EXHIBIT II U.S. vs. FOREIGN-FLAG COMPARATIVE SHIPPING COSTS-1978 PERSIAN (ARABIAN) GULF TO U.S. U.S. flag premium (saving) vs. foreign 225,000 dwt III. Assumptions used-Continued D. Conversion factors: A. Production: 3. Weighted average premium per gallon: based on 1980 VLCC ULCC fleet composition as follows: STATEMENT BY PAGE GROTON, ASSISTANT TO THE INTERNATIONAL PRESIDENT AND DIRECTOR OF THE BOILERMAKERS IRON SHIPBUILDERS MARINE COUNCIL OF THE INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIP BUILDERS, BLACKSMITHS, FORGERS & HELPERS Mr. Chairman, and members of the Committee. My name is Page Groton, and I am the Director of the Boilermakers Iron Shipbuilders Marine Council, which represents the shipbuilding division of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers. My International Union represents 145,000 trade unionists, of whom some 50,000 work in the shipyards throughout the United States. So we represent more shipyard workers than any International Union in the Country. I welcome this opportunity to voice our Organization's support of the objectives of H.R. 8193 and similar bills to reserve twenty percent of imported crude immediately for privately-owned U.S. flag vessels to the extent the vessels are available at fair and reasonable rates, this to increase to 25 percent after June 30, 1975 and to 30 percent after June 30, 1977, providing the Secretary of Commerce determines that sufficient U.S. flag tonnage exists to carry the increased amounts. We wholeheartedly support these objectives and hope for speedy congressional action. The need for this vital legislation, in my judgement, is crystal clear. The U.S. has become a national dependent on foreign-flag vessels for the carriage of our oil imports. Ninety-five to ninety-seven percent of our crude comes to our shores on foreign-flag tankers. If we ever needed a jolt to wake us up, the reaction of our usual allies to the crisis in the Middle East should have done it. The sensitive state of world-oil diplomacy clearly dictates that considerably more than five percent of our oil imports should be under absolute U.S. jurisdiction. For dozens of years the Department of Defense and the American owners of runaway-flag ships have justified the flight from the American merchant marine by insisting that the United States still maintained "effective control" over such ships in case of emergency. For an equal number of years, American merchant marine unions have argued to the contrary in their fight to maintain a merchant fleet worthy of the country and of its needs. This position has now been dramatically supported by the collapse of the "effective control" argument. One of the most significant foreign-flag ship countries, under whose flag millions of tons of American-owned ships sail the seas, is Liberia. Panama is another. Liberia not only has turned its back on American foreign policy by openly supporting the Arab states and breaking relations with Israel, but has now decreed that ships under its flag may not transport "arms, armaments or implements of war" to the Middle East, meaning, of course. Israel. Whether "implement of war" includes oil has not been spelled out, but what is of starting importance is that Liberia has taken upon itself control of vessels that long have been regarded by the American government and their owners as being under the "effective control" of the United States. The fact that Liberia has now asserted its control over vessels flying its flags, including those of the United States, is a blow that canno be ignored. There are 180 American-owned big ships totalling more than 13 million deadweight tons that fly the Liberian flag, actually somewhat more than the 469 smaller American-Flag ships in our own merchant marine whose total tonnage is only about 13 million tons. There are actually more than 26 million tons of American-owned ships in the runaway-flag fleet of the countries. Many of the Liberian-flag ships are owned by the very oil corporations that are so involved in the Middle East energy crisis. Standard of California, for example, has 21 ships under the Liberian flag, totalling more than a million tons. Amoco has six totalling 81,000. Other oil companies have varying numbers. Standard Oil of New Jersey has 136 ships totalling 8,378,000 tons, mostly under the Panamanian flag. While Panama has not taken action similar to that of Liberia, it must be point out that Panama has been displaying strong nationalistic tendencies in relation to the Panama Canal and might well decide, also, to exercise "effective control" over ships under its flag as Liberia has done. It is my guess that as soon as the new treaty is signed. Although the Liberian action has received very little coverage in the American press, I am sure it has not gone unnoticed by Congress. While declining to be quoted, some government officials take the position that the Liberian action will not have much effect on the "effective control" doctrine, although conceding that a dent has been put in it. We have been fighting the doctrine for many years in our effort to build a strong American-flag merchant fleet and disagree completely. With the collapse of the effective control policy, it should be apparent that these American-owned foreign-flag ships can no longer be counted upon in a pinch and we must build our own American flag merchant fleet. The world today is filled with contradictions. Instead of peace and tranquility, there is turmoil and confusion. Instead of confidence in usual procedures, there is doubt. Instead of certainty as to energy sources, there is uncertainty as to future energy supplied. No two forecasts of supply and demand for fuels agree, and no two sets of pertinent statistics coincide. Public statements are frequently contradictory. Moreover, not all analysts agree as to the short and long term impact of present energy problems. There are, of course, many other contradictions which affect the lifestyle of people everywhere. But this much can be said with confidence: the availability and transport of crude oil and petroleum products will profoundly influence all of mankind until the millenium is reached. In conclusion, I want to thank the distinguished Chairwoman and the honorable members of this committee for introducing this vital legislation. I would like to say, in my humble opinion, time is of the essence. Therefore, quick Congressional action on this