Would decoupling domestic shipping from the international help in a shipping crisis?

The only case I can see for subsidies would be in exchange for repeal of the Jones Act’s US-built requirement. Basically, replace a de facto shipbuilding subsidy with an explicit subsidy. But I think the optimal policy would be no subsidy. Right now we build 2-3 ships per year, and that is about to start trending down (the 3 ship per year average of the past 20 years was due to some one-off factors such as the need to replace old tankers due to OPA 90 and the need to transport crude after the fracking boom kicked off – a moot point now with the end of the oil export ban). I don’t think those few ships are what stands between the country being able to build large ships or not. What’s really keeping that capability in place is government contracts, which currently account for ~80% of shipbuilding and repair revenue. I mean, some of the country’s largest shipyards build zero commercial ships (Newport News, Bath Iron Works, Ingalls, Electric Boat).

As for why U.S.-built ships are so expensive, there are many reasons. But I also think it is a predictable result of having the JA’s US-built requirement and, from the 1930s until 1980, construction differential subsidies. Those are both big disincentives to becoming internationally competitive. But there are other factors. One big one is the lack of economies of scale. Most recent orders of JA ships have been for two. Maybe a few orders for four ships (tankers). In contrast, overseas you can get orders for a dozen ships of a particular class, or even more. That means you can spread your fixed costs across more vessels, you get lessons learned that can be applied to future vessels in the series, and you get a better price from suppliers on inputs like steel and components. US-built is also a disincentive to specialization and finding a competitive niche. US shipbuilders are basically jacks of trade, masters of none. In contrast, the Dutch are among the best at dredging vessels, the South Koreans at LNG tankers, the Finns at icebreakers, the Norwegians at fishing vessels and OSVs, etc. while the Americans have no real commercial specialty outside of maybe river barges. You can find more about this here: Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security | Cato Institute

People like to bring up wages, but a) U.S. shipbuilding wages aren’t particularly high (see pg.32: https://www.nassco.com/pdfs/Shipbuilder-Assessment-American-Marine-Highway-NASSCO.pdf) and b) this would be a more compelling explanation if we still weren’t being beaten on price by high-wage European yards: https://twitter.com/cpgrabow/status/1428764866714681347

And yes, Philly is backed up with the NSMV and NASSCO with the John Lewis class oilers. American yards would struggle to build LNG carriers. Note: https://www.gao.gov/assets/gao-16-104.pdf

Representatives from one shipyard roughly estimated that for an order of one large LNG carrier they might hire about 1,000 short-term U.S. workers and hire an additional 250 to 300 skilled Korean workers for the duration of the build time to ensure the work is done correctly. However, if they had contracts for a larger number of carriers, they would likely hire fewer Korean workers, who would gradually be transitioned out as U.S. workers were trained to complete the work. A representative from the second shipyard stated that the skills needed to build the LNG containment system do not exist in their current workforce, so for an order of two LNG carriers, they would likely hire skilled foreign shipyard workers to do the work in order to mitigate risk and increase schedule predictability, even if the costs of employing a foreign workforce may be slightly higher than using U.S. workers.

Agree, it is not the WORKERS that is highly paid, it is Managers, especially top management and CEOs. Expectation of high return on investment and emphasize on short term (quarterly) result doesn’t help.

Besides, European yards know that they can’t compete with the yards in China and Korea on building large ships in long series, so they don’t waste time and money on welding together steel. They build hulls at low coast yards and concentrate their effort on complex vessels.

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Great point. Related: https://twitter.com/cpgrabow/status/1370106112586965008

Another thing is that US is member of OECD and WTO. They set limits for subsidies that can be offered to both shipping and and shipbuilding industries.

US traditionally vocally being anti-subsidies, but has found ways to support their industries by other means. Mainly by inflated military contracts, both to the shipping, aeronautic and shipbuilding industries.
The Airbus-Boeing case is well known and documented:

Free trade is supposed to work both ways. “You have to open your market to us, but we have the right to protect ours” doesn’t work. (That applies to shipping as well)

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Its a port problem not a ship problem

The JA is not compatible with the goal of optimizing the shipping sectors strictly on the basis of cost. That’s been established. The question is what if there are other goals, for example to function at a acceptable level in the event of a crisis?

Not just the current crisis and not just a military crisis?

Janusian

The lower right corner is where (arguably) the lowest costs are to be found but is there where shipping sectors ought to be?

I think we need to ask ourselves what we are trying to achieve with shipping policy. Plainly it fails on cost. But does it even function at an acceptable level in a military crisis? Seems difficult to make that case given a) the current deficit in mariners b) the small number of Jones Act ships (96), only a subset of which are militarily useful (77) and c) that JA ships would only be used en masse in a peer to peer conflict scenario since pulling them from trade would have very harmful economic effects.

If we want more mariners then we should subsidize their hiring. And if we want more ships we should expand MSP or enact another subsidy program that also provides some kind of funding in exchange for the wartime use of ships. Transparent subsidies linked to clear goals. Also, US-built makes no sense and should be repealed under any scenario.

At least that’s how I see it.

Subsidizing the hiring of mariners will never fly. Expanding MSP as you suggested is viable. and the requirement to employ US mariners could be included, wages and benefits can be negotiated thru labor organizations.
Transparent subsidies? Good luck with that.
One hundred percent US built for trade not only makes no sense it is not happening to any extent as your own study shows.

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To clarify, I think MSP qualifies as a transparent subsidy. X amount of money gets you X number of ships (currently $300 million and 60 ships, but set to increase). Examples of opaque subsidies would be the Jones Act and cargo preference where the costs and benefits are much less clear.

