Opinion | A U.S. ‘Ships Act’ Would Break China’s Control of the Seas

From the NYT article: - By Michael Roberts

Mr. Roberts is a former shipping industry executive and past president of the American Maritime Partnership.

America needs a “U.S. Ships Act” that sets a clear national maritime strategy, channels investment into developing the country’s shipbuilding industrial base and includes financial and other supports to help American shipbuilders and shipping companies reclaim lost ground in international markets. The United States also needs to replace its fleet of mostly obsolete ships that are kept on standby to carry military supplies in an overseas conflict, as was done successfully during the Persian Gulf war and which may be necessary in a conflict over Taiwan.

All of this must be accompanied by a push to recruit, train and retain the tens of thousands of skilled American workers who will be needed for this industry revival. The United States has a strong basic infrastructure for maritime education in place, with the federal merchant marine academy, six state academies and various other programs. But shipbuilding is hard work, and working on commercial vessels can mean weeks away from home. Aggressive recruiting programs are needed starting at the high school level, with the sincere message that building and operating ships can be a safe, rewarding career choice that helps make America stronger.

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Interesting article, but raises few new points other than addressing the recruitment issue. Let’s face it, someone offered $100,000 to sail as 3rd Mate is not going to change their mind about not sailing if the pay increased to $110,000. That is decent money for a fresh college grad, though on par with shoreside jobs they qualify for. Take someone sailing as Master or Chief and the pay discrepancy becomes more, at which point personal decisions in people’s lives play a greater factor and money alone cannot cure. Shipyard workers are another story, though that talent demands pay on par or above what local trades earn. Has anyone looked to hire a welder, pipefitter, or other skilled labour position lately? Applicants are not easy to find. Now take a shipyard offering them a job, but with the caveat they will be laid off if there are no ships to build. A series of five ships is great and gives a paycheck for maybe 3 years, but after that?..nothing else on the order books means no job. Few people want that type of insecurity, even if they know another job is easy to find (as long as the economy remains solid and labour shortage continues).

The military angle appeals to congress and lobbyists, but not to the general public.

Is there any published, cited information on the subsidies provided to foreign yards? Not that I say this is untrue, I only would like to learn more as I honestly do not have good knowledge on this subject.

The US has two commercial yards capable of large ship construction, San Diego and Philadelphia. I consider these yards based on their facilities and ability to construct in modular capacity. Gulf coast yards are also possible but not as well equipped for economical construction in terms of time and cost. Then what do we have for ship repair yards? Detyens? VT Halter? Vigor? I’m talking about yards capable of heavy steel renewal. Could we send a basic tanker to a yard for special survey, blasting and coating, and 50 tons of steel renewal, all to be completed in 21 days? That is the competition of foreign yards. Yard costs are not all about repair and survey expenditures, there is also the off-hire time to consider and fuel for positioning. The proof we have limited economical options is reflected on US owner’s preference to use Veracruz or Grand Bahama.

The author’s comments about FOC maintaining lower safety standards is garbage, fodder used in every hit piece against non-Jones Act companies. Not saying the MLC is a save-all or it would affect US sailors/companies much, but why has the US not signed on as a signatory? Likewise, imagine if some US ships were subjected to PSC inspections on same regularity and scrutiny as foreign ships? What’s good for the goose is good for the gander. PSC inspections would help clean up the aged ships in the US fleet or send them away for good. When your external oversight is class (ABS always gives a pass to US owners) and flag (USCG defers to class other than attending for a few hours for annuals), the only group to satisfy is third-parties (OCIMF, RS, etc). When is the last time the USCG detained a US-flag ship for safety or ISM/ISPS deficiencies? Maybe it happens more often than I think, but I can say I’ve never heard of one.

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Wise observation. Many in the industry don’t realize this.

Here’s a sentence from a USDOT text: Over the last several decades, large U.S. shipyards and their skilled labor forces have atrophied due to the uneven playing field of low-cost, highly-subsidized international shipbuilding competition among other factors, resulting in shipyard closures and reductions in the U.S. vendor base.

