It is no secret that the American commercial shipbuilding industry is struggling. The U.S. Merchant Marine fleet is small, aging, and will be unable to provide the U.S. military with significant additional sealift capability during wartime. China’s large shipbuilding industry and its expanding fleet of dual-use merchant marine vessels are likely to provide it with a strategic edge in the event of a conflict, and its dominance over the United States in shipbuilding has been recognized by both the Biden and Trump administrations. Countering this will require tackling the significant hurdles facing American shipyards and the U.S. Merchant Marine.
A lack of focus on commercial shipbuilding over the last three decades has meant that any action taken on the issue was piecemeal at best. Now, however, a new piece of bipartisan congressional legislation aims to really tackle the wider structural issues that hobble the sector. The Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, also known as the SHIPS for America Act, contains much-needed measures to revitalize the U.S. shipbuilding and commercial maritime industries, breathing new life into the U.S. Merchant Marine.
Nonetheless, the legislation has a fundamental problem: protectionism. A strong commercial shipbuilding industry should not be coddled by its government through protectionist laws, regulations, or tariffs, but rather promoted and supported in a targeted manner, with a healthy amount of competition driving innovation. The SHIPS for America Act risks undermining the good policies it contains by not only failing to tackle existing protectionism, but also adding to it. Congress should take this opportunity to both remove the protectionist sections of the SHIPS for America Act and repeal other protectionist legislation — particularly the Merchant Marine Act of 1920, known as the Jones Act. Protectionism cannot create a truly sustainable maritime industrial base for the future of American national security. The rest of the SHIPS for America Act has a chance to put the United States on the right heading.
National Security Needs Commercial Shipbuilding
On the face of it, one might assume that a country’s commercial shipbuilding industry has little to do with its national security — the latter most obviously requires the construction and maintenance of naval vessels, from aircraft carriers to troop transporters, rather than the cargo ships, tankers, fishing vessels, and ferries used for civilian purposes. However, the two sides of shipbuilding are considerably intertwined, and the presence of a healthy commercial shipbuilding sector contributes enormously to a nation’s ability to fight and win in a period of conflict. As the great American naval theorist Alfred Thayer Mahan wrote, seapower is “commercial before it is military.”
One of the primary roles of the U.S. Merchant Marine is its ability to provide strategic sealift capabilities. In times of war or national emergencies, the United States relies heavily on commercial vessels to transport military equipment, supplies, and personnel across oceans. The Merchant Marine Act of 1936 allows for the requisition of ships of American registry (by either title or charter) in times of war or national emergency. Programs like the National Defense Reserve Fleet, Maritime Security Program, and Voluntary Intermodal Sealift Agreement allow the Maritime Administration to ensure that a fleet of U.S.-flagged vessels and their skilled mariners are readily available to the Department of Defense for strategic sealift. The Merchant Marine played a central role in sealift during World War II, with then-Gen. Dwight Eisenhower commenting in 1944, “When final victory is ours, there is no organization that will share its credit more deservedly than the Merchant Mariners.”
Strategic sealift requires there to be ships available to requisition in wartime and to buy for the reserve fleet in peacetime. However, the pool is shrinking. In 1960, the American commercial fleet (outside of the reserve fleet) was made up of 2,926 ships of over 1,000 deadweight tons, including tankers, bulk cargo ships, and roll-on/roll-off vehicle carriers. Today, there are just 185. China, in contrast, had 9,222 ships of that size in its nationally flagged commercial fleet as of last year, and the United Kingdom had 1,054.
This atrophy extends to the shoreside as well. Of the 154 private shipyards listed as active in the United States by the Maritime Administration in 2021, only 25 are large enough to build naval ships and submarines, oceangoing cargo ships, and high-complexity mid-sized vessels. The rest are smaller yards capable of building simpler and smaller commercial vessels like tugs, fishing vessels, ferries, and barges. As well as the more obvious impact of a lack of facilities on shipbuilding numbers, this would be a significant issue during wartime. Requisitioned vessels might need retrofitting and will definitely need maintenance, and a shortage of shipyards of adequate size will have an impact on the readiness of Merchant Marine sealift capabilities.
