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4 Does the United States Need to Accommo(late Large Vessels? INTRODUCTION Assessing the nation's need for additional capacity to accommodate large vessels involves balancing a complex set of factors. Proponents of additional capacity give three reasons: (1) economics, (2) national security and defense, and (3) the need to be able to respond rapidly and flexibly to future changes in the character of the ocean transportation system. This chapter appraises the purported need for additional capacity to handle large vessels in terms of these three categories of justification. As an initial step, it is necessary to define "large ships." Two categories of deficiency in port capacity have been identified in studies conducted by the U.S. Army Corps of Engineers and by the ports of the United States: (1) the limited ability of the United States to handle large bulk carriers, and (2) the need by some ports to handle medium size vessels; in particular, the latest-generation containerships, but also other specialized or general vessel types of Panamax dimensions. The limits of the Panama canal are 900 ft length, 106 ft beam and 42 ft draft (draft limits vary with water supplied to the canal and may in some seasons be less). These two identified needs have been taken by the committee as defining "large ships." Proposals for additional dredged capacity are briefly summarized in Table 2 (Appendix G). The range of large bulk carriers cited in these proposals have cargo-carrying capacities of 105,000 DWT to 150,000 DWT. The latest-generation containerships referred to vary in length from 800 ft to 950 ft. and in beam between 105 ft and 110 ft. These vessels have cargo-carrying capacities of about 3500 TEUs* and require water depths of 37 to 43 ft. Owing to the windage area of these vessels when containers are loaded on deck, additional channel width may be necesary, particularly in bends or turns. This chapter discusses the present port situation in the United States for accommodating large vessels, status and trends in the world *A TED is a "twenty-foot-equivalent unit." Containers are 8 ft wide, and 10, 20, 30, or 40 ft long. "TED" is the standard for comparing container-carrying capacity. 26

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27 fleet, arguments that have been advanced for and against creating the capacity to handle large ships, the present situation of other ports worldwide, and considerations of national security and defense. WHAT IS THE PRESENT PORT SITUATION? It has been suggested that the United States is already paying penalties because of its limited capacity to accommodate large ships; specifically, that many large vessels call on the ports of the United States less than fully loaded, owing to the limited water depths in navigational channels. A review of 1980 data indicates that 3849 port calls were made in the United States by vessels with design drafts greater than 45 ft. but only 754 of these port calls were at actual drafts greater than 45 ft. For most of the major ports of the United States, water depths become limiting for vessels at about 40 ft of draft. Additional feet of draft are achieved by operating vessels in navigational channels at slower speeds, by taking fully loaded vessels in or out of port at high water, and other means, but the additional draft that can be achieved by-these means is limited. While the inference might be drawn that light-loading is always due to channel limitations, there are several other reasons. A major one is avoidance of a ballast leg; for example, a large combination (liquid and dry bulk) carrier may deliver a large oil cargo to a U.S. port and load a smaller grain cargo at another U.S. port for export. Other reasons are discussed in succeeding sections. Channel depths at mean low water for the coastal ports of the United States are listed in Table 3 (Appendix G), together with the number of port calls at vessel drafts at or exceeding channel depths (at mean low water) in 1981. For the vessels defined in this report as large ships, data for 1980 indicate that 476 vessels greater than 90,000 DWT made 2863 port calls in the United States. Bulk carriers (liquid, dry, combination) that would have drafts of 46 ft or more fully loaded made 1590 port calls that year, but only 236 were at actual drafts of 46 ft or more. Of these, 26 were at the deep-water terminals of Long Beach, Los Angeles, or Puget Sound. Thus, less than 13 percent of total port calls by bulk carriers were at 46 it or more in draft. Table 4 (Appendix G) presents port calls in 1980 by large liquid- and dry-bulk carriers at the four ports with approved plans for construction dredging to accommodate such vessels. While definite conclusions cannot be drawn from the table, shippers and ship operators dealing in bulk commodities in these and other ports uniformly emphasized to the committee their need to load additional feet of draft. Draft limitations for tankers or bulk carriers limit their cargo-carrying capacity as follows: for a 150,000 DWT or 200,000 DWT vessel, failure to use a foot of draft may translate into 3400 to 4900 long tons of lost cargo-carrying capacity. Some representative figures are given in Table 5 (Appendix G). Table 6 (Appendix G) lists U.S. port calls by containerships in 1980, in comparison with port calls by other vessels carrying general

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28 cargo. Owing to the aggregation of the data from this source into a large category of 16 ft to 45 ft of draft, it is not possible to determine the use being made of U.S. ports by large containerships. Delivery has been taken in the past three years of several large containerships, and some have called on U.S. ports. Great care has been exercised in some ports to achieve transit of these vessels, such as entering/leaving at high water, one-way traffic, and operation at slow speeds. If in the future two-way traffic, higher speeds, or other operational changes are desirable, greater channel dimensions may be required. Efficiency or higher traffic density may depend on depth. If vessels pass or overtake one another, or if higher speeds in port are desirable, or if shipowners want to be able to enter and leave port at periods of low water, these operations require more depth (and possibly greater widths) than one-way traffic, slower speeds, and transits at high water (see Chapter 71. Thus, the broad implication that can be drawn from these summary data is that the physical dimensions of navigational channels in the United States are being used in some instances to capacity (and beyond). Whether significant benefits are to be gained (and if so, how much and over what period) from additional navigational capacity is difficult to determine, owing to the volatility of trade, and of oceanborne shipping, and several uncertainties affecting projections of the future, as discussed in succeeding sections. Vessels in the World Fleet and Major Trends Tables 7, 8, and 9 (all in Appendix G) list the dry bulk and combination carriers, tankers, containerships and roll-on/roll-off vessels (Ro-Ros)* of the world fleet. Inspection of Tables 7 and 8 indicates that the proposals of U.S. ports to increase their capacity to handle large bulk carriers are not for the largest of these vessels. The proposals to dredge deeper channels for 105,000 DWT to 150,000 DWT vessels encompass perhaps 600 vessels in the world fleet, but note that because of variation in draft in this range of cargo-carrying vessels approximately 300 to 350 of the vessels may still need to be light-loaded by 1 ft to 5 ft to call on U.S. ports even after deepening. There remain beyond these vessels 82 dry bulk carriers and 475 tankers that are larger, and that would be significantly light-loaded if they called on the deepened ports. Containerships in the world fleet and on order can be categorized in two groups: those having less than 30 ft of draft (79 percent), and much larger vessels with container-carrying capacities of 3000 or 3500 TEUs or more, and design drafts of 37 to 43 ft. It should be pointed out here that there is greater ambiguity between the design and actual draft of a containership (fully loaded) than is the case with bulk carriers and tankers carrying dense and fairly uniform *Roll-on/roll-off vessels are equipped with ramps, over which their cargoes are loaded or unloaded. Some also carry containers.

