H.R. 5534. I promised the staff that I would keep my comments brief.

I would like to have my written statement entered into the record and I would like to offer a couple of summary comments. First, on behalf of the industry and that includes the two shipyards that have testified before you this morning, Trinity Marine and Avondale, we would like to applaud your initiative, Mr. Taylor, in having this bill introduced. We agree that everything has to be done to try to create a level playing field for United States shipyards in providing the kind of vessels that owners are looking for in the operation of cruise ships.

We think this goes a long way towards helping to create that level playing field.

As I pointed out in my statement, we believe that United States shipyards can be competitive in this market. You have heard from two this morning.

A third, Southwest Marine in San Diego recently won a major ship conversion contract with Royal Caribbean Cruise Lines, and I think these are indicators that United States shipyards are becoming a growing force in this market and anything that can be done to help ship operators, particularly United States companies that want to be able to operate vessels within the territorial waters of the United States, we would fully back.

It seems to us to be unfair and inequitable that United Statesflag ships cannot provide the same amenities and entertainments to passengers that our colleagues in the foreign-flag community can undertake. I am here to applaud your efforts and to say to you that it isn't just a case of the two yards here this morning, but the entire industry across the United States supports this legislation. [The prepared statement of Mr. Stocker can be found at the end of the hearing.]

Mr. TAYLOR. Thanks for being here. I want to read a short statement from Mr. Jones that thanks you for your presence here today and to let you know that this Committee fully supports your objective to build more ships in United States yards.

The question I have for you is, is it not true that the United States Government has been engaged in negotiations for more than a year to end the shipyard subsidies Mr. McAlear here spoke about provided by foreign governments?

Mr. STOCKER. Yes. Those negotiations have been going on since July of last year and are targeted for completion by the end of this year, hopefully.

Mr. TAYLOR. Is one of the obstacles in those negotiations the fact that there is really no incentive for foreign governments to change the current business practices, that they, in effect, enjoy all the privileges of our ports, enjoy all the privileges of their subsidies to their own people, and yet pay none of the cost and we don't seem to have anything to use as leverage to get them to change the situation.

Mr. STOCKER. Absolutely. This is a very significant problem, Mr. Taylor. For some reason, if I can generalize for a moment, foreign governments understand the principle of economic development pretty well, and they understand that the United States offers them the largest consumer market in the world, and they will bend

over backwards to ensure that their manufacturing industries, including shipbuilding, have an opportunity to provide products for this market. And since we have tended to form our economic policy here in the United States to be oriented towards consumers rather than producers, we find ourselves in a situation where we are competing against governments and not other firms because of the interest of these governments in supporting their firms.

There is no incentive for foreign countries to sign this agreement with the United States, because we unilaterally gave away our subsidy program in 1981 and we have done nothing in 10 years to encourage the development of shipbuilding in the United States.

This bill is a first step along the way of trying to redress that imbalance.

Mr. TAYLOR. With reference to the market that the foreign countries, the foreign ship owners would like to have access to, I would like to remind the Committee of testimony in a previous hearing on cruise ship safety revealed that over 80 percent of all the cruise ship market is here in the United States, that over 80 percent of all the passengers, to over 80 percent of all the funds that are spent on a cruise ship take place in the United States and yet only 2 of those vessels out of 100 fly the American flag.

With that in mind, would not the enactment of H.R. 5533 making it illegal for foreign-flag ships to gamble within our 12-mile territorial boundary provide the kind of leverage that our trade negotiators need in order to put an end to the practice of foreign subsidies that has so drastically affected American shipbuilding?

Mr. STOCKER. Mr. Taylor, we would agree with you on that. We have studied the possibility in terms of the timing of this particular piece of legislation given the current status of the trade talks. However, I am very pessimistic that these talks will result in a trade agreement.

