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Rural and Regional Affairs and Transport References Committee
04/12/2015
Flag-of-convenience shipping in Australia

REILLY Jr, Rear Admiral Robert Dunham (Retired), US Navy; Consultant, International Transport Workers' Federation Australia

[09:55]

CHAIR: Welcome, Rear Admiral Reilly.

Rear Adm. Reilly : I would add that I am a citizen of the United States, originally from Chicago, Illinois. I currently reside in Maryland, outside of Washington DC. I am a member of the SPECTRUM Group, a defence and aerospace industry consulting company headquartered in Alexandria, Virginia, New York, Washington DC. I also volunteer my services with various US not-for-profit groups that support our nation's military. Some of these include the Navy League of the United States, the National Defense Transportation Association and the Armed Forces Communications and Electronics Association.

I am here today at the request of the International Transport Workers' Federation, which includes the Maritime Union of Australia, and also the seafarers international union of the United States, to provide my comments on the national security role that the Jones Act or the maritime [inaudible] plays.

CHAIR: I am going to ask you to make an opening statement. I normally say 'brief' but you do have a story to tell us—and we will be itching to ask questions of you, so fire away.

Rear Adm. Reilly : May I just add, for the record, I became aware of this opportunity to come to Australia about 10 days ago, and I jumped at it. The reason I jumped at it is I have never been to Australia—but I have had relatives who have, including one of my family mentors, my uncle, a naval officer who fought in World War II and was very fortunate that when his ship was torpedoed it was able to make it to Sydney, where it received voyage repairs and was able to get back in the fight. So I want to thank you for how you have helped my family over the years. I will go into the role I played while on active duty and the relationship we had with the maritime unions. I considered this something I needed to do, because of the respect I have for our merchant maritime community and how integral it has been to the United States Navy.

I served as a commissioned officer in the United States Navy for 34 years, from 1975 through 2009, and I retired at the rank of rear admiral. My navy career culminated in my assignment, in 2006, as the 24th commander of the United States Navy's military seal of command. I will be very careful, for the staff here, not to use too many acronyms because, in my profession, you can die from the death of a thousand acronyms!

MSC is an organisation where, as I commanded MSC, I was responsible for the training, the maintaining, the equipping and the crewing of the US Navy's afloat logistics and our government's strategic seal of maritime forces. This meant that I routinely worked with our commercial maritime industry partners—that includes the Jones Act trades—to help develop and sustain an infrastructure that has over time and today remains critical to the United States Navy and to our national defence strategy.

I want to say at the outset that in my presence here I do not represent the government of the United States, including the Department of Defense, the Department of Transportation, the Department of Homeland Security or the United States Navy, the United States coast guard or even my country's United States Maritime Administration, known as MARAD. The reason I tee these all up is that these federal organisations are all stakeholders—along with the American people—and we all have equities, when it comes to our economy, our security and the role that the Jones Act performs in helping to sustain our maritime, industrial and transportation sectors.

On a personal note, and I can relate to the fact that Australia is a maritime nation as the United States is a maritime nation, our countries do share the distinction of a number of things. We are both nations of immigrants. In my case, my great-grandfather left Ireland, at the age of 16, via Liverpool. He went on a sailing vessel and found himself in New York City back in 1861. He arrived shortly after the civil war began. Like many fellow Irish immigrants, he found his way into the US military, where he served for 39 years. I am the fourth generation Reilly to serve in the United States military. Each one of those generations has had to call upon strategic sea lift in times of war and peace. In fact, that is a track record that has occurred since 1898. The majority of major conflicts that the United States military has participated in have been overseas, as you well know, requiring the use of ocean-going ships to transport our military. In the early 1990s, and you are probably familiar with this fact, America found itself in the midst of its largest strategic sea lift efforts since World War II. That required the use of over 200 different strategic sea lift ships. It moved four times the amount of cargo that occurred during the Normandy invasion of World War II.

CHAIR: Read Admiral, I am sorry to come in. We are really keen to here that. It is very important, but we do have that information. What we really want to hear about is the Jones Act, how it applies in the US and the reasons it applies in the US.

Rear Adm. Reilly : I would be happy to set this aside.

