BUSH TEAM STILL HOPES FOR SHIPYARD SUBSIDY TALKS

BUSH TEAM STILL HOPES FOR SHIPYARD SUBSIDY TALKS

The Bush administration opposes U.S. legislation to combat foreign shipbuilding subsidies and remains committed to negotiating an international agreement to phase out shipyard aids.

Members of the House Merchant Marine and Fisheries Committee's Merchant Marine Subcommittee pressed Donald Phillips, assistant U.S. trade representative, Wednesday on the talks. But he was not ready to declare that the negotiations before the Organization for Economic Cooperation and Development are dead."We still believe that outstanding differences can be resolved," he told the panel. "And we are hopeful we will be able to achieve success at the mid- March negotiating session."

The negotiations in Paris have dragged on for over two years, and most observers, including U.S. shipbuilders who instigated the whole process, hold little hope they will reach a successful conclusion. The OECD is a group of 24 industrialized nations.

Mr. Phillips said a lot of progress has been made in the talks, including agreement on a definition of barriers to trade and what constitutes subsidies.

But serious problems remain on a dispute resolution process, the treatment of indirect subsidies such as tax benefits, unfair pricing of ships and a subsidy phase-out schedule.

"We don't believe time is running out on the negotiations," said Mr. Phillips, "but we agree that it's pretty close to running out. We don't want the negotiations to go on indefinitely."

"I am not optimistic about the possibility of reaching a successful conclusion to the multilateral negotiations. It doesn't appear that all of the parties to the negotiations are serious about reaching an agreement," said Rep. Walter B. Jones, D-N.C., chairman of the subcommittee.

"I'd like to see an agreement, but I don't think anyone will live long enough to get one without leadership from the United States," declared Rep. Sam Gibbons, D-Fla.

A bill championed by Rep. Gibbons would force foreign shipowners to certify that their vessels were not built with a subsidy, or that it has been paid back, as a condition of entry into U.S. ports.

U.S. negotiators "need some real power behind them, leverage and leadership," Rep. Gibbons said. The OECD "ain't going nowhere and they'll never come up with an agreement unless we put their feet to the fire."

"This question has to be on our agenda until we resolve it," said Rep. Gerry Studds, D-Mass.

Referring to carrier concerns that the Gibbons bill unfairly targets shipowners, rather than shipyards, for penalties, he added: "I'm not sure whether your exact prescription is part of the solution to the overall problem; it's unlikely to succeed if we become involved in the bitter arguments that have rankled the industry."

Mr. Phillips and a contingent of carrier and port interests criticized the Gibbons bill.

He opposed the added regulatory burdens on the government to enforce the bill, said it could invite foreign retaliation and could run afoul of legal obligations under the General Agreement on Tariffs and Trade.

Also, the bill "penalizes the wrong party. Our objective in the shipbuilding negotiations has been to assess the penalty on the shipbuilder, the actual recipient of the subsidy," he said.

John Stocker, president of the Shipbuilders Council of America, said, ''There is almost no chance for a trade agreement to be achieved. At the last meeting in December 1991, the Japanese government made it very clear that it was not interested in signing an agreement that included an improved anti- dumping provision."

Mr. Stocker asserted that U.S. policy and budget decisions, leading to the termination of U.S. construction subsidies and the "collapse of the military market," will have generated the loss of 265,000 jobs from 1980 to 1998. Those decisions "have very nearly destroyed America's ability to produce ships," he said.