period. However, this is not the case in the international market. A prime example is the implementation of the Merchant Marine Act of 1970, which modernized the provisions of the 1936 act to allow negotiated procurements, direct payments to shipyards using two-party contracts (rather than the more cumbersome three-party contracts), support for bulk as well as liner ships, and a shipbuilding R&D program worth more than $12 million per year at today's dollar value. Eighty modern merchant ships of many types were built under this act during the 1970s. The 1970 act included a provision that successively lowered the allowable subsidy rate each year. Many ships were contracted for at subsidy rates under 38 percent. High-technology, LNG ships were constructed at zero to 15 percent subsidy rates. However, all of the ships constructed by U.S. yards during this period were for U.S. owners only. The ships were competitively priced only among U.S. shipbuilders, not the international market. Although the subsidy system can discourage yards from striving to compete, during several periods the U.S. Merchant Marine acts have encouraged shipbuilding capital expenditures and aggressive marketing by U.S. shipbuilders in the international commercial shipbuilding market. In spite of this encouragement, U.S. shipbuilders were unable to market commercial ships overseas successfully.

This discussion identifies a related nontechnological factor that may weigh more heavily in shaping U.S. industry success than any technology; namely, the U.S. must closely monitor the ratified OECD agreement if the U.S. commercial shipbuilding industry is to survive. Especially in the face of reduced defense budgets, without a level playing field, if other nations continue to subsidize their industries in a greater measure than the United States, U.S. industry faces massive layoffs and yard closures and cannot survive to benefit either from public or private technology development or investment.

Organization of the Report

Chapters 2 through 4 of this report respond to the three elements of the committee's charge. In Chapter 2, on technology application, the committee reviews four major areas to assess the technology needs for revitalizating U.S. commercial shipbuilding. In Chapter 3, significant programs of assistance to U.S. shipbuilding are assessed, particularly in light of the technology needs the committee identified. In Chapter 4, the committee considers current programs in naval architecture and marine engineering (NA&ME) education and steps that might be taken to strengthen the education base to achieve national shipbuilding goals. Finally, Chapter 5 presents the conclusions and recommendations reached in the preceding chapters.

Appendix A provides information about members of the committee. Appendix B provides the names of individuals who made presentations to the committee and the subject of their presentations. Appendix C provides brief background information on international subsidies in shipbuilding. Appendix D provides

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