CHAIR: Senators will be really dying to ask you questions. Please, do not take that as—

Rear Adm. Reilly : No, that is quite alright. You have my written statement. It is long and it is complicated. It is complicated because when we look at our maritime industry it covers a number of national security pillars. We break those down and our war colleges teach that those elements include diplomacy, intelligence or information, the military and the economy. There are a number of those pillars that our maritime community has a role in. Certainly, over the years, as our US-flagged fleet has diminished over time, there has been increased focus, particularly at the national security level in the United States, as to what is happening with our US-flagged fleet and how that relates to our national security strategy. At the same time, in an effort to make the United States Navy more efficient and to adopt better business practices, because defence is a form of insurance, and it can be a very high bill to pay, and as technologies has changed things, we have had to become more efficient and we have also had to recognise that, in matters of national crisis and in matters of response, part of the equation is getting there and getting there quickly. We cannot do that without the help of our US maritime community.

The Jones Act—although it is, from what I understand, a little bit more stringent than the maritime cabotage laws here in Australia—requires the use of US owned, US built and US operated ships for our coast-wide trade. In the United States, this includes up and down our coasts, it includes up to Alaska, it includes out to Hawaii, it includes to Puerto Rico and it also includes about 22,000 miles of inland transportation means. This includes all of our major rivers: the Mississippi, the Ohio, the Columbia River—

CHAIR: Twenty-two thousand miles?

Rear Adm. Reilly : Twenty-two thousand miles of inland waterways. Each one of those is unique in terms of its environmental aspects—tides, currents, obstructions. Some of them, like the Mississippi River, have a series of locks. It does not take much to smack a side of a lock and render that ineffective. When that happens, it impacts the economy. When we had hurricanes Katrina, Rita and Wilma in 2005—there was a series of hurricanes—they basically shut down the Gulf Coast. The Mississippi River was not navigable. We started to tick off the billions of dollars of revenue that was lost. When that happens, for the American public, in my opinion, it really draws attention to the kind of critical infrastructure this is in the United States. Then when something happens overseas, the response usually is, 'What are going to do? What are our national interests, and how do we maintain them?' So the common denominator in both of those areas is the ability to draw upon a very experienced, trained and highly regulated industry—our maritime industry—that fully adheres to all international rules. You have heard of IMO and SOLAS. I think many of these are areas where our two countries probably have led the way in instituting these kinds of standards for all of the right reasons—for environmental, security and national security reasons, and the like. This globalisation effect has impacted the world, as it obviously has in the United States. We rely exclusively on our overseas trade. We have megaports, as you do. They continue to grow. They continue to be active. They are frequently visited by foreign flagged vessels. When a foreign flagged vessel comes into a US port, its manifest has to be provided 96 hours in advance. There may be some individuals that already have cleared visas that would allow them to get off the ship; if they don't, they do not leave the ship.

Similar to your screening processes, in the United States it is called the transportation workers identification credential. It is a process where our Federal Bureau of Investigation starts to do a background check. In the United States, as you can imagine, we have a number of mechanisms that can share information for the purposes of national security. We have terrorist watch lists and the like. So there is that mechanism in place to ensure that there is a modicum of security as it pertains to visitors and certainly security to meet the expectations of the average American citizen when it comes to the people who sail in our coast-way trade.

For the Department of Defense, having our merchant maritime community, which we call the fourth arm of defence, is absolutely critical for us to respond in terms of national crises and disaster. We have called upon them time and time again. This is a capability and being that we do not need to be totally on the US government payroll. This is where we have a mixture of best business practices that include maintaining military-useful cargo ships in a reserve capacity parked at piers, in case we need them, with a reduced operating crew. It includes agreements with 60 of our only 88 Jones Act flagged US vessels, so that if we need to recall them for active service, for whatever means, we can do that.

CHAIR: Can we come in there and ask some questions. There are 88 Jones Act vessels.

Rear Adm. Reilly : Deep-draft vessels, yes.

CHAIR: Sorry?