bill would be gratefully appreciated. STATEMENT OF MR. JORGEN JAHRE, CHAIRMAN OF THE INTERNATIONAL My name is Jorgen Jahre. I am Chairman of the International Association of Independent Tanker Owners (INTERTANKO), an international organization with member owners from the following countries: Australia, Denmark, Finland, France, Germany, Greece, Hong Kong, Israel, Italy, Japan, Kuwait, Liberia, The Netherlands, Norway, Spain, Sweden, United Kingdom and United States. INTERTANKO has its head office is Oslo, Norway and represents independent owners of almost 15 tankers, aggregating more than 120 million deadweight tons or about 70% of the world's independently owned tanker fleet. INTERTANKO's primary aim is to provide a forum for independent. tanker owners. Oil companies and state agencies owning or operating tankers are not eligible for membership. I appreciate this opportunity to express the views of INTERTANKO on the proposed legislation now receiving your attention. We believe that H.R. $193, if ever enacted, would have grave implications for the international shipping industry, would inhibit development of world trade and would intensify the energy crisis. As an organization representing tanker owners, INTERTANKO can attest that tanker freight rates are highly sensitive to any interference with normal patterns of tanker suppy and demandl. In our estimation, H.R. 8193 represents the kind of interference which would predictably result in increased transportation costs for United States oil imports. These cost increases would be substantial. They would automatically result from restrictions on the flexible deployment of vessels and the resulting decreases in tanker efficiency and productivity. Cost increases would also result from the removal of the moderating effect of overseas competition in the captive market which would be created by H.R. 8193. The artificial exclusion of world fleet competition in 20 to 30 per cent of the U.S. oil import trades would, in our opinion, produce inflated freight rates in that protected market. We also believe that H.R. $193, if enacted, would represent a major impediment to the maintenance of the flow of oil to the United States. The inflexible and inefficient deployment of tankers would very likely result in disruptions in this flow of oil and thus would intensify the energy crisis. We further note that the availability and reliability of the independently owned world tanker fleet have been important factors contributing to the security of oil supplies to the United States and the rest of the free world. Those in favour of H.R. 8193 have argued that it is necessary to provide adequately for national security in time of emergency. This argument ignores the fact that the United States and the rest of the free world have always been very well served by independently owned tankers sailing under the flags of friendly maritime nations. There is absolutely no reason to believe that this record of availability and reliability would ever be broken. The independent tanker owners who are members of INTERTANKO have always appreciated the support which the United States has given to free and open competition in world trade. The bill under consideration is an abandonment of that philosophy. It would violate the basic guarantees in treaties of friendship, commerce and navigation which the United States has concluded with a substantial number of nations. Furthermore, it directly conflicts with the declaration pledging greater liberalization of world trade which was made in Tokyo on September 14, 1973 at the ministerial meeting of General Agreement on Tariffs and Trade (GATT). In conclusion, INTERTANKO believes that H.R. 8193 would be seriously harmful to international shipping and to free international trade. In addition, we believe that it would intensify the energy crisis by impeding ocean transportation of oil and by increasing tanker transportation costs. We believe that the objective of the bill-to increase capacity of the United States tanker fleet--should be obtained by less drastic and more internationally acceptable means. STATEMENT OF THE COUNCIL OF EUROPEAN AND JAPANESE INTRODUCTION 1. The Council of European and Japanese National Shipowners' Associations (CENSA) is an international organization, the membership of which comprises the National Shipowners' Associations of the following countries: Belguim, Denmark, Finland, France, Germany, Greece, Italy, Japan, The Netherlands, Norway, Spain, Sweden, and the United Kingdom. CENSA was estab lished in 1963. Its broad purpose is to provide a medium for consultation and cooperation on common problems affecting European and Japanese shipowners, whether they operate liners, tramps, tankers, or bulk carriers. CENSA has also various objectives of a specific nature, chief among which is to promotion and maintenance of an international merchant shipping system in the service of world trade, free so far as possible from governmental interference and discrimination. It is the furtherance of this objective which has prompted CENSA to submit this statement to this Committee. 2. CENSA appreciates the opportunity to express its views in connection with the proposed legislation now receiving your attention because it feels that this legislation has significant implications for international shipping in general, and international tanker shipping in particular, as well as for the transportation cost of oil, and consequently the U.S. economy as a whole. and, thus, indeed, for world trade overall. 3. CENSA wishes to make it clear that it does not in any sense seek to tell the United States how to run their merchant marine. The members of CENSA understand and appreciate the aspirations of the United States to have a strong merchant marine; to oppose such aspirations would be contrary to CENSA's own objectives. DISADVANTAGES OF DISCRIMINATORY LEGISLATION-GENERAL 4. CENSA recognises that United States shipowners are at a competitive disadvantage because of high domestic costs and that some form of governmental support might be considered necessary by them to remedy their cometitive position. However, in CENSA's view and that of authoritative opinion in the United States, ample provision already exists under the United States Merchant Marine Act of 1970 for the attainment of this objective; and it is a mistaken policy to seek to achieve it by discriminatory measures, as these |