extraordinarily competitive. There is this whole flow of companies that were going into Southeast Asia, where you could get cheap labor, and there was very little regulation. Now what they found is that for all sorts of reasons, Motorola is moving production back to the United States.

Mr. BALLENGER. They were willing to invest in substantially labor-saving devices in Motorola's operation in this country. I am a manufacturer myself. If you do not spend money to upgrade your equipment and to cut your labor costs in operation, you go out of business. Motorola, in investing in its own equipment, upgraded it. I do not know if you do that on a ship.

Mr. SCHNEIDER. They did a lot on the labor front to increase quality, to increase their service, reliability, and things of that sort. What they found is that the caliber of the American worker, being closer to the marketplace to cut delivery time, and things of that sort made a difference.

I think that if this law were passed, the American cruise industry is not going to disappear because people like yourself are still going to take cruises. You are going to look at a whole complex of decisions as to why you are making this decision to take a cruise. There are going to be people who will say, "I am going to take the lowest priced cruise, and I am going to fly to Antarctica in order to pick up that cruise.

Where there is the mainstream of the market, what they are going to do is look at quality and the delivery of service. To the extent that you get an enormous growth business, it is not going to disappear. It is not going to be severely impacted by this law.

Mr. BALLENGER. The one thing we both will admit, though, is that the cost of that cruise is going to be substantially greater once this law is passed. In other words, there is that thing we watch on TV all the time-$279 for 3 days in Bermuda-could now be raised to $879.

Mr. SCHNEIDER. I think that is interesting because if you get into the economics, the one that is very easy to get into is Carnival Cruise Lines, because they are a publicly traded company. If you look at their profit margins, they are way above average for American industry.

If you look at the labor component of these vessels, what you start to see when you put it together is, they could cut their prices, or their costs could go up and they could keep their prices constant, and still be very competitive and still get higher return than the average company.

I do not know how price-elastic the cruise business is. I do not think anybody really knows. But the one thing that is fairly clear is, if you start to look at their own financial reports, to the extent that they were to double their wages, their return might drop from 22 percent to 18 percent, but I will tell you, there are a lot of investors in this country who would happily invest in something for an 18 percent return. So at that point, it is not automatically clear. Mr. BALLENGER. I understand what you are saying. I think we both got our point across.

Thank you, Mr. Chairman.

Mr. ANDREWS. Mr. Schneider, in your testimony, you make reference to some of the arguments against the bill. You make reference

to ILO Convention 147. We have heard from the Deacon, Mr. Sansone, and Mr. Turner some compelling stories about victims of present practices. Was ILO 147 of any aid or comfort to any of the victims that you have encountered? Did it do any good?

Mr. BALDERAS. On occasion, it is. It depends upon the port. It depends upon the powers that be and their familiarity with ILO 147 and, of course, their response to it. Yes and no, depending upon those particular ports.

Mr. ANDREWs. Would you characterize it, Deacon, as a sufficient protection for these individuals?

Mr. BALDERAS. When it comes down to deficiencies with the ship, the Coast Guard has the power to look into it and do something about it. When it comes down to rights and abuses of seafarers, then they really do not. There is not that much that they can do. If the crew says, "This ship is unseaworthy because it has a hole in its side," the Coast Guard can go down and readily take action, to the extent that they are capable of doing it. But if the crew says, "We are being cheated out of our wages, and we are being deposited, little by little, in foreign ports," that is a horse of a different color and something they cannot do anything about, regardless of the ILO enforcement.

Mr. ANDREWS. Mr. Sansone, what do you think?

Mr. SANSONE. ILO 147 is at least a step in the right direction. I think ILO 147 or something similar to it should have a little bit more teeth to it. On occasion, ILO 147 has been an advantage to seafarers.

Unfortunately, ILO 147 is not uniformly enforced from port to port. In one port, where you might have a deficiency on a ship, it might be severe to one Coast Guard inspector, where in another port, it might just be a ho-hum situation. I do not know what the answer is, as far as equal enforcement across the board in what the Coast Guard can do.

What I am saying, as I try to be a champion for the seafarer, is that slavery is going on within the United States on board these vessels. Something has to be done to protect these poor guys, because they are so fearful and they are always being destroyed by being blacklisted, where they cannot find gainful employment even in their own country.

