Europeans Declare OECD Shipbuilding Agreement "DEAD"
The massive expansion of shipbuilding capacity in South Korea, followed by aggressive dumping practices and the bailout by the International Monetary Fund of South Korean shipyards have forced European shipbuilders to recognize that the OECD Shipbuilding Agreement will do nothing to solve the international shipbuilding crisis. This has been the position of the American Shipbuilding Association (ASA) since the agreement was negotiated in 1994.
European shipbuilders have now joined American shipbuilders in recognizing that the prices of new ships being quoted by South Korean yards is less than the international price of materials for construction of such ships. In response to South Korean "unrealistic" prices, Thorkil Christensen, director of the Association of Danish Shipbuilders, recently stated:
The OECD agreement would not in thepresent situation solve the problems of overcapacity. Time has run out for the OECD. What we need is an international agreement that limits shipbuilding activity, and which is not just aimed at one country but which is aimed at the large shipbuilding nations."
The targeted country to which he refers is the United States of America. In 1981, the U.S. Government unilaterally terminated its commercial shipbuilding subsidy program in the face of increasing foreign subsidy practices. This led to the collapse of commercial shipbuilding in the 1980’s. While today the U.S. holds only one percent of the world commercial market, the OECD shipbuilding agreement was drafted to target the Jones Act, Passenger Services Act, and military shipbuilding programs of American shipbuilders, rather than the massive subsidy and dumping practices of those foreign governments which signed the agreement.
In March, Spain proposed to the Committee of European Shipbuilders’ Associations that the European Union adopt a new international pact that would include shipbuilding capacity limits as a substitute "for the failed OECD Agreement". These recommendations are expected to be considered in April by the Council of EU Industry Ministers.
While Europe has declared the OECD Shipbuilding Agreement "dead", American shipbuilders are concerned that efforts will again be undertaken by some in the United States Senate to implement the agreement anyway. Such action would mean that the United States would once again, as in 1981, unilaterally surrender our remaining domestic commercial shipbuilding market to foreign shipbuilders. This would in turn further weaken the defense shipbuilding industrial base of the United States, and our ability to project sea power around the globe. The question is a puzzling "why"?
Administration Proposes Waiver of U.S-build for Food Aid Transport
During recent testimony before the Merchant Marine panel of the House Armed Services Committee, Maritime Administrator Clyde Hart revealed the Administration’s proposal to waive the three-year waiting period for foreign-built vessels to be eligible to carry government preference cargoes. The proposed Administration waiver would allow foreign-built vessels immediate access to the transport of government cargo.
In a letter to the House Armed Services Committee, Cynthia L. Brown, ASA President, stated the industry’s opposition to the proposed waiver. "The purpose of a waiting period," said Brown, "is to give preference to U.S.-built ships." The proposed waiver, however, will remove that preference when U.S. shipyards are actively pursuing commercial contracts during historically low rates of naval production. "Commercial ship construction is essential to sustaining our highly skilled work force; to reducing the cost of ships for the U.S. Navy, and; in helping to sustain the defense shipbuilding industrial base," Brown said.
"The waiver’s timing appears to be aimed at allowing some U.S. companies the opportunity to take advantage of the unrealistically low ship prices currently being quoted by Asian shipyards," she said. According to Brown, the financial crisis of Asia has led to ships being dumped on the international market. "These dumping practices, coupled with the currency exchange rate of Asian currencies against the dollar, have placed American shipbuilders, and all other shipbuilders for that matter, at a severe competitive disadvantage. Anti-competitive dumping practices should be discouraged rather than rewarded by the U.S. government," said Brown.
The Maritime Administration states that such a waiver would allow new, more efficient tonnage to be added to the trade. However, by the end of this year, Hvide Marine of Florida will have taken delivery of five U.S.-built double-hulled tankers that are ideally suited for transporting preference cargo. Brown noted that, "these ships are extremely efficient in the carriage of bulk commodities. This waiver would place these U.S.-built ships at a competitive disadvantage with dumped Asian ships; it would preclude other newly American-built ships from entering the trade, and; it would result in fewer ships being ordered from American shipyards." "U.S. Government food aid should be delivered in American-built ships," said Brown.
