[Congressional Record Volume 141, Number 164 (Monday, October 23, 1995)]
[Senate]
[Pages S15496-S15498]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BREAUX:
  S. 1354. A bill to approve and implement the OECD Shipbuilding Trade 
Agreement; to the Committee on Finance.


                  THE SHIPBUILDING TRADE AGREEMENT ACT

 Mr. BREAUX. Mr. President, I introduce legislation to approve 
and implement the Agreement Respecting Normal Competitive Conditions in 
the Commercial Shipbuilding and Repair Industry, also known as the OECD 
Shipbuilding Agreement. While not perfect, this agreement appears to be 
our last best chance to eliminate unfair subsidies, to counter 
injurious pricing policies, to reign in trade distorting export 
financing, and to institute an effective binding dispute settlement 
system for shipbuilding controversies. Because of this agreement, for 
the first time, U.S. shipyard workers will have safeguards against 
having to compete with continued funding from foreign treasuries.
  My involvement with the issue of unfair foreign shipbuilding 
practices relates to my State of Louisiana being one of the premier 
shipbuilding States in the country. Over 27,000 Louisiana jobs are 
impacted by constructing or repairing ships. As has been the case 
nationwide, Louisiana's shipbuilding employment has suffered 
significantly since the 1980's. This situation is due to U.S. defense 
downsizing and to unfair foreign shipbuilding practices. Since 1989, 
I've been actively working to eliminate unfair foreign shipbuilding 
practices and to restore the U.S. commercial shipbuilding industry.
  How did the United States get in this dilemma? From 1974 to 1987, 
worldwide overall demand for ocean going vessels declined 71 percent. 
During the same time span, United States merchant vessel construction 
dropped drastically from an average of 72 ships/year to an average of 
21 ships/year. Also during this period governments in all the major 
shipbuilding nations, with the exception of the United States, 
dramatically increased aid to their shipyards and their associated 
infrastructure with massive levels of subsidies in virtually every 
form.
  The U.S. Government, however, decided to unilaterally terminate 
commercial construction subsidies to U.S. yards. Instead, U.S. Defense 
shipbuilding increased. U.S. Defense shipbuilding construction rose 
from an average of 79 ships/year in the 1970's to an average of 95 
ships/year in the 1980's. The net result was a virtual abandonment by 
the large U.S. Defense yards to subsidized foreign yards of the 
international commercial shipbuilding market. In 10 years, the number 
of major U.S. shipyards producing only commercial ships declined from 
11 to 1.
  The end of the 1980's saw a Department of Defense reevaluation of the 
need for a 600-ship navy. It also saw the U.S. shipbuilding industry 
reevaluate its need to compete for commercial ship construction orders 
in a subsidized world market. Consequently, in June of 1989, the U.S. 
shipbuilding industry, 

[[Page S 15497]]
represented by the Shipbuilders Council of America, filed a claim for 
injurious unfair subsidies under section 301 of the U.S. trade laws 
against the major shipbuilding countries of the world.
  Later that year, however, U.S. Trade Ambassador Carla Hills, 
persuaded the industry that a better way to eliminate the foreign 
subsidies was through multilateral negotiations. Industry decided to 
give international negotiations a chance and therefore withdrew its 
section 301 claim. The 5-year OECD quest to eliminate shipbuilding 
subsidies had begun.
  From late 1989 to late 1994, the OECD negotiations were constantly on 
again and off again. During 1993, when the talks had seemingly 
collapsed, I introduced a bill in the Senate (S. 990) and Congressman 
Sam Gibbons introduced a bill in the House (H.R. 1402), that would have 
invoked significant sanctions against ships constructed in foreign 
subsidized yards when those ships called upon the United States. This 
legislation became unnecessary when the agreement was finally signed.
  From June 1989 until the present agreement was signed on December 21, 
1994, the U.S. objective and the industry's urgent request appeared to 
be straightforward: ``Eliminate subsidies and we can compete.'' When 
the Clinton administration came into office, to its credit, it proposed 
a shipyard revitalization plan. Assistant U.S. Trade Representative Don 
Phillips described the nature of the plan for the Senate Finance 
Committee Trade Subcommittee on November 18, 1993 when he said:

       Finally, this five-point program is a transitional program, 
     consistent with federal assistance to other industries 
     seeking to convert from defense to civilian markets. In 
     addition, it seeks to support, not undercut, the negotiations 
     that are currently underway in the OECD. In this regard, we 
     have made clear our intention to modify this program, as 
     appropriate, so that it would be consistent with the 
     provision of a multilateral agreement--if and when such an 
     agreement enters into force. (emphasis added).