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29 cargoes. Tankers and bulk carriers tend to be weight-limited and containerships tend to be volume-limited. Thus, tankers and bulk carriers fully loaded with dense cargoes will be at or near their maximum draft (as indicated by load lines), but containerships loaded with the maximum number of containers they were designed to carry rarely approach maximum draft. With the great number of smaller vessels in the world fleet, why are the larger vessels of concern to ports? First, many of the vessels included in summary tables of the world fleet are designed for short sea routes (as, for example, between European ports) and coastwise trade. Second, the maximum achievable speed of vessels is related by physical laws to their shape and length. Since the increase in the price of fuel, speed requirements have been reduced, but any change in the future giving an advantage to speed will favor larger vessels. Third, the transportation costs per ton of cargo (or per container) are lower for larger than for smaller vessels, as illustrated in Figure 2 (Appendix G). Primarily because of their lower transportation costs and higher productivity, movement to larger vessels has been the trend for the past two decades, as illustrated in Figure 3 (Appendix G). This trend was first evidenced for tankers, and although the lack of deep water in the ports of the United States and many other oil-importing countries has resulted in the use of smaller tankers to lighter larger tankers, 72 percent of the world's oil supplies are carried in tankers 100,000 DWT and larger (Cargo Systems Research Consultants, 1982~. Bulk carriers 100,000 DWT or more increased their share of oceanborne shipments from 6 percent in 1971 to 35 percent in 1980 (H. P. Drewry, 19821. Large bulk vessels dominate iron ore trade: 80 percent of iron ore shipments were carried in vessels 100,000 or more in 1981. The trend to larger vessels for iron ore and coal was reinforced by the introduction of combination carriers (oil, ore, dry bulk), which tend to be larger than dedicated dry-bulk carriers. Large bulk carriers now carry 45 percent of all coal shipments, and 10 percent of grain shipments. Other bulk cargoes (the "minor bulks"--phosphate rock, sulfur, wood chips, etc.) are carried in smaller vessels. Among the commodities imported or exported in vessels calling on U.S. ports at 46 ft of draft or more in 1980 were corn, edible oils, sugar, iron ore, sulfur, chemicals, rubber, coal, oil and oil products, and vehicles. Containerships, because of their much higher productivity as compared to other general cargo ships, are displacing older general cargo vessels, and their productivity appears to increase with size. Cargo-carrying Ro-Ros of large size are also growing as a percentage of the world fleet, as they are flexible vessels (many carry containers) able to load and unload in a great variety of ports, and able to carry cargoes too large or awkward for packing into containers. In the world fleet, both types of vessels are of recent vintage--80 to 90 percent are less than 10 years old. Aggressive building programs have been instituted the past three years aimed at replacing smaller with larger containerships and Ro-Ros. The vessels.

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30 latest-generation containerships are entering round-the-world service in attempts by large liner companies to retain and enlarge their share of markets (Maritime Transport Committee, 1984~. There are several possible difficulties in assessing the reasons for the trend to larger ships. One is that while larger ships offer economies of scale in transportation, they may or may not have higher loading/unloading costs in port. Another difficulty is that economies of scale are usually represented in terms of the costs, rather than the actual price, of oceanborne transportation. For example, the market prices of oceanborne shipping in bulk carriers for the past three years, while reflecting lower costs for transport in larger vessels, also reflect a smaller price spread between transport in larger and smaller vessels (some representative prices are given in Table 10, Appendix G) than the cost differential would suggest. Price is set by the perceived relationship of supply and demand for various vessel types, and the past three years have been characterized by low (uneconomic) prices for transportation in all bulk carriers. Owing to the high rate of new orders for bulk carriers and (despite record scrapping) continued surplus of tankers, prices may remain depressed for some time into the future.* In sum, price differentials do not necessarily reflect cost differentials. Other difficulties make shipping hard to assess. While shipowners would like always to sail fully loaded, the size of cargoes may be determined by shippers in a surplus market. For the past three years, trade in the major bulk commodities has been characterized by spot markets, rather than long-term, fixed contracts, and the same has been true for vessel charters. During the recent worldwide economic recession, demand for vessels was influenced by the use of existing stocks of major bulk commodities, and the amounts shipped tended to be smaller than the amounts consumed (Maritime Transport Committee, 1984~. Other factors which can influence port needs are suggested by a new trade pattern that emerged for coal in 1982. It illustrates some of the uncertainties associated with projecting the additional benefits to be gained from channel improvements. Large bulk carriers (100,000 DWT and more) were light-loaded with coal in Atlantic ports in the United States and sailed to Japan via the Cape of Good Hope, where they were topped off in a deep coal port (Richards Bay, South Africa). It is not possible to predict whether deepening the coal ports of the United States would capture this additional amount or whether buyers will still prefer to buy from both sources. Yet another possibility is that even larger vessels might be used, loading to 150,000 DWT or so in the United States and topping off in South Africa or elsewhere. . *Some observers are pessimistic about a near-term balance of supply and demand in these vessels and in liquid and dry bulk cargoes (Maritime Transport Committee, 1984), others are optimistic that balance will be achieved in a few years (Office of Technology Assessment, 1983~.

