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I. NATIONAL DEFENSE AND ECONOMY

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Coastmise shipping has been of traditional significance to the economic welfare and the national security of the United States. It was one of the i marliest comercial enterprises developed by American colonists and it has I played a very important part in the growth and the prosperity of the population

of the country, the greater portion of which is located in close proximity to i wp-sea shipping. It is also of the greatest importance to national security. rence during the present century, in World War I and again in World War II, the Inited States had no alternative except to requisition all of the sea-going Pessels operating in the deep-sea continental coastwise and intercoastal trades the break-bulk ships operating in the Great Lakes trade capable of oceanping navigation and to place these vessels at the disposal of the military faces transporting troops, equipment, and supplies to the various theaters

1. 'aportance of Coastwise and Intercoastal Shipping in the National Defense.

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Vessels engaged in the United States coastwise and intercoastal trades et important to the national security in various ways. They provide the Suntry with a substantial amount of transport capacity which is readily avail

upon the outbereak of hos tilities for the outward movement of troops ana Tupplies, they provide United States shipbuilding and ship repair yards with th, and they provide se sports with cargo, thus enabling the ports to construct port facilities which are needed in time of war. Moreover, they are a means for training additional seamen needed in time of national military emergency and are spected to be a natural laboratory for the development of roll-on, roll-off appe vessels mich are so important to military logistics,

1. Significance of Coastwise and Intercoastal Transport Capacity. Ships agaged in the continental United States deep-sea trades constitute a large proportion of the total United States merchant marine actively engaged in commercial Farat Long, As of July 31, 1955, there were 358 ships with a deadweight capacity 25,293,000 tons and these vessels constituted about 35 percent of the total saber of United States-flag vessels and about 40 percent of the deadweight tantage so employed.

Thile all types of vessels are indispensable to a large scale military operation, the continental coastwise trades are especially significant to modern ulitary planning since the bulk of the tanker carrying capacity registered in

e Inited States is engaged primarily in those trades. of the 5,575,000 deadmight tons of American-flag tankers in active operation on July 31, 1955, 2,220,000 tons, or 76 percent, were so operated. Modern Warfare places heavy spersence upon petroleum products with which to prosecute land, sea, and air operations, and tankers must be used to transport virtually au of those come

les mich are moved by sea. Since only 1,235,000 deadwei ght tons of tanker stipping were engaged in the foreign trade, of which 702,000 tons were operated * * nearby foreign trades, 1 it is obvious that the continental United States y A substantial mumber of United States-flag tankers are operated in the

tiearby foreign trades only because they are used in the coastwise trade
interchangeably.

dome stic trades are of great importance to the national security as a major source of tanker carrying capacity.

While the deadweight tonnage of tankers engaged in the coastwise and intercoastal trades has increased during the post-World War II period, the deadweight tonna ge of the dry-cargo fleet has decreased and, as of July 31, 1955, amounted only to 974,000 tons deadweight, or about 12 percent of the total active United States-flag dry-cargo tonnage which amounted to 8,182,000 tons.

In sharp contrast, the deadweight tonnage of such vessels on June 30, 1939 comprised 2,565,000 tons deadweight out of a total of 5,395,000 tons, or 47.5 percent of the total United States dry-cargo tonna ge operated at that date in all seagoing trades. Since all the pre-World War II coastwise and intercoastal dry-cargo vessels were requisitioned by the government during the war, it is obvious that the prewar dry-cargo fleet provided a relatively large amount of shipping for wartime duty. The current decline in the size of the dry-cargo segment of the American coastwise and intercoastal fleets is of such magnitude that they can contribute only a relatively small amount of dry-car go shipping to the military for wartime duty.

2. Ready Availability of the Coastwise and Intercoastal Fleet. In addition to a national defense stockpile of laid-up merchant-type ships which can be reactivated as a war progresses, the national security is dependent upon an adequate supply of ocean transport capacity in active operation composed of various types of seagoing vessels which would be available immediately upon the out break of hostilities. However, it is generally recognized that the United States vill have difficulty in maintaining such a merchant fleet to meet immediate mobilization requirements. Consequently, this national security problem must be given careful attention so that the plans of the military authorities upon the outbreak of hostilities will not be thwarted by the lack of sufficient numbers and types of deep-sea vessels.

The problem of maintaining an adequate nucleus of water transport capacity in active operation becomes more serious as fewer United States troops are maintained in foreign areas. Such a policy requires the redeployment of larger numbers of men, supplies, and equipment during the initial phases of another war and places greater significance upon the problem of maintaining an adequate number of vessels of suitable types in a state of immediate availability.

