The following is an excerpt from the article “U.S. maritime policy needs an overhaul,” originally published Sept. 6, 2024, by War on the Rocks.
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The scale of America’s maritime policy dysfunction has begun to register in Washington but only bold measures will turn it around
U.S. maritime policy is a grievous failure. Whether evaluated in terms of effectively meeting national security requirements or bolstering the country’s economy, America can point to few successes.
Belatedly, the scale of dysfunction has begun to register in Washington and a long overdue conversation has begun over how to reverse matters. Most of the solutions put forth, however, are tepid and unequal to the task before them. Tinkering at the margins will not do.
To unlock the country’s maritime potential and address its glaring national security deficiencies, policymakers should resolutely advocate for measures that place them at odds with powerful groups seeking to perpetuate the status quo.
In particular, they should focus on reforming outdated protectionist laws that impede the use of allied resources and replacing indirect assistance to the maritime industry with targeted aid whose costs and benefits are transparent.
Absent such action, maritime decay will continue apace and the United States will persist in ceding the oceans to a world that refuses to stand in its own way.
Toward a new maritime vision
Bold thinking means a willingness to re-examine all elements of U.S. maritime policy, including some regarded as sacred. Given the depth and magnitude of current problems, nothing should be considered off the table. It is in that spirit that the following suggestions are offered for consideration.
They include updating the Jones Act, eliminating cargo preference laws, establishing a second ship registry and updating restrictions on military use of foreign shipyards
>> Update the Jones Act
Widely regarded as the foundation of U.S. maritime policy, many of the most deep-seated problems with the U.S. maritime industry are due to the provisions of this outdated law.
Particularly out of step is the law’s requirement that [all] vessels used in intra-U.S. trade be constructed in domestic shipyards — a requirement that no other country imposes.
The U.S.-build mandate utterly fails from a purely national security perspective, while commercial shipbuilding output borders on negligible, with years sometimes passing without a single large oceangoing merchant ship being delivered. In exchange for this meager output, the domestic fleet is rendered smaller, older and less capable than would otherwise be the case due to crushing capital costs unrivaled in the world.
Any notion that the Jones Act’s high costs grant the country a shipbuilding capability free of foreign reliance is illusory, given U.S. shipyards’ heavy reliance on imported parts and components — frequently from China — for the few large ships built domestically.
The Jones Act’s restriction on foreign mariners — limited to permanent alien residents that comprise no more than 25% of a vessel’s unlicensed crew — is also ripe for reassessment, particularly during a time of crew shortages. This is an idea that has already been broached by some in the domestic maritime industry.
The law’s limit on foreign ownership also demands a second look, given its deterrent effect on investment and practical enforcement difficulties.
The Jones Act is a law rooted not in immutable truths but in the conditions of a long-bygone era. Properly understood, many of its prohibitions amount to a self-imposed embargo that benefits U.S. adversaries by severing the country from allied capabilities and know-how.
Some voices maintain that the Jones Act should not be revisited because it ensures access to ships in case of war or national emergency — a claim perhaps rooted more in theory than reality. But this is entirely the wrong framing.
The question should not be whether the Jones Act provides some de minimis levels of shipping and shipbuilding, but rather whether it creates these resources efficiently and in sufficient quantities. The answer is a resounding “no.” If maritime policy was written from scratch today, few would arrive at the Jones Act as an optimal means of addressing U.S. national security needs.
>> Eliminate cargo preference laws
Due to their high operating costs of approximately $7 million higher per year than those of equivalent internationally flagged vessels and ensuing lack of competitiveness, U.S.-flagged ships depend heavily on laws mandating their use for government-impelled cargo. This is a deeply flawed approach to promoting a U.S.-flagged fleet.
The harm inflicted by cargo preference is at least two-fold.
First, requiring the use of these ships imposes high costs on the military — which has expressed concerns about the financial burden of U.S.-flagged shipping — and civilian government agencies subject to cargo preference laws.
