FLUNKING THE TEST

FLUNKING THE TEST

Here's a question to test your maritime knowledge: To which era does the following paragraph refer?

''What was unsettling about the way the government addressed maritime policy problems - was its irresolution, its failure to put in place policies capable of bringing order and prosperity to what had so recently been a vital industry. The maritime industry itself was clearly incapable of fashioning a coherent program of its own, one that could command the political support needed to succeed as legislation. The industry's friends in Congress were no more effective; each of them was beholden to interests that represented only one or two sectors of the industry and hence they could not secure passage of suitable legislation.''

That commentary from The Abandoned Ocean, a fine new history of American maritime policy by Andrew Gibson and Arthur Donovan, refers to the years immediately following the Civil War. But it could apply just as easily to the 1900s, the 1920s, the 1980s, or today.

A chart of the industry's fortunes during the last two centuries would show a few peaks (mostly around wars) among longer periods of decline. The history of the American maritime industry is a 200-year saga of enterprise, ingenuity and accomplishment - and of selfishness, shortsightedness and stupidity.

Gibson, a former executive with Grace Lines and Delta Lines, was U.S. maritime administrator during the Nixon administration. Donovan is a professor at the U.S. Merchant Marine Academy at Kings Point. They've collaborated on a well-written book that provides the most thorough, clear-eyed examination available of why the industry is in the shape it's in. The Abandoned Ocean (University of South Carolina Press, Columbia, S.C.) should be read by anyone involved in maritime policy.

Gibson and Donovan quote Alfred T. Mahan, who a century ago developed the doctrine of sea power and questioned whether America's national character ''is fitted to develop a great seapower.'' Mahan said the U.S. could become a sea power if ''legislative hindrances'' were removed and investors weren't diverted to ''more remunerative fields of enterprise.''

Is America a maritime nation? Perhaps not, judging from the evidence. Through much of its history, U.S. shipping has been shaped less by commercial needs than by influences ranging from military preparedness to shipyard employment. The industry remains hobbled by legal restrictions, petty bickering and resistance to change.

As Gibson and Donovan point out, ''legislative hindrances'' abound. For years, federal subsidies discouraged shipowners from adding routes, replacing ships or bargaining hard with unions. Business was lost and costs soared, resulting in more subsidies.

Ships operating between domestic points or carrying government-sponsored cargo still must be built in high-priced U.S. shipyards. Other laws impose customs duties on foreign repairs to ships, restrict the efficient use of shipboard personnel, and tax the earnings of U.S.-owned ships in international trade as if they were a domestic operation.

The net result: A dysfunctional industry. The domestic Jones Act trade is showing a little life, as demonstrated by recent orders for new ships (which, however, must be built in American shipyards and cost at least twice the world market rate). The U.S.-flag international fleet is another story. Except for military charters, it survives on government-influenced cargo and on annual $2.1 million subsidies paid to 47 ships.

With the sale of Farrell Lines to P&O Nedlloyd, 34 of those 47 ships will be controlled by owners based outside the U.S. That, and the declining military importance of the U.S. merchant fleet, could make it difficult to replace the current subsidy program when it ex-pires in 2005.

A token program, however, probably will be enacted. The subsidies have the backing of maritime unions and are small by Washington standards. The current program costs $100 million a year - less than what the Agriculture Department spends on farm subsidies in a slow week.

But it's hard to imagine any serious revival of a U.S.-flag fleet in international commerce. Except for the protected Jones Act trade, no one is building U.S.-flag ships. And since the 1986 tax law, even U.S.-owned, foreign-flag operators are in decline. Investors are seeking ''more remunerative fields of enterprise,'' to use Mahan's phrase.

They'll continue to do so until U.S. maritime policies put commercial needs first, and until the industry can look beyond short-term solutions and learn from its mistakes.

The authors of The Abandoned Ocean quote a report which observed: ''The history of the United States in subsidized shipping has been most unfortunate. We have generally acted under the lash of necessity which precluded the planning necessary to a sound commercial policy.''

That statement came from the Economic Survey of the American Merchant Marine, published in 1937.