I suggest that we ought to use this as retaliation against those countries who refuse to sign the agreement with the United States. I might also point out that our forecasts for the number of cruise ships to be built for the United States market during this decade exceeds 100 vessels and we would be glad to provide you and your staff and the Committee staff with the results of our inquiry. Mr. TAYLOR. Thank you, Mr. Stocker.

One last question, and this is really a request of you as the representative of the shipbuilders, and that is if an agreement cannot be reached on December 14, as a member who is deeply concerned about putting America back to work on the high seas and building vessels in our Nation, merchant and passenger vessels, I am requesting you as the representative of that industry to go back to your industry and request that we next year pass H.R. 5533, because we have acted in good faith.

After the 14th, if we have not reached an agreement, we will see that our neighbors have not and then we should take the steps at that point to ensure the area between the Capes which has been reserved for American commerce since the earliest days of our republic is once again returned to the American fleet and not being abused by foreign competition.

Mr. STOCKER. You have my personal commitment on that.

I believe, on a manhours per ton basis, they are as competitive as any in the world that build vessels similar to those we build.

We sell vessels around the world. We sell crewboats to the Middle East.

We sell patrol boats to South America. Yet when we compete for foreign business, we usually don't have a chance because of subsidies, both outright and hidden.

The Governments of Japan, Korea, Norway, Germany and many other shipbuilding nations provide subsidies that we just can't match because our Government does not provide such subsidies to us, nor do we ask for subsidization.

All we ask is to compete on an even basis. We have to turn a profit on the work that we produce.

Their governments treat their labor force as a fixed cost and only calculate the cost of materials when they compete with us. Their governments provide their yards with facilities; we have to go and buy our facilities, amortize them and still try to make a profit.

I understand that there are ongoing negotiations with our Trade Representative and these nations. They have been slow on making any meaningful concessions to eliminate subsidies to their shipbuilding industries.

Congressman Taylor's bills, if enacted, would provide for additional work for our shipyards.

All of the present "Cruises to Nowhere" are vessels which are not built to the same standards and government inspections that are required of vessels that we build for the commercial trades.

Under Congressman Taylor's bill, these vessels would be built in U.S. yards, sailed in U.S. waters, and manned by U.S. crews.

This is certainly an opportunity for the three competing interests-the owners of the vessels, the crews that operate them, and the shipyards that will build them to get together to bring this business back to the United States.

The United States will gain the taxes, obtain the jobs, and enjoy the benefits if Congressman Taylor's bills are enacted.

Thank you very much for this opportunity to address you.

If there are any questions, I will be glad to give them a try.
Mr. JONES. I have no questions.

Mr. Taylor.

Mr. TAYLOR. Mr. Jones.

I want to thank Mr. Walpert for representing his industry. Mr. Walpert, 15 years ago, what percentage of your business would have been public sector versus private sector?

Mr. WALPERT. It would have been all public business. We didn't get into the Government business until 1985, sir, when commercial shipbuilding had just gone away, totally.

Mr. TAYLOR. Today it is what percentage of your business?
Mr. WALPERT. About 50 percent.

Mr. TAYLOR. Would it be safe to say that if we were able to increase the opportunities for our vessel owners, that that would translate into more work for our domestic shipyards so that the taxpayers-we think you make tremendous landing craft and other vessels, but don't you think our economy would be better served

creating something for the private sector on a higher percentage basis than the public sector?

Mr. WALPERT. Yes, sir.

I think if you can find a way that you can make intercoastal trade more attractive, there will be more of it and gambling is certainly one way that attracts people to go from New Orleans to Gulfport or to Tampa.

That is not a trade that is very much used now, but if there are reasons for people to take that, I would expect to see vessels result from it.

Mr. TAYLOR. Didn't your shipyard submit the low bid a few years back on a cruise ship that was to have been built in British Columbia?

Mr. WALPERT. Yes, sir; in fact, last month.

We competed against Japan, Finland, and Canadian interests and we were low bidder after all the tariffs and duties were considered, and even though it was a worldwide competition and we had the best price and the best delivery, because of their own political interests, they still gave it to their own yard.

