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I. INTRODUCTION A. HISTORICAL BACKGROUND Despite a tradition of competence, the U. S. merchant marine has been subject historically to a series of peaks and valleys. During the fifty-year period following the establishment of the United States as an independent nation, the U. S. merchant marine thrived with little or no Government aid. The best wooden ships in the world were available from domestic shipbuilders at lower prices than foreign shipbuilders could meet. With the advent of the metal ship, shortly before the Civil War, the U. S. owner lost this construction cost advantage. The New England shipbuilding industry was inadequate to meet this new technological advance without Government aid. For the next century this aid took the primary form of ocean-mail contracts. The program was administered in a sporadic fashion which made ship operation an insecure investment, and at times the U. S. flag ship almost disappeared from the seas. During World War I, the Government, faced with a serious shipping shortage, undertook a huge building program. Only a few ships were delivered, however, before the signing of the Armistice in 1918. As the building contracts did not include a cancellation clause, ships con- tinued to be built through 1921. Following World War I, the Government was slow to dispose of the war-built fleet because of a reluctance to sell these ships at less than cost. The opportunity to compensate U. S. shippers for construction cost differentials, through a program of selling them ships at prices they could afford, was present at that time but not effectively utilized. In 1935, with the war-built fleet in a condition of obsolescence, the President proposed legislation designed to discard the obsolete mail contract program and to establish a forthright program of construction-differential and operating-differential subsidies. This program was embodied in the Merchant Marine Act of 1936 and is the basic policy under which the nation is operating today. Subsidies are paid for the con- struction and operation of vessels built in the United States and operated under the U. S. flag on essential foreign trade routes. These subsidies are designed to compen- sate the operators for the higher U. S. building and operating costs. U. S. entry into World War II interrupted the operation of the 1936 Act and occasioned the mass production of some 5500 U. S. merchant ships. Many of their design features were matters of expediency rather than choice and substitute materials were used perforce in numerous cases. Now, in 1959, we again face the problem of replacing a war-built fleet that is long outmoded from the standpoint of modern design. -1-

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B. PRESENT SITUATION The present decline of the U. S. merchant marine is a matter of vital concern to the Government, to industry, and very particularly to the military services. Foreign shipping policies and the number of relatively new foreign flag ships are causing in- creasing difficulty in meeting foreign flag competition, even for the subsidized portion of the U. S. flag merchant fleet. Reasons for the decline are many. In the unsubsidized portion of the U. S. fleet, operating costs are almost prohibitive. In both subsidized and unsubsidized segments, construction costs are high. There is a general lack of incentive to take advantage of technological advances to offset these costs. The withering of the merchant marine is of especial concern at this time. The nation is presently engaged in a political-economic struggle--which Soviet leadership, at least, regards as a struggle for survival. It is further confronted with secondary threats involving a range of limited war situations. It must also face the possibility of general war, i. e. , a nuclear exchange on the homelands. The limited and general war situations most deeply concern the military services, for they depend on a vital shipping industry for direct support. Even more disturbing, however, is the merchant marine's threatened inability to cope with the requirements of the current war, a political-economic war, which is certainly the most immediate and may well prove to be the most crucial struggle. The problems involved are very complex, the solutions no less so. The decline , of the total maritime industry is one which has wide implications. Government, private industry, and the military services are all affected in various ways. The attitudes of management and labor, the numbers and abilities of technicians, the degree of guaran- teed government support, all affect the future of the U. S. merchant marine--and more basically, whether indeed there will be one. Basic national policy regarding the merchant marine was last expressed 23 years ago in the Merchant Marine Act of 1936 at a time when the United States was essentially a self-sufficient nation. Today, in direct contrast to the situation in 1936, the U. S. is a raw-material importing country, dependent as never before on overseas transpor- tation for importing raw materials and exporting manufactured goods. Since 1936, and particularly since 1945, shifts in power alliances, developments of complex weapon systems, the development of what appears to be a long period of cold war, technical possibilities in transport systems, and the pressing need to replace an obsolescent fleet have led to the now urgent need for a reappraisal of the whole merchant marine area. It was for this purpose that the Maritime Research Advisory Committee's Advisory Panel on Wartime Use of the U. S. Merchant Marine was created. The Panel, with other participants, now presents a general appraisal of the current situation, an assessment of the merchant marine mission, a survey of technological possibilities, and its best conclusions and most considered recommendations as to steps that should be taken to improve the capability of the merchant marine to meet future contingencies. These guidelines are suggested in the conviction that the U. S. maritime industry will not long survive unless it can be given a common national orientation leading to an orderly, pro- gressive, and purposeful development and employment.

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The Panel has found important areas of common agreement among its members, who represent many diverse interests and disciplines. The Panel hopes and believes that its recommendations will prove of value to the Maritime Administration in orienting its research and development program, for the generation of such guidance was the precise purpose for creating the Maritime Research Advisory Committee.