Representatives from Nasa, the department of defence, and aerospace companies all agreed the United States is falling behind in the commercial space race, and will have look to the private sector.

``We used to have 100 per cent -- now we have 40 per cent of this market,'' Louisiana senator John Breaux, a Democrat who is sponsoring a space launch industry bill, told a hearing.

``And we are forced to use Ukrainian rockets, which is real embarrassing, especially when they blow up.''

Earlier this month a Ukrainian-made rocket crashed shortly after blasting off. It was carrying 12 satellites, worth $15 million a piece, for the US Globalstar consortium, which is trying to start up a hand-held satellite telephone network.

There are domestic embarrassments as well. In August a Titan 4A rocket blew up on launch, destroying a spy satellite anddestroying a billion dollars worth of equipment.

Breaux's bill, the Space Launch Cost Reduction Act of 1998, would offer low-interest loans to ``qualified private companies'' to help them build cheaper launch vehicles.

``I am a big believer in the private sector,'' Breaux told a hearing of the senate subcommittee on Science, Technology and Space. ``But while we are competing with other countries that are not market-based economies, it is important that we be able to compete.''

Acting under secretary for technology Gary Bachula at the department of commerce agreed. ``In an increasingly competitive world, the US launch industry cannot afford to fall behind,'' he said. Plus, he added, bolstering the industry would help the country's defence interests.

``We should explore together the concept of loan guarantees, advance purchase agreements, cooperative research and development, and any number of alternatives,'' Bachula said.

NASA administrator Dan Goldin echoed Bachula's suggestions adding the idea of atax credit, as well.

He said the US space launch industry was creaking along.

``US commercial launchers are based on technology and designs nearly half a century old,'' he told the committee. ``Even the Shuttle's technology is over 30 years old, and it costs $450 million per launch. Your laptop computer is more sophisticated than the computer on board the Shuttle.''

But old technology is not cut-rate, Goldin said.

``Nasa's total launch costs exceed $4 billion a year, nearly a third of our budget. This is too much.''

Goldin said the government had to help open the space frontier. ``Only when the commercial market, not government, is predominant in space will costs be driven down enough to make launch on demand a reality,'' he said.

Goldin said a rigorous screening process would be essential. He said many proposed projects were a ``whole bunch of hopes and dreams and promises'' that had no chance of ever working. ``Sometimes people come into Nasa with new laws of physics,'' hesaid.

Representatives from private industry agreed, and supported the idea of government help. ``In Lockheed Martin's view, the most straightforward and effective means of facilitating private investor confidence would be through a government loan programme,'' Jerry Rising of Lockheed Martin said.

He praised Breaux's bill. ``To ensure appropriate allocation of risk we believe private industry should be required to provide an appropriate level of upfront equity funds, the most risky element of any financing,'' he added.

Gregory Randolph of investment bank Goldman, Sachs and Com said government guarantees would be vital to getting financing for any project but he said the bill made a good start.