THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, September 2, 1994 TAG: 9409020603
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 88 lines
A maritime reform bill that includes subsidies for U.S. shipyards trying to get back into commercial shipbuilding, such as Newport News Shipbuilding, is stalled in the U.S. Senate, observers say.
``The odds I think are long,'' said Rep. Herbert Bateman, whose district includes Newport News. Bateman introduced an amendment that attached the shipyard subsidies to a House bill that increases vessel tonnage taxes.
The House of Representatives passed the bill in early August. It provides $1 billion in subsidies to keep more than 50 U.S.-flag merchant ships in service for 10 years and an additional $300 million to help U.S shipyards, long dependent on Navy shipbuilding, re-enter the commercial market.
The Senate version of the bill is now bogged down in the the Commerce Committee, Bateman said Thursday at a lunch meeting of naval engineering societies in Hampton.
Sen. Charles S. Robb is working with commerce committee leaders to clear the bill through the Senate, he said in a telephone interview after a Thursday afternoon campaign stop at Newport News Shipbuilding.
For now, the Senate version doesn't include shipyard subsidies, which are opposed by the Clinton administration as violating a recently negotiated trade agreement that will eliminate new shipbuilding subsidies worldwide by 1996.
The bill also is opposed by senators from states that export bulk commodities such as wheat and coal because the tonnage tax unfairly impacts ships that carry vast amounts of low-value commodities, according to the Shipbuilders Council of America.
The shipyard subsidy program faces a ``very difficult road ahead,'' said Pat Phillips, president and chief executive officer of Newport News Shipbuilding. The Peninsula yard plans to capture a slice of the commercial ship market with its ``Double Eagle'' petroleum product tanker design.
``I'd be a lot more optimistic if the (Senate commerce) committee were engaged, but they've been distracted by health care, the crime bill and other issues,'' Bateman said. Referring to Robb, he added, ``We need our Virginia senator on the committee to weigh in and support the bill.''
``The House bill, as currently drafted, would have no chance in the Senate,'' Robb said.
The shipyard subsidies, known as the Series Transition Payment, or STP, program, would provide short-term assistance to U.S. yards as they convert from building complex, labor-intensive warships for the Navy to manufacturing more standardized commercial ships in a series. It would pay the difference between the cost of a U.S. built ships and the price charged by foreign yards subsidized by their governments.
Starting a line of series-built ships is expensive because it entails such start-up costs as design, engineering and training. The first in a series of ships is much more expensive the fifth or sixth.
``It's vitally important to all of the U.S. maritime community, not just the shipyards, but the U.S. Merchant Marine, to pass that bill,'' Bateman said. ``And it won't be a good bill unless it's got STP in it.''
But the Clinton administration and powerful Louisiana Sen. John Breaux believe the STP program would violate the recent agreement among shipbuilding nations to eliminate shipyard subsidies worldwide.
Eliminating foreign shipyard subsidies has been seen as the long-term solution to making U.S. yards competitive for commercial work, Robb said. ``The concern is that the STP program would scuttle the long-term solution,'' he said.
The agreement, reached in July through the Organization for Economic Cooperation and Development, requires the elimination of subsidies for new shipbuilding contracts by 1996. It has yet to be ratified.
The administration and Breaux feel the already funded Title XI loan guarantee program, which provides long-term, low-cost financing for buyers of U.S.-built ships, is sufficient to jump start U.S. commercial shipbuilding. That program could guarantee more than $2 billion of commercial shipbuilding in U.S. yards in the next four years.
Newport News Shipbuilding plans to get back into the international commercial market with or without the subsidy program, a spokesman said. It's already got a letter of intent to build up to four product carriers for a Greek shipping company pending approval of the loan guarantees.
But STP would help U.S. shipyards ``through the initial commercial construction money curve,'' Phillips said.
Senators on the Commerce Committee are trying to fashion a compromise that would include some sort of STP program contingent on it not violating the OECD agreement, Robb said. But the formula for the tonnage tax would still have to be changed to reduce the onus on bulk carriers, he said.
``I think that there is at least a reasonable chance that we can pass something that would be contingent, but that would only deal with half the problem,'' Robb said. ILLUSTRATION: Color photos
by CNB