Coastwise and intercoastal shipping is extremely vital in any program developed to solve this problem. As these vessels are operated along the coast of the United States, their availability to lift early military cargoes outward from the United States is much greater than that of ships laid up in reserve fleets or of a large proportion of the vessels engaged in the foreign trade which are likely to be located in foreign ports or areas far from the United States. Moreover, vessels engaged in trades close to the United States seaboard are more secure from enemy destruction or seizure than ships engagea in foreign areas located some distance away from our shores.

3. Shipyard Modernization and Expansion. Modern and efficient shipbuilding and ship repair industries are absolutely essential to the national security of the United States. Their significance in this respect was amply demonstrated during World War II when, with the exception of British and Canadian yards, the yards located in the United States were the only worthwhile source of new ships to replace the thousands of vessels destroyed, to increase the water transport capacity required by the military in its prosecution of the

w", and to repair damaged ships. This situation could be repeated. Therefore, it is imperative that the United States shipbuilding and ship repair industries be supplied in time of peace with as many orders as are necessary to provide an aduate nucleus of modern and efficient facilities to build and repair the ships Deressary in time of war and to employ the number and type of shipyard and ship impsis labor needed for rapid expansion in time of military emergency.

Under normal shipbuilding conditions, the American merchant marine is the uy customer for the building of seagoing commercial ships available to ship

yeris located in the United States. Ships operated under foreign-flag registry late built in foreign shipyards where costs are much lower than in American shipi parts. Obviously, the size of the American merchant marine will determine the

all of the business available to shipbuilding and ship repair yards located in the United States -- the smaller the fleet, the less work that will be available.

the yards are supported by ships engaged in both the domestic and foreign trades, ! but in the coastrise and intercoastal fleets do not prosper to any greater ex

test than they have during the post-Horld War II period, fewer shipbuilding and skip repair yards will be in operation when needed during a national military mergency

b. Development of Military-Type Ships. !!odern warfare has greatly increased the need for fast vessel loading and discharge in combat areas in order estuin nad men logistic performance and to reduce the length of time that se and cargoes are subject to damage or destruction in port. These problems ** &e of intense concern to military authorities especially since modern meapons have become so singularly destructive.

One of the approaches to the solution of this problem is the developset of ships capable of transporting fully loaded combat and general-purpose Febde les which are moved into and out of ships under their own power and on er to wheels, Such vessel designs greatly expedite and facilitate cargoziking time, de creare cargo-handling costs, and simplity the dispersal Joalan connected with cargo loading and discharging operations.

Because of the competitive precsure exerted on coastwise and intercoastal preght rates by land transportation agencies and the increasing costs of water carriage, due especially to cargo handling, many operators in the United States saatinental seago ing trades have concluded that the traditional type of breaksalk package freight er in which cargo is handled piece by piece or on pallets s obsolete and that a new type of vessel must be constructed, incorporating the plans and designs considered by the military authorities as necessary for their Pentreeents. Such a ship using roll-on, roll-off or lift-on, lift-off methods till decrease the time required to load and discharge cargo, minimize longshore Labor costs, and decrease pilferage and cargo damage.

It is of great interest to the national security of the United States that one of the transportation requirements of the military authorities inpolering ships of this novel design should coincide with the impelling need for sestrise and intercoastal operation to achieve major cost reductions by using ekspe of the same design. This situation establishes the coastwise and interCoastal trades as a low-cost natural laboratory for the development of such a tip design. Moreover, it is believed that the new type of ships, if successful mercially, will provide the military authorities with a very substantial saber of rapid handling cargo ships which will be invaluable additions to the sational defense potential.

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5. Additional Ports and Transportation Facilities. Modern Warfare is extremely destructive of physical facilities and a great deal of attention has been given to the problems resulting from this condition by military authorities. Transportation facilities obviously are of principal importance to a country of continental proportions such as the United States and the successful prosecution of military operations is dependent upon transportation, Consequently, if our major seaboard ports and inland transportation centers are attacked successfully, alternate facilities will be highly desirable.

Coastwise and intercoastal shipping can play an important part in providing certain of the needed alternative facilities. It not only will be in a position to provide for the movement of traffic in the domestic trades, but its exdistence during peacetime will provide the United States during an emergency with harbor and terminal facilities in the smaller port areas or in the areas a safe distance away from the major port areas. Such alternative transportation centers also could be used by vessels operating in the overseas trade until such time as the major ports are placed in usable condition. The development of ships operating on the roll-on, roll-off principle will decrease the need of coastwise operations having terminals in the immediate vicinity of large ports. Since the cargoes woula be loaded on wheeled vehicles, the terminals for these ships could be located reasonably far from congested port areas which would be vulneraole in an atomic war.