The lack of ships is not due to a lack of demand. The United States has a healthy export book for a wide range of goods that could be transported on American-flagged cargo ships if they were available and competitive. And there is scope for even more demand. For example, President Donald Trump has already stated his goal to boost liquefied natural gas exports by undoing his predecessor’s moratorium on export licenses, but there are currently no U.S.-flagged liquefied natural gas tankers in operation. The likely outcome is that America’s liquefied natural gas industry will scale much faster than its shipbuilding, once again leaving U.S. products to be carried on foreign ships.
The Good Stuff
Given the state of American commercial shipping, the SHIPS for America Act is a welcome sight. It is the first attempt in decades to tackle some serious structural issues with joined-up strategic thinking — and its authors deserve considerable credit for their proposals in several important areas. Sponsored by a series of well-regarded senators and representatives — including Rep. Mike Waltz, who has been tapped as Trump’s pick for national security advisor — the bill is the best chance the U.S. commercial shipbuilding industry has to get on the right path toward a strong and sustainable future, bringing with it considerable benefits for the nation’s defense.
Coordination
The legislation establishes a position of a maritime security advisor, based in the White House, to lead an interagency Maritime Security Board tasked with implementing a National Maritime Strategy. This kind of whole-of-government approach has been severely lacking, something that is particularly concerning given how many agencies have a stake in maritime security. Having a person responsible for delivering wide-lens strategic planning will hopefully focus minds and allow for a far more coordinated approach to maritime issues.
Investment
There are four big investment proposals in the bill, all of which are intended to support and incentivize the expansion of U.S. shipyards and maritime infrastructure: a 25 percent investment tax credit for shipyard projects; the transformation of the Title XI Federal Ship Financing Program into a revolving fund, with proceeds generated by loans and loan guarantees reinvested into the program; a Shipbuilding Financial Incentives program that allows the Maritime Administration to make investments in facilities; and the creation of a Maritime Security Trust Fund that would reinvest duties and fees paid by the maritime industry into maritime security programs and infrastructure. These will support the goal contained within the legislation under the Strategic Commercial Fleet Program of increasing the U.S.-flagged commercial fleet to 250 vessels.
Innovation
The U.S. Center for Maritime Innovation will establish a maritime innovation incubator program, with regional hubs across the country, to accelerate research and development for technologies that are relevant to the maritime industrial base. These priority areas will include next-generation ship design, shoreside infrastructure, alternative fuels, and manufacturing processes. The center will be a valuable addition to the research space, particularly if it can draw on lessons and best practice from incubators within the defense side, such as the Navy Rapid Innovation Fund and the Defense Innovation Unit.
Workforce
The ships of the U.S. Merchant Marine are nothing without their crews, and the legislation contains several long-overdue proposals for the maritime workforce. For recruitment, the Maritime Administration will be required to run a targeted campaign over the next decade to promote the opportunities for and benefits of a career in the maritime industry. Military recruiters will be encouraged to recommend careers in the maritime industry to recruits who do not qualify for U.S. military service, and it will be made easier for retiring servicemembers with transferable skills to transition into a new career in shipyards or the Merchant Marine. For education, the U.S. Merchant Marine Academy will be considered a co-equal school to the other four military service academies and provided with additional funding for campus modernization and training programs. And for retention, a new Merchant Marine Career Retention Program allows mariners to more easily retain their credentials, along with new programs for educational assistance and other incentives.
This is a lot for one piece of legislation, but that is a sign of how much needs to be done. The commercial maritime industry in the United States has been underserved for decades, and the U.S. Merchant Marine hugely underappreciated. Congress should pass and fund all of these proposals without delay, and make sure to keep the commercial maritime industry in mind as a core part of national security going forward — this legislation is a strong start, but insufficient to fix every problem, so it should serve as a jump-start rather than the end of the discussion. The best legacy of debate around this law would be a government that understands, appreciates, and champions its Merchant Marine, not just once but consistently into the future.
Cargo, Cabotage, Complications
Where the SHIPS for America Act falls short is in its approach to cargo preference. There is a complicated web of existing protectionist laws and regulations that require various percentages of certain cargoes to be carried on U.S.-flagged vessels — including a delightfully Kafkaesque regulation from 2011 that covers imported components used to build U.S. ships with government financing. The SHIPS for America Act raises the percentage of U.S. government cargo covered by cargo preference from 50 percent to 100 percent, and further requires that 10 percent of all cargo imported into the United States from China be imported on U.S.-flagged vessels within 15 years.
