A Bi-partisan authored Congressional report says the United States has fallen far behind China in shipping and shipbuilding and needs to make the long-term investment to catch up.
While it is easy to blame China for being the aggressor, the reality is that the United States has fallen behind not just in shipping and shipbuilding but in manufacturing, infrastructure, research and development and even affordable housing.
- Korean investment in U.S. shipbuilding such as the acquisition of Philly Shipyard.
- Japanese investment in U.S. Steel and U.S.- built ship to shore cranes
- Taiwanese investments in U.S. semiconductor manufacturing.
The Problem: Decades Of Neglect
The Republican and Democratic-authored, Congressional Guidance for a National Maritime Strategy, said the United States maritime industry has suffered from “decades of neglect” allowing China to take the lead: “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. Moreover, the People’s Liberation Army Navy and the merchant marine and maritime militia of the People’s Republic of China [PRC] outnumber the U.S. Navy. For decades, our country has failed to invest in critical maritime infrastructure and capabilities.”
One of the report’s co-authors, Senator Marco Rubio (R-FL) explained: “The competition between the United States and Communist China will define the 21st century, and nowhere is this conflict more prevalent than in the maritime domain. The U.S. must move quickly to revitalize our maritime industrial base, reinvest in a robust workforce, and advance innovative technologies to project strength and security in the world’s waterways, oceans, and seas.”
The report’s concerns were echoed by Jennifer Carpenter, CEO of the American Waterways Operators and President of the American Maritime Partnership who wrote: “The United States must renew its commitment to a strong, reliable American maritime capability to confront emerging threats. China’s aggressive shipping expansion poses significant challenges to the United States and our allies.”
Collaborations With U.S. Allies
The new strategy being championed by U.S. Navy Secretary Carlos Del Toro is to develop collaborations with Japanese and Korean shipbuilders so as to encourage them to invest in the United States. One result of this is that Korea-based Hanwