Op-Ed: The degradation and recovery of U.S. shipbuilding

by Ted Williams, president of Senesco Marine LLC

Global maritime supremacy has been a cornerstone of our national security for decades. However, today, we have not only lost this supremacy, we are not even close to being able to regain it if needed. We are a nation with almost 12,000 miles of coast line. A leading global power that requires our maritime military to not only defend, but also to mobilize and have a world-wide presence to ensure peace and stability is maintained. Commercially, we are the No. 2 exporter in the world, behind only China. We are the leading importer in the world. Sea power, presence and commercial capability are vital to our nation’s survival. Yet, our global ocean-going presence has all but disappeared in the past half century.

To truly understand the degradation of U.S. shipbuilding, we must go back 100 years to see the growth and subsequent decline. In the nearly 20 years following the end of the World War I, America’s merchant fleet, including its cargo and passenger ships, was becoming obsolete and declining in numbers. Recognizing this decline, our leaders in D.C. amended our maritime strategy and a shipbuilding program began with the passage of the Merchant Marine Act of 1936. The purpose of this act was “to further the development and maintenance of an adequate and well-balanced American Merchant Marine, to promote the commerce of the United States, and to aid in the national defense.”

World War II then provided additional impetus to intensify those efforts eventually leading to a ship-building program that allowed for mass scale production. The U.S. shipbuilding industry, mobilized under the U.S. Maritime Commission, and set records of production that have never been equaled. The nation was faced with having to build ships faster than they were being sunk and as a result, shipyards across the country found new ways to increase their efficiency and scale of production. Huge new shipyards were built, a labor force of almost 750,000 people was employed, and U.S. shipbuilding was never greater.

In the six years that marked WWII, the United States built almost 9,000 ships. The next closest shipbuilding country was Great Britain who built 1,156, and our adversary at the time, Germany built 954. This allowed for a major advantage that the United States had with maritime presence to include firepower and commercial shipping.

Post WWII, our navy decreased in size. But again it was war that corrected this as the Korean and Vietnam Wars saw sustained naval presence. However immediately following Vietnam, the Navy workload declined once again, yet the commercial shipping industry remained vibrant. It was in the early ’70s that United States commercial shipping accounted for about two-thirds of the country’s total shipbuilding workload. By 1978, the Naval market had also begun to reappear and at the end of the 1970s, American shipyards employed almost 200,000 people nationwide. Significant, but still far less than the WWII era. As a result of this re-focus, in the ’80s we were back to being a global naval leader with a 600-ship navy most of the decade.

However, 1981 was the watershed year that changed the shipbuilding industry in the United States. Driven by a desire to remove the Government from private markets, the Reagan administration terminated funding for the construction differential subsidy program, which offset the higher shipbuilding costs in the U.S. by paying up to 50% of the difference between the cost of U.S. and non-U.S. construction. With that termination, the U.S. shipbuilding market collapsed.

This policy decision meant that U.S. yards became a one-customer industry, the Navy. And at the end of the ’80s, with the end of the Cold War, that customer was not in the U.S. shipbuilding business. As a result, the 1980s saw the shipbuilding industry shed 40,000 production jobs and, for all practical purposes, the collapse of the commercial sector. And to this day, we have never recovered.

Today we are a distant fourth in the world in shipbuilding, behind the Asian nations of China, South Korea, and Japan. A nation that was among the world’s leaders in commercial shipbuilding at key junctures in its history today builds less than 10 large cargo carrying vessels for oceangoing commerce in a typical year. China builds over one thousand such ships each year. The entire U.S.-registered fleet of oceangoing commercial ships numbers fewer than 200 vessels, out of a global total of 44,000. Despite trade flows to and from America exceeding a trillion dollars annually, the vast preponderance of which travel by sea, U.S.-registered ships carry barely 1% of that traffic.

Currently there are just over 150 private shipyards in the United States. Of these private shipyards, 25 are mid-sized to large shipyards capable of building naval ships and submarines, oceangoing cargo ships, drilling rigs and high-value, high-complexity mid-sized vessels.

The remaining yards are smaller yet capable of building the simpler types of commercial vessels, such as tugs, towboats, offshore service vessels, fishing vessels, ferries and barges. In addition to these private shipyards, there are five public shipyards operated by the U.S. Navy or U.S. Coast Guard. These numbers include the fact that the U.S. has lost 14 new-construction shipyards since 1970, with minimal governmental interaction.

China and other shipbuilding nations continue to proactively subsidize their shipbuilding industries, while the United States does very little in comparison.

The U.S. Navy has also lost its capacity to keep up with China in military shipbuilding.

China now has the largest fleet of warships in the world, about 350, while America’s Navy is struggling to maintain 300 ships—half of what existed just 40 years ago.