Rear Adm. Reilly : Those are 88 open ocean Jones Act vessels that can support the military's mission when called upon. The most military-useful vessels are eligible to participate in what is called our Maritime Security Program. What is the relationship to that and the Jones Act? The Jones Act ensures that we have sufficient US merchant mariners that are trained and can be called upon in a matter of hours, if you will, to respond to national tasking to either get a government strategic sea lift or a special mission purpose ship underway. Or, if they are out there sailing on a Jones Act vessel that has participated in this program—and these are companies that work hand in hand with the government; these are maritime trade unions that work hand in hand with the government; and the government includes our Coast Guard, our Department of Homeland Security—we get together as a nation, as a community, in an enterprise fashion to address these things.

Senator HEFFERNAN: Could you describe in a minute—you are doing a lot of circle work—the Jones Act? Describe it? A picture paints a thousand words. You are going around in circles. You are probably trained to do that.

Rear Adm. Reilly : Certainly, Senator. I thought I had mentioned it before.

Senator HEFFERNAN: You mentioned it—the working detail.

Rear Adm. Reilly : Simply said, the Jones Act is cabotage. It applies in the maritime arena and it can apply in aviation and the like. It simply states that if you are going to operate a vessel, in the case of the maritime community that operates from a US port to a US port—and that can be a port up a river, a port in Alaska, a port in Puerto Rico or a port up or down our coast—that vessel will be built in the United States, crewed by US licensed and unlicensed mariners whose course curriculums have been approved by our Coast Guard who works with our school houses and it is to be owned, at least 75 per cent, by a US company.

Senator HEFFERNAN: So who pays the bill when it is called up to the job under the Jones Act? Is it the taxpayer?

Rear Adm. Reilly : When it is called up in terms of national security, the government pays the bill.

Senator HEFFERNAN: You would be aware that the US is technically insolvent.

Rear Adm. Reilly : I would beg to differ. I do not know that we are insolvent. We certainly—

Senator HEFFERNAN: I said 'technically insolvent'. I have been to Harvard University and argued with the college there. You are technically insolvent. Do you know who your biggest creditor is?

Rear Adm. Reilly : I am sorry?

Senator HEFFERNAN: Do you know who the biggest creditor of the US government is?

Rear Adm. Reilly : Sir, I am not an economist; I am a naval officer.

CHAIR: That is a good answer.

Senator HEFFERNAN: A US pension fund has actually borrowed the entire reserve of your pension fund for cash flow—$5 trillion.

CHAIR: If we can come back to—

Rear Adm. Reilly : Senator Heffernan, I am not particularly concerned about that for me, but I am concerned about that for my children.

Senator HEFFERNAN: Most of the world expects, if there is trouble, the US to pick up the bill. That is what I am saying. In reality, the rest of the world cannot expect the US to keep picking up the bill because you are technically insolvent. You are approaching $18 trillion now in public debt.

Rear Adm. Reilly : I would be happy to forward you a report done by the Congressional Budget Office that talks about our budget. It talks about the principal drivers of our budget. I am very aware of that.

CHAIR: Senator Heffernan is a much loved figure around here. He is actually known as the most disgraced senator in Australia. He wears that title proudly. To use one of his phrases, 'Don't take the bait.' Let's come back to the Jones Act. For the United States of America to have confidence in their seafaring fleet that they are highly trained, they are there day in and day out in American built ships—and you are creating an industry there too, because you are protecting your jobs—in a national crisis, whether it be a hurricane or a theatre of war somewhere, there is a shipping fleet of 88 vessels that the taxpayer pays for. They know there is this highly trained fleet for security. They are all Americans and there are no shenanigans.

Rear Adm. Reilly : Let me clarify a little bit. We currently have 165 US flagged vessels; 88 of those vessels are Jones Act ships. That means that they comply with the act. They are US built, US owned and US crewed. Of those 88, 60 have been determined to be militarily useful. In other words, they can carry military cargoes. These are roll on, roll off vessels. They can be certain container ships. This requirement is linked to our combatant commanders' operational plans, which have some element of risk. It is a requirement that has been generated by the Department of Defense. That applies to 60 of those ships. Also, there are 46 ships that are part of the Maritime Administration's Ready Reserve Force. There are also strategic sea lift assets that are maintained by the Military Sealift Command which principally are kept at a reduced operational status waiting to go somewhere if we need to fill them up with army or Marine Corps cargo and go overseas. That option can be scaled. You can go to one extreme and ask, 'When's the next time there is going to be in Operation Desert Storm?' You can do drills all you want. My point is that we have a scalable option for a variety of potential scenarios, including disasters, humanitarian aid and so on. We have this resident capability. The reason we have this resident capability is that we sustain our merchant mariner human resources. It is that capital management.

