The United States, warns a new essay in The Atlantic, is turning its back on the world’s oceans with deleterious consequences for the country’s national security. While much of the piece focuses on U.S. naval power, author Jerry Hendrix also highlights de minimis U.S. commercial shipbuilding as symptomatic of American maritime deterioration. To place the industry back on a solid footing, the former Navy captain urges the adoption of a reinvigorated subsidy regime. Past experience, however, suggests that simply throwing more money at U.S. shipbuilders is unlikely to elevate the industry beyond mediocrity. Equally distressing, the offered rationale for doing so rests to a disturbing degree on questionable assertions and logic.
The state of U.S. commercial shipbuilding is shambolic. Under Jones Act protectionism the industry’s competitiveness has collapsed to the point that a tanker produced overseas for $45 million would cost $185 million in the United States, and containerships that cost $225 million in this country can be built abroad for one-fifth that amount. Faced with such prices, international demand for U.S.-built deep-draft merchant ships is non-existent. Domestic ship operators, forced to patronize U.S. shipyards to comply with the Jones Act, are their lone commercial customers. But confronted with astronomical capital costs, these firms cling to their ships for years—sometime decades—longer than their international counterparts before replacing them.
Given this lack of demand, the annual production of merchant ships is now in the low single digits.
Rather than emphasizing the role of protectionism in the industry’s downfall, Hendrix instead fingers the reduction of shipbuilding subsidies in the early 1980s as the relevant culprit. As he writes:
America’s commercial shipbuilding industry began losing its share of the global market in the 1960s to countries with lower labor costs, and to those that had rebuilt their industrial capacity after the war. The drop in American shipbuilding accelerated after President Ronald Reagan took office, in 1981. The administration, in a nod to free-market principles, began to shrink government subsidies that had supported the industry. That was a choice; it might have gone the other way. Aircraft manufacturers in the United States, citing national-security concerns, successfully lobbied for continued, and even increased, subsidies for their industry in the decades that followed—and got them.
This requires context. While a casual reader may conclude that all was well in U.S. shipbuilding until the 1960s, the industry’s lack of competitiveness stretches back at least a century before that. In 1867, for example, Canada-built ships were estimated to be less than half the price of those constructed in United States while an 1869 estimate placed the price of U.S.-built vessels at one-third higher than those from British shipyards. An 1894 government report comparing U.S. and British shipbuilding found a similar price difference while in 1916 The Economist placed the cost of a U.S.-built cargo freight at twice that of one built in the United Kingdom.
The rot in U.S. shipbuilding is long-standing.
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