No Money, No Ship Subsidy

December 06, 1993

Before the cheering starts, backers of hefty new subsidies to United States shipping lines had better read the fine print of a bill passed recently by the House. There's no money to pay for the $1.2 billion, 10-year handout.

Yes, the maritime subsidy bill surmounted a big hurdle. Yes, the program would keep a portion of this country's small ocean-going fleet in business. Yes, the bill contains a few provisions to prod the industry to cut overhead costs and improve efficiency. But the bill is flat-out stalled in the Senate until someone comes up with a funding source.

What was approved by the House in a lopsided vote marked the first step aimed at changing the maritime subsidy system in over 20 years. It would cut the per-ship subsidy from more than $3 million to $2.3 million in the first year and to $2.1 million thereafter. The old subsidy law expires in 1997.

There are some welcome changes in the House-approved bill. The lower subsidy rate would put heavy pressure on shipping lines and maritime unions to find ways to cut costs in order to compete with overseas rivals. Even if U.S. container ships simply reduced the size of their crews and lowered wages so they were comparable to other developed countries, there would be substantial savings.

Shipyards that devise a production-line, standardized design for ships would qualify for big subsidy payments. That, too, should cut costs dramatically. And under certain conditions, foreign-built vessels would get subsidies, for instance, if the owner agrees to build a second ship in a U.S. yard.

The bill is less generous than what the shipping industry sought but a far cry from the kind of sweeping overhaul of shipping regulations, taxes and subsidies at the heart of the problem. While this measure might prod some shippers in the direction of greater operating efficiencies to meet international competition, the subsidies might encourage others to continue the status quo.

That won't matter, though, if proponents can't agree on a funding source, such as a tax on containers or on cruise-line passengers. The Clinton administration has finally recognized that subsidies cannot be cut completely without crushing what's left of our ocean-going shipping industry. But at the moment there's no money to pay for these government handouts -- an average of $120 million a year. Until money is found, the shipping subsidy will remain in drydock on Capitol Hill.

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