On Tuesday, July 9th, the House Subcommittee on Coast Guard and Maritime Transportation hosted a roundtable to hear from industry experts on strategies to reinvigorate the U.S.-flag fleet and shipbuilding industry. Roundtable participants included the following:
- Ms. Jennifer Carpenter, President and Chief Executive Officer, The American Waterways Operators
- Mr. Christian Johnsen, Chair, USA Maritime
- Mr. Matt Paxton, President, Shipbuilders Council of America
- Mr. Jim Patti, President, Maritime Institute for Research and Industrial Development
- Mr. Brian Schoeneman, Political and Legislative Director, Seafarers International Union of North America
- Rear Admiral (Ret.) James A. Watson IV, Author, Zero Point Four: How U.S. Leadership In Maritime Will Secure America’s Future
- Mr. Brent D. Sadler, Senior Research Fellow, The Heritage Foundation
- The Honorable Michael Waltz, 6th District of Florida, Member of Congress
Unlike a traditional hearing, there were no written testimonies, and no timers running. And while the structure of two-minute initial remarks from participants followed by a question-and-answer window with members in attendance held a more conversational feel, the topic was nothing short of critical.
Subcommittee Chairman Daniel Webster (R-FL) kicked off the discussion with a straightforward description of the pressing challenges for U.S. shipping: the U.S.-flag fleet has decreased severely since WWII, shipbuilding is lagging, cargo on U.S. ships has declined, the nation is facing a shortage of mariners and industry professionals, and the U.S. is clawing to remain competitive in maritime globally.
U.S.-Flag Fleet and Shipbuilding
During WWII, the U.S. produced ships at an astounding rate, and following the war, the U.S. maintained a fleet of more than 5,000 ships. During this period, the U.S.-flag vessels controlled around half of the world’s cargo shipping capacity. (Ed. Note: The federal government’s shipbuilding subsidy budget was bigger than the air traffic control budget until the late 1950s.) Today, the number of U.S.-flag vessels operating in international trade has plummeted from the post WWII total, or approximately 90 ships according to Johnsen (yes, you read that correctly). About 98 percent of cargo moving through U.S. ports is moving on foreign flag ships with foreign crews, which has obvious negative implications for any economic impact analysis of the U.S. shipping and ship building industries, but it also raises some alarms for national security and the U.S.’s overall global competitiveness.
While there are a multitude of reasons as to how the maritime industry has ended up in this situation, multiple roundtable participants mentioned it, and Representative Garett Graves (R-LA) said it outright, “Markets will always gravitate toward lower costs.” Schoeneman further stated that there has never been a time when the U.S. has had the cheapest merchant marine globally. The country’s ships have always been more costly for the simple fact that Americans are building them, and wage requirements alone drive-up costs. Paired with additional issues like dwindling government and private investment into the U.S. maritime industry in recent decades, the U.S.-flag fleet has fallen, and the ship building industry has lost the ability to be competitive.
Cargo Volumes
This native Texan author is well acquainted with the phrase “Oil is king,” but during the hearing, Sadler used the phrase “Cargo is king.” For this industry, that obviously holds true. If there is not an adequate amount of cargo for new ships to carry, there is no reason or incentive for the construction of these vessels. While government assistance is required to make American shipping more competitive, which will be discussed further, the necessity of cargo preference laws was discussed throughout the hearing.
Participants primarily discussed the cargo preference laws related to taxpayer funded goods, like military and foreign aid supplies. The rationale behind cargo preference laws is that some goods, or at least a percentage of certain types of goods, should be transported on U.S. ships to increase economic vitality and enhance national security. The Military Cargo Preference Act of 1904, The Cargo Preference Act of 1954, and Public Resolution 17 (PR-17) require the movement of certain percentages and types of goods on U.S.-flag vessels. While these are helpful for U.S. goods movement, these regulations only target government goods. According to Shoeneman, U.S.-flag ships are transporting all defense cargo and only about 50 percent of foreign aid cargo – a number he argues should be 100 percent for all taxpayer funded goods.
Protecting and enhancing these cargo preference laws was considered vital by participants, but Johnsen noted that if you want to increase the fleet of U.S.-flag vessels operating in the international trade market, this is something that has to be done through commercial cargo. Shoeneman threw out the example that the last time the U.S. seriously considered legislation to impose cargo preference requirements on commercial goods was in the Energy Transportation Security Act through H.R. 8193 of the 93rd Congress. This legislation would have required 30 percent of imported oil be moved on U.S.-flag tankers, but the legislation was pocket-vetoed by President Ford. A few years later, in 1977, the House struck down legislation which would have required 9.5 percent of imported oil be carried on U.S.-flag ships, an increase from the 3 percent rate at that time. The legislation failed in a 257 to 165 roll call vote. Few attempts have been made since this period with little to no traction on the issue of cargo preference.
