of the President, 1993). These figures compare well with figures from a recent study for the National Shipbuilding Research Program (NSRP). That study predicts a market of about 1,130 ships per year (NSRP, 1995). During the late 1980s and early 1990s, the international market experienced a combination of rapidly increasing world shipbuilding costs relative to the United States, along with increased demand, especially for tank vessels, and an associated rise in ship prices ($60 million to $100 million for very large crude carriers). This situation was forecast by Temple, Barker & Sloane (1990). This shipbuilding market situation became very evident to the Clinton administration policy-setters when they established the five-point shipbuilding initiative described in the following paragraph. Since 1993, the international market has changed again. The spurt of new ship orders in the 1989-1992 time period, plus the Desert Shield/Desert Storm activities, created a near-term oversupply of ships. This decrease in shipping requirements abruptly decreased the demand for new ships and created a significant drop in prices. However, U.S. construction has become more competitive in the international market because of increasing foreign labor and material costs, competitive U.S. labor rates, and improved U.S. productivity and capacity (Dallas et al., 1994; Temple, Barker & Sloane, 1990).

All of these considerations prompted the U.S. government to consider how it might best support the reestablishment of a commercial shipbuilding industry, with the hope that the industry can serve both commercial and military markets to their mutual benefit. Through the National Defense Authorization Act of 1993, the U.S. Congress specifically required the president to develop "a comprehensive plan to enable and ensure that domestic shipyards can compete effectively in the international shipbuilding market." In October 1993, the Clinton administration issued a corresponding five-part plan, Strengthening America's Shipyards (Clinton, W.J., 1993).

The nation's goal, according to this plan, should be to assist the efforts of the nation's shipyards to make a successful transition from military to commercial shipbuilding—a competitive industry in a truly competitive marketplace. The plan points out that such a proposed transition program is consistent with federal assistance to other industries seeking to convert from defense to civilian markets.

Three parts of the administration's plan concern financial issues: ensuring fair international competition; financing ship sales through loan guarantees; and assisting in international marketing. Another part of the plan is aimed at eliminating unnecessary government regulations to increase U.S. competitiveness. The fifth part of the plan intends to advance the industry's competitiveness through a government cost-sharing program that features industry-initiated research and development projects in technology transfer and shipbuilding process change.

More specifically, the five elements are as follows:

  • Level the playing field for foreign and domestic subsidies, both direct and

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