BREAUX: PENTAGON MAY PAY SUBSIDIES

BREAUX: PENTAGON MAY PAY SUBSIDIES

Sen. John Breaux, the Louisiana Democrat who heads the Merchant Marine Subcommittee, said discussions are under way for the Pentagon to contribute financially to maritime reform legislation that would include a program of subsidies for U.S.-flag ships.

Sen. Breaux said that early last week - in the aftermath of an Oct. 12 Oval Office meeting in which President Clinton gave his personal support to maritime reform - representatives of the departments of Defense and Transportation and the Office of Management and Budget met to discuss ways in which the Pentagon might help pay for a subsidy program.The administration and Congress have been unable to come up with an acceptable way to pay for a subsidy program despite reports that Mr. Clinton supports the concept.

A program to keep 50 to 60 merchant ships under the U.S. flag is expected to cost about $1.5 billion over 10 years. Without a new program, all remaining subsidies are scheduled to expire in 1997.

Nevertheless, the senator said he was optimistic that given the president's support for a subsidy program, the Pentagon as the prime beneficiary would find funds to contribute.

The Pentagon in recent years has backed away from its support for a U.S.-flag commercial fleet as a military auxiliary, a concept codified in the Merchant Marine Act of 1936, instead relying more on quickly deployable vessels under its own control to meet military sealift needs.

In a news conference before a dinner on Friday in New York - where he was given the U.S. maritime industry's highest award, the Admiral of the Ocean Sea - Sen. Breaux downplayed any chance that cargo preference laws would be weakened or sacrificed as a way to pay for the subsidies, which are given to compensate U.S. shipowners for the higher costs of operating under the U.S. flag.

"I don't see this as a quid pro quo. Both are integral parts" of maritime reform, he said.

In stating that cargo preference, operating differential subsidies and Jones Act provisions relating to U.S. cabotage trade are essential components of any maritime reform package, Sen. Breaux appeared to back away from earlier statements that indicated a willingness to consider changes to cargo preference, which are laws mandating that U.S. military and certain foreign- aid cargoes move on U.S.-flag ships.

Under that proposal, reported last week in The Journal of Commerce, the government would be free to contract with lower-cost foreign-flag ships to move its cargo, and the savings would become available for operating differential subsidies.

"I expect President Clinton to reaffirm cargo preference and the Jones Act," he said. "While budgetary constraints may prevent the full support want, I believe we will have a maritime reform program that is comprehensive and rational."

The senator also said he did not expect a bill introduced by Sen. Howard Metzenbaum, D-Ohio, to eliminate antitrust immunity for shipping conferences to reach the Senate floor this year.

Niels W. Johnsen, chairman of International Shipholding Corp. of New Orleans, also received the AOTOS award this year.