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31 Understanding why light-loading occurs requires information about the maximum desired sizes of shipments, frequency of delivery, amount of stockpile desired by various customers, time-value of the stockpile, and the influence of political decisions and new technology on demand. Political considerations are sometimes significant in decisions determining the composition and characteristics of the world fleet and in its deployment. For example, governments subsidize shipyards for noneconomic reasons and give preference to their ships when the government is the customer. Many newly industrializing nations that are seeking to build a merchant marine protect their fleets by assuring those fleets a share of the nation's imports and exports. These considerations may result in agreements reserving cargoes for national-flag fleets and other stipulations that will (besides inhibiting competition) enhance or reduce the need to accommodate large vessels in the future. Ports Worldwide Ports in other maritime nations have perceived a need to increase their capacity to accommodate large vessels. There are now 76 ports worldwide with depths greater than 55 ft (Table 11, Appendix G). Most of these ports export or import one (or more) major bulk commodity. To gain information about the expectations of world ports, the committee sent a list of questions (Appendix D) to a large number of ports with the assistance of the International Association of Ports and Harbors and the embassies of several maritime nations. Of the 59 ports responding, 22 indicated they had plans for expansion of navigational facilities, or that expansion was under way, and 5 had just completed improvements. The responses of these ports are briefly summarized in Table 12 (Appendix G). Some ports that are already between 55 ft and 64 ft deep are planning further improvements--Antwerp and Zeebrugge, Belgium, for example. Richards Bay, South Africa, has just completed deepening to 64 ft. and is now deepening to 75.9 ft. Two of the ports in the very deep category (greater than 65 It) noted the need for a new deep-water port in their respective countries (Mombasa, Kenya, indicated plans for a deep water port at Lamu; Su-Ao, China, stated that another deep-water port was needed). Review of the existing and planned dimensions of ports elsewhere in the world suggests that a large number expect to need the ability to handle large vessels in the future. ECONOMICS Clearly, the primary factor influencing the movement toward larger ships is that they offer lower transportation costs. Stated in the simplest terms, the argument for additional channel dimensions to handle larger ships is to allow the nation to enjoy the transportation

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32 savings that ultimately flow from using larger ships. In the absence of adequate port capacity, large ships must either enter and leave U.S. ports less than fully loaded or U.S. trade must be carried in smaller ships. In either case, the cost to the nation will be higher. Most of the controversy over whether there is a need to develop additional port capacity to handle large ships revolves around whether the reduced transportation costs flowing from that capacity will be sufficient to cover the costs of developing the capacity. In general, the debate has been focused on proposals for deepening existing ports. Table 17 (Appendix G) indicates the range of costs associated with various proposals for port deepening. In the case of those projects calling for deepening to 55 ft. construction estimates range from $372 million to $440 million. In each of these instances, the U.S. Army Corps of Engineers' analysis of benefits and costs concludes that the benefits outweigh the costs. Many factors influence whether benefit/cost analyses turn out to be positive or negative. The most critical single variable is the expected level of use. Future use of additional port capacity, however, is inherently uncertain. The committee posed two questions for itself: Is there sufficient present need to justify developing additional capacity? Will there be sufficient future need to justify developing additional capacity? With regard to the first question, the committee could find no convincing evidence of present needs to develop additional capacity to handle large ships. It should be emphasized, however, that even assessing present needs involves dealing with considerable uncertainty. Perhaps the key example was the committee's inability to determine whether (and how much) channel limitations result in the use of smaller rather than larger vessels, or light-loading of large vessels. The level of uncertainty is substantially greater in answering the second question; that is, future needs. Confident assessment of future port needs would require reliable information on: (1) the over-all size and growth patterns of the future world economy, (2) the level of oceanborne U.S. exports and imports, and (3) the character or mix of those exports and imports. Data presented in Chapter 3 suggest two trends with regard to the U.S. and world economy. First, the United States is increasingly becoming an interdependent part of the world economy. Among important U.S. exports to industrializing countries, for example, have been (and are) manufacturing machinery and equipment, while manufactured goods produced at lower cost in those countries are imported into the U.S. The U.S. both exports and imports raw materials and agricultural products. These relationships involve trade among countries in various geographical regions. The growth of manufacturing capacity in many countries is broadening and diversifying patterns of trade. Low-cost oceanborne transportation is generally seen as contributing to the enhancement of interdependent national economies and to the promotion of world trade which ultimately benefits the United States. But while the world economy and world trade are expected to exhibit over-all growth in the mid- and long-term future, trade is volatile, and oceanborne transportation is more volatile. Thus, sharp, short-term fluctuations can be expected.

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33 The primary pressure driving the demand for U.S. capacity to handle large bulk carriers rests on the expectation that there will be opportunities for increased exports of bulk commodities, particularly coal and grain. The potential world market for U.S. coal has been the most frequently used rationale for developing additional port capacity. The landed price of coal in foreign markets can be heavily influenced by transportation costs. For example, one recent study of the potential advantages of using large bulk carriers for transporting coal between Hampton Roads and Rotterdam indicated a potential cost per ton differential ranging from $10.33 to $6.95 (Graves et al., 1984~. Depending on the assumptions used, these investigators found that transportation costs could vary by as much as $3.38 per ton. Assuming a landed cost for coal in Rotterdam of $50 per ton, these differential transportation costs could range from 14 to 20 percent of landed costs. Many analysts believe that this 6 percent differential in delivered costs could, for a low-value, high-volume commodity such as coal, make the difference between U.S. competitiveness and lack of competitiveness. Stated differently, these transportation costs could significantly influence the share of the world coal market supplied by the United States. The authors of the study referenced here found compelling reasons for recommending caution in funding the dredging of coal ports. They did, however, find that, given optimistic assumptions about future European demand for U.S. coal and accepting what they referred to as a lower societal return-on-investment, dredging one coal port could be justified. In general, economic studies have recommended caution (Energy Information Administration, 1983; General Accounting Office, 1983). The potential benefits to the U.S. grain export trade of being able to handle large bulk carriers is even less clear. First, because grain has a much higher value per ton, transportation costs represent a smaller portion of landed costs. Second, many of the markets for U.S. grain do not have adequate unloading facilities or ports with sufficient depth to handle large bulk carriers. These two points are regularly made. The committee would caution, however, that it was repeatedly informed of instances where large bulk carriers were used to transport grain. Additionally, the Soviet Union has recently been investigating the possibility of topping off grain ships in the Gulf of Mexico. We include these references simply to indicate that even in the case of grain, there is evidence that if additional port capacity were available, larger portions of U.S. grain exports might be carried in large bulk carriers at lower prices. The relative advantages and disadvantages of being able to accommodate larger oil tankers are also difficult to evaluate. Oil is a flexible commodity that can be loaded and unloaded by several different technologies (as described in Chapter 5~. There are additional costs associated with some of the alternatives, and the cost of oil imports might also be reduced by the ability to accommodate larger tankers in port. The potential economic benefits of increased capacity to handle high-value cargo in larger ships have not been as extensively debated

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34 or studied as those of increased capacity to handle bulk carriers. The movement toward large containerships suggests economic advantages, however, and the costs of developing the additional capacity to handle these ships in some of the major U.S. ports may be economically justifiable. Recent history shows a significant increase in the quantity of bulk commodities exported from the United States. A more narrowly focused review of those data indicates another important characteristic. That is, in the case of both coal and grain exports, the quantity of exports can differ substantially from one year to the next. For example, coal exports in 1981 amounted to 110.2 million tons. By 1982, those exports had dropped to 105.2 tons, and in 1983 to 76.9 million tons. Similarly, in 1978, the peak year for grain exports, the U.S. sold 105.2 million metric tons overseas. By 1982, those exports had dropped to 97.2 million metric tons. The point which appears to deserve emphasis is that in bulk commodities, extreme swings can occur over very short periods of time. To take advantage of rapidly expanding markets, the nation would benefit from having available port capacity when the swing is upward. Because the buyers of these commodities are often concerned with the delivered price, inability to accommodate optimal vessel sizes and types may affect the nation's ability to secure long-term agreements that at least minimize the freight rate (H. P. Drewry, 1981). One conclusion seems demanded from a review of the preceding data: it is that the United States faces great uncertainty with regard to the size and character of the future world economy, the nature of future oceanborne transportation into and out of U.S. ports, and the future mix of commodities that the nation will export and import. Further, the character of U.S. exports and imports, particularly exports of such bulk commodities as coal and agricultural products, is likely to change from year to year. In conclusion, the size and character of future U.S.