President Donald Trump has focused his attention on the US shipbuilding industry, the league behind China’s close-to-peer competitor, and recently signed an executive order designed to reinvigorate it.
Trump’s April 10th order directs agencies to develop a maritime action plan and orders US trade representatives to compile a list of recommendations to address China’s “anti-competitive action in the shipbuilding industry,” among other things.
Additionally, the executive order directs a series of assessments on how the government can enhance financial support through the Defense Production Act, the Department of Defense Strategic Capital Office, the New Maritime Security Trust Fund, investments from Allied shipbuilders, and other grant programs.
But simply throwing money into the shipbuilding industry doesn’t solve the problem, according to Brian Clark, director of the Defense Concept Technology Center at the Hudson Institute think tank.
“Even if you have foreign technical assistance, you’re unlikely to be a competitive commercial shipbuilder with experienced and highly subsidized shipyards, even if you’re given more money into US shipbuilding,” Clark said in an email Monday to Fox News Digital. “In the mid- to mid-term, governments should also promote higher demand for US-built ships.”
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President Donald Trump signed an executive order on April 10th, aimed at boosting the US shipbuilding industry. (Getty Images)
Clark also said the executive order appears to complement American law, a set of legislative measures introduced in both the House and Senate that aims to promote growth within the US shipbuilding industry and strengthen the US merchant fleet that can transport military materials in times of conflict.
Specifically, the Ship Act includes provisions that establish a strategic commercial fleet program. This is an attempt to develop an internationally operated, but American-made, owned and operated merchant ship. The law would also seek to strengthen the US Flag International Fleet with around 250 ships in 10 years.
“If we implement EO and Ship Act together, the government can create incentives in the US to flag ships and build them, providing capital to the shipbuilding industry, meeting increased demand with increased efficiency and reduced costs,” Clark said. “This doesn’t outweigh the US as a shipbuilder than China, South Korea or Japan, but it will provide more resilience for the US.”
The US is dramatically behind its competitors that are close to peers like China in shipbuilding. China is responsible for more than 50% of shipbuilding around the world, according to the Center for Strategic and International Studies, compared to just 0.1% from the US.
However, Trump has expressed interest in working with other countries on shipbuilding, and has proposed working with Congress to pass laws that allow foreign ship purchases when signing the order. No details are provided.
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The ship CMA CGM Marco Polo will be seen heading the river in Savannah, Georgia to Savannah Port on May 26, 2021. (Stephen B. Morton, File/AP)
But doing so could overturn a century-old law known as Jones law. This is a controversial law based on the current US shipbuilding environment that requires only US ships to carry cargo between US ports and that at least 75% of their crew are American citizens. It also requires that these ships be built in the United States and that they are owned by American citizens.
While supporters of the Jones Act argue that it is key to national security and prevents foreigners from entering the United States, experts argue that the law has significantly hindered US shipbuilding, weakening competition while keeping shipbuilding costs high.
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Amidst bipartisan support in Congress, efforts to abolish the law have failed. However, some experts argue that eradicating the law is the first step to changing the US shipbuilding industry.
A drone shot of a giant container ship arriving at the port of Long Beach, California. (istock)
“Anyone who is serious about reviving the shipping industry must basically start by removing the Jones Act,” Veronik Delugi, a senior researcher at the Mercatus Center at George Mason University, told Fox News Digital on Thursday. “It’s not everything, but it’s the beginning.”
Colin Grabow, associate director of the Cato Institute’s Center for Trade Policy Research, said that the US shipbuilding issue is multifaceted, but the Jones Act is a major part of the issue. Still, he doubts his efforts to prove it will be successful.
“I think the bars are set very low, and it’s hard not to think we’re going to get worse without the Jones Act,” Gravaux said. “And actually, I think we’ll do better. And why do you think we’ll do better? It’s…I think it’s basically just an axiom that’s not a competitive industry.”
