The Undebatable Answer!

Don’t you just love a good debate? Bill Gray, President of Gray Maritime Co., put together an article for the November issue of Marine Log with the title, “Build American”, and Fred Harris, President of General Dynamics’ NASSCO, forthwith issued a telling rebuttal.

So did H. Clayton Cook, Jr., the former General Counsel of MarAd (1970 to 1973). When given the opportunity to read and re-read these opinion pieces, it becomes quite easy to understand the rationale behind the opposing viewpoints.

Bill Gray, for example, stated that “Despite the ‘championing of short sea shipping’ on ‘America’s Deep Blue Highway’ by former MarAd Administrators Bill Shubert and Sean Connaughton, nothing has been achieved in this direction for one simple reason. America has no suitable short sea Roll On/Roll Off (Ro-Ro) ships because of the costly Build American provision in the 1920 Jones Act requiring domestic cargo to be moved only on U.S.-built ships. Large ship shipyards in this country cannot build ships at reasonable prices comparable to Asia or Europe that would make it economically possible to compete with road and rail traffic along our often overcrowded coastal highways and railroads.”

To say that the “one simple reason”why nothing has been achieved is because the Jones Act prevents suitable Ro-Ro vessels from being built in this country is not really the whole truth. Ro/Ro vessels won’t be the catalyst for short sea shipping no matter where they’re built. But we’ll get to that later.

Mr. Gray continues. “Returning to the role of larger U.S. shipyards, I have watched with great sorrow what has happened in this country. During WWII, Admiral ‘Jerry’ Land with Henry Kaiser and Edward Deming produced what Winston Churchill called the salvation of Europe by building nearly 6,000 merchant ships to help defeat Hitler. When these U.S.-developed ship manufacturing techniques were exported to Europe and Asia, I saw our major shipyards ‘resting on their oars’ for the last 60 years. The result was that our seagoing merchant fleet – once the largest in the world – numbering in the high thousands after WWII, shrunk to less than 200 vessels despite Jones Act protection and Construction Differential Subsidies (CDS), Title XI and other international fleet subsidies.”

Sad but true. The whole story of what happened to our enormous – and magnificent – merchant fleet is given in Antony Sutton’s “National Suicide”. Read it.

Mr. Gray goes on to cite MIT’s Professor Ernst Frankel who holds that “American shipyard workers are probably as good as any other industry’s, but … productivity lags far behind leading countries … the reason is lack of effective workplace organization and management …”

Professor Frankel no doubt was repeating an assessment made back in the summer of 2004 by Washington attorney Mark Shlefer. “It’s not that the American workmen don’t work as hard,” he said, “it’s the way management works. It’s a management failure.”

That’s nonsense. Didn’t we just read about the incredible shipbuilding programs organized and managed by Admiral Land, Henry J. and Ed Deming? Are we supposed to believe that a nation that turned out some 6,000 cargo ships in five years lacks organization and management talent?

Fred Harris is quick to point out that Bill Gray’s opinion piece “asserts the claim that short sea shipping will not become reality until the U.S.-build requirement of the Jones Act is abolished. With this statement, Mr. Gray misrepresents the facts and neglects economic and national security implications by failing to mention that the Jones Act, the long-established U.S. maritime law, is no more preferential to domestic manufacturing capacity than the foreign government shipbuilding subsidies in Asia an Europe to which Mr. Gray would like to see more American jobs outsourced.”

Now that’s where Mr. Gray is off base. Way off base. We’ve “outsourced” millions of jobs already, and this kind of a hooray-for-me-and-to-heck-with-you attitude on the part of business execs and politicians has brought this country to the brink of disaster. As bad as the Wall Street gangsters and the country’s banksters are, the real cause of this nation’s economic tailspin is the prevailing thinking that if you can’t beat ’em (the foreign manufacturers), join ’em. So they swapped whole factories and millions and millions of jobs – for destitution. Nice guys.

If those millions of jobless folks were still gainfully employed instead of cooling their heels in unemployment lines in desperate attempts to pay bills and feed their kids, they wouldn’t be forced to deal with foreclosures, bankruptcies and credit card woes. Those millions of jobs are gone now. We’ll never get them back. The Jones Act is about all we have left.

“People are misleading themselves if they believe short sea shipping would blossom if they could only use foreign tonnage. You have to look at the unit cost,” said Michael Roberts of Crowley Liner Services. Mr. Roberts argued that the capital cost of a ship does not factor significantly into the price of transportation. That cost is spread over several thousand units a year for a 25-year projected life of the ship. A short sea carrier could buy a comparable ship for half the price overseas, and still it would not make a real difference.”

Clay Cook said pretty much the same thing. “I am generally skeptical when someone states that a particular Jones Act service can’t be undertaken because the vessel’s U.S. shipyard price is some multiple of the vessel’s price at some foreign location. I wonder about the statement’s relevance. Isn’t the test whether the vessel’s ‘fully financed cost’ will fit into a business plan that will allow the project too proceed and provide acceptable returns to the investor?” he asks.

A report released by the Center for Commercial Deployment of Transportation Technologies states that the cost of a U.S.-built vessel represents only 14% of the total operational costs for short sea service on a per-container basis. 26% is spent on fuel, crewing, insurance, maintenance, pilot’s tugs, and other miscellaneous. The remaining 60% goes to terminal operations, inland transportation, longshoremen and administration costs. That 14% is what Mr. Roberts said is not significant.

The real question, according to Mr. Cook, is “whether Jones Act shipbuilders can find a way to build cost-effective vessels for the short sea trade.” Cost-effective vessels? That’s what we’ve been offering for the past ten years. Our patented design is the only way short sea shipping can succeed.