this?
ANSWER: Primarily because ship construction over the past decade has not been equal to the creeping obsolescence of our fleet. About 80 percent of the vessels in the American merchant marine today were built in World War II. So they're 20 years of age and older. Because of other national commitments and budgetary stringencies, there has not been sufficient money appropriated to cover the Government's share in the construction of needed ships to offset this obsolescence.
QUESTION: How does the U.S. presently rank as a shipbuilding nation?
ANSWER: From its position as the world's greatest shipbuilding nation at the end of World War II, the United States has slipped to 12th place in terms of annual output of commercial ship tonnage. Such countries as Denmark, Greece, Norway and Spain, which are not noted for heavy industrial production, exceed the United States in merchant ship construction. As of mid-1969, American shipyards had 57 large merchant ships totaling 1.4 million gross tons under construction or on order. This tonnage represented less than 3 percent of the world order-book and relegated our country to 12th place behind the Soviet Union. It should be mentioned, however, that the United States leads the rest of the world in naval shipbuilding, although Russia is currently challenging our leadership in this field.
QUESTION: Why is the merchant marine so important to the national interest?
ANSWER: The merchant marine is important for several reasons. First, of course, is national security. Another reason is our well-being in terms of national economy. Shipping is a critical item in terms of the persistent balance of international payments problem. Finally, our merchant fleet is a medium by which our trade and commerce — or, if you will, the way a particular philosophy of life — is projected throughout the world.
QUESTION: How does an inadequate merchant marine hurt America in its international balance of payments problem?
ANSWER: In a study made two years ago, it was demonstrated that if all the U.S. trade and commerce that had been carried aboard foreign-flag ships in recent years had instead been carried aboard American-flag ships, there would be no balance of payments problem whatsoever. Shipping is a critical factor, a sensitive factor, in the balance of payments situation.
QUESTION: Would increasing the U.S. merchant fleet by purchasing foreign-made vessels help?
ANSWER: This course would constitute a further drain on the balance of payments, though, I suppose, in a period of years after foreign-built ships are operated, under the American flag, they would contribute something to the plus side. But meanwhile they are not helping the imbalance of payments.
QUESTION: Why do some then seem to favor foreign shipbuilding?
ANSWER: Because of expediencies — expediencies that relate to money, primarily. We've been in a budget squeeze — we're still in a budget squeeze — and there's no walking away from the very clear fact that to cure the maritime problem you are going to have to spend money — whether you build ships in this country or abroad. The people who advocate foreign building think that foreign construction minimizes the overall cost or impact. But when you take into account the balance of payments and other economic factors, shipbuilders don't agree with that view. Remember that you're talking about employment for American citizens when ships are built in the U.S. You're talking about components produced by American companies. This production is diffused throughout the entire United States — throughout the entire American economy. Every State in the Union provides something that goes into the construction of every ship in an American shipyard.
QUESTION: Is there a difference in the quality of American-built ships and, say, Japanese-built ships?
ANSWER: Japanese shipyards — and most foreign yards — build very good ships. The difference, however, between the Japanese-built, foreign-built and U.S.-built ships is primarily in terms of regulatory and specification requirements. We must incorporate in U.S. built ships some 20 to 25 different groups of safety and quality requirements, all of which are cost additive.
QUESTION: How much can foreign builders undercut the American cost of building ships?
ANSWER: The popular statement is that it costs twice as much to build a ship in the U.S. as it does in a foreign shipyard. This is not an absolute statement of fact because all sorts of factors and influences must be considered, not the least of which are the specifications and regulatory requirements mentioned a moment ago. We're talking about roughly 15 to 20 percent of the value of the ship in just those requirements. Then there is the matter of wages. Shipyard wages in this country are roughly four times those of Japan. Productivity of American shipyards is generally superior to that of Japanese shipyards. But to overcome the wage differential alone would require a tremendous amount of improvement in productivity which I don't think is humanly possible.