-world trade and oceanborne transport is simply not now predictable over any length of time with any degree of reliability. Most of the analyses and most of the arguments made by proponents and opponents of additional capacity to handle large ships start from assumptions that this conclusion suggests must be suspect. Assumptions bound the ratios found in benefit/cost analyses. Decisions with regard to developing additional port capacity, then, must be made with the recognition that the fundamental reality is an uncertain future. An uncertain future implies risks: If the decision is to do nothing, trade may be lost. Or trade may be sustained with existing port capacity but at a higher cost. If additional port capacity is created, the anticipated trade or traffic may fail to develop. Or the additional capacity may be insufficient. Changes in technology may supersede improvements, and make them obsolete.

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35 LONG LEAD TIMES The nation's dilemma with regard to the port capacity question revolves around the fact that future need is fundamentally uncertain, short-term needs may experience substantial fluctuation from year to year, and developing additional port capacity requires sustained programs carried out over many years. In the case of major federal dredging projects (as pointed out in Chapter 7), the lead time may be up to 22 years. Even assuming that those lead times can be substantially reduced, there is a mismatch between the uncertain and fluctuating character of need and the activities required to develop port capacity. In sum, the nation's decisions with regard to developing additional port capacity must find some accommodation between what will likely be a continuing uncertainty about need and the long lead times required to develop that additional capacity. Stated simply, the nation's choice is: "What should be done in the face of uncertainty?" Summary of Factors Contributing to Uncertainty A review of the debate over additional capacity in navigational facilities indicates its complexity. Some of the arguments made by opponents are: (1) The prices charged for ocean transportation have little relationship to costs. Rather, rates vary with surplus and scarcity of vessels relative to cargoes. When vessels are in surplus, unit prices for transport in large versus small ships vary less than the difference between the unit costs. Alternatively, when there is a scarcity of transportation, vessel owners charge whatever the market will bear regardless of cost. (2) The historical movement to larger ships reflects fashion more than economics, but the movement was partly subsidized by nations that (to keep their shipyards busy) moved from subsidizing one generation of ships to subsidizing the next generation of ships. (3) The pattern of developing additional port capacity to handle large ships, again, may reflect fashion as much as compelling economic reasons. (4) The-United States is such a major factor in the world economy and in world oceanborne transportation that shipowners will build their ships to ensure that they are able to use U.S. ports. That is, the United States can set the standard for ship size with that standard being existing port capacity and it does not need to develop additional capability. (5) Most of the major competitors with the U.S. for the world's coal market are countries such as South Africa where the government controls the mines, the railroads to the ports, and the ports. Those countries will, as matter of national policy, ensure that their coal always sells for less than American coal. That is, competitors with the United States for the world coal market will do whatever is necessary to ensure that their coal sells for less than coal from the United States. Some of the arguments made by proponents are: (1) Prices charged for transporting commodities do in fact, over the long term, reflect costs. Therefore, the economies-of-scale associated with large ships