Transportation Panels Review OPA 90
Several Members of Congress including Herb Bateman (R-VA), Robert Borski (D-PA), Gene Taylor (D-MS), Steve Horn (R-CA), and Don Sherwood (R-PA), questioned the conspicuous absence of shipbuilders and a discussion on the double hull provisions of the Oil Pollution Act of 1990 (OPA 90) at the March 24th joint hearing of the Transportation Subcommittees on Coast Guard and Maritime Transportation and Water Resources and the Environment. Not by coincidence, the hearing was held exactly 10 years after the catastrophic Exxon Valdez oil spill devastated the pristine coasts of Alaska’s Prince William Sound.
The purpose of the hearing was to review the performance of OPA 90. The requirement for double-hulls and the phase-out of single-hulled ships was the most important oil spill prevention mechanism in the law. Yet, the overwhelming majority of invited witnesses from the Administration and the oil transportation industries were asked to limit their testimony to other OPA 90 provisions such as liability. Only one witness, Sally Lentz, representing the environmental community, highlighted the importance of the double-hull provisions to future oil spill prevention.
Congressman Borski asked the Commandant of the Coast Guard, James Loy, if he anticipates any changes to the phase-out schedule. The Commandant said he does not anticipate any changes. "Aren’t we better off with double-hulls?" asked Borski. "Absolutely," said Loy. Representatives Taylor, Horn, and Sherwood all reiterated the importance of protecting our marine environment by strictly enforcing the double hull provisions of OPA 90.
Congressman Bateman remarked that he was puzzled that a representative from the shipbuilding industry was not asked to testify on the phase-out schedule and double hull requirement of OPA 90. "Additionally, Hvide Marine, Inc. has undertaken the enormous economic investment of purchasing five double-hulled tankers from Newport News Shipbuilding, in my district, in compliance with OPA 90 for the Jones Act trade. Yet, I don’t see a representative from Hvide Marine here today," said Bateman.
In reaction to the concerns raised by members of the panels, Wayne Gilchrest (R-MD), Chairman of the Coast Guard Subcommittee, promised to hold another hearing that would review the compliance of oil companies with the double-hulled provisions of OPA 90.
ASA Participates in EPA Shipyard Forum
On March 25-26, 1999 the Environmental Protection Agency (EPA) hosted the first-of-its-kind environmental forum for the shipyard industry. Cynthia L. Brown, ASA President, spoke on behalf of the member shipyards, and reiterated the commitment of the ASA CEOs to work with EPA as "Partners in Pursuit of Pollution Prevention," and "to build ships in a manner that protects the environment." She highlighted the fact that "our industry cares about the environment and that is why we share one common goal - - cooperation with EPA rather than confrontation." She further stated that "the commitment to that goal is best illustrated by the fact that our industry has never sued nor threatened to sue EPA." She concluded her remarks by reiterating the desire of the ASA member shipyards to develop a partnership with EPA that will serve as a model for other industries to follow.
The Forum afforded the shipbuilding industry an opportunity to present virtual reality briefings of the industry so that the EPA representatives who were in attendance, and who represented each of the Directorates within EPA, would more fully appreciate the unique characteristics of the industry. A recurring message of the briefings was the need to identify and resolve environmental issues in a way that protects the environment while simultaneously reducing costs and improving productivity of the shipyards. The Forum also laid the foundation for shipyard participation in the EPA Sustainable Industry Program. That program has the flexibility to creatively "fast track" resolution of environmental issues that confront an industry.
At the conclusion of the Forum, Michael Stahl, Deputy Assistant Administrator for the Office of Enforcement and Compliance Assurance, expressed appreciation for the thoroughness of the industry presentations, and expressed the belief that EPA would work with the industry to facilitate resolution of environmental issues at the national and regional levels.
By every measure of merit the Forum was a success, and should serve as a springboard for forging a lasting partnership with EPA that will foster a flexibility that will permit innovative solutions that are financially sound and protect the environment.
Industry News
BIW Launches DDG 81
Bath Iron Works (BIW), Bath, ME, recently launched the WINSTON S. CHURCHILL (DDG 81). It is the 18th ARLEIGH BURKE Class AEGIS guided missile destroyer built by BIW for the U.S. Navy.
U.S. Navy Commissions DDG 78
The U.S. Navy recently commissioned the USS PORTER (DDG 78) AEGIS guided missile destroyer built by Ingalls Shipbuilding, Pascagoula, MS, in Port Canaveral, FL. The ship is the 12th destroyer built by Ingalls Shipbuilding.
NNS Awarded Contract Modification for CVN 75
The U.S. Navy recently awarded Newport News Shipbuilding, Newport News, VA, a $30 million addition to a contract for work on the nuclear-powered aircraft carrier Harry S. Truman (CVN 75).
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