[Congressional Record Volume 143, Number 160 (Thursday, November 13, 1997)]
[Senate]
[Pages S12649-S12651]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      OECD SHIPBUILDING AGREEMENT

 Mr. BREAUX. Mr. President, I strongly support passage of S. 
1216, legislation to implement the OECD Shipbuilding Agreement. S. 1216 
was favorably reported out of both the Senate Finance and Commerce 
Committees.
  The issue of unfair foreign shipbuilding practices is very important 
to my State. Louisiana is one of the premier shipbuilding states in the 
country. Over 27,000 Louisiana jobs are impacted by constructing or 
repairing ships. We have almost every conceivable type and size 
shipyard, from a huge primarily defense oriented yard to smaller and 
medium sized strictly commercial yards. My interest in this issue spans 
the entire range of shipbuilding.
  I believe it's important to state again for the record the historical 
context that surrounds the OECD Shipbuilding agreement and this 
implementing legislation. If nothing else, we should learn from 
history. 1974-1987, saw worldwide overall demand for ocean going 
vessels decline 71%. United States merchant vessel construction went 
from an average of 72 ships/year in the 1970's to an average of 21 
ships/year in the 1980's. During this period, governments in all the 
shipbuilding nations, with the exception of the United States, 
dramatically stepped up aid to their shipyards with massive levels of 
subsidies in virtually every form.
  In 1981, the U.S. government unilaterally terminated commercial 
construction subsidies to U.S. yards. At

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the same time, U.S. defense shipbuilding increased in an effort to 
reach a 600 ship Navy. U.S. defense shipbuilding construction went from 
an average of 79 ships/year in the 1970's to an average of 95 ships/
year in the 1980's. U.S. international commercial shipbuilding, on the 
other hand, was virtually abandoned to subsidized foreign yards.
  The end of the 1980's and the end of the ``Cold War'' saw a 
Department of Defense reevaluation of the need for a 600 ship Navy. The 
U.S. shipbuilding industry was consequently forced to reevaluate its 
need to secure commercial ship construction orders in order to stay in 
business. In June of 1989, the U.S. shipbuilding industry, represented 
at that time by the ``Shipbuilders Council of America'', filed a 
section 301 claim against the major shipbuilding countries of the world 
for unfair subsidies and practices that were injuring the U.S. 
industry.
  Later that year, however, U.S. Trade Ambassador Carla Hills, 
convinced the industry that a better, more effective way to eliminate 
the unfair foreign subsidies and practices was through multilateral 
negotiations. The industry decided to give international negotiations a 
chance and therefore withdrew its Section 301 claim. The U.S. then 
encouraged the responsible trading partners to enter into negotiations 
and the five year OECD quest to negotiate the elimination of trade 
distorting shipbuilding practices had begun.
  From late 1989 to late 1994, the OECD negotiations were on and off 
again. During 1993, when the talks had seemingly collapsed, I 
introduced a bill in the Senate (S. 990) and then Congressman Sam 
Gibbons introduced a bill in the House (H.R. 1402), that would have 
unilaterally triggered significant sanctions against ships constructed 
in foreign subsidized yards when those ships called upon the United 
States. Despite prompting a flood of domestic opposition from those 
fearing the bills would start a trade war, the introduction of these 
bills did help re-ignite the stalled OECD talks.
  From June 1989 until the present agreement was signed on December 21, 
1994, the U.S. objective and the U.S. industry's urgent request 
appeared to be simple: ``Eliminate subsidies and we can compete.'' When 
the Clinton administration came into office, to its credit, it proposed 
a ``Shipyard Revitalization Plan.'' A main feature of this plan was new 
Title XI financing for commercial export orders.
  In a Senate Finance Committee, Trade Subcommittee hearing on November 
18, 1993, a year before the agreement was signed, Assistant U.S.T.R. 
Don Phillips described the plan and its relationship to the OECD 
Agreement as follows:

       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).

  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 shipbuilding practices without the agreement than it is with the 
agreement. The ``loopholes'' referred to by opponents will become the 
rule rather than limited and temporary exceptions. The Congress is not 
prepared in this time of fiscal restraint to match their subsidies with 
ours.
  Concerns about the agreement putting the Jones Act domestic build 
requirement at risk are contradicted by the fact that the largest 
``Jones Act'' carriers in the country, who avidly support this 
agreement. They say this implementing bill strengthens the Jones Act. 
If that protection were not enough, we added language providing for an 
expedited procedure for U.S. withdrawal from the agreement if the Jones 
Act were perceived to be undermined.
  Opponents argue that new export orders associated with the current 
U.S. title XI export financing program will be lost under the 
agreement. These orders exist, however, because a title XI financing 
advantage is in place due to the standstill clause in the OECD 
agreement. If we reject the agreement, we lose the standstill 
clause, and consequently we lose our current title XI advantage. 
Considering the European Union routinely provides billions of dollars 
of direct shipyard aid each year and absent this agreement will soon 
redirect and increase this aid, matching our U.S. financing program 
will require minimal EU effort and change.