CHAIR: I fully understand. Can you take on notice to provide the committee with charts or material that shows—

Rear Adm. Reilly : I have that readily available for you.

CHAIR: I fully support the Jones Act. I make no secret about that. But I am not speaking for my political party because they are not as for it as I am. I also see the opportunity in creating a shipbuilding industry, but we will not talk about that. We will leave arguments about submarines to another committee.

Senator BULLOCK: Rear Admiral, thank you for coming to Australia.

Rear Adm. Reilly : Thank you for having me.

Senator BULLOCK: Your firsthand knowledge of the interaction between the Jones Act and the United States defence capacity is important for any country that is concerned about its national security—in these uncertain times, we have to be concerned about our national security. I refer to four paragraphs of my written copy of your opening statement, which I want to read:

Repeal of cabotage laws, which would allow foreign-built, foreign-operated, foreign-manned, and foreign-owned vessels to operate on American waters, would effectively transfer a core American defense industry, i.e., shipbuilding, overseas to other nations which heavily subsidize their shipyards and play by their own set of rules.

…   …   …

Without the Jones Act, the U.S. Coast Guard and other government entities would face the daunting task of monitoring, regulating, and overseeing potentially tens of thousands of foreign-controlled, foreign-crewed vessels in internal U.S. commerce. As a result, America would be more vulnerable and less secure.

…   …   …

I find it hard to believe any scenario where the American people would feel comfortable having someone other than a vetted, well trained, and experienced U.S. Mariner crewing a vessel, and having unfettered access to the maritime portion of our nation's critical infrastructure.

…   …   …

The U.S. Department of Defense has consistently emphasized the military importance of maintaining a strong domestic shipbuilding industry, stating "[W]e believe that the ability of the nation to build and maintain a U.S. flagged fleet is in the national interest, [and] we also believe it is in the interest of the [Department of Defense] for U.S. shipbuilders to maintain a construction capability for commercial vessels."

I took all that on board. We are an island nation. How could this country justify taking a position contrary to the position you have outlined with respect to the United States?

Rear Adm. Reilly : Let me think about that, because I am trying to put all the pieces together and understand. Your question is: how could Australia—

Senator BULLOCK: We are here contemplating taking a different course. All of your comments, one way or another, related to the interaction of the shipping industry and the defence capability of the 'land of the free'. Given your experience in the defence of the United States, in a world consumed with the threat of terrorism and the possibility of infiltration through ports—all of the points in those four paragraphs—if we are serious about defence, how could it be possible to take a different position to the position you have taken in this paper?

Rear Adm. Reilly : I do not think you could.

Senator BULLOCK: Thank you for the answer.

Rear Adm. Reilly : It boils down to the fact that this requires someone to take the long view. It takes decades to build a—

Senator BULLOCK: It is about more than how to knock a few bob off the cost of dropping something up the coast. Sorry, 'a few bob' is both an Australian expression and a very old expression—I apologise for it.

CHAIR: A few dimes. Rear Admiral, we are really interested—in fact, some of us salivate at the thought of how advanced the Americans are. I love my country, but, unfortunately, the quality of some of the politicians in this nation is quite pathetic. You will probably walk away wondering how the heck we ever made the OECD. Anyway, that is my little rant.

Rear Adm. Reilly : My background is not only as a naval officer; I chose to study political science as an undergraduate degree and I have a master's in public administration and national resources—

CHAIR: Woops, I had better get under the table!

Rear Adm. Reilly : which speaks to how our federal government works. I have had five Washington DC tours. I understand that it is the process of making sausage. I also understand that your role as elected officials is that you have to represent your constituency and balance the needs between local needs and national needs. How you make that come together is what democracy is all about.

Senator BULLOCK: Coming back for a moment to taking a long-term view, you were just launching into that, I think.

Rear Adm. Reilly : Certainly. In the United States, my experience during the course of my military career is that there has always been a strategic concern that, once you allow a critical industry to atrophy, it just will not come back. I will also tell you that, growing up, like every American teenager I could not wait to get my first automobile. I grew up being a Ford man. My father bought Fords; my mother drove a Ford.

