One final major regulatory issue which will con- 
tinue to receive close consideration relates to the 
problem of controlling the competitive practices of 
state-owned shipping companies which, in recent years, 
have been aggressively seeking a larger role in the 
carriage of U.S. foreign commerce. Such carriers, pri- 
marily of Soviet registry, have been charged by their 
competitors with cutting rates to levels which are not 
fully compensatory in order to achieve rapid trade 
penetration gains which, it is suggested, are motivated 
more by political objectives than by commercial con- 
siderations. The Soviets have, in turn, countered that 
their rates are not lower if the extensive illegal rebat- 
ing activities of their competitors are taken into ac- 
count. As a result of these charges and counter- 
charges, the rebating and rate-cutting issues have 
recently become increasingly intertwined. 
In attempting to resolve the rate-cutting issue, 
former FMC Chairman Karl Bakke met with Soviet 
maritime officials in July 1976 and successfully nego- 
tiated an agreement concerning the terms of Soviet 
liner participation in the carriage of U.S. waterborne 
foreign commerce. Under the provisions of the so- 
called Leningrad Agreement, Soviet officials basically 
agreed to adjust rates as quickly as possible in ali U.S. 
liner trades to at least the level of the lowest rate 
offered by other competing independent carriers and 
to begin negotiations for entry into the Atlantic and 
Pacific conference systems. 
In the wake of the Leningrad Agreement, various 
legislative initiatives, which had been undertaken to 
Promotion of U.S. Shipping and Shipbuilding and Shipbuilding 
Federal promotion and protection of the U.S. 
sierchant Tare date Tron Te Bestar OF our his- 
tory ara NANORTA WELW HITE URS SeGRE ATG ATS of 
this support have varied from period to period, the 
provision ederal maritime assistance, in one form 
or another, has bee sistent policy. 
—=Gver theyears'a number of justifications have been 
advanced in support of Federal programs designed to 
foster U.S. shipping and shipbuilding. These justifica- 
tions, which have assumed varying positions of rela- 
tive importance during different periods of our his- 
tory, may be classified under three general headings 
—national security, international political considera- 
tions, and economic benefits. @ 
ational security considerations have consistently 
played a predominant role in shaping and justifying 
Federal involvement in the promotion and protection 
of the U.S: merchant marine. The importance of 
maintaining a domestic shipping and shipbuilding 
capacity has been repeatedly demonstrated during 
periods of war_and_other_national emergencies, and 
the security requirement for a U.S. maritime capacity 
is today probably the most widely recognized and 
provide FMC with new authority to deal with Soviet 
rate-cutting practices, were suspended to see how well 
the new agreement would work. The suspension of 
these efforts, however, was temporary as Congres- 
sional impatience grew over the slow pace of progress 
under the Leningrad Agreement. In May 1977, Chair- 
man Bakke himself suggested that progress had been 
inadequate and urged the Congress to pursue a legis- 
lative solution to the rate-cutting problem.** 
Legislative proposals which have thus far been 
advanced to address the rate-cutting issue would amend 
the Shipping Act of 1916 to require nonnational, 
third-flag carriers (vessels not registered under either 
U.S. flag or the flag of the U.S. trading partner in a 
particular trade) to maintain rates with the FMC 
which are no lower than the lowest rates filed by any 
national flag carrier for the same services. FMC would 
be allowed to authorize lower rates only upon finding 
such rates to be commercially compensatory. Under 
the terms of one legislative proposal in this area, only 
State-owned nonnational carriers would be subjected 
to these new requirements, while an alternative pro- 
posal would extend this authority to all third-flag 
vessels engaged in the carriage of U.S. liner commerce. 
In the face of continued Soviet expansion in the 
carriage of U.S. commerce and with the continued 
offering of liner services at what appear to be non- 
compensatory rates, pressure for Congressional action 
in this area is likely to grow. As a consequence, the 
third-flag rate-cutting issue promises to continue as a 
major regulatory concern. 
t, Marhhoult Harie= 
lone eh 
% OFT 
supported justification for Fedeval Us to era in ca ie 
area. 
The security requirement for a national ae 
marine is generally defined to include two compo- 
nents. The defense component consists of the ship- 
ping and shipbuilding capacity needed to assure rapid 
deployment and re ly of U.S. armed forces in 
time-of-war, while the economic_s component 
represents a broader requirement to assure the con- 
tinued viability of the fsa ae 
other national emergency conditions. The growing 
taal pea net ee 
rials has greatly increased the importance of thi 
second component of national security in recent year 
Closely related to national security are certain inter- 
national political considerations which have also fre- 
quently been cited as motivations for Federal support 
for the U.S. merchant marine. Merchant ships, like 
43 U.S. Department of Commerce, Maritime Administration, 
Office of Policy and Plans, Division of Special Studies. Expan- 
sion of the Soviet Merchant Marine into the U.S. Maritime 
Trades. Washington, D.C., Government Printing Office, August 
1977, p. 43. 
V-27 
‘no 3 