  If this debate is really about competing for international export 
orders, and unless we are prepared to enter into a subsidies race with 
our competitors, I don't see how we can reject this agreement. Not only 
is Congress continually faced with dire budgetary decisions, such as 
cutting Medicare and Medicaid, but the Department of Defense has 
indicated that it is reluctant and unwilling to fund commercial 
shipbuilding subsidies through its DOD accounts.
  Greater competition from our trading partners due to increasing world 
shipbuilding capacity and the inevitable decrease in demand for new 
oceangoing vessels, will lead us to the same untenable situation that 
confronted our industry in 1981 if we do not approve this agreement. We 
won't have adequate trade laws to protect our industry and we won't 
have enough subsidies to successfully compete for international orders.
  Last year, the full House of Representatives considered implementing 
legislation for the OECD Shipbuilding Agreement. A substitute amendment 
offered by Congressman Herb Bateman passed the Chamber, but was 
inconsistent with the agreement. The Senate failed to consider an 
implementing bill before adjournment though we made relentless efforts 
to address the concerns of opponents and engage them in constructive 
dialog.
  Every time opponents have raised an objection, we have tried to 
address it in a manner consistent with the agreement.
  First, when they said they needed explicit clarification that the 
United States would not under any circumstances change its Jones Act, 
we did it and more.
  Second, when they said they needed explicit clarification that our 
national security interests would be protected and that the definitions 
of ``defense features'' and ``military reserve vessels'' would be 
decided by the Secretary of Defense, we did it and more.
  Third, when they said they needed 30 additional months of current 
Title XI financing terms to cover projects close to having their 
applications in, we did it and more.
  In fact, S. 1216, as amended by Senator Lott and myself, meets every 
legitimate concern raised by opponents. I am including a detailed 
comparison of this bill with the issues raised in the Bateman 
amendment.
  This agreement is not perfect because there is no such thing as a 
perfect agreement. To overlook its significant features, such as 
elimination of foreign subsidies while ensuring that the U.S. is the 
only country of all the signatories able to reserve its domestic market 
from foreign competition, provides an inaccurate view at best.
  In conclusion, Mr. Chairman, there are no opponents to the U.S. 
shipbuilding and broader maritime industry in this debate today. We 
simply have different members with different constituencies and 
different priorities. We must decide as a Senate, however, if we want 
to provide our own U.S. commercial shipyards the right and ability to 
compete on a level playing field for international work.
  I join Senator Lott in promoting the entire U.S. shipbuilding 
industry. America needs both a competitive U.S. commercial shipbuilding 
industry as well as a strong defense shipbuilding industry. We can have 
both if we enact the OECD Shipbuilding Agreement legislation. I look 
forward to a vote on this agreement in the U.S. Senate before March 1, 
1998.
  The material follows:

  How S. 1216 (as amended by Senate Finance and Commerce Committees) 
       compares to H.R. 2754 (as amended by Congressman Bateman)


                                Title XI

       S. 1216 includes Title XI transition language more 
     favorable than the Bateman Amendment. Under S. 1216, the U.S. 
     would be able to keep its current (25-year/87.5% of the 
     project cost) Title XI financing through January 1, 2001. The 
     Bateman Amendment extended such terms through January 1, 
     1999.
       S. 1216, like the Bateman Amendment, provides a full three-
     year delivery ``grace period'' for ships that receive 25-year 
     Title XI

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     financing. Therefore under S. 1216, such ships would have to 
     be delivered no later than January 1, 2004. S. 1216, like the 
     Bateman Amendment, allows for further extending the delivery 
     date in the case of ``unusual circumstances'' (defined the 
     same as the Bateman Amendment).
       S. 1216 includes a provision not in the Bateman Amendment 
     that allows the U.S. to make the current favorable terms of 
     the Title XI program available to U. S shipyards when 
     competing against bids of subsidized yards in countries that 
     are not signatories to the OECD Agreement. This provision: 
     (1) provides an incentive for such nations to join the OECD 
     Shipbuilding Agreement and, (2) protects U.S. shipyards from 
     unfair competition from subsidized yards in nations that fail 
     to join the Agreement.


