No Leg Left to Stand On -- An Obituary for MarAd?

Monday, June 18, 2001
Unless things change dramatically, I am writing as the last Deputy Administrator of the Maritime Administration (MarAd). At least the MarAd we have known, sometimes loved, but always needed for the last 50 years. As I look at the Administration's budget proposals to transfer management of the Maritime Security Program (MSP) to the Department of Defense (DOD) and eliminate funding for the Title XI shipbuilding loan guarantee program, I cannot help but conclude that MarAd's days are numbered as a freestanding federal agency.

This is not simply melodramatic doom saying from a former bureaucrat whose first credo in life is perpetuation of the species (or in this case the agency). No, my deep concern is rooted in my regard for MarAd as a little agency with a portfolio and reach that literally spans the globe. My pessimism is founded upon a belief that very few people in our industry understand or fully appreciate what MarAd means to this industry and to the country; and my feeling of resignation is that even fewer people are willing to expend political capital to not only fight these proposals, but to return maritime policy to our national priorities.

In my view, both the proposal to move the MSP program to the DOD and the elimination of funding for the Title XI loan guarantee program reveal that these are the first moves in a concerted and determined effort to dismantle MarAd. Neither of the proposals can be defended on the basis of sound public policy or cost savings. Moreover, it clearly cannot be asserted that the proposals were made after detailed analysis, in-depth review or anything more than a cursory examination of their purpose, effectiveness or the consequences of the proposed actions.

The MSP is a major accomplishment for MarAd and our industry. Under the leadership of Admiral Herberger, the Clinton Administration, the maritime industry and the Congress, it was conceived, developed and has been implemented as a partnership between the commercial maritime industries and DOD. MSP was specifically designed to be managed by MarAd, in close cooperation and partnership with DOD and the maritime industry. This was a decision affirmed by Congress in the statute that created the program, and implicitly in every appropriations bill since MSP was enacted. Contrary to an oft-cited misconception, it is not a subsidy program. Rather for the modest (what I've always called "insurance premium") of $100 million per year, through its companion program, the Voluntary Intermodal Sealift Agreement (VISA), the United States gains access to $8.5 billion in global commercial intermodal transportation assets. That is a deal for the taxpayer, and one that may be threatened if this so-called "efficiency move" is allowed to take place. Shouldn't we expect the analysis to support a change of this magnitude in a carefully crafted and balanced program to be more than a couple of throwaway lines in the President's budget?

The Title XI proposal is even more baffling since it is justified by the catchall epithets of "corporate welfare" and "subsidies" proclaimed by those experts in all things who reside in the ivory towers of the Office of Management and Budget. However, in making this damning assessment of the Title XI program, they have obviously neglected to take a close look at what might be a "golden goose" that they are killing.

Let me get this straight: Here we have a program that has, since 1994, done exactly what the Congress and President intended in an effective and cost-efficient manner, generating more than $6 billion in shipyard work. It makes money for the government through the fees and interest that are collected ($150 million since FY 1993 and more than $1 billion of collected fees and payments returned to the Treasury in that same period). U.S. shipyards have made investments and become more efficient, which has produced benefits in our U.S. Navy shipbuilding programs. It results in the employment of thousands of people in shipyards and allied industries around the country. The vessels that have been constructed with Title XI primarily enter domestic service, providing critically needed employment opportunities for civilian merchant mariners. It has become the most consistent source of marine finance in the United States at precisely the time the domestic fleet, (both tankers and dry cargo), needs replacement, while the commercial banking sector has been lukewarm, at best, about continuing to pursue marine finance investments. Some Welfare Program!

Why should you care? Title XI and MSP are two of MarAd's main support legs that enable it to stand firmly as the only voice for commercial maritime issues in the entire federal government. If these are removed, MarAd has but one leg to stand on comprised of the rest of its portfolio, and I fear that leg will very shortly be too weak to sustain the agency through the next several budget cycles in government.

Along with Title XI and MSP, our industry would lose the tremendous work that MarAd does for the Maritime Transportation Initiative, ports and intermodal programs, Jones Act enforcement, cargo preference, ship disposal, merchant marine employment to name but a few. Those endeavors, as worthwhile as they are, do not engender the level of political support and public awareness necessary to sustain funding for MarAd, and while the work might continue in scattered locations throughout the government, just as we are feeling the effects of losing our own standing committee in Congress, our industry would lose the benefits of a single source of knowledge, competence and advocacy.

I have always believed that MarAd occupies a unique place in government that is, in my view, unrecognized by the maritime industry. MarAd is the only agency in the entire federal government that has one, and only one mission: namely the promotion, enhancement and protection of the maritime industries of the United States. The people at MarAd, are, in large part, maritime transportation professionals, who "talk the talk" and many have also "walked the walk." MarAd is the industry's "seat at the table" whenever issues that affect the industry are discussed in the U.S. government, or indeed worldwide. And believe me, in my tenure, all of the senior leadership at MarAd were included in countless meetings at the highest levels of government where our issues were discussed, where we articulated the rationale for policies such as the Jones Act, Cargo Preference, anti-trust immunity for ocean carriers, inland waterway transportation, Marine Transportation System. We were heard and in most cases listened to, and we even made a few converts to our cause. Didn't anyone ever wonder how in the last eight years so much was accomplished, and so many proposals that would have hurt our industry were defeated?

If MarAd is eliminated, the vacuum will be filled by the uninformed or, more likely, those who have an agenda designed to undermine and weaken the U.S. maritime industries to the point of extinction, and the certain loser in any debate will be our industry.

MarAd and the laws it administers are creatures of the wisdom of our past leaders who saw clearly the link between a strong merchant marine industry and our national security. Franklin Roosevelt in 1937 said that the "American people deserve vessels in keeping with our national pride and national need." What has changed today to make those words any less powerful, especially when we have seen the reliance of our military leaders on the commercial maritime industry grow exponentially in the last decade?

Before we let these proposals become law, I urge our friends in the Congress to insist upon a full, open and thorough examination of maritime programs, maritime policy and then make decisions based on fact and analysis, not catch phrases like "corporate welfare." I am confident that if we have our day in court, this industry and MarAd will make believers out of agnostics, and zealots among our friends.

John Graykowski served as Deputy Maritime Administrator and Acting Maritime Administrator 1994 through 2000. He is currently a partner with Dyer Ellis & Joseph, P.C., a Washington, D.C.-based law firm with a domestic and international practice involving transportation, shipping, finance, corporate, securities, legislative, environmental, and trade matters.

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