There are some countries that even make people sign clauses within their contracts that tells them that they cannot get involved with any kind of labor organization and get any more money to their wages; if they do, they will be incarcerated, the money will be taken away, and given back to the shipowner. This takes place in the United States.

Mr. ANDREWs. Mr. Turner, we are going to ask if you would give us an answer to the same question, and then the committee will adjourn for about 15 minutes so we can go cast our votes and return. At that time, I think we will be ready to proceed with the second panel. Terry, if you would, give me your opinion of the utility of ILO 147.

Mr. TURNER. I concur with the previous testimony of Mr. Sansone and the Deacon. However, I would like to put on the record the subject that we visited earlier and I did not get a chance to comment about. I do not want to beat a dead horse, but it is the

competitive idea, of whether or not the U.S. flag is competitive in the world economy.

I submit that it is. We represent Sea Land, which is the largest liner carrier in the world. Sea Land takes not one penny of subsidy and competes very well with First World nations, nations that pay their seafarers a living wage. There is a major difference between those countries, like Japan, Germany, and Australia, and companies who fly the runaway flags. We cannot compete with that, but we can compete on an equal footing with some of these other countries, despite the fact that this country's policies has tied our hands behind our backs. We cannot build a ship in this country because we do not subsidize our shipyards.

Mr. ANDREWs. So if I can paraphrase, you think our greatest competitive disadvantage is not our economic disadvantaged versus other regulated countries, it is our disadvantage against unregulated countries or flags that can operate in a vacuum, without the regulatory environment. Is that a fair statement?

Mr. TURNER. Absolutely.

Mr. ANDREWS. We are going to adjourn for about 15 minutes, and we will resume with the second panel. We thank very much the members of the first panel. I can run faster than those two Republicans; that is why I stayed.

[A brief recess was taken.]

Mr. ANDREWs. Ladies and gentlemen, we are going to resume the hearing. Thank you for your patience.

I would like to tell you that I was tardy because I was involved in a serious and urgent consultation on the floor. The truth is that I forgot the hearing was on the second floor and was wandering around the first floor looking for it.

With that, we have with us Mr. John T. Estes, President, International Council of Cruise Lines, and Ms. Jean Godwin, Vice President, American Association of Port Authorities. Mr. Estes?

STATEMENTS OF JOHN T. ESTES, PRESIDENT, INTERNATIONAL COUNCIL OF CRUISE LINES, ACCOMPANIED BY DUNCAN HOOPES, PRICE WATERHOUSE, WASHINGTON, DC; AND JEAN C. GODWIN, VICE PRESIDENT, GOVERNMENT RELATIONS, AMERICAN ASSOCIATION OF PORT AUTHORITIES

Mr. ESTES. Thank you, Mr. Chairman. I have with me from Price Waterhouse Mr. Duncan Hoopes, who I would like to introduce to the committee, if you should have any questions on my testimony later.

What I would like to do, with your permission, sir, is to submit my written testimony for the record and just summarize and amplify some of the points that are made in the testimony.

Mr. ANDREWS. Without objection, it is so ordered.

Mr. ESTES. Mr. Chairman, I think it is important that we try and get back to basics here a little bit and talk about this bill, what this bill would do, and why this bill is so very important to us.

We have heard a lot of information this morning. I must confess that some of it is correct and some of it is incorrect. Perhaps we can sort that out in the next few minutes.

Mr. Chairman, this bill will injure American workers, it will injure American families, and it will injure American foreign trade. I think we should state that right up front. There is no equivocation. There are no ifs and buts about it. This will happen. I do hope that when my testimony is finished, you will see why I say that.

It is a bad bill, Mr. Chairman. I struggled with the word "bad" because to some extent, it conveys what I am trying to say and to some extent it does not. It is not an evil bill. It is not a malicious bill. It is not an immoral or a naughty bill. What it is, Mr. Chairman, is a flawed bill. It is a defective bill. It is a bill that is injurious to many elements of our country, and it is a bill that is terribly unjust. I hope, once again, you will agree with me when I have finished my testimony.

The bill, Mr. Chairman, is based on emotion. It is based, to some extent, on misrepresentation. It is based, as you must have heard from the first panel this morning, on unsubstantiated evidence. With that as an introduction, Mr. Chairman, let me just go briefly over why it is a bad bill: because of the bad law that it would create, the bad foreign relations that it would foster, and the bad economics that would result.