Good point about the reality of these “U.S.-built” ships that use foreign components and designs and are often assembled in foreign-owned shipyards (e.g. VT Halter, Keppel AmFELS, Philly).

I can’t keep quiet on this any longer. As much as it pains me to say it, I agree that the US build component has to go. It is a well proven barrier to any kind of sensible maritime policy … as if one even exists or can this far down the road.

But, if we dump the US build part it absolutely must be replaced with a maritime equivalent of the foreign air carrier economic authority.

That might also go a long way toward ending the rustbucket full of abandoned seafarers problem, in the US at least. How often do we see an airline and its crew begging for meals at an airport restaurant?

As far as subsidies go, American shipowners don’t seem to require one to purchase foreign built ships by the dozen so I wouldn’t be too quick to offer building assistance. I am strongly in favor of huge subsidies for mariner training, particularly that required for obtaining and maintaining a license. Either pull the plug on KP to help pay for it or open KP to working mariners and dump the military cadet facade. We don’t need more baby grunts or zoomies at the expense of the merchant marine.

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How would the Jones Act help in a shipping crisis? Answer: It depends.

In a sealift/export scenario, it’s very helpful because those scenarios often involve RoRo and breakbulk cargo, and to a lesser degree containerized cargo. The RRF, MSC, and JA fleets, although old, are capable of moving those types of cargo en masse. Hull modernization would certainly help.

In the current supply chain crisis, the Jones Act doesn’t help one bit. Neither does Short Sea Shipping.

SSS doesn’t apply because trade flows dont match waterbody routes, excepting ag export and petrochemical routes and certain continental to outlying island JA mandated routes. Demand certainly exists for and the geography permits SSS in the NYC metro area, but no one seems to have perfected the business model, yet.

The existing JA container transport capacity is already allocated to existing domestic lanes, so shifting operations to international imports isn’t practical, nor is it necessary to alleviate the congestion.

There’s plenty of containerized sea transport, as evidenced by the huge port backlogs. There’s plenty of available crane capacity, and a decent amount of rail and trucking capacity. If anything, rail and drayage trucks could haul more if warehouses accepted cargo in a timely manner. Yet warehouses can’t return empty containers because there simply is no room to return them at the terminals. Sales are up, days of inventory are down, and merchants are ordering an unprecedented amount of inventory to both build up inventory to customary days of inventory levels, but also surge inventory to stave off impacts from future supply chain disruptions. They’re also using in-transit containers as long-term inventory storage, and often these containers are sitting on chassis. Chassis cycle times, both in port and on the street, continue to grow, reducing apparent chassis availability.

There’s plenty of throughput capacity at the nodes and links of the multimodal supply chain network. There are plenty of chassis available. We just need to give it some space to work.

Simply put, we suffer from a lack of grounded container storage capacity.

Fortunately, that is easy to expand. We’ve suggested to USDOT that the USG could use Defense Production Act authority to establish Expeditionary Container Yards near ports and inland warehouse clusters for return of empties and long-term storage of loaded containers. It will clear out the warehouse parking lots and rail terminals, free up chassis, and get freight moving again to clear up the backlog.

See attached for further info. Let us know if you would like to assist.

SupplyChainCongestion_Mid-AtlanticGateway_comments.pdf (607.8 KB)

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I changed the title of the thread and edited the OP.

I can’t find the article I saw but I found this with a search:

Reporting on the results of an online poll of attendees, TMC Executive Director Robert Braswell said, 75% of their respondents indicated they were having problems taking delivery of new vehicles because of parts shortage. “It’s not anecdotal evidence, there’s some empirical evidence right here,” he said.

Don’t know what portion of trucks and truck parts are manufactured overseas.

The manufacturers are very careful to avoid using the word China in any annual report other than to reference sales of finished trucks. If you look back a few years, Paccar, the company that builds Kenworth and Peterbuilt was bragging about their new factories in China to manufacture parts.

I don’t have time to do it but an interested researcher should be able to find US customs documents that show types of parts and value of those parts imported. Customs keep very good records.

All current websites for American truck manufacturers only say “assembled” in America. Keeps the rednecks happy I guess.

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A post was split to a new topic: Domestic intermodal to the rescue?

Would the domestic build requirement be relaxed for large ships only or would it be removed to mean ferries, tugs, barges, etc can be built overseas as well?

The last three posts illustrate the concept I’ve been advocating for years re: shipbuilding/Jones act. The way to make American shipbuilding viable is the same way we made American car manufacture viable: make the parts overseas and assemble them in America.

Make the ship modules in Mexico, ship by barge to the U.S. Assemble and finish. Slap Made in America on the side. Everyone happy.

Works for cars, will work for ships. Side benefit: more jobs in Mexico means fewer migrants needing work here.

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99+% of internationally trading ships calling at US ports every day are foreign flag vessels with foreign crews. Considering that there are hundreds of foreign flag vessels in US ports on a daily basis without incident suggests that your fears are unfounded.

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Let’s first ensure that US sailors are STCW qualified, even when sailing within US territorial waters.

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From the standpoint of the port owners and transportation owners, whether sea, land or rail there is no upside to reduce the backlog. Profits are up. Its the free market at work. Supply less than demand = higher profits.

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And a bonus is; if there is any complains from the customers, or consumers, the blame can be put on China and greedy foreign shipping companies.

Besides; share prices are up and so is the bonus to Management. Shareholders are happy. Capitalism and hypocrisy is alive and well.

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