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36 are reflected in prices. (2) Only if the United States is able to take advantage of low-cost transportation will it be able to maximize its competitiveness in the international economy. (3) Even though other countries may, as a matter of national policy, provide coal for lower prices than the United States, the range of the price differential can make a substantial difference in the U.S. share of the market. If the price differential can be kept small by efficient transport, many countries will pay a marginally higher cost to be assured of the secure, stable supply offered by this country. (4) Faced with a huge trade imbalance of over $100 billion, the United States can pass up no opportunity to increase its exports. (5) Given the long lead times necessary to develop port capacity, the United States has no choice but to move ahead with port development in the face of uncertainty. The above samples of the opposing arguments made with regard to port capacity and its economic implications are not susceptible to resolution by studies. They reflect differing perceptions of what will occur in the future, of the U.S. role in the world economy, and perhaps most fundamentally they sometimes have an unstated premise. That unstated premise reflects differing views about or whether the federal government should underwrite the costs associated with developing additional port capacity. In sum, much of this debate is driven by differing perceptions of the appropriate role of the federal government with regard to port funding, with the key issue being whether tax dollars should be used for this purpose. National Defense/Security Although not a central point in the debate, some have argued that additional port capacity would contribute to the nation's security/defense capability. Like the economic issue, security and defense needs are difficult to ascertain. To the extent that those needs have been defined but are classified for security reasons, this committee has been without the basis for making an informed assessment. The committee did, however, seek information on security-defense needs. Based on those efforts, several observations seem in order. First, security-defense needs exist in three categories: (1) military ships, (2) logistical support for overseas military operations, and (31 access to strategic materials. Responsibility for assuring adequate port capability to meet these three needs rests with different defense and civilian agencies. The Navy assumes responsibility for assuring adequate capacity to handle its own ships. Logistical support for overseas military operations is the responsibility of the Military Traffic Management Command, which has designated the National Defense Ports to be used in case of mobilization. The vessels supporting overseas military operations would operate under the direction of the Military Sealift Command which has responsibility for mobilization of the necessary cargo vessels. Responsibility for assuring adequate capacity to transport strategic materials in times of war or international conflict rests

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37 with the U.S. Maritime Administration. The U.S. Army Corps of Engineers has the direct responsibility to ensure the navigability of the nation's ports and waterways. The committee was unable to find any evidence that these three areas of responsibility were being systematically coordinated or that projected needs for dredging are being communicated to the Corps. Given the changing character of the world's merchant fleet, this is an area which would appear to warrant continuous and careful attention. For example, in such areas as the ports of Hampton Roads (Norfolk, Newport News, and Portsmouth, Virginia), which might in time of war serve all three of the identified functions, such coordination and planning would appear to be particularly appropriate. In the case of the Navy, the committee found, for example, that the Navy has not specified any need for additional channel depths. Channel depths in that port are 45 ft. yet the Navy has specified that berths for its aircraft carriers should be 50 ft. Before the largest carriers can transit the channels into the Norfolk naval facility, they must unload all their aircraft and pump off most of their fuel. The committee questions whether existing depths are appropriate if rapid access needs to be assured. In the case of logistical support, the Military Sealift Command expects to use vessels from the U.S.