The reason for the second failed cargo preference measures being imposed on oil was cost – opponents argued the legislation would increase the price of oil from $300 to $600 million annually. The legislation was said to be a “contrivance of the ship construction industry and maritime unions to fatter profits and salaries,” yet we find ourselves in this dire situation today. Roundtable participants made no attempt to argue costs would not increase as other countries have lower safety standards, wages, and other related costs. The argument instead was that proper incentives and reasonable cargo preference requirements could allow U.S. shipping to make some headway in the critical task of returning the nation’s maritime industry to a position of global competitiveness while strengthening national security.
Mariner Shortages
Within the U.S. maritime sector, there is also a shortage of qualified shippers to man these U.S.-flag ships. This one is seemingly a chicken-and-egg situation. Without vessels or a promise of a secure career, there are understandably fewer individuals who will look to pursue these career paths. The increase in the U.S.-flag fleet and the U.S. supply of trained mariners would have to occur simultaneously, but participants did discuss some ways to increase interest in these careers.
Above all, one of the needs is to garner more attention for the possibility of this career. Sadler laid out a few strategies to highlight this field including investing in the Merchant Marine Academy, providing resources for states to develop their own academies, and other low-cost methods of status raising like having the president attend a graduation ceremony at the academy. Shoeneman echoed many of these thoughts and drove the point home in mentioning that there are high numbers of commercials for the U.S. Army, Navy, Air Force, and Marine Corps, but these are not prevalent for the Merchant Marine Academy in the same manner. He also mentioned that an important undertaking for today’s young professional mariners is to enhance quality of life on ships through things like safety, internet access, and shore leave and that these young professionals do not care about pay and retirement in the same way that others did 20 to 30 years ago (something this young millennial author might argue is more of a symptom of skyrocketing costs of living and fading hopes of ever retiring comfortably, but that is a discussion for a different article).
Additional strategies contributed by Carpenter can help in the short run like updating the archaic paper system mariners have to use to obtain credentials for their jobs, providing trade opportunities, and decreasing the cost of education. But comprehensively, if the country can address some of these challenges, Patti said it best, “If the ships are there, the mariners will be there.”
It is worth noting at this junction that the roundtable made mention of the Jones Act, which requires that goods being shipped from point-to-point within the U.S. be carried on U.S.-built and U.S.-crewed ships, repeatedly. While the Jones Act periodically emerges as a controversy (for example, when it slows relief supplies and drives up costs during natural disasters in Puerto Rico, the Virgin Islands, and Hawaii), that was not the case here, and the importance of the Act for domestic shipping seemed an understood and agreed upon element within this conversation. Participants clearly noted and agreed that the Jones Act is critical for the protection of domestic shipping and should be enforced accordingly.
Global Competitiveness
The section saved for last is the topic most unsettling from the roundtable discussion, which can likely be guessed by most – economic competitiveness with particular attention to Chinese maritime strategy. From 2010 to 2018, China infused around $132 billion in direct subsidies into their shipyards, and given that industries are state controlled, public and private investments in Chinese maritime are also investments into military operations. Right now, China maintains a fleet of around 7,000 vessels operating around the globe. This is a far cry from the approximately 90 U.S.-flag vessels.
The advantage provided in subsidizing these operations so heavily is that ship construction in China is attractive to foreign entities due to the perception that production is so much cheaper. It bolsters economic development and provides a national security advantage for China in the country’s ability to influence the international market and largely control their own supply chain. The thriving shipping industry also attracts foreign investment in innovative technologies and provides China a significant competitive advantage over other countries. Given global power dynamics, it creates a very precarious situation for the U.S.
Opportunities
Many of the opportunities for the U.S. maritime industry have been woven into the sections above in figuring out how to address the challenges at hand. The roundtable discussed numerous policy initiatives possible, but the overarching theme was that the U.S. government can no longer take a backseat in the maritime conversation. It is necessary to inject funding into the sector to prop up ship construction and economic competitiveness to enhance the industry overall. There needs to be a clear recognition from Congress that the solution to this issue cannot be addressed by private industry.
A few current policies, like the Jones Act and cargo preferences, can be fully enforced or preserved and enhanced to further industry security. Overall, Congress and the U.S. maritime industry need what Shoeneman referred to as a Merchant Marine Act of 2025 that is comprehensive and addresses all issues, including the mariner shortage, cargo shortage, shipyards, and ship building. In the short-term, Congress can express support by augmenting funding like the stipends available to vessels enrolled in the maritime security program mentioned by Patti (which is included in the Armed Services Committee’s Defense Authorization legislation). The complex solution to the maritime crisis is an across-the-board approach including government funding, tax incentives, targeted and expanded education opportunities, and a national commitment to American shipping.