U.S. vessel quality and capability as well as the skill level of its sailors still outdistance our Chinese counterparts, but this will not continue forever. The U.S. merchant marine today is so small that analysts question its ability to support military sealift requirements in a war.

With only 200 or so oceangoing vessels in the U.S.-registered commercial fleet and less than 12,000 professional mariners—the capacity of the private sector to enhance or even only maintain our fleet of aging vessels is in question.

It is easy to find excuses for why our government has allowed the U.S. maritime presence to dwindle. After all, how likely is a prolonged war with China, requiring months or years of sealift activity to sustain forward-deployed forces? However, that current unlikeliness hardly mitigates the seriousness to our national security with respect to  America’s gradual disappearance from the world’s oceans.

We know that China’s long-term goal is to dominate global supply chains for vital industrial goods, so the fact China is outproducing America in large commercial vessels 100-to-1, that it increasingly dominates ocean-going traffic, and that it is securing control of ports along key trade routes, should be concerning not only to D.C., but to all American citizens. However, so far, it has yet to elicit a significant response.

China’s more immediate naval goal is to secure control of nearby seas; the now smaller U.S. Navy strives to maintain a global presence, stretched thin to cover all desired areas. The problem of loss of sea power is fixable, but it may require a different kind of political culture and financial stomach than America currently possesses.

So what, as a nation can we do about it?

There appears to be three options:

1. Akin to a Jones Act, a century old law that mandates all ships coming into a U.S. port and then subsequently working in U.S. waters must by U.S. built and U.S. manned, the lawmakers could mandate that a percentage of our country’s shipping and cargo movements must be moved by U.S. built/US manned vessels.  This however would be very difficult to regulate and oversee. Creating accounting challenges that would test the ports’ limits. And it certainly would not happen overnight. Additionally, this would create an added cost to the consumer to utilize the more costly U.S. labor produced ships.
2. Another option would be to directly subsidize U.S. shipyards and shipbuilders, as we were doing prior to 1981 with the construction differential subsidy program and similar to what China is heavily doing today. This is perhaps the fastest and easiest method to help the industry. When a vessel is built, the labor expense is anywhere from 25-40% of the vessel price. These large cargo ships are on the magnitude of well over one million man-hours to build and over $100 million dollars to construct. With that many labor hours, U.S. labor rates add up fast. The Asian nations labor rates are significantly less and therefore making their vessels at a much lower expense. This obviously makes it difficult if not impossible for United States ships to compete in the ocean-going market.   
3. The final option is to do nothing and watch the continued decline of U.S. maritime supremacy.  It will then likely take a global war to scare the United States back into the shipbuilding industry, however by then it will likely be too late and significantly more costly.

It does appear however that our leadership is starting to notice. We are recognizing that we once again need a new and more vibrant maritime strategy. There has been a move to change this disparity and implement a new strategy. Led by the recent highlighting of this disparity by Secretary of the Navy Carlos Del Toro, there is legislation pending that would provide significant boosts to the industry.

The Energizing American Shipbuilding Act of 2023 proposed by Representative John Garamendi of California. Congressman Garamendi, Ranking Member, Coast Guard and Maritime Transportation Subcommittee sums up the problem clearly in his legislation by stating “The world relies on maritime transportation to move ninety percent of its global trade, but very little of that travels on U.S.-flagged ships. Of the 1.4 billion tons of goods that are imported and exported through U.S. ports each year, 98% travel on foreign-flag vessels operated by foreign mariners.

The erosion of our ability to build and operate ocean-going vessels at competitive rates is also a threat to our industrial base. Good manufacturing jobs in shipyards and shipbuilding supplier companies have been outsourced overseas at alarming rates, and with them the invaluable technical skill and shipyard infrastructure that once kept costs down for both commercial and naval shipbuilding. Inertia and bad public policy precipitated this decline, but Congress can turn the ship around by passing the Energizing American Shipbuilding Act.”

Rep. Garamendi has also introduced other bills including the Federal Ship Financing Improvement Act and the Rebuilding the United States-Flag International Fleet Act.

More recently, Arizona Sen. Mark Kelly and Florida Rep. Mike Walz are preparing to introduce the SHIPS for America Act.

Kelly, besides being an astronaut and fellow naval aviator, is a Kings Point graduate and understands the critical needs for merchant mariners and their vessels.

It is good news that signs of recovery are on the horizon. It will not happen overnight, but with continued pressure can happen. The U.S. shipbuilding industry can and will recover but only with our continued focus on recognizing the vulnerable position we are in as a nation and developing a strong maritime strategy to counter this position. To maintain a global balance of power, it is imperative that the United States recover our global position as a leading maritime player, both militarily and commercially.

The post Op-Ed: The degradation and recovery of U.S. shipbuilding appeared first on Marine Log.