-flag fleet and those of national-flag fleets in NATO. Given the movement toward larger and specialized vessels, a continuing analysis of port navigational facilities would appear necessary. Finally, as is often noted, the United States is heavily dependent on foreign suppliers for strategic materials. The committee found no evidence that additional port capacity was needed to meet the nation's strategic materials need. Neither did it find that these needs were being coordinated in any meaningful fashion with other defense/security needs and being communicated to the Corps of Engineers. Future Flexibility The United States has very limited capabilities to take advantage of any benefits that may be offered by larger ships. Only two of the nation's major ports can handle dry bulk carriers of more than 90,000 DOT and only a limited number of the nation's major container ports can readily handle the latest-generation, high-value cargo vessels. Although evidence is mixed on the rate at which large ships will increase and unclear about what the optimum size of large ships will be, the nation's present capacity to handle these ships is limited. The United States, then, has little flexibility to respond to any developments which emphasize or accelerate the advantages of using large ships. The nation faces an uncertain future with regard to the quantity of its exports and imports and the mix of cargoes that its ports will need to handle. Its dilemma is that to be able to take advantage of any benefits offered by large ships in the future, it must undertake

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38 to develop port capacity now. That is because developing port capacity to handle large ships requires many years. Further, whatever the source of funding, the cost of developing port capacity to handle large ships is high. A decision to develop such capacity, therefore, involves risk. The question faced by the nation is: Should it take that risk? There is no existing body of data or associated analyses available now or likely to be available in the immediate future which will compel a consensus on this question. The committee found itself in unanimous agreement that faced with this uncertainty, the nation should develop sufficient capability to allow it to be able to respond flexibly to whatever opportunities develop in the future. That is, the United States should move from a position of not being able to accommodate large bulk carriers on the Atlantic or Gulf Coasts and limited capabilities to handle medium-size vessels to one where it has expanded capabilities. Specifically, it is the committee's conclusion that there should be a capability to handle large bulk carriers on each of the nation's coasts. In present circumstances, that capability could be minimal. The committee can find no justification for the expenditure of federal funds on all of the projects that have been proposed. Should local ports determine it is to their advantage to underwrite the costs for additional development, that is a judgment they should be allowed to exercise . Alternatively, a limited capacity to handle large bulk carriers on each of the coasts and some expansion of the capacity to handle the medium-size vessels, in the committee's judgment, is in the national interest. In sum, the United States needs additional but limited capability to assure that it will be able to capture the benefits that may develop from being able to handle larger vessels in the future. REFERENCES Cargo Systems Research Consultants (1982), Large Dry Bulk Carriers - Employment Prospects in the Eighties (Worchester Park, England, Cargo Systems Research Consultants). Cushing, C. R. (1984), "The Ships of Tomorrow," Cargo Systems, 11: 32-37. Energy Information Administration (1983), Port Deepening and User Fees: Impact on U.S. Coal Exports (Washington, D.C.: Government Printing Office). General Accounting Office (1983), Prospects for Long-Term Steam Coal Exports to European and Pacific Rim Markets (Washington, D.C.: Government Printing Office). Graves, S. C., M. Horwitch, and E. H. Bowman (1984), "Deep-Draft Dredging of U.S. Coal Ports: A Cost-Benefit Analysis," Policy Sciences, 17: 153-178. H. P. Drewry (1982), Shipping Statistics and Economics (London: H. P. Drewry (Shipping Consultants), Ltd.~.

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39 H. P. Drewry (1981), Governments and Dry Bulk Shipping (London: H. P Drewry (Shipping Consultants), Ltd.). MARDATA, Inc. (1984), Survey of World Fleet prepared for Committee on National Dredging Issues, Stamford, Connecticut, Maritime Data Network, Ltd. Maritime Transport Committee (1984), ~ (Paris: . Organisation for Economic Cooperation and Development). Office of Technology Assessment (1983), An Assessment of Maritime Trade and Technology (Washington, D.C.: Government Printing Office). Poten and Partners (1983), "Evaluation of a Port Improvement Project from the Perspective of a Shipowner," Prepared for the Committee on National Dredging Issues. Schonknecht, R. et al. (1983), Ships and Shipping of Tomorrow (Centreville, Md.: Cornell Maritime Press). Tozzoli, A. J. and S. Frank (1984), "Federal Channel and Related Development in New York Harbor, n Testimony presented to Subcommittees on Energy and Water Development and Senate Committees on Appropriations, U.S. Congress, April 2, 1984.