Shipbuilding subsidies were supposed to be regulated by an OECD Agreement:

US is a signatory, but unfortunately the agreement has not been ratified by the US Congress:

About Maritime Subsidies in general:

US shipyards get subsidies and tax breaks too

One way to bypass OECD restrictions are by awarding gov. contracts at inflated rates.
Not unknown in the US IIRC.

The only “investments” that will regrow a large overseas-bound USMM are sustained subsidies, paid for by the American public. Everything else is hot air. Mr. Roberts knows this but he doesn’t attack things head-on. He refers to…

…but what he really means is subsidies, so why not come out and say it? Want the subsidies? Convince 51 senators of their importance. A monumental task, when “subsidy” is a dirty word in Washington–unless you’re a farmer. Until most senators are convinced of the need for those subsides it’s a waste of time to talk about recruiting workers.

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This is the major problem with the U.S. economy right now. Not enough workers to fill the demand in all sectors.

Which lays to rest a myth: if the southern border is being overrun by foreigners stealing American jobs, why is it so many jobs are going vacant right now, all across the country? Inflation is high right now, in large part, because employers are trying to outbid each other attracting workers. I see it in the maritime sector right now.

It won’t stop until either the number of jobs drop (recession) or legal immigration increases the number of workers to fill the jobs (prosperity).

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How much do qualified ship welders make now per hour? Years ago guys that could weld steel, CuNi and pass x-ray inspection made very good money.

I have had the pleasure of being involved in newbuilding projects, from conception to initial design, machinery selection, construction, and ultimately delivery. This was for ships built in China, Korea, and two in Japan. Each yard selects equipment from their own country, as far as possible, unless owners choose other options. I could not imagine sourcing all machinery for a ship from USA makers. Consider navigational equipment - Furuno, Transas, JRC, Kongsberg - all the makers are overseas. Sourcing pumps and other machinery is easier, but is it economical? The fact is there are no options for domestic-made equipment like main engines, purifiers, bridge equipment, etc. Sure, there are domestic options used by the Navy, but is it economical for a commercial ship (and do you want the headaches of an over-complicated system)? Some medium speed engines are available domestically, but are they the best choice for efficiency and meeting new CII/EEDI requirements?

As you also mentioned, USA shipyards receive tax credits, which is a subsidy. Subsidies are not just governments giving money or favourable loan terms - any economical assistance could be viewed as a subsidy. How to quantify Chinese yards where many are owned partially or outright by the state? Should Korea have allowed DSME to fail prior to the government-brokered deal with Hyundai? That would have had a detrimental effect on the Korean economy. I agree there needs to be support from the US government to bolster the domestic US shipbuilding and repair industry because it is not economical otherwise. If the programs which the Reagan administration ceased were again available, this alone would entice domestic shipowners to at least renew aging fleets or even expand if market conditions are suitable. But domestic trade is not the topic here, foreign trading is what the article glazed over. US-flag ships will never be a major player in the global sector without major financial support (unlikely) or heightening of cabotage laws (very unlikely) as there are many benefits available to foreign shipowners - Germany, Hong Kong, Singapore…though I wonder what tax breaks and US income tax is actually paid for the foreign shipowners with offices in Stamford. The Great Lakes got a new ship this year for the first time in ages (I’m discounting ATB’s). The rest of the US fleet dates from the 1950’s-1970’s. Those ships built in the 70’s were built under various subsidy programs. With regards to the old ships one could say “it still works, if it’s not broke then don’t fix it” but we all know the shipowners would build new, more economical vessels if they were affordable. It’s one thing to use an asset until depreciated and worn out, it’s another to continue using an un-economical hull simply because building new is cost-prohibitive. Like a car, you can drive it for a long time after the loan is paid off, but at a certain point you must replace it, or be content with sinking money into an inefficient vehicle. The microeconomics of the Great Lakes shipping industry and justification for fleet renewal is another consideration but beyond the scope of my comments.

