'Payoff' Charges On Cargo Bill

Carter redeems a promise --but the memos leak

The maritime unions are small--a total membership of 76,000--but their political puissance rivals the billow of a spinnaker in a full wind. One reason: knowing that the U.S. shipping industry survives largely by Government subsidy, the unions have been willing to contribute to the campaigns of friendly politicians. One is President Carter, whose support of the unions is now subjecting him to angry charges of "political payoff' by Republicans brandishing Administration memos apparently slipped to them by somebody inside the White House.

The subject of the uproar is a "cargo preference" bill that would require 9.5% of all oil imported into the U.S. to be carried by U.S.-flag ships by 1982, v. 3.9% now. Most of Carter's advisers--in the Treasury Department, the Council of Economic Advisers, the State Department, the Defense Department, the Office of Management and Budget--are against the bill. They fear it would aggravate inflation by forcing the use of more expensive U.S. ships with highly paid crews: it costs $14,300 a day to run a 90,000-ton U.S. ship, v. $9,700 for the same size Liberian-flag freighter. Further, critics say the bill is protectionist special-interest legislation, antagonistic to free trade and potentially disruptive to U.S. treaty relations with perhaps 30 other nations. But Carter is for the bill. Wooing labor support during the campaign, he said he would work to "enact and develop a national cargo policy that would assure our U.S.-flag merchant marine a fair share of all types of cargo." Reading that as a promise to support cargo preference, the maritime unions donated more than $100,000 to Carter's campaign.

In June a series of memos on the cargo preference bill, which at that point would have required that 25% to 30% of all imported oil be carried by U.S. ships, reached the President's desk. Treasury Secretary Michael Blumenthal reviewed the pros and cons: the bill, he said, would create as many as 18,000 jobs at sea and in shipyards and reduce the nation's trade deficit, but in the long run, by raising costs, would reduce both total employment and national production. Domestic Affairs Adviser Stuart Eizenstat noted that not only Blumenthal but CEA Chairman Charles Schultze and Under Secretary of State Richard Cooper "feel that no version of cargo preference is acceptable," but added that "rejection of cargo preference will be seen as a broken promise."

The decisive memo apparently was one from Robert Strauss, former Democratic National Committee Chairman, who is now the Administration's top trade negotiator. Strauss wrote that "other options don't serve or satisfy the political need." He added that he and Eizenstat had discussed the issue with Senate Finance Committee Chairman Russell Long and "left him in the political posture of 'anything you fellows can satisfy Jesse Calhoon [president of the 9,500 member Marine Engineers' Beneficial Association] with, I will take and support.' " Next to a portion of Eizenstat's memo that recommended Administration advocacy of a revised bill limiting cargo preference to 8% to 12% of oil imports, Carter himself scrawled, "less than 10%, as Strauss indicates." At the end, he scribbled, "O.K.--Strauss get minimum--J."

Somehow the memos got to Republican Senate Leader Howard Baker. Last week he and House Minority Leader John Rhodes charged that the memos dramatize the "vast difference" between Carter's "protestations of purity and his willingness to use the powers of the White House to make payments out of the American people's pockets as a down payment on the political debt he owes the maritime unions." They sought to summon Blumenthal, Schultze, Eizenstat and other officials to testify on the cargo bill decision, but got nowhere.

The Republican leaders' protests are unlikely to defeat or even delay the bill. Last week it passed the House Merchant Marine and Fisheries Committee by a lopsided 31-to-5 vote, and will probably sail through the full House and Senate about as easily. Many Congressmen also have political debts to the maritime unions, which contributed $979,000 to the campaigns of various House and Senate candidates during 1975-76. Carter can argue that he is giving the unions much less than they sought--but, says one of his own aides, "it's the principle. Today it's less than 10%. But once Congress gets a toy like this, the number can just be filled in as we go along." He adds: "We can't understand it." In fact, Carter's decision is surpassingly easy to understand. The only mystery is who in the White House was so distressed by it as to leak memos to the President's Republican foes.

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