Second, access to mandated cargo disincentivizes cost control, thus undermining the competitiveness that ought to undergird commercial U.S.-flagged shipping.
Targeted maritime subsidy programs should be direct and transparent, with clear dollar amounts that enable the cost-benefit analyses essential to good public policy. As has long been recognized, cargo preference is the opposite of this.
>> Reform, and possibly expand, subsidy programs
A superior method to indirect subsidies is more direct aids such as the Maritime Security Program and Tanker Security Program. Each provides an annual stipend to participating vessels in exchange for the U.S. Defense Department’s assured access to them during armed conflicts or national emergencies. The costs and benefits are visible and easily measurable.
The concept is sound, but such programs should be reformed by establishing a bidding system to ensure that the stipend — currently set by statute — matches market conditions and incentivizes cost control.
In addition, funding for these programs and determinations over their size — reflecting perceived sealift requirements — should come from the Department of Defense. If defense officials determine current shipping to be inadequate, the number of participating vessels could be expanded, ideally funded with savings from the discontinuation of cargo preference.
>> Establish a “second ship” registry
Commercial vessels registering under the U.S. flag are internationally uncompetitive largely due to numerous accompanying requirements, including the employment of U.S. citizen mariners; payment of U.S. taxes such as payroll taxes and a 50% tariff on vessel repairs performed abroad; and subjection to U.S. laws, including the ability to file lawsuits over personal injuries, which raises vessel insurance costs.
A straightforward means of expanding the size of the U.S.-flagged fleet would be to establish a second ship registry akin to those operated by Denmark, Germany, Norway and others that feature less onerous conditions.
This new registry could distinguish itself from the legacy U.S. registry by offering a competitive tonnage tax and relaxing the U.S. citizen-mariner requirement, which could be applied only to senior officer positions, or removed and replaced with a generous tax credit for those companies that hire U.S. citizen mariners.
Although availing themselves to many of the privileges of U.S. flagging, such as U.S. Navy protection, such vessels would be ineligible for coastwise commerce or participation in U.S. subsidy programs linked to sealift needs.
>> Update restrictions on military use of foreign shipyards
There is value in preserving a U.S.-controlled shipbuilding industrial base to construct Navy and Coast Guard vessels, but such considerations should be weighed against the benefits of constructing and repairing vessels on time and cost-effectively.
Meeting military shipbuilding needs requires that the balance between these two considerations be more evenly struck. Currently, the balance is tipped almost entirely toward the former via protectionist statutes.
Fortunately, however, there is growing recognition, including from members of Congress and the secretary of the Navy, of the necessity for the U.S. to avail itself of abundant and competitive allied shipbuilding and repair capabilities. Indeed, the Commission on the National Defense Strategy recently called for the expanded use of such shipyards to address maintenance and shipbuilding needs.
This is not advocacy for wholesale outsourcing but to recognize that for some vessels in some circumstances, the cost and time savings of allied construction and maintenance are of such magnitude that they outweigh other considerations.
Among the candidates for such treatment are the disastrous Polar Security Cutter acquisition as well as non-combatant support and sealift vessels whose overseas construction offers higher quality, faster timelines, and dramatic cost-savings — no small matter in an era of record budget deficits.
The path ahead
These proposals do not constitute an exhaustive list of those worthy of examination. Other items also merit strategizing, such as reforming overzealous environmental laws that hamper shipyard development and establishing a Merchant Marine Reserve to address concerns over mariner numbers and reliability.
But these should be adjuncts to reform instead of their centerpieces. Redesigning the main pillars of U.S. maritime policy to comport with modern realities should be at the forefront of modernization.
True maritime reform advocacy is not for the faint of heart. The protections and policies highlighted for reform have accreted a collection of powerful special interest groups willing to dedicate considerable resources to their preservation. But confronting them is what’s required to craft a maritime policy that meets American economic and national security needs.
The simplest approach would be to continue with the policies that have led to the abysmal status quo — or worse yet, further strengthen them. But that road’s destitute destination is already known.
America’s maritime future depends on a decisive break with its failed legacy approach.