6. Supply of Shipboard Personnel. Manpower requirements are increased substantially by military aemands for a much larger fleet of naval and merchant vessels. This situation was experienced quring Worla War II ana again during the 1950-1952 period when the Korean emergency and the European coal shortage required the United States to reactivate several hundred vessels from the reserve fleet. This acute problem was overcome only with difficulty and the United States Coast Guard was required to issue waivers permitting many seamen to sail in billets which called for higher ratings and licenses than they held. Nevertheless, a number of ships were delayed for lack of adequate manpower.

The coastwise and intercoastal trades employ a substantial number of seamen. In addition, they have been responsible for the training of a large number of seamen who have left the sea for employment on shore, many of whom can be induced to return during a national emergency to man the greatly expanded naval and merchant fleets. In view of the acute difficulty of manning vessels during emergencies, it is apparent that a larger continental domestic trade fleet will minimize the problem of manning vessels when such conditions arise.

B.

Importance of Coastwise and Intercoastal Shipping to the National Economy.

The coastwise and intercoastal shipping industry has played an important part in developing the economy of the United States, It is an integral part of our national transportation system which, together with other transportation agencies, has been built up over a long period of time. As a result of its close relationship to our over-all transportation system, its relationships to other transportation agencies are both complementary and competitive. The industry is complementary to the degree that it possesses a decisive cost advantage over other types of transportation agencies. It is competitive when its cost advantages are not so pronounced and it must compete with other types of carriers for the traffic.

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As is characteristic of a dynamic economic society, naterial changes occur from time to time which have a distinct bearing upon the economic importance of any industry. Coastwise and intercoastal shipping is no exception to this rule as substantial changes have taken place in the volume and the composition of individual items of traffic which it has moved. However, it est not be assumed that because of these changes the continental domestic water trade, as a mode of transport, is no longer significant to the economy of the United States. Furthermore, it does not follow that such changes, particularly trose of an adverse nature, are permanent.

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1. Economy of Transportation. The current importance of coastwise and intercoastal transportation to the economy of the United States is clearly evident in the transportation of goods and commodities in which water carriers possess a definite cost advantage over competitive land transportation carriers. Such a condition exists in the movement of bulk commodities. With the exception

biturinous coal shipments moving along the Atlantic coast, which have decreased because of competition with other types of fuel, bulk comodities such 25 petroleun, petroleum products, sulphur, and phosphate rock, are moving in the domestic fleet in record volume. As a consequence, many industrial organizations, such as oil refineries and fertilizer plants, have been located at the seaboard to take full advantage of low-cost water transportation.

2. Location of Industry. A number of elements are respons ible for the location of industries all of which are relative to each other. Transportation rates are one of those elements, but they are not always the controlling, factor. Other elements such as power costs, or low wage rates, or the presence of an adequate supply of skilled labor may be more important. However, there is one group of industries whose location is strongly influenced by transportation Sosts -- the industries whose location depends upon the relationship between rates on raw materials and rates on finished products manufactured from those ra materials. To be more specific, if rates on raw materials are high in reition to the rates on the finished product certain industries will tend to locate near the source of their raw materials. Conversely, if raw material rates are low in relation to the rates on finished products, industries will tend to locate near the market for their products. As a result, the low rates merged by domestic water carriers have been significant in the location of certain industries near their markets such as oil refining and fertilizer szufacturing

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3. Extension of Market Areas. Low transportation rates are an important factor in determining the size of the market available to a particular cacam. While this condition is true of high-valued goods to a certain degree, It is of more direct importance in the marketing of low-valued commodities which sanot pay a high transportation rate. In this connection joint rail and water rates are significant in widening the market area. As a result of water transportation, certain items can be moved for very long distances. For example, iron and steel products still move in substantial volume from the East Coast to the West Coast of the United States and lumber moves in the opposite direction. common carriers operating between United States Atlantic Coast ports maintain Joint through rates applicable via all-water or rail-and-water routes on traffic wering between Eastern territory and Southern and Southwestern territories that pererally are differentially lower than corresponding rates applicable via allal routes. The water rate structure on commodities moving between Atlantic ed Gulf ports is somewhat similar to that existing in the Atlantic coast wise trade although the "spread" between the joint rates and the all-rail rates for

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