Senator BULLOCK: You are going to depress us if you start talking about the death of the Australian car industry.

Rear Adm. Reilly : In 1987 or 1988, when I had small children, I had a Ford station wagon and it was terrible. It was poorly manufactured. There was not a high level of quality. I am now a Toyota person. I have two Toyotas in my garage: one was manufactured in Japan and the other one was manufactured in the United States. So do I have a US built automobile? Yes. I also have a foreign built automobile. When you talk about a ship it is a little bit different. It is a different dynamic.

We constantly in the Navy are concerned about our shipbuilding base and we have very deliberate, strong and sometimes intense discussions with our shipbuilders about how you can effectively and efficiently keep a production base and we get the whiplash. One of the reasons we support the Jones act is that by having these 165 ships maintained in the US shipyards from Hawaii to Mobile, Alabama we retain the core competencies—the welders and electricians. That is the most dangerous working environment that you can imagine and that is another area that is regulated. The same applies when you get into things like nuclear submarines.

The longer you stay in the Navy you understand it is more than just being out there on the tip of the spear, if you will; it is how you incorporate all elements of your economy as part of your national security strategy. I will tell you that because the operational tempo of the United States Navy is starting to grow and our fleet size continues to go down it means longer times at sea. We have almost a weekly dialogue in some sectors of the Navy, particularly our people charged with maintenance, on what the workload projections are. That is also found in contracts. Our ability to have that dialogue with industry means we are supposedly safeguarding the American taxpayers. That is what they expect us to have.

Senator BULLOCK: Shipbuilding and maintenance are part of the defence infrastructure of the United States?

Rear Adm. Reilly : I was absolutely thrilled when I got off the plane here in Canberra. The reason I was absolutely thrilled was right above one of your baggage carousels is the beautiful ship USS Independence LCS-2 built in the Austal USA shipyard in Mobile, Alabama. We have taken advantage of Australian high-speed vessel technology and have purchased it along with 10 expeditionary fast transports, which are your version of high-speed ferries, because we found there is good military utility in that from a logistics response and from a war-fighting perspective. There are arguments about its ability and its survivability because it is a relatively small ship but what we have instituted in that ship is something call modularity—plug and play. It speaks to how you manufacture ships—or how you used to build ships in the past. Our shipyards have teamed with Daewoo and Hyundai to learn how they do business, like we have teamed with Australia.

Senator BULLOCK: Austal is a good Western Australian company so I am pleased you are using them. That is it for me, Chair.

Senator MADIGAN: From listening to you today and reading your submission it seems the Jones act supports America's national security, its national interest in trade and skills and supports you having a credible deterrent, being able to protect American interests beyond your shores. Does it fit in with America's view of the world—with that very unstable world, increasingly, that we are seeing—that the Jones act is an integral part of America's national security and its fight against terrorism?

Rear Adm. Reilly : To me, that is a linkage that can be made. It can be long and complex. But, ultimately, when I was running the Military Sealift Command and I had about 100 vessels across 22 different time zones—and all of my vessels were reporting to our combatant commanders, our Navy commanders in the field—it gave them a wide variety of options in order to respond to a wide variety of circumstances. Many of those ships are here in the western Pacific theatre of operation. All of the Military Sealift Command ships—this just speaks to the fact that it was the job of a lifetime, and I miss it—have US merchant mariners that operate them, and the reason that we do that is it is a great business decision. Their operating tempo is similar to ocean-going vessels. They stay out at sea longer. They are single-mission purpose. And we can effectively use the talents of merchant mariners. From the deck personnel to the engineering personnel, we can train them to do a few military-useful functions, such as operating a flight deck and handling rotary aircraft, and they can do the job for us while we free up sailors to go to our warships—and, as I said, they can stay out there longer. We are confident with how they are trained. We are confident with the oversight. When I was in command, I did not even have to pick up the phone to have a conversation with our maritime labour shipmates because I knew those conversations were ongoing; they were a function of the $6 billion worth of contractual agreements we had with the maritime community. So we had all of these incentives in place to ensure that we had the necessary quality and the capability.

