Senator MATSUNAGA. We have 71⁄2 minutes. Would you like to take your 71⁄2 minutes now before we go vote or would you like to wait until we come back?

Mr. CHARNEY. I haven't timed my summary.

Senator STEVENS. I will not be able to come back. If you would, I would like to hear your comments.

go.

Senator MATSUNAGA. When the bells ring next, we have got to

STATEMENT OF JONATHAN I. CHARNEY, ASSOCIATE PROFESSOR OF LAW, VANDERBILT UNIVERSITY SCHOOL OF LAW, NASHVILLE, TENN.

Mr. CHARNEY. I am Jonathan I. Charney, associate professor of law, Vanderbilt University. I have been involved in the law of the sea issues for over 10 years in many capacities and currently a member of the U.S. Advisory Committee on the Law of the Sea. I have written extensively in the area, particularly on the deep seabed issues.

I appreciate the opportunity to be able to present my views to you today and have presented them in detail to you which I assume will be included in the record.

I believe the legislation raises a number of significant issues. My final conclusion, as you will see, is generally to oppose the investment guarantee provision in the legislation, but to recognize justification for refined regulatory legislation dealing with deep-seabed mining.

My initial starting point is based on the view a successful and timely conclusion of the negotiations is, in fact, possible. I base this in part on the progress last summer where we saw in committees significant progress for refining the law of the sea text and, in fact, even Committee One with the work under the Evensen group work.

Let me approach the interest to be served by the legislation in the negotiations from the broader to the narrower issue. I have set out in my testimony, and in my article in "Foreign Affairs" last April, the statement that there are broad systemic interests involved in law of the sea negotiations.

We are not dealing with a narrow issue of the law of the sea; we are dealing with a system of negotiation of multilateral systems under multilateral law. Failure of this Conference can prejudice the system of nations' resolution of major issues. I think there is great interest and great purpose by seeing a successful conclusion of this negotiation at the Law of the Sea Conference.

I will not go into that in more detail. I will if you wish.

In addition, another broad interest of the United States are the general interests in other areas of the law of the sea negotiations which Ambassador Richardson had touched on. It is very important we preserve the gains made there and see them codified into the treaty. As a result there are broad U.S. interests in seeing the U.S. negotiations succeed and the Senate and the executive branch should do all that is necessary to attempt to see success reached. I believe well refined legislation can help to get these negotiations back on track. I believe in the Evenson Group work there was an indication of a willingness and ability to reach agreement.

I think to get them on track unilateral legislation of limited degree could indicate the United States's credible and realistic desire to see deep-seabed mining go forward, indicating the United States is serious in its desire to get its interests protected.

This legislation, on the other hand, should not go too far to indicate a substantive withdrawal of the United States or indicate things that do not represent our true national interest. Thus, I would avoid site specificity, the investment guarantees, and other aspects of the legislation I will mention later on.

Now, another broad interest involving this legislation is one that I mentioned, it has only been touched on tangentially by Ambassador Richardson. That is the legislating of negotiating positions at an international conference. I am afraid the investment guarantee provisions and the elimination of an escrow fund would, in fact, lock the United States into a specific negotiating position and create large disincentives to ratification of a treaty, limit the flexibility of the negotiators in producing an acceptable treaty that will protect all U.S. interests.

Thus, by providing for the investment-guarantee provision, and the lack of an escrow fund, you are putting a cost on the U.S. taxpayer for entry into voice an agreement that varies from the legislation.

This artificially costs the interests of deep-seabed mining. It communicates to the other nations we are substantively withdrawing from this Conference. It sets a bad precedent in international negotiations whereby other domestic interests would be coming before the Congress in protection against ongoing negotiations. I think this is a bad precedent that should be avoided at all costs.

Turning now to some of the domestic interests, I think it is important when you look at U.S. domestic interests to make a distinction between public interests versus private interests. The fact something benefits private industry does not necessarily mean it is in the public interest of the United States and it means it necessarily requires there be legislation and perhaps investment guarantees which I think are subsidies to be provided to those private industries.

On the other hand, I see public interest in seeing a viable industry. I see public interest in seeing natural resources provided to our market. In addition, we have a public interest in regulation of industries, protection of the environment, safety, and other regulatory actions. Thus, there are justifications for some regulatory legislation that will protect the public interest.

I draw a line again at the investment-guarantee provision in which we are protecting a private investment. The question there is whether the private investment is so important to the United States it becomes a public interest requiring taxpayer underwriting of the private industry risk. I start from the assumption this is a capitalist country in which private industry assumes the risk. The allocation of resource development rights was based on an allocation of the cost of that including political and economic costs. Am I running out of time?

Senator MATSUNAGA. You have. We will give you one more sentence.

Mr. CHARNEY. I think, by providing the subsidy, we distort the market. We support an industry in which there has not been strong enough proof that there is a public interest, a passing current public interest to underwrite deep-seabed mining. I don't think in the short term-the term that is considered in this legislation-we need to subsidize deep-seabed mining. I think we have the resources available from many sources and this can be deferred until later when this becomes more important.

