The Virginian-Pilot
                            THE VIRGINIAN-PILOT  
              Copyright (c) 1995, Landmark Communications, Inc.

DATE: Sunday, November 19, 1995              TAG: 9511190400
                                             LENGTH: Long  :  118 lines


If the Jones Act is repealed or reformed, thousands of jobs will be lost and the tiny U.S. maritime industry will be destroyed, one side says.

If the Jones Act is reformed, it will be a multi-billion dollar economic boon for many industries and could revive the nation's moribund merchant fleet, the other side argues.

Those opposed or in favor of the law, which requires goods shipped between U.S. ports to be shipped on U.S. vessels, appear to have little common ground.

The Jones Act, preserving U.S. sea lanes for the domestic fleet, is under attack in the halls of Congress by shippers who say it unfairly inflates freight rates. On the other hand, U.S. ship owners and operators say that foreign cargo ships with cheap labor would drive them out of business if the act is radically changed or dumped.

The two sides gathered Wednesday at Old Dominion University for a seminar on the future of the Jones Act sponsored by the school's International Maritime, Ports & Logistics Management Institute.

The Jones Act requires shipments between U.S. ports to be carried by vessels operating under the U.S.-flag that are built and owned in the United States. The law was set up to protect the U.S. merchant fleet from competition and to ensure a pool of skilled maritime labor that the government can draw on to crew ships in a national emergency.

The Jones Act Reform Coalition, a group of shippers led by agribusiness interests, is lobbying Congress to repeal or substantially reform the 75-year-old law. They want to be able to take advantage of cheaper shipping costs that would be available if the U.S. domestic trade were opened to international competition.

High labor and operating costs have all but destroyed the global competitiveness of U.S.-flag freighters. International shipping companies operating vessels under the flags of countries with cheap labor and little regulation can ship goods at lower cost than U.S.-flag operators.

There's still a substantial tug and barge fleet plying the nation's rivers and inland waters and a small, but aging, fleet serving the Great Lakes. Those U.S.-flag shipping companies fear that repealing the Jones Act would kill their companies and put thousands of mariners out of work.

``U.S. Jones Act operators would be forced to compete on a very unlevel playing field,'' said Bruce Law, executive vice president of Allied Towing Corp., a Norfolk-based tug and barge operator.

``We're not out to repeal or gut the Jones Act; we're out to reform it,'' said Rob Quartel, president of the Jones Act Reform Coalition. ``We're not out to destroy the (U.S. maritime) industry, but rebuild it.''

The coalition's recommended reforms would recreate the now comatose coastal trade between ports by letting U.S.-flag operators become more competitive and giving them somebody to compete against, Quartel said.

``The Jones Act steals jobs from American seamen who could be working on coastwise freighters and feeders,'' he said.

The coalition frequently cites a report by the International Trade Commission that suggests repeal of the Jones Act would provide a $10 billion annual economic benefit to the country. While the report said repeal would result in the immediate loss of about 10,000 maritime jobs, more than 10,000 jobs would be created elsewhere in the economy and eventually in maritime trades.

The study, however, presumes replacing the entire U.S.-flag fleet with foreign carriers; something that wouldn't happen even under the coalition's proposals, said Arthur J. ``Skip'' Volkle, associate general counsel of MARITRANS Inc., a Philadelphia-based tug and barge operator.

But the coalition seems to use as its principal weapon the conservative political argument against industry protectionism and subsidies.

``The (maritime) industry's attitude seems to be that nothing is wrong that can't be fixed without a little more protectionism or subsidies,'' Quartel said.

``We are more expensive because we have to adhere to Coast Guard vessel standards that exceed world standards, (Occupational Safety & Health Administration) standards that are unparalleled, U.S. labor laws on wages and hours and benefits, and we pay taxes,'' Volkle said.

Some of those very standards, though, are what makes the industry less competitive, according to Quartel.

Domestic flag shipping companies' competitiveness is also harmed by provisions in the Jones Act that require them to build vessels in more costly U.S. shipyards and penalizes them for repairing ships in cheaper foreign yards, Quartel said.

But those rules help sustain the U.S. shipbuilding base.

``We have to maintain shipbuilding capacity. . . ,'' said Henry Bouffard, a maritime law specialist and senior partner with Vandeventer, Black, Meredith & Martin in Norfolk. ``At some point we're going to have to build ships in national emergency.''

The coalition would reform the Jones Act to:

Harmonize Coast Guard vessel regulations with world standards;

Protect domestic workers in inland waterway shipping through immigration laws;

Change U.S.-flagging requirements to allow foreign ownership and foreign building of vessels, so long as the owner maintains a domestic corporate presence, pays U.S. taxes and uses American labor;

Permit foreign flag vessels to spot, or one-time, cargos in domestic trade lanes.

U.S. shipping companies argue this is a recipe for disaster.

``Under these proposals, you would wipe out domestic coastwise shipping,'' Volkle said. ``We employ 500 people. We are out of business.''

Allowing foreign shipping companies to enter domestic sea lanes is tantamount to having a foreign automaker set up a plant in Detroit that doesn't have to pay U.S. wages, taxes to the government or meet U.S. safety and environmental standards, proponents of the law say.

``This Jones Act proposal is the first time that anybody has proposed that we let foreign workers compete with U.S. workers in the United States,'' Volkle said. ``If someone were to propose that we let foreign workers compete with GM workers in the U.S., they would be laughed at.''

``U.S. seamen are paid more than their counterparts in Third World nations, just as U.S. truckers and construction workers are paid more than their Third World counterparts,'' said Bruce Law, executive vice president of Allied Towing Corp., a Norfolk-based tug and barge operator.

U.S.-flag vessel operators also question how much shipping costs savings would change consumer costs. If oil transportation costs between Houston and Florida were halved, it would reduce the cost of gas at the pump by less than 1 penny, Law said.

``What's clear is that a lot more thought needs to go into any reform of the Jones Act that has been given it until now,'' Bouffard said. by CNB