On March 8, 1988, the Journal of Commerce printed an op-ed article by Robert C. Waters, a professor of engineering administration at George Washington University, entitled, Death Throes for U.S. Flags? While the overall thesis - the need for immediate reform - is correct, much of the article's specific facts and conclusions are questionable and need to be corrected.
Speaking on behalf of over 95 percent of the U.S.-flag liner industry, United Shipowners of America notes with interest that Professor Waters places much of the blame for the plight of the U.S.-flag merchant marine on his claim that U.S.-flag carriers are the most expensive in the world. The tone of his words hints darkly that our industry is unique in this regard. Of course, the truth is that the same could be said of almost every U.S. industry or service- oriented business.One major cost differential referred to by Professor Waters is the cost to crew a U.S.-flag vessel. While he recognizes this inequality, he offers no real solution. Indeed, he cavalierly suggests that the Operating Differential subsidy program that now solves the inequality of crew costs be terminated. Such an ostrich-like solution to the problem of cost differential in crewing U.S.-flag vessels will never solve the problem but will have the opposite effect and exacerbate the differential.
Professor Waters also ignores the fact that U.S. law requires that U.S.-flag vessels employ U.S. citizen seamen at minimum crew sizes to insure a pool of trained seafarers to man ships in a military emergency. Without the subsidy program, many companies could not afford the added cost that the law entails.
It appears his destructive non-solution stems from his belief that the current direct subsidy program has not worked because U.S.-flag participation in the foreign commerce of the United States has declined during its existence. We respectfully suggest that, but for the direct subsidy program, there would be much less U.S.-flag liner participation in foreign commerce than there is today.
Dismantling a program that has worked well but not perfectly is an incorrect response. Reform of the program is what is needed, especially in the rules and regulations affecting the U.S.-flag operators' ability to compete with foreign flags and with each other in the 1990s.
Professor Waters categorically states that U.S.-flag vessels in foreign commerce have been able to survive by being conference members and enjoying the relatively high prices charged by the conferences. This is just not the fact. U.S.-flag companies in the liner industry have survived because they have been on the cutting edge of each and every innovative step from the first container shipment 30 years ago to today's revolution of intermodalism.
Without any empirical support, Professor Waters irresponsibly concludes that in the next several years there will likely be additional reductions in the number of U.S.-flag vessels on the Pacific and Atlantic routes. Those remaining will carry almost nothing but U.S. government cargo.
Not one scintilla of evidence is put forth to support this most improbable statement. While U.S.-flag liner carriers are far from the congressionally mandated goal of 50 percent carriage in the U.S. foreign commerce, they do carry approximately 20 percent of the cargo and, as stated, are at the forefront of the industry.
It also should be noted for the record that Professor Waters implies that the recent bankruptcy of United States Lines further depletes the number of U.S.-flag vessels competing in the international market place. Once again, this is just not the case. Each and every one of USL's vessels has been purchased by other U.S.-flag operators and are now running under U.S. flag.
Also, Professor Waters' conclusion that the U.S. merchant marine has lost much of its usefulness for the national security of our country stands in naked contrast to the recent impartial Report and Recommendations of the
Commission on Merchant Marine and Defense.
Professor Waters' theoretical views also are in direct conflict with the
commission's position on the need to maintain the present cabotage laws. Regretably, it appears that the driving force behind his opinion is that it is too costly to support a U.S.-flag merchant marine. Of course, the same can be said for supporting the Army and Navy and all public and social services.
The time has come that we all recognize that there is no free lunch and that there is indeed a price tag attached to our national security. The public debate should revolve around the question, Are we getting our money's worth? History has answered the latter with a resounding and emphatic Yes. As it says on the National Archives building here in Washington, What Is Past Is Prologue.