US Shipping Industry Faces Rough Seas in Washington

THE monopoly- and subsidy-pampered shipping industry had better batten down the hatches. Free-market forces are building on the horizon.

Under way in Washington are efforts to scuttle laws that dictate who may build, own, and operate the merchant and passenger ships that ply United States waters. And federal subsidies that allow US-flag ships to compete in international waters could run aground as House Republicans concentrate on balancing the budget. All of this alarms those who benefit from the status quo.

Tampering with the fleet's protections will "take away a lot of jobs for American mariners" and harm military readiness, warns Daniel Duncan, a spokesman for the Seafarers International Union (SIU).

But the shipping industry's century-old arguments about employment and national security no longer float, skeptics say. They insist that the dwindling US fleet has few shipboard jobs - perhaps a few thousands - left to protect. Competition will create more jobs throughout the economy, they say, and save the Treasury $21 billion over seven years.

They also scoff at the notion that a cargo fleet is vital to resupply a US war effort. "The laughable part of that is, when the Gulf war came, only six of those ships went directly into the war," says Rob Quartel, a former maritime regulator who wants to harpoon a school of shipping laws.

Among the developments both sides are watching:

*The House may soon vote on the Ocean Shipping Reform Act of 1995. This bill would abolish the Federal Maritime Commission, whose role in regulating international shipping amounts to helping a cartel of mostly foreign companies maintain artificially high prices, Mr. Quartel says. If the FMC sinks beneath the waves, rate wars could follow.

*The Marine Security Act has advanced in the Senate but faces entrenched opposition by budget-minded Republicans in the House. The bill would give millions of dollars in subsidies to the international operations of a single US-flag carrier, giant Sea-Land to help it compete with foreign carriers. Other US-flag carriers, already subsidized under a law that expires in 1997, hope to be added to the MSA by then, Quartel says.

*By year end, the Coast Guard will review its new procedure for doling out the "z-card," a document enabling merchant mariners to work. For 58 years, the Coast Guard granted them only to bearers of "letters of commitment" from an employer. But in a blow to the unions that control who gets those letters, last year the Coast Guard began giving z-cards to anyone for a nominal fee.

SIU official Joseph Sacco says the new system is "frustrating" because so many people are buying z-cards who have no hope of getting a job. But Coast Guard spokeswoman Justine Bunnell says the old way was "not extremely valid" because mariners rarely took jobs with the companies that provided the letters.

*Next year, Congress will review the shipping industry's most sacred cow - the so-called Jones Act. The 1920 law limits shipping between US ports to vessels built, owned, and operated by Americans. An even-older law with the same stipulations for passenger traffic is also targeted.

Leading the attack is Quartel, president of the Jones Act Reform Coalition, which he says speaks for 300,000 businesses. He charges that the Jones Act makes it more expensive to ship a cargo to Maine from Georgia than from Brazil. It would actually be cheaper to pay American mariners not to work than to continue present job subsidies, he adds.

One coalition member is the port of Corpus Christi, Texas. Were it not for the Jones Act, says executive director John LaRue, Corpus Christi would be a natural transit point for free-trade cargo bound for Monterrey, Mexico, from other US ports. "We know we've lost business," he says.

US shipbuilders, whose products cost double or more what foreign-built ships cost, want to keep the law that preserves the domestic market for themselves. "We definitely support continuation of the Jones Act, because we hope to sell some Jones Act ships," says Jerri Dickseski, a spokeswoman for the Newport News Shipbuilding division of Tenneco Inc.

Quartel, though, says prices for a US-built ship are so high that there are few customers. The US-flag fleet has shrunk from 2,500 vessels of larger than 1,000 tons in 1945 to just 128 today.

As for passenger ships, the US has but two. At the port of Houston, which leads the US in foreign cargo, officials are studying becoming a cruise-ship hub. "We're certainly interested in what happens" to the buy-American law for passenger ships, says Pat Younger, the port's legislative affairs manager.

Congress may soon allow export of Alaskan oil for the first time, thereby getting a higher price, but only on tankers built, owned, and crewed by Americans.