  Now we have such an agreement, but the largest U.S. Defense shipyards 
don't want it because current U.S. transitional subsidies will need to 
be curbed, as well as additional future subsidies prohibited, in order 
to be consistent with the agreement. This is really the issue in a 
nutshell. We can talk about the Jones Act, we can talk about the 
trustworthiness of other countries, we can talk about the adequacy of 
enforcement mechanisms, but what it really seems to come down to for 
these big shipyards is whether or not we can keep our currently 
advantageous subsidies.
  In all the comments I have heard to date about this agreement, I have 
yet to hear of a scenario whereby U.S. industry is better off fighting 
unfair foreign shipbuilding practices without the agreement than it 
would be with the agreement. For example, this agreement will give us 
real tools to fight unfair French subsidies. It will allow us to 
counter unfair dumping of ships by Japan and Korea. It will finally 
plug the gap in existing U.S. trade laws that has cost so many American 
shipyard workers their jobs.
  The assertions that this agreement somehow puts the Jones Act 
domestic build provisions in jeopardy is discredited by our own Jones 
Act carriers who stand to lose the most under a faulty agreement. The 
largest Jones Act carriers, in fact, support the agreement and they 
clearly would not if this agreement hurt their interests--it does not. 
In addition, many of the new shipbuilding orders that have been placed 
at U.S. shipyards are for use in the Jones Act trade.
  It also seems that the optimism over the current success of our title 
XI financing program may be overstated. As I understand it, the new 
export orders associated with the current title XI program exist 
because our stepped-up title XI program is currently protected by a 
standstill clause in the OECD agreement. If we reject the agreement, we 
lose the standstill clause, and consequently it seems to reason that we 
will lose our current title XI advantage. While I recognize the need to 
conform our title XI program, I am willing to explore the continuation 
of current title XI terms, subject to reasonable due diligence 
negotiations, to the date that we implement the terms of the agreement.
  Unless we are prepared to win a long-term subsidies race with our 
competitors, I don't understand how we can reject this agreement. Not 
only is Congress faced with dire budgetary decisions, such as cutting 
over $450 billion from Medicare and Medicaid over the next 7 years, but 
the Department of Defense has also indicated that it will not fund 
commercial shipbuilding subsidies through its DOD accounts.
  Add heightened competition due to increasing world shipbuilding 
capacity and it seems to me, and history supports, that our competitors 
are very likely to match or exceed what little amounts we will be able 
to devote to title XI. It was estimated by the Shipbuilding Council in 
1993 that the top six subsidizing nations in the OECD were budgeting 
over $9 billion on average each year to assist their shipyards. We may 
then find ourselves in the same untenable situation that confronted our 
industry in 1981: No international subsidies disciplines, inadequate 
U.S. trade remedies, and no recourse for the U.S. commercial 
shipbuilding industry and its workers.
  Mr. President, we're all in the same boat, so to speak. However, 
before anyone attempts to scuttle this agreement to help revise our 
U.S. commercial shipbuilding industry, I'd like to redouble efforts 
with all members of the industry to see what we can do to close the 
remaining competitiveness gap. Our goal should be to couple the 
significant advantages of this agreement with genuine and creative 
improvements in U.S. shipbuilding competitiveness.
  With this in mind, I am introducing the Shipbuilding Trade Agreement 
Act. The text of this bill closely reflects an administration draft 
that we have attempted to improve and strengthen. It is a bipartisan 
work-in-progress bill composed of two titles. Title I contains 
``injurious pricing and countermeasures'' provisions that closely track 
current U.S. antidumping laws, while taking into account the unique 
nature of ship transactions. Title II contains ``other provisions'' 
including amendments to the Merchant Marine Act of 1936, repeal of the 
U.S. vessel repair statute for signatory countries, and a special 
monitoring provision to ensure foreign country compliance with the 
terms of the shipbuilding agreement.
  The House Ways and Means trade Subcommittee has already held a 
hearing on this agreement. I understand the subcommittee is currently 
making final revisions to the same USTR draft that we used and intends 
to introduce a bill in the House shortly. It is my hope that the House 
can move its bill quickly in order that both legislative bodies might 
pass a bill and send it to the President for signature before year-end. 
I have requested a full committee hearing on this Senate bill with the 
chairman of the Senate Finance Committee. Commerce Committee Surface 
Transportation and Merchant Marine Subcommittee Chairman Trent Lott has 
also indicated interest in holding a hearing on the agreement.
  In closing, we stand before a window of opportunity for the U.S. 
commercial shipbuilding industry. The $265 billion commercial 
shipbuilding market is fast approaching its cyclical peak. I am hopeful 
that we will seize this moment and implement this agreement. It may be 
our best and only chance to end foreign shipbuilding subsidies and 
finally five our workers and yards the level playing field for which 
they have asked, and deserved, for too long.
  I also ask unanimous consent that a copy of the October 19, 1995, 
Journal of Commerce editorial supporting the OECD Shipbuilding 
Agreement be included in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              [From the Journal of Commerce, Oct. 19, 1995

