MARITIME SUBSIDY REFORM has been like a toothache for members of Congress. Try as they may to ignore it, it just won't go away.
And, sure enough, proposals to reform the system by which the government helps U.S. containership operators offset cheaper wage and operating costs of foreign-flag competitors are once again circulating through Washington. The Bush administration is revising last year's Reagan administration plan and at least one maritime subsidy bill already has been introduced in Congress.As the U.S.-flag fleet continues to dwindle, it's time for Congress to put the maritime assistance program in order - and to put the shipping industry on notice that it must prepare to face competition without federal aid.
Nearly two years ago this paper asked, Who needs a fleet? We suggested that ship subsidies might be a sacred cow that no longer should be regarded as sacred. We also noted that the subsidy system has failed to achieve its principal purpose, to maintain a strong merchant marine for national security. Those comments, we hoped, would spur agreement on a new course. Alas, though letters flooded our mailbox, the contentious components of the American shipping industry are no closer to common ground now than they were then.
There are recent indications that the Navy's U.S. Transportation Command, the Military Sealift Command and civilian officials within the Bush administration are giving more thought to the commercial fleet as an integral part of defense policy, both for the vessels it would supply in wartime and the stock of able-bodied seamen it would maintain. Indeed, a draft "national sealift policy" is rattling around the National Security Council. That is a worthy exercise that needs to be completed quickly, but there is no assurance that it will be: Other sealift policies in other years - 1984 comes to mind - never saw the light of day.
Meanwhile, the existing subsidy system, with its vast scope for government involvement in carriers' operations, continues to encourage U.S. carriers to harass each other in regulatory proceedings rather than focusing on their ever larger and more potent competitors abroad. Congress needs to put an end to this situation, and to affirm that ship lines, like every other U.S. industry, must take primary responsibility for their own survival in a global market. Here are some steps that might help:
* Subsidies, which are now granted to some carriers and not to others, should be made available to all seven U.S.-flag liner operators for a 10-year- period. That will give management and labor a decade to prepare to face the world market unaided. After 10 years, operating subsidies should be phased out.
* The program should encourage efficient, commercially oriented operations. Government restrictions on routes, port calls and the use of foreign-flag feeder ships should be eliminated.
* To help control the cost, no operator should be allowed to receive subsidy for more vessels than the largest subsidized carrier now has under subsidy. Liner operators that are presently subsidized and that operate American-built vessels in compliance with the requirements of the existing subsidy program should be guaranteed to receive no less than what they currently receive during the first five years of the new program.
* The subsidy program should provide incentives to hold down labor costs. About 85 percent of subsidy payments cover the difference between the wages and fringe benefits of American shipboard workers and seamen who work for foreign lines. This has led to uncompetitive wages and unrealistic fringe benefits, such as six-month vacations for seamen on subsidized vessels. Wage subsidies should cover only the minimum number of seamen that the Coast Guard determines is required for the safe operation of a vessel, and should be based on the lowest collectively bargained wages in the industry.
* The competitive problems of U.S. shipyards cannot be resolved on the backs of U.S. carriers. Permitting subsidies only for the operation of U.S.-built vessels has made the vessel replacement costs of U.S. carriers higher than those of foreign lines, harming the competitiveness of U.S.-flag operators. Carriers should be permitted to receive operating subsidy for vessels regardless of where they were constructed. If there is to be a construction program to help U.S. commercial shipyards, it must be handled separately.
* Ship lines should not be entitled to operating subsidies for carrying preference cargoes, such as military equipment and Food for Peace shipments. Cargo preference is itself a form of subsidy. There should be no double dipping.
There is no reason why U.S.-flag liner operators cannot be as efficient as any in the world. Encouraging them to become that way must be the overriding goal of subsidy reform.