I would go on later into discussion of the OPIC analogy and summarizes my specific recommendations.

Senator MATSUNAGA. Thank you.

Senator STEVENS. I am sorry that I have to miss it. I thank you, Mr. Chairman. I will not be back. For myself. I will tell you I think if the U.S. position as presented to the Law of the Sea Conference had been adopted there would still be problems ratifying the treaty. It was not a position that, in my opinion, was in the best interest of the United States. What you are saying, in effect, is that we should compromise somewhere beyond that. I think people ought to understand that the Senate is not in favor of establishing such a fantastic regime that is in effect a new world government on the ocean, that leaves us completely at its mercy as far as any ability to recover the resources of the deep seabed. There has to be some change in that provision.

I note, for instance, the Trilateral Commission had no representative from a mining state. As far as I can see, it had no representative of a fishing state. I don't know how we can take the recommendations from that Commission and follow them in connection with protecting our ocean interests as far as this Nation is concerned.

Senator MATSUNAGA. The committee stands in recess until after the vote.

[Whereupon, a recess was taken from 11:34 to 11:55 a.m.]

Senator MATSUNAGA. The joint hearing will come to order. When we recessed last, Professor Charney had spent 71⁄2 minutes of his 10 minutes. You have 21⁄2 minutes to summarize.

Mr. CHARNEY. Thank you for the remaining 21⁄2 minutes, Mr. Chairman.

At the end of my statement, Senator Stevens made a remark about the fact he did not think the text at the present time was worth the U.S.'s ratification. That may be so. I think that is a question that should come before the Senate to consider.

My problem is the artificial costing out of deep-seabed mining by putting a monetary figure, that is the investment guarantee, and the requirement ultimately perhaps to pay into the international community. I would not want to put that cost on the Senate when it considers whether or not it should give its advice and consent to a treaty. I would rather we consider all of the interests of the United States as they stand on their own.

I had concluded my discussion of the investment guarantee provision as to why I thought it was distorting the market and there was public interest in providing it.

Now, with regard to OPIC, I see some distinction between OPIC and the investment-guarantee provision here. OPIC was designed to ultimately phase into private insurance companies, thus the cost

of insurance would be borne properly by the industry, where there would not be distortion of the market.

Second, the purpose of OPIC, perhaps the real motivation behind it, was to provide something comparable to aid to developing countries. It was to assist them be developing investment there, to develop good relations between the United States and those countries capable of investment. The provision would have a contrary effect and would bring the United States the development and deny its participation by the developing countries ultimately, and it may exacerbate relationships with developing countries by such an action.

Thus, to get to the bottom line, my specific recommendation would be to consult actively with the executive to formulate the legislation; to maximize its beneficial impact on negotiations; to put them back on track; to eliminate the site specificity concepts involved in the legislation; eliminate the investment guarantee provision; add a realistic escrow fund for the international community; a further startup date for deep-seabed mining; provide sufficient flexibility so there can be a phase into an international regime and retain and augment the strong protections for the environment, safety, and other regulatory interests of the United States.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Charney follows:]

STATEMENT OF JONATHAN I. CHARNEY, ASSOCIATE PROFESSOR OF LAW, Vanderbilt UNIVERSITY SCHOOL OF LAW, NASHVILLE, TENN.

Thank you Mr. Chairman for inviting me to present my views on the pending Deep Seabed Hard Minerals Bill, S. 2053. Over the past few years, I have testified before House and Senate Committees on the predecessors of this bill. The gist of my testimony at those hearings was that I strongly opposed enactment of the legislation for both domestic and foreign relations reasons. Although I cannot support this legislation as drafted, I now believe that it is justified to proceed with some legislation on the subject.

1. FOREIGN RELATIONS INTERESTS

Let me first discuss the foreign relations interests that might be affected. I believe that the entry into force of a satisfactory Convention on the Law of the Sea is very much in the public interest of the United States. Not only are there specific ocean based interests that can be best protected by such a convention, but there are broader international relations interests of the United States that can be furthered by the successful conclusion of the current negotiations. Briefly, these larger interests include the facilitation of efforts to develop a system for peaceable and orderly resolution of complicated multilateral issues, the maintenance of constructive relations among the different economic and regional groups of states and the maintenance and establishment of viable international organizations that can permit collective international action when unilateral action would be less than optimal. Unfortunately, these interests would be prejudiced if the Law of the Sea Conference were to fail. Many nations see this negotiation as a key test for international multilateral negotiations from the systemic as well as substantive perspective. Failure would mean to many not only that the system of negotiation has failed but that other nations are not able to reach substantive accommodations on pressing international economic issues. The consequences could be to increase international tension as well as to increase the reluctance of many to utilize multilateral conference machinery for substantive purposes.

The consequences to the United States would be compounded if it could be credibly alleged that the United States precipitated the failure. The resulting loss of good will and isolation could be significant. I have submitted for the record a copy of my recent article, published in the April 1977 issue of Foreign Affairs, entitled, "Law of the Sea: Breaking the Deadlock," in which I have discussed the importance of the Law of the Sea Conference to the United States and other nations.