                               Jones Act

       S. 1216 provides extraordinary protections for the Jones 
     Act that fully meet the objectives of the Bateman Amendment.
       S. 1216 states unequivocally that US coastwise laws are 
     completely unaffected by this Agreement. This provision is 
     virtually identical to the Bateman Amendment.
       S. 1216 states that nothing in this Agreement shall 
     undermine ``the operation or administration of our coastwise 
     laws''. This provision provides a stronger statement of 
     protection for the Jones Act than the Bateman Amendment.
       S. 1216 provides a legislative procedure (Joint Resolution) 
     for Congress to initiate US withdrawal from the Agreement if, 
     ``responsive measures'' to U.S. Jones Act construction are 
     taken. This process provides an equivalent alternative to the 
     Bateman Amendment prohibition against counter-measures being 
     filed against the US and which is consistent with the 
     agreement.
       Responsive countermeasures against the Jones Act are 
     a highly theoretical event. Under the agreement, 
     responsive countermeasures are authorized only when 
     relevant Jones Act construction ``significantly upsets the 
     balance of rights and obligations of the agreement.'' Even 
     the most optimistic projections indicate that relevant 
     U.S. Jones Act construction will represent only a fraction 
     of 1% of the global shipbuilding market. Furthermore, the 
     withdrawal provision in S. 1216 provides a disincentive 
     for a nation to pursue a countermeasure against the U.S. 
     since a successful action would result in U.S. withdrawal 
     from the Agreement. U.S withdrawal from the Agreement 
     would not only moot the countermeasure, it would terminate 
     the Agreement altogether.
       Finally in a worst case scenario, even if a Jones Act 
     countermeasure were to be authorized and for some reason the 
     US did not withdraw from the agreement, there would still be 
     no real consequence to the U.S. Jones Act shipbuilding 
     industry. Under the agreement, the only countermeasure 
     allowable without the consent of the US would be to offset an 
     equivalent portion of the complaining party's ``Jones Act'' 
     market from US bidding. Because the global market is so vast 
     (2000 commercial ship starts annually), providing so many 
     alternative contracts to U.S. yards, the relatively tiny 
     number of contracts that might be restricted by a 
     countermeasure would not significantly affect U.S. yards. 
     Additionally, the bill would prevent any countermeasures from 
     being taken against other WTO sectors.


               protection of national security interests

       S. 1216 provides virtually identical language to that in 
     the Bateman Amendment for the purposes of protecting our 
     essential security interests.
       S. 1216 preserves the prerogatives of the Secretary of 
     Defense to exempt from the Agreement--``military vessels'', 
     ``military reserve vessels'' and anything he deems to be in 
     the ``essential security interests'' of the United States.
       S. 1216 allows the Secretary of Defense to exempt all or 
     part of a ship on which National Defense Features are 
     installed, on a case by case basis.
       The bill would not enable other OECD party nations to 
     question U.S. authority to protect its essential security 
     interests.
       In a May 29, 1996, letter to the Chairman of the House 
     Committee on National Security, the Department of Defense 
     stated definitively; ``The Agreement will not adversely 
     effect our national security.''


                            other provisions

       S. 1216 includes the same conditions for US withdrawal from 
     the Agreement, and the same provisions for the snap-back of 
     US laws changed by this legislation, as the Bateman 
     Amendment.
       Just like the Bateman Amendment, S. 1216 provides an 
     effective mechanism for ``third party'' dumping petitions. 
     The provision in S. 1216 conforms to the existing US anti-
     dumping code. S.1216 requires that anti-dumping actions be 
     ``consistent with the terms of the Shipbuilding Agreement''.
       S. 1216 includes several provisions that would 
     substantially strengthen our monitoring and enforcement 
     capabilities under the Agreement. USTR would be directed to 
     establish a comprehensive interagency compliance monitoring 
     program in conjunction with the U.S. shipbuilding industry 
     and the maritime labor community, and to report to Congress 
     annually.
       S. 1216 further directs the US Government to vigorously 
     pursue enforcement against noncompliance by other nations. 
     These improvements are beyond the scope of the Bateman 
     Amendment.
       S. 1216 includes provisions that substantially enhance our 
     ability to secure the accession to the Agreement of other 
     shipbuilding countries including, specifically, Australia, 
     Brazil, India, the Peoples Republic of China, Poland, 
     Romania, Singapore the Russian Federation, and Ukraine. This 
     improvement goes beyond the scope of the Bateman 
     Amendment.

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