QUESTION: Why do so many ship operators choose to sail under flags of convenience?
ANSWER: This is not really in my field, but as I understand it, there are some 1200 ships owned by American interests which are registered under the flags of other nations — the flags of convenience. Some of these operate in American foreign trade, others in what is called the offshore trade. The unions have very emphatic views on this subject because registering the ships under foreign flags means decreased employment for American seamen. Interestingly, since the end of World War II, there have been just about 1200 ships built in foreign shipyards for American interests. I would say less than ten of these have been brought under American registry. To do so the owners would have to immediately modify the ships to meet U.S. safety and regulatory requirements, and agree to crewing the ships with American citizens at American wage levels. The lower wages paid to a non-American crew are one of the biggest appeals in flying the flags of convenience.
QUESTION: What are the dangers of these flags of convenience?
ANSWER: The dangers are that we probably can never be sure that these ships will be available for U.S. needs when we need them. There is, of course, the so-called doctrine of effective control. The Pentagon has agreements with some of the owners of these flags of convenience ships that, in the event of emergency, they would be returned immediately to American control. How this might actually work out in a real national crisis is uncertain.
QUESTION: What do you feel it would take to revitalize the American maritime fleet?
ANSWER: This is really an open-ended question. But here's perhaps the best way to look at it: We are now carrying roughly six percent (by volume) of our trade and commerce on American-flag ships. President Nixon has indicated that the goal should be 30 percent by sometime in the 1970's. This is a reasonable goal. It is a goal about which none of our allies could quibble because in many instances other maritime countries, including Russia, are carrying 50, 60 and 75 percent of their own trade and commerce on their own ships. Obviously, a jump from six to 30 percent would require a considerable volume of merchant shipbuilding.
WORLD MERCHANT FLEET STANDINGS (BY TONNAGE) 1. LIBERIA 2. NORWAY 3. BRITAIN 4. JAPAN 5. UNITED STATES 6. RUSSIA
SOURCE: FEDERAL MARITIME COMMISSION
QUESTION: What would such an undertaking cost?
ANSWER: That would depend on the type of ships being built. For example, container ships, which are becoming increasingly popular, are costly ships. Likewise when you get into the nuclear area, you're talking about costly ships. In other words, you are talking about costly initial outlays which will produce savings in the ship operations. I would say that a Government support program of $300 million a year could produce significant improvements.
QUESTION: Three hundred million per year over a period of years?
ANSWER: Right. This much in Federal support is really quite small when you consider the space program, for example. If you look at a list of subsidy-like programs of the Federal Government you go down the list, and down the list, and what's at the bottom, right above miscellaneous? Merchant ship construction. Yet, ship construction capability shares vital importance to the national interest.
QUESTION: If the money were appropriated for a crash shipbuilding program, would we lack the ability to carry it out? Is our technology behind the other shipbuilding nations?
ANSWER: I don't think so. We have two new yards which will be among the most technically advanced in the world when completed early next year. And nearly every major shipbuilding facility in the country is improving or expanding its capacity, primarily to achieve a better output. Shipbuilding is no different than any other industry or activity. American inventiveness, ingenuity and free enterprise will respond to the market place. Shipbuilders are businessmen. If an enlarged program were enacted, the shipbuilding industry would react as any other industry or business would.
QUESTION: Is there a need for public education concerning the importance of shipping and shipbuilding?
ANSWER: Definitely. In my judgment, the average person knows little about this subject. This is why the Shipbuilders Council of America has just produced a film called "Shipbuilding for the Seventies." We recently showed this film to a group of people in the investment community. We were amazed at their reaction. Even these fairly sophisticated people knew very little about our problems, technology and progress. So there is a great deal that needs to be done by way of public education to show what a maritime industrial base, including shipyards, means to the national economy, the balance of payments, our commercial and military strength on the oceans, etc. Informative articles in the public interest are certainly beneficial in helping to achieve this education.