Progress Under the Merchant Marine Act of 1970 
Although the specific objective of initiating the 
construction of 300 merchant ships between 1971 
and 1980 was included in the 1970 Act, it is now 
evident that this goal is not likely to be achieved. 
By mid-1977 construction-differential subsidy (CDS) 
had been awarded for a total of only 66 new ships, 
aggregating 6 million deadweight tons and valued 
at $3.3 billion. In addition, CDS contracts had been 
let for the reconstruction or conversion of 27 exist- 
ing general cargo vessels to modern containerships. 
It is important to note that progress toward the 
300-ship goal is somewhat understated by the raw 
CDS construction figures alone. When the 300-ship 
objective was established, it was predicated on the 
construction of vessels generally smaller than those 
which have actually been contracted for to date. 
Despite this partial distortion, however, it is none- 
theless clear that the level of new construction under 
the program has fallen short of the objective. 
A major factor impeding progress toward the 300- 
ship goal has been the worldwide shipping and ship- 
building recession which began after the 1973 Arab 
oil embargo. The tanker industry was particularly 
hard hit by this recession, and in April 1976 (the 
peak of the recession’s impact on the tanker fleet) 
about 50 million tons of tanker capacity was idled 
around the world. In addition, foreign trade gen- 
erally was hampered by the precipitous rise in oil 
prices following the embargo. As a consequence 
of these events, commercial! demand for new U.S. 
vessels all but evaporated despite the availability of 
expanded Federal assistance under the 1970 Act. 
Of course, since 1970, additional construction 
beyond that supported by construction subsidies has 
also been initiated under the expanded Title XI 
mortgage guarantee program. While such mortgage 
guarantees have been used extensively to secure 
financing in conjunction with CDS-supported proj- 
ects, the Title XI program also has aided in financ- 
ing an additional $2 billion worth of nonsubsidized 
construction since 1970. Considering all U.S. mer- 
chant ship construction from mid-1972 through the 
end of 1976, U.S. shipyards delivered a total of 98 
new merchant vessels representing more than 5.2 
million deadweight tons of new U.S. capacity. 
Thus, although the success of the 10-year building 
program has been mixed and while U.S. shipyards 
will clearly require additional contracts to sustain 
present production levels, the current shipyard order- 
book in the United States is substantial. It should 
be emphasized, however, that because new orders 
have not kept pace with deliveries, this orderbook 
is expected to begin a serious decline by mid-1978. 
Over the past few years, U.S. shipyards have been 
partially insulated from the full impact of the world 
shipbuilding recession principally because of con- 
struction demands associated with large new domes- 
tic trade requirements. Among these, the most not- 
able has been the U.S.-flag tanker requirement asso- 
ciated with the delivery of Alaska oil. As of June 1, 
1977, the U.S. orderbook for new merchant ship 
construction consisted of 69 vessels, totaling more 
than 6.2 million deadweight tons and valued at $4.2 
billion. Of these 69 ships, 46 are tankers. 
In assessing progress under the Merchant Marine 
Act of 1970, it is interesting to compare various 
1982 trade penetration projections developed by 
MarAd shortly after enactment of the 1970 Act ° with 
the U.S. participation rates which have actually been 
attained thus far. Although changes in the U.S. for- 
eign trade outlook and changes in the construction 
mix have rendered these early projections largely 
obsolete, the comparison provides a useful indication 
of how far U.S.-flag trade penetration results are 
likely to vary from those originally expected under 
the 300-ship program. 
Overall, MarAd projected that the new program 
could be expected to yield U.S.-flag foreign trade 
penetration of between 14 percent and 17 percent in 
terms of tonnage by 1982. However, by 1976, U.S. 
foreign trade participation was only 4.9 percent by 
tonnage, just slightly higher than the 4.6 percent 
level that had been attained in 1969 before the new 
program.®? While total U.S.-flag foreign trade car- 
riage grew dramatically over this period, total U.S. 
trade grew at an equal pace. 
The 1982 expectation for liner trade penetration 
was set at 35 percent to 50 percent in terms of ton- 
nage and 50 percent in terms of value. In 1976, 
U.S.-flag vessels transported more than 30 percent 
of the tonnage of liner cargoes in U.S. foreign trade 
and these cargoes represented more than 31 percent 
of the total value of such cargoes. Comparable U.S. 
penetration figures for 1969 were 23 percent by 
tonnage -and 27 percent by value. The favorable 
trend since 1969 in this area reflects a substantial 
upgrading and modernization of the U‘S. liner fleet 
principally through the incorporation of intermodal 
technology. Today the U.S. intermodal fleet is the 
°2U.S. Department of Commerce, Maritime Administration, 
Office of Policy and Plans. New Maritime Program Progress 
Analysis Report on the Objective: To Increase U.S.-Flag Par- 
ticipation in the U.S. Foreign Trade. Unpublished Maritime Ad- 
ministration Report, March 1972, p. 8. 
°3 The 1976 trade penetration figures presented in these para- 
graphs are based on preliminary Census data as reported in 
U.S. Department of Commerce, Maritime Administration, Office 
of Subsidy Administration, U.S. Oceanborne Foreign Trade 
Report, December 1976, No. 3 Annual Recap. Washington, D.C., 
Maritime Administration, September 1977. Prior year penetration 
figures are from U.S. Department of Commerce, Maritime Ad- 
ministration, MARAD ’76: The Annual Report of the Maritime 
Administration for Fiscal Year 1976 and the Transition Quarter 
Ending September 30, 1976. Washington, D.C., Government 
Printing Office, April 1977, p. 76. 
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