Congress Raises the National Security Alarm on Shipbuilding

A bipartisan, bicameral group is emerging in Congress as the thought leaders for future maritime policy. On January 30, 2024, Senator Mark Kelly (D-AZ) and Representative Mike Waltz (R-FL-6) led a letter to President Biden, joined by 17 other members of Congress, urging the White House to embrace a “bold and clear vision” for the future of U.S. sea power. Among other recommendations – including establishing an interagency maritime policy coordinator – the Congressional group urged President Biden to issue a Presidential Determination to establish “commercial, civil, and military shipbuilding and shipping industries, with their associated domestic infrastructure and workforces, as elements on the nation’s critical infrastructure sectors list and authorize the Department of Defense to utilize its Defense Production Act Title III authorities to invest in the commercial shipbuilding and shipping industries and civilian infrastructure and workforces, in coordination with the Maritime Administration.”

The letter was squarely aimed at enhancing the U.S. industrial shipbuilding base, in both the commercial and military sectors, to counteract the growing strategic influence of the People’s Republic of China (PRC) over the maritime space. Senator Kelly and Rep. Waltz doubled-down on their position, joined by Sen. Marco Rubio (R-FL) and Rep. John Garamendi (D-CA-8) on April 30, 2024, with the issuance of the Congressional Guidance for a National Maritime Strategy. The members did not mince words, stating plainly, “Decades of neglect by the U.S. government and private industry has weakened our shipbuilding capacity and maritime workforce, contributing to a declining U.S.-flag shipping fleet to bring American goods to market and support the U.S. military during wartime.” The Congressmen again took aim at the threat of growing PRC influence over the maritime domain, stating that the PRC had become “the world’s top shipbuilding and shipping nation, boasting 230 times more shipbuilding capacity than the United States, according to the Office of Naval Intelligence.” That is a startling number that should concern any U.S. maritime stakeholder. The Congressional Guidance specifically cited to the fact that Chinese shipyards received over 1,700 orders in 2023, employing a workforce of over 600,000, while U.S. shipyards received less than five orders during the same period, employing less than 153,000 workers.

Among other strategic objectives, the unified Congressional group seeks to:

• Invest and innovate in domestic shipbuilding and U.S.-flag shipping capabilities and capacity to advance the power and influence of America’s maritime industry.
• Leverage existing, unused authorities to speed the flow of taxpayer resources towards U.S.-flag shipping and domestic commercial shipbuilding.
• Encourage public outreach to demonstrate how American shipbuilding and U.S.-flag shipping are critical to national security, and that maritime workers are essential.
• Attract private investment into U.S.-flag shipping and domestic shipbuilding while restricting cash flow into the PRC’s maritime shipping and shipbuilding industries.

To implement these strategies, Sens. Kelly and Rubio and Reps. Waltz and Garamendi have called upon Congress to provide the authorities and funding necessary to support domestic shipbuilding and to explore treaty ally collaboration to expand domestic shipbuilding opportunities and insource capabilities to the U.S. market.

These Congressional members are not alone in voicing their concerns on the relative state of the U.S. and PRC shipbuilding industries. On March 12, 2024, a collective group of labor unions filed a petition with the U.S. Trade Representative (USTR) regarding the PRC’s policies in the maritime, logistics, and shipbuilding sector. In the petition, the unions assert that the “American commercial shipbuilding industry is a shell of its former self” now producing “only a fraction of one percent of the world’s commercial vessels, falling to 19th place” worldwide. As the petition asserts, “The biggest obstacle to the industry’s recovery is the unfair trade practices of the world’s largest shipbuilding nation: China.” The petition argues that numerous strategic discriminatory actions by the PRC over the past 25 years have led to Chinese domination in the shipbuilding industry, including, (a) directed mergers and anticompetitive actions, (b) over $91 billion of direct government intervention (often through state-owned banks), (c) preferences for Chinese-owned vessels through port and logistics policies, (d) control of upstream markets, and (e) intellectual property theft.

The petition has strong Congressional support, with Rep. Raja Krishnamoorthi (D-IL-8), Ranking Member of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party (CCP), immediately releasing a statement providing, “Given the strategic importance of commercial shipbuilding to our economic and national security, dependence on the CCP creates a vulnerability that undermines our maritime capabilities. We need to shore up our critical maritime supply chains and ramp up our domestic manufacturing capacity to build resilience. The Biden Administration has been a leader in supporting domestic manufacturing and U.S. workers. I encourage the Office of the United States Trade Representative to launch a new investigation to uncover how the CCP has negatively impacted the U.S. commercial shipbuilding industry and how we can create more jobs in this critical sector here in the United States.” Other Congressional members called for the USTR to immediately initiate an investigation under Section 301 of the Trade Act of 1974, including Senators Tammy Baldwin (D-WI) and Bob Casey (D-PA).

The demands from Congress have clearly been heard as the White House announced on April 17 that the USTR is taking up the labor unions’ petition, initiating a Section 301 investigation into the PRC’s unfair trade practices. In announcing the investigation, Ambassador Katherine Tai stated, “The petition presents serious and concerning allegations of the PRC’s longstanding efforts to dominate the maritime, logistics, and shipbuilding sectors, cataloguing the PRC’s use of unfair, non-market policies and practices to achieve those.” Further, “The allegations reflect what we have already seen across other sectors, where the PRC utilizes a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally. I pledge to undertake a full and thorough investigation into the unions’ concerns.”

In the background of these actions, the Maritime Administration (MARAD) remains focused on developing the National Maritime Strategy, working with the Center for Naval Analyses. We understand that MARAD is aiming to have a draft of the strategy developed by the end of the year, with final publication to occur in 2025. Undoubtedly, the strategy will focus heavily on building the U.S. shipbuilding industrial base to counteract PRC influence. When coupled with the actions of Sens. Kelly and Rubio and Reps. Waltz and Garamendi, and the pending USTR investigation, it appears that many in Washington are finally ready to make the investment necessary to reestablish the U.S. as a competitive force in the international shipbuilding market.