However, looking back on the last century shows that cargo preference laws simply do not incentivize domestic shipbuilding or promote the maintenance of a strong Merchant Marine. To illustrate this, let’s look at the most famous of these existing laws: the Jones Act. This restricts the water transportation of cargo between U.S. ports (cabotage) to ships that are American-owned, predominantly American-crewed, American-registered, and — most fundamentally — American-built, assembled entirely in the United States with all “major components of the hull and superstructure” fabricated domestically. This is the most restrictive cabotage law in the world. Indeed, even the U.S.-flagged commercial fleet doesn’t always live up to it: Only half of the fleet is actually eligible for cabotage under the law, and the rest must stick to international cargo transportation only.
When it was passed, the Jones Act was presented as a way to ensure adequate domestic shipbuilding capacity following the extreme pressures placed on U.S. sealift capability during World War I — a reflection of the same problems outlined above, over a century ago. However, the fact that these same problems not only persist but have worsened clearly shows that the law has not worked as intended. Not only do we see no fostering of a healthy domestic shipbuilding industry and Merchant Marine, but the incentives contained within the Jones Act actually contribute to the opposite. The limitation of cabotage to American ships means the sector is not subject to healthy competition, leading to higher prices for waterborne cargo transportation, which in turn drives down demand in favor of other options like road, rail, and pipelines. Indeed, waterborne cabotage only makes financial sense along routes where these options are not available, such as between the U.S. mainland and Alaska, Puerto Rico, or Hawaii. This reduced demand means fewer ships are built and a smaller number of vessels must share the high fixed costs of shipbuilding between them, leading to far higher unit costs for American-built ships. If you want to buy a coastal-sized container ship, for example, a foreign shipyard could sell you one for around $30 million — go to an American shipyard, and you’d need to shell out somewhere above $200 million.
A knock-on effect of this is that the fleet becomes older — high replacement costs are an incentive for a ship’s operator to squeeze as much service life out of their vessel as possible. Older ships are less efficient and may lack modern safety upgrades, and they would consequently be far less useful for strategic sealift than a more up-to-date fleet. Additionally, there is far less incentive for innovation within the shipbuilding industry — why invest in the most cutting-edge technologies when the options are so limited that operators have to buy from you anyway?
The problems caused by the Jones Act for cabotage are echoed along the lineage of cargo preference rules for international shipping. Along with placing considerable costs on the U.S. economy overall, this protectionism has clearly not helped the domestic commercial shipbuilding industry. The result of the Jones Act and other cargo preference laws is an aging and often dilapidated commercial fleet that is far smaller than it needs to be. If a law doesn’t achieve what it is intended to, and hasn’t for over a century, shouldn’t it be reformed? And yet, the SHIPS for America Act adds yet another layer to the cargo preference quagmire. Protectionism hasn’t worked for the United States and its Merchant Marine — more of it cannot be the answer.
Don’t Protect, Promote
The SHIPS for America Act goes a long way to securing the future of the U.S. Merchant Marine and its considerable contribution to strategic sealift, as well as boosting the American shipbuilding industry more broadly. Investment, innovation, coordination, and workforce incentives are all much needed and very long overdue, and the bill includes measures that mark considerable progress in all of these areas. However, doubling down on protectionism is a disappointing addendum to what is otherwise a piece of legislation that represents the best chance in decades for the U.S. maritime sector to move toward becoming successful and sustainable.
The long-term answer to the inherent structural problems that the U.S. Merchant Marine faces is not to protect it, but to promote it. Congress should pass the sections of the bill that achieve the latter, but remove those that add to the former — and also take this opportunity to significantly rethink the myriad other protectionist laws and regulations around shipping. Keeping to a course that has failed for over a century is remarkably unwise, and America’s commercial fleet should break out of protectionism to chart a new one.
Emma Salisbury, Ph.D., is a research fellow in the Sea Power Laboratory at the Council on Geostrategy and an associate fellow at the Royal Navy Strategic Studies Centre. The views expressed here are her own and do not represent the views of the Royal Navy or any part of the U.K. government.
Image: Larry A. Taylor via Wikimedia Commons
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