That was just last month, $200 million worth of business that we would have done in this country.

Mr. TAYLOR. So you are telling us that because of local political pressure, another country gave the contract to their own people while we are prohibiting our people from participating in the same type of business?

Mr. WALPERT. Really, all we are asking for is to compete on an even basis. If we can compete on an even basis, we can compete with anybody.

Mr. HUBBARD. Would the gentleman yield?

I apologize for being late.

I was in a Banking Committee hearing and must go back. We thank Mr. Harvey Walpert for being a witness and I congratulate you upon having such an excellent Congressman here representing the interest of southern Mississippi.

Is my understanding correct that enactment of this legislation would also stimulate the construction in shipyards of smaller vessels?

Mr. WALPERT. I believe that. We are talking about intercoastal trades and you don't need a thousand-foot vessel to participate in that.

I believe that with the opportunity for vessels to go between ports, not only going nowhere-going nowhere is just a way to get around the law.

People like to travel somewhere.

Mr. HUBBARD. In your testimony, as far as I am concerned, you said all the right things and I support your position and that is why some of us don't have any questions.

Thank you for yielding.

Mr. TAYLOR. Mr. Walpert, thank you once again for appearing before the Committee.

Mr. JONES. Our next set of witnesses is Mr. Rogers, accompanied by Mr. McAlear and Mr. Stocker.

Mr. Rogers, you may proceed.

STATEMENT OF JOHN S. ROGERS, VICE CHAIRMAN/CHIEF EXECUTIVE OFFICER, WORLD CITY CORPORATION, NEW YORK, NY; ACCOMPANIED BY RONALD J. MCALEAR, DIRECTOR OF SHIP MARKETING, SHIPYARD DIVISION, AVONDALE INDUSTRIES, INC., NEW ORLEANS, LA; AND JOHN J. STOCKER, PRESIDENT, SHIPBUILDERS COUNCIL OF AMERICA, WASHINGTON, D.C.

Mr. ROGERS. Thank you, Mr. Chairman and Members of the Committee.

My name is John Rogers. I am Vice Chairman and Chief Executive Officer of World City Corporation.

I want to thank you for the opportunity to appear here today and express our views in support of H.R. 5534.

We take no position on H.R. 5533, simply because it doesn't impact on the matters which concern us.

Mr. Chairman, we have submitted a written statement plus some exhibits and I would request that it be made part of the record of this proceeding.

Mr. JONES. Without objection, so ordered.

Mr. ROGERS. Just to touch on a few points including some that have been raised in testimony thus far today if the panel please, World City comes here today, in a sense, as a shipowner.

It is a company which has committed itself to a project to build the largest passenger cruise vessel ever built and we are committed as far as we can make this happen to build it here in the United States, man it with U.S. citizens and put an American flag on it. This will be the largest vessel in the world. It will be the first major cruise vessel built in this country in over 30 years.

We believe that this is possible financially, technologically with the shipyards with whom we are dealing and that this will be a major step in the revival of an industry, the cruise industry in America, which is ready for revival and can compete on an even playing field.

This is, in a sense, almost a negotiating session as far as our business is concerned here today because we are moving ahead.

We have a contract with Avondale Shipyards in New Orleans. We are paying good money to see if we can make this happen.

We have about $20 million thus far committed to this project and expended to date, which is more, I suspect, than any of the foreignflag ship owners have expended on development of a ship.

The ship can be expected to cost on the order of $800 million. It will be 250,000 gross registered tons. It will be a floating city operating out of U.S. ports.

If built and flagged here, it will be a taxpayer. It will provide 1,800 crew members, a major shot in the arm for the maritime manning industry.

Attached to our statement

Mr. JONES. May I interrupt to apologize, but that is the second bell on a vote on the House Floor. I am sure Mr. Taylor would like to vote, and so would I.

We will recess for 15 minutes and be right back. [Brief recess.]