U.S. Shipbuilding Industry Reconstruction: Implications for Our Shipbuilding Industry and Korea-U.S. Security Cooperation?

Before his inauguration, President Trump stated that “We need Korea’s help and cooperation for the American shipbuilding industry,” and “I am well aware of Korea’s world-class warship and vessel construction capabilities, and we need to closely cooperate with Korea in the maintenance, repair, and overhaul (MRO) sector as well.” Recently, the Secretary of the Navy visited Korea to discuss cooperation in shipbuilding and support for warship maintenance and construction.

President Trump’s request and the U.S. government’s movements reveal two facts. One is the status of Korea as a shipbuilding powerhouse, and the other is the reality of the U.S. shipbuilding industry, which possessed the world’s largest shipbuilding capacity until the mid-20th century but has now declined.

After World War II, the U.S. manufacturing industry significantly declined as the economy shifted toward the service sector, with the shipbuilding industry being a prime example. American shipyards that built over 1,000 merchant vessels per year during World War II have seen their numbers and construction capacity decrease to the point where only five shipyards remain. Each shipyard’s construction capacity is merely 1.3 vessels per year.

This situation has reached the point where the U.S. Navy cannot build the warships it needs. This is because there are no shipyards in the United States with the personnel and facilities to build warships.

The United States, engaged in hegemonic competition with China, feels a sense of crisis as China has surpassed it in the number of warships. What is serious is that the approximately 80 U.S. merchant vessels used in international trade represent only 1.5 percent of the 5,500 merchant vessels owned by China.

Behind the decline of the U.S. shipbuilding industry is the Jones Act, enacted in 1920 to protect the domestic shipbuilding industry. This shipbuilding monopoly law requires that vessels used for cargo transportation within the United States must be built in the United States. Under this law, the U.S. shipbuilding industry avoided competition with foreign companies and maintained a monopolistic position, but gradually lost its competitiveness.

U.S. shipping companies had to use expensive and inferior domestic vessels instead of cheaper and better-performing vessels built abroad. This led to increased shipping freight rates and reduced demand for maritime transportation. As transportation decreased, so did ship orders. As this vicious cycle continued, shipbuilding capabilities declined while construction costs continued to increase.

Currently, the price of tankers built in the United States is four times the global construction cost, and container ships are five times more expensive. As U.S. shipyards lost their competitiveness, only four shipyards capable of building large merchant vessels remain.

During the period when the United States, which grew into a global power after its founding, was expanding its influence across the Pacific and Atlantic oceans to seas worldwide, Alfred Mahan advocated the importance of Sea Power rather than Naval Power. Naval power can only be maintained on the solid foundation of civilian maritime industries such as shipbuilding and maritime transportation. Today, with an extremely weak shipbuilding industry base, the United States faces a crisis where, from Mahan’s perspective, only simple naval power exists without sea power.

On April 30, both Republican and Democratic parties jointly introduced the bipartisan ‘Shipbuilding and Harbor Infrastructure for Prosperity and Security Act’ (abbreviated as ‘SHIPS for America Act’). This bill contains comprehensive measures to rebuild the merchant fleet and revive the maritime industry.

The ‘SHIPS Act’ aims to rebuild America as a maritime nation through national-level oversight and funding for maritime policy, strengthening the international competitiveness of flagged vessels, reviving the shipbuilding industry, and training seafarers and shipbuilding workers.

A distinctive feature of this law is that its purpose is not merely to rebuild the shipbuilding industry and strengthen maritime industry competitiveness, but rather to strengthen U.S. security through these means. It establishes a ‘Maritime Security Advisor’ in the White House to coordinate maritime issues and policies, including national maritime strategy.

The legislative intent for security enhancement is clearly evident in that the Maritime Security Advisor leads the government-wide ‘Maritime Security Board’ while overseeing policies related to shipbuilding and maritime industries.

The Maritime Security Board is composed of representatives from federal agencies responsible for the maritime industry and serves as the supreme command post for maritime industry and shipbuilding/shipping industry policies, determining the size of the maritime security fleet, developing maritime personnel, and setting priorities for shipbuilding and maritime industry research and development. The implementation of policies decided here is handled by the U.S. Maritime Administration and the U.S. Coast Guard.

This law establishes the ‘Strategic Commercial Fleet Program’ and targets a merchant fleet size of 250 vessels. The strategic merchant fleet refers to vessels used for commercial purposes in peacetime but mobilized for material transportation in wartime.

While the strategic merchant fleet requires U.S. construction, U.S. flag, and U.S. crew, considering the insufficient construction capacity of U.S. shipyards, it allows for the use of foreign-built vessels as ‘Interim Ships’ as a temporary measure.

The United States is also experiencing a shortage of seafarers due to the tendency to avoid difficult and dangerous maritime work. To address this, incentives are provided to encourage young people to apply for maritime officer positions. Those who graduate from the U.S. Merchant Marine Academy and meet the mandatory requirements, as well as seafarers who have worked on U.S. merchant vessels for more than seven years, are granted eligibility for federal government employment without competition.

It also grants the Merchant Marine Academy equal status with other military academies and increases enrollment at both federal and state merchant marine academies. The bill includes measures to facilitate the transition of veterans from the Navy, Coast Guard, and other services to merchant marine officers, and to allow retired military personnel to obtain maritime licenses through expedited programs of less than three months at state merchant marine academies.

The ‘SHIPS Act’ can be said to be a law that reaffirms America as a maritime nation and contains the will to strengthen the maritime industry. It requires the possession of a ‘strategic merchant fleet’ to achieve U.S. national and economic security goals and allows for agreements with allied nations for this purpose.

The U.S. shipbuilding industry conditions cannot increase the size of its approximately 80 flagged international trade merchant fleet to the target of 250 vessels in a short period. In the meantime, foreign-built vessels can be utilized as ‘interim vessels’ until they are replaced by U.S.-built vessels or included in the fleet through long-term charter contracts.

The fact that the Trump administration is seeking our cooperation while reorganizing the shipbuilding industry and strengthening maritime power can be a great opportunity for our country’s shipbuilding industry. Additionally, shipbuilding industry cooperation can strengthen the Korea-U.S. alliance and be utilized as leverage in tariff negotiations and security cooperation.

On the other hand, the merchant marine training program for military retirees at U.S. state maritime academies could serve as a valuable policy reference for South Korea, which is experiencing a severe shortage of seafarers due to population decline, aging demographics, and the phenomenon of seafarer avoidance.