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America used to be great at building commercial oceangoing ships. Can it be great again? The current administration looks like it is going to at least try to find out. President Joe Biden first floated the idea of pushing back against Chinese dominance of shipbuilding during his 2021-2017 term.
Now, President Donald Trump has threatened to fine Chinese-built ship up to $1.5 million to enter U.S.
ports. Additionally, in the first two years of a plan put forth by the U.S.
Trade Representatives, 1% of U.S. exports would have to be shipped using U.
S.-flagged vessels, before increasing to 3% after two years, 5% after three years, and 15% after seven years. A similar seven-year ramp-up period would also eventually require 5% of all U.
S. exports to be moved on U.S.
-built vessels. The Office of the USTR held two days of public meetings in late March to explore these and other proposed remedies intended to penalize ocean carriers that use Chinese-built ships, with a view to reviving commercial shipbuilding in the U.S.
Ahead of that meeting, a group of more than 30 organizations representing a wide range of the ocean-going shipping supply chain released “ The Economic Effects of Proposed Action in the Section 301 Investigation of China’s Maritime, Logistics, and Shipbuilding Policies and Practices ,” a study prepared by Dr. Joseph Francois and Laura M. Baughman, Senior Fellows at Trade Partnership Worldwide, LLC (TPW), an economic research firm.
That report, after examining the various remedies suggested by USTR finds that “in every case they would result in net losses for the U.S. economy, U.
S. trade, and most of the U.S.
shipbuilding supply chain...
would reduce U.S. GDP, and likely worsen the overall U.
S. trade deficit.” But industry experts argue it’s not a wholly bad idea to intervene in what could appear to be, on the face of it, a natural, decades-long decline.
The U.S. has gone from building 5% of the world’s ocean-going commercial ships in the 1970s to building about 0.
2%, measured by gross tonnage. However, the U.S.
builds some of the best military vessels in the world, according to Benjamin Plum, associate partner at consulting firm McKinsey & Company , and one of the authors of a report, " Charting a new course: The untapped potential of American shipyards. " “If you look at the history of U.S.
shipbuilding, where it still excels is building ones of very high complexity vessels, such as nuclear submarines or nuclear aircraft carriers,” he says. “The U.S.
builds best in the world, and does so regularly.” “You can make an argument that large container ships are an opportunity, but also that the U.S.
could and should be involved in myriad other vessel types. I don’t think it has to just be about large, ocean-going ships. There are quite a number of others you could be going with,” Plum says, including ice breakers, LNG and bulk carriers.
Plum also sees a future in building more vessels for use on coastal waterways in the U.S., which have to be U.
S.-built and operated under the Jones Act. Blum says that making that work economically would be a “significant challenge,” for sure.
But it could work if there were significant investments in infrastructure, including in heritage facilities such as mothballed shipyards at Newport News and Bath Iron Words. But certain vessels, he says, need wholesale new yards designed around producing commercially desirable vessels, such as the yards in South Korea. “They produce vessels at scale; the facility is designed around the product.
” What is unquestionable is that economically viable shipbuilding in the U.S. would require high degrees of automation and worker-productivity-enhancing tools, Plum continued.
That means our workers need to be enabled with hard technology and software, such as digital twins of yards, that would enable them to be more productive than countries that rely on low-cost labor. One example is welding. “When we look at welder productivity in shipyards, it’s usually constrained, not by their talents.
They’re some of the best in the world!” he says. “But you have material constraints, supply chain constraints. And that can hold off the productivity of an individual welder.
” He suggests that cobots (robots designed to work in tandem with humans) could be deployed to make welding operations much more efficient. “You’d still need human welders, but you could use them in high precision, high complexity welding that only they are capable of doing, not the long straight welds that are repetitious.” “I believe it is possible to make a living wage for workers in shipyards possible while still producing economically viable ships,” Plum says.
“We will have to build smarter. We will have to build more effectively and efficiently than other yards. But I actually think that’s possible.
” Even so, the joint-industry report, sponsored by companies and bodies such as the American Apparel & Footwear Association, the Gemini Shippers Association and the National Retail Federation , concludes that, while the U.S. shipbuilding industry might benefit, other sectors like farming, manufacturing and retail would suffer significantly.
“The negative effects would ripple through supply chains, affecting manufacturers, importers, retailers and other stakeholders like wholesale and retail trade, hospitality and consumer services industries,” the report’s authors argue. Many U.S.
buyers of commercial ships at the USTR hearings agreed. One typical speaker was Carlos Diaz, chief operating officer of World Direct Shipping , which he characterized as an American family-owned business created with the mission to create a commercial highway between Mexico and the U.S.
, which owns three ships, two of them built in China. “The proposed action cannot force the market to use American-made ships, because they are strictly unavailable. You all have a very important task to protect and increase U.
S. strength. This proposed action will be punitive to American operators for legal purchasing decisions made years ago,” said Diaz.
“To succeed, instead of cutting down existing business, start laying the seeds to create new ones.” Still, Plum says the future could nevertheless hold a rejuvenation of U.S.
shipbuilding. “I think we have been inspired by and excited to see the recent developments in private-public partnership like the maritime-industrial base,” he says. “And I could imagine and hope that there’s at least a discussion about how the government can partner with industry, or create conditions where industry is confident to invest in reinvigorating shipbuilding.
”.
