A Blue-Water Building Boom

POLITICAL controversy has raged for months over the Nixon Administration's openhanded use of agricultural subsidies, and particularly over the subsidized wheat deal with the Soviets. But another huge increase in federal giveaways to a troubled--and politically powerful--industry has gone almost unnoticed. Government assistance to U.S. shipbuilders and ship operators, who run some of the world's least competitive businesses, rose from $290 million in fiscal 1969 to more than $500 million in the current fiscal year. Last week, while simultaneously trying to make Congress slap a strict limit on federal spending as a whole, President Nixon successfully pressed for a $175 million increase in this year's already record-setting subsidy for the maritime industries. The increase was passed for the maritime industries by the House; the Senate seemed sure to follow suit.

High costs have put the maritime industries at a low ebb. Not even American firms like to use U.S. flag ships, which are chronically prone to labor troubles. Union rules require those ships to carry crews that are both large and highly paid; labor costs run up to five times higher than those for foreign sailors. And because ships can be built more cheaply in Japan, Sweden, Norway, Poland, Spain--indeed, almost anywhere outside the U.S.--the nation has sunk to 14th in the ranks of shipbuilding countries. Since the huge construction rush in World War II, yards have been kept afloat mainly by repair work and Navy orders. The result was bluntly described to TIME Correspondent Mark Sullivan by Maritime Administrator Robert J. Blackwell: "We are faced with a sorely depleted fleet."

Former Navy Lieut. Commander Nixon pledged last July "to restore the United States to the rank of a first-class maritime power." The key to that promise was the Administration-sponsored Merchant Marine Act of 1970, which commits the Government to construction of 300 new commercial vessels, including the nation's first 250,000-ton supertankers--to be constructed by Bethlehem Steel and Seatrain Shipbuilding--and other classes of ships that previously were ineligible for subsidies. Builders are paid the difference between construction costs in the U.S. and abroad, which means that companies collect between a quarter and a half of the cost of new ships from the Government. Further, U.S. shipowners are paid "operating subsidies" to reimburse them partially for their crews' American-sized wages. Counting special tax deferrals and various ship-American laws that raise prices to the consumer, the Brookings Institution estimates, federal support for the maritime industries amounts to $1 billion annually. The support averages out to $6,000 for each of the 165,000 men who work building, operating or loading U.S. ships.

Now the sounds of shattering champagne bottles will echo through shipyards from Bath, Me., to San Diego. Last month Commerce Department officials signed the two biggest commercial shipbuilding contracts in U.S. history. Both were for new types of ships called LNG tankers, which will carry huge quantities of liquefied natural gas from Algeria and perhaps Russia. One of the orders, for $269 million, went to General Dynamics; the federal share, which is less for advanced-technology ships like LNGS than for other models, is $64 million. The other order, for $298 million (federal share: $76 million) was bagged by Newport News Shipbuilding & Drydock Co., a subsidiary of Tenneco. Plenty more is on the way: only one-sixth of the 300 ships called for by 1980 in the maritime bill have actually been ordered.

Harpoons. Why all the federal interest in blue-water commerce? Administration officials contend that a strong, modern merchant marine is still a necessary defense asset. Says Maritime Administrator Blackwell: "We don't want trouble, but if we have trouble in the Middle East or Thailand, we'll need those ships again." The case for building a "bridge of ships" to foreign trouble spots is questionable at best; the number of troops ferried to Viet Nam by ship, for example, was negligible. Moreover, the lavish subsidies violate the Nixon Administration's free-trade philosophy, which generally holds that goods and services should be supplied to the world by the countries that can produce them most economically and efficiently. Shipbuilders contend that the federal assistance will eventually make U.S. firms competitive in selling some kinds of vessels, especially sophisticated, computer-run models like the LNG. Some kind of cost breakthrough is undoubtedly necessary to make U.S. products salable overseas, but no such hopes really exist for many of the less advanced ships that are now subsidized.

A few Democrats have shot verbal harpoons at the huge subsidies. Senator William Proxmire has said that the program is "mindless" and financially "out of control." Though the nation's tax money doubtless could be put to better uses, the majority of legislators from both parties have lined up behind the maritime program. The maritime lobby is one of Washington's strongest, giving generous political contributions and speakers' fees to legislators; it has also contributed to President Nixon's campaign. Unions and management work hand in glove to promote new shipbuilding projects, since leaders of both know full well that exorbitant wages and costs hurt the Government, not each other. Considering that cozy arrangement, it is hardly surprising that two of the most potent maritime unions have endorsed Nixon for reelection.

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