CHAIR: Rear Admiral, I am keen to let the senators get their questions out. But, just touching on that, you have a community that is paying taxes in America as well.

Rear Adm. Reilly : That is right. I think in my statement I provided you with some of the dynamics in terms of the billions of dollars that help us contribute to the economy. I am glad we have it, since we may be going insolvent.

Senator MADIGAN: America is, as you know, the home of the free market and everything like that, but in spite of all of that America still places a very high value on having its own maritime workers who complement the American Navy—for instance, in the event of war or a domestic event that may require help. So, in spite of everything, in spite of the cost, it is an insurance policy, isn't it, for national security?

Rear Adm. Reilly : Yes, it is. Some people might also call it a subsidy. There are a variety of other ways that—

Senator MADIGAN: But America does not outsource its national security, does it?

Rear Adm. Reilly : I think that is a fair statement.

Senator MADIGAN: So America places a very high value on knowing who and what it has at its disposal to protect America's national interests?

Rear Adm. Reilly : Yes.

Senator MADIGAN: Thank you.

Senator RICE: Thanks, Rear Admiral. It has been really interesting. From what you say, in summary, there are three benefits of having the US built, flagged—

Rear Adm. Reilly : And operated.

Senator RICE: and operated ships. There is the benefit of being able to draw upon local ships and seafarers to military operations. There is the economic benefit of the industry. There is also the benefit of greater security at ports in having local ships and seafarers. You obviously have foreign-flagged and foreign-crewed ships in America because of international trade.

Rear Adm. Reilly : We do.

Senator RICE: Can you tell me more about some of the different screening processes and security that operate for those ships in US ports, compared to what you know is the situation in Australia?

Rear Adm. Reilly : You said Australian processes in US ports?

Senator RICE: No. What are the screening processes and security processes that operate for the foreign-flagged foreign-crewed ships in US ports, compared with what you know about what happens at Australian ports?

Rear Adm. Reilly : Let me caveat this: I have to be careful what I say here because, frankly, because this is so ubiquitous, I do not see it per se. As a naval officer I came in on a government vessel and I was not a party to that screening, although I will tell you that when a US Navy vessel comes back from overseas the first person who meets them is a representative from customs. Like everybody, it does not matter whether you are in the military; you have to fill out your customs form. There is an overlapping security infrastructure that includes surveillance capabilities at ports. Obviously they are there for safety and security. We have a vessel system that is relatively new called an automated information system, AIS. It is a process by which a ship has its own unique identifier, which is transmitted so that you can go into the database and see that this particular ship is claiming it is vessel X from Y and here is the crew complement. In the port area, the manifest will have been vetted. You have the discussion about where it is going to go in the port and how it is going to get there, when the pilot is going to come aboard. Of course, if a pilot boards a vessel and believes it is unsafe, it is probably going to remain at anchorage. If there is any need whatsoever for it to not enter port and if any of these checks occur and something appears to be out of the ordinary, then our port authorities will consult with the coastguard and that ship should remain at anchor outside the port before it comes alongside.

My other belief in this regard is that there is an economic check and balance here in play because there is cargo on board that ship. So it is in the interests of whatever American company is doing business at the port to ensure that the paperwork is in order and that the stevedores are ready to unload the ship, and that it is going to berth. So there is visibility in that process as well, now it is complex, it is dynamic. Because of the pace of trade where these huge container ships have to get in and offload thousands of containers in a matter of days, it can be extremely dynamic. That is where the processes try to link all the intermodal forms of communication and have a level of security. In the case of a US-flagged ship, that starts with America.

Senator RICE: How about in terms of the crew, for a foreign crew arriving on a foreign-flagged ship?

Rear Adm. Reilly : Again if I may, it would be important for me to take this for the record so that I can get you the most accurate information available. I will get that back to you because I would like to consult with the Department of Homeland Security and our Coast Guard. I will however tell you my impression based on conversations I have had and on what I have seen. A vessel's manifest is required to be there 96 hours in advance. Then it is turned over to the Department of Homeland Security for an inspection. If the vessel indicates that there is an individual on board that ship who has a visa, they have already gone through a vetting processes and they have obtained it, that will allow the individual to go ashore if they want to. If not, they do not leave the ship.