With respect to the bad law that it would create, it is bad law. because, as you have heard, we have on the books ILO 147. There was a lot of talk this morning about ILO 147 and whether it is working properly or improperly. I would urge this committee to look at that. That is where the direction ought to be. Examine ILO 147. If the Coast Guard is not doing its job, let us make sure it does its job. If ILO 147 needs some shoring up here and there, let us do that.

That is an international treaty that is on the books, that will work, that can work, and we should make it work. We do not have to go through all of this. We do not have to put a watershed of new extraterritorial laws onto the international maritime industry when we have on the books a piece of law that will work, a statute that will work, and a treaty that will work.

We have other treaties, Mr. Chairman, that are also on the books. Some of these are mentioned in written statements that the committee has received, both from myself and from other interested organizations.

The 1958 Geneva Convention is rooted in the concept that the seas are open to all nations. That means that the extraterritorial application by any port state flies in the face of that convention. That is an obligation of the United States, it is an obligation that went into force here in 1962.

We also have the 1963 Vienna Convention. That is similar to the ILO Convention, in the sense that the consulates around the world-not only in this country but in other countries-are charged with the responsibility for investigating any alleged abuses that may have happened to seamen.

Mr. Chairman, what this bill sets up is a totally false jurisdictional test, based on regularity of contact. Yet, amazingly, it exempts from the bill liners. As you may know, a liner is, in a sense, a common carrier. A liner goes from port to port, from place to place, on a regular, routine basis. Of all types of shipping, they per

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haps have the most regular contact of any, and yet the bill exempts them. One has to wonder why. Why exempt liners, when they do have the most contact?

The other thing with respect to regularity of contact is the comment that was made earlier today about airlines. Clearly, airlines have regular contact with this country. People will say, "Well, we have bilateral treaties with other countries, so we could not have the unilateral application of labor laws to foreign airlines." We do not seem to be bothered about treaty violations with respect to seagoing vessels, so I am sure that the precedent is present here in this case, it would be present there.

Mr. Chairman, I would also urge you to look very briefly, in your deliberations on this bill, at the FACS testimony about national security. The Congress has much greater opportunity than we do to talk to the Pentagon, both on the record and off the record, about the significant contribution that foreign flag vessels do play with respect to our national security.

It is a bad bill, Mr. Chairman, because it is bad foreign relations. Some would say, "Who cares about foreign relations? We are sick and tired of foreign countries coming in here and setting up steel plants and automobile plants and taking away our jobs."

Mr. Chairman, it is bad because in today's world, as you know, foreign relations means foreign trade. Foreign trade means jobs. No foreign trade, no jobs. It is that simple. This bill is very bad for foreign relations. You have received, from a number of Western European countries, a formal protest. It has been filed before on similar legislation. They are not fooling. They believe this bill is serious. They do not want this bill passed. And I can assure you, it will hurt our foreign trade. If you do not believe me, please talk to them. It is a serious matter.

It is a bad bill from a foreign relations standpoint, Mr. Chairman, because it flies in the face of literally centuries of maritime custom and practice. We have, in the maritime industry, the supremacy of the flag. That is not just a phrase; that is a concept that has been applied for centuries with respect to how a ship is managed, how a ship is run. The captain of the ship, Mr. Chairman, is the law of that ship. The captain is responsible to the flag. We are not talking about a factory. We are not talking about a hotel or a shopping center. We are not talking about the parallels that were expressed to you this morning. We are talking about a ship. We are talking about international maritime commerce. We have to get ourselves oriented into that context and then look at the effect of this bill. I do not think we have done that yet. I think we are still thinking in terms of a shopping center or a hotel or a factory.

It is a bad bill, Mr. Chairman, because it is bad economics. It is bad economics because, let me talk just very briefly about the cruise line industry. We have completed, with the help of Price Waterhouse, a major study which indicates what our industry provides to the United States.

In 1992, the foreign flag cruise line industry created 450,000 fulltime-equivalent jobs in the United States. In the next 4 years, we will add another 135,000 jobs. That is a 4-year figure. Those, incidentally, are jobs that will be created by our industry without one