                           End Ship Subsidies

       Government subsidies have been the mainstay of foreign 
     shipbuilders for decades. That has been a good deal for 
     companies that buy ships but a burden for taxpayers who 
     underwrite the handouts, and a problem for unsubsidized 
     shipyards, including those in the United States.
       Much of this would change under a pending global agreement, 
     which would end most subsidies and give U.S. shipbuilders a 
     better chance to compete. But the agreement is languishing in 
     Congress, a victim mainly of political concerns. After more 
     than six years spent negotiating this deal, lawmakers would 
     be foolish to let it unravel over partisan sniping. Congress 
     should approve it, and soon.

[[Page S 15498]]

       Japan, Korea and Europe dominate the world shipbuilding 
     market, and for years their governments have showered them 
     with financial support. The United States, which ended its 
     direct subsidies in 1981, has been trying for six years to 
     stop the foreign handouts. A deal completed in 1994 would 
     largely do that, and it is scheduled to take effect Jan. 1 
     but only if the major shipbuilding nations ratify it. So far, 
     the United States has not, and the prospects for approval are 
     uncertain.
       Most of the problems are purely political. The shipbuilding 
     agreement's strongest supporter, Rep. Sam Gibbons, is the 
     former Democratic chairman of the House Ways and Means 
     Committee. The new Republican chairman, Rep. Bill Archer, has 
     been cool toward an agreement viewed largely as a Democratic 
     initiative--even though, as a Republican, Mr. Archer should 
     be stumping for any plan that ends government subsidies. 
     Indeed, Mr. Archer might eventually back the agreement, but 
     only if influential Democrats support one of his bills. This 
     is the usual Washington game of political trade-offs, but if 
     a deal isn't struck soon, the pact may not be ratified by the 
     January deadline.
       The other problem is rooted in the White House. The Clinton 
     administration negotiated the shipbuilding agreement and 
     supports it publicly. But several big shipyards oppose it, as 
     do their labor unions. Mr. Clinton, anxious to rebuild his 
     labor base in time for the election, has been careful not to 
     offend unions this year, so the White House hasn't been 
     pushing Congress very hard.
       Mr. Clinton and Republican leaders would do well to look at 
     the larger issue here. Like farming and steel, shipbuilding 
     has been one of the most distorted of international 
     industries. Decisions on where to build ships have been based 
     as much on government subsidies as on quality and 
     workmanship. This has hurt U.S. shipyards, and the agreement 
     would begin to change that.
       Ironically, the biggest U.S. shipyards continue to fight 
     the pact, arguing, instead, for new direct subsidies to help 
     them make up for lost time. That is stunningly shortsighted. 
     Any new subsidy plan by the United states would be matched 
     instantly by other shipbuilding nations. Indeed, other 
     countries most likely would top any U.S. subsidy, as they 
     have before. That would leave U.S. shipbuilders in the same 
     position they've been if for the last 15 years. For that 
     reason, many smaller shipyards, including those with more 
     commercial experience, are supporting the agreement.
       Foreign shipyards, admittedly, have a leg up on their U.S. 
     competitors because of existing subsidies, some of which will 
     not be completely phased out until 1999. But U.S. yards have 
     had their own advantages over the years, including lucrative 
     military work and a government-created monopoly on building 
     ships for the U.S. domestic trades. In fact, commercial ship 
     orders actually have been increasingly lately at U.S. yards. 
     A generous government loan guarantee program has spurred the 
     new orders, and while the program will be scaled back under 
     the new pact, it has given U.S. yards a foot in the door with 
     commercial buyers.
       No trade agreement can ever instantly level the competitive 
     field between nations. Still, the shipbuilding pact gets 
     other countries off the subsidy treadmill and restores some 
     sense to the global market. Leaders of both parties should 
     put aside politics and get this deal done.
                                 ______