How many US-flag, international trading ships are trading which are not enrolled in the MSP or other military-related programs which guarantee cargo/money for US owners? Again, focus on the military and not the private sector…that’s what gets attention in DC. That results in jobs for mariners, but does nothing for the shipbuilding and repair sector.

For the sake of discussion, what if the Jones Act was amended to allow US shipowners to build compliant ships overseas, but all following drydock surveys must be done in US yards? What mechanisms are in place to accurately track cargo if there was a requirement that even 5% of imports and exports must be on a US-flag ship? Or go for the easy one and allow oil exports only on US-flag ships. That is a shrinking sector but pick and choose the battles which get your foot in the door. The public would support this though oil majors would shut it down before a bill could even be introduced.

In the PNW, a non-union shipyard journeyman-level welder makes on the order of $37.75/hr.

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All oil, timber, and seafood exports should be restricted to American flag ships.

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Since you wrote an essay allow me to as well. The purpose of the Jones Act was to foster a strong U.S. Merchant Marine. The preamble to the act states that this is necessary for both national defense and to promote growth of commerce. Unfortunately, the act has not had the desired effect.

According to the Bureau of Transportation, in 1960 the world fleet of ocean-going vessels of 1000+ Gross tons was 17,317 and the U.S. portion was 2,926. However, by 2016 while the world total had grown to 41,674, the U.S. portion had shrunk to just 169 vessels. That is a whopping 94% decrease.

With modern ships requiring an average crew of only about 16 people, labor costs can’t be nearly as significant as in say 1960. Many foreign flag vessels hire and pay enough for US mariners to work on them (Cruise ships -think Capt. Kate, SubCom cable layers, drill ships in the gulf, etc.)

Today the major obstacle to the intended outcome of the Jones Act is the cost of building ships in the United States. This has been realized, and in the 90s the MSP was created - but only as a band aid (60 vessels). The federal government could grant a limited time exception to the Jones Act requirement that the ships be built in the United States. Reducing the cost to register ships in the U.S. should also be considered.

Such a change would allow U.S. companies to register foreign-built vessels (that they may already own) in the U.S., which would provide flexibility for U.S. companies to respond to disasters by diverting vessels that are already in the U.S. to serve domestic needs. This change would also hopefully increase the U.S.-owned fleet. If the desired effect are not achieved, when the temporary exception expires there would be no need to renew.

Since so few American shipyards are still in business, the Jones Act has also failed to protect U.S. manufacturing jobs. The ones left are focused on inland and offshore vessels, yachts, or government (Navy/MSC/USCG/Research/training ships). All of the solutions that I’ve ever heard largely leave out support for US shipyards and workers, but it is indeed easiest to come up with ideas that simply cut the problem out of the equation. To address US Shipyards, a foreign built exception could have requirements based on quotas, sectors, vessel tonnage, future commitments (like drydock surveys as you mention) so that the exceptions only apply to parts of the US shipyard industry that have already died.

Is seafood a big US Export?

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Getting foreign built vessels into US flag could be done with an open registry. The USVI registry was created to solve this problem, not sure what’s up with it. Can’t find much info on it since it was announced.

I know it wasn’t popular for a variety of reasons (very valid and serious reasons too), but maybe the idea can be looked at?

Conceptualized more so than created. The organization behind the idea and press release hasn’t had much to say recently (NMI/COPE).

Why not add agricultural commodities, food products and manufactured goods to the list?
Maybe all imports should be carried on US owned, US built, US flagged and US crewed ships as well?
What is stopping you, except International treaties, trade agreement and logic?
Lack of ships, shipbuilding capacity and seafarers can be overcome with time and money, not to mention sheer grit and ingenuity. (Remember Apollo?)

PS> Here is statistics showing what was exported from the US in 2021:

Do your own homework.

Done it for him above:

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