Senator RICE: That sounds a very different and much more stringent process than Mr Crumlin outlined for us this morning, where we do not have the vetting of the foreign crew. They get a temporary visa and they are basically allowed to leave the ship with very little vetting at all. Do you think that is a risk for Australia—particularly given that almost all of our shipping, as proposed, is going to be foreign flagged and foreign crewed ships?

Rear Adm. Reilly : I am very circumspect about trying to quantify risk. Part of the reason I say that is: when I was on active duty, when I held a security clearance that allowed me to fully understand and work in a classified environment where I had the ability to reach into these organisations in a secure mode and understand what they were doing and whether or not there was a flagged event or whether there was intelligence that indicated that there might be a problem, I felt extremely comfortable being a member of a military and I felt very comfortable for my family. How much insurance do you buy and how do you weigh the risk?

Senator HEFFERNAN: Change your gun laws.

Rear Adm. Reilly : I would tend to agree with you there.

Senator RICE: For me, I am worried by what I hear. And given that it looks like almost all of the shipping that will be coming to Australia is going to be flagged in Liberia or Panama, with crew coming from often quite unstable parts of the world—who are then able to come ashore in Australia with very limited vetting—that worries me from a national security perspective and in times of uncertainty and extremist terrorist activity in the world. It sounds to me as if the US situation is very different and you have got much stronger controls. If you were an Australian would you be worried as well, from what you have heard about what our conditions are like?

Rear Adm. Reilly : I will tell you that we are still concerned. To have an open society, a free market and a democracy, that is transparency and interaction in the global economy. Many of you are well aware of some of the recent tragic events. These were internal issues, and it speaks to Senator Heffernan's point about gun control. As part of my master's program I studied assault weapons. Why should the average American be able to go out and purchase a semi-automatic assault rifle similar to what was used by the military in decades of combat? It speaks to the right to bear arms, which is a very sensitive subject in the United States.

Senator RICE: Why do you think that there are the stringent visa controls in the US on foreign crew being able to come ashore? It sounds like it would not be possible in the US to do what is possible in Australia.

Rear Adm. Reilly : I do not know enough about the details and I must confess I am a detail oriented person. I would need to learn more about how you do business. But I will tell you that the world for the United States fundamentally changed on 11 September. I also recall that there were 11 Australians in the World Trade Centre, and there was an Australian in the aircraft that hit my office building that morning.

Senator RICE: It is very sad.

CHAIR: We are going to have to wrap it up, but very quickly: how long as the Jones Act been in place?

Rear Adm. Reilly : Since 1920.

CHAIR: I see from your bio that you were the commander of the USS Harry S Truman aircraft carrier strike group.

Rear Adm. Reilly : I was.

CHAIR: I would love to have a beer with you when you are fully retired. You could tell me some great stories. On that, Rear Admiral, I thank you very much for coming before us today. We do appreciate the effort. We know you have only come over for a couple of days. Safe travels, and we hope to hear from you again, probably in Washington.

Rear Adm. Reilly : Thank you. You have my email.

CHAIR: Thanks very much.

Senator HEFFERNAN: Do you know straight off the cuff what the average labour cost in your maritime industries are versus the general industries in the United States? Your labour costs are a lot lower than ours. Do you know what the hourly rate is?

Rear Adm. Reilly : I could not tell you, Senator.

Senator HEFFERNAN: Do you know how much the US missed out according to the World Bank because of the US$3 trillion that was on the merry-go-round, running away from tax last year?

CHAIR: It is alright. You do not have to answer that.

Senator HEFFERNAN: You missed out on somewhere between US$650 billion and US$800 billion.

CHAIR: On that, I can tell you the trucking rates. If you are in a teamster union agreement it is $22 an hour, but the basic wage is US$7 an hour and US$8 an hour in California.

Rear Adm. Reilly : Do you have a minimum wage here?

CHAIR: Yes, we do.

Rear Adm. Reilly : What is it?

CHAIR: It depends on the industry.

Senator BULLOCK: There is the national minimum wage. It is $650 a week or thereabouts.

CHAIR: But in unionised yards they joke about that. We should be proud to stand up and deliver decent wages and conditions. On that, we will take a short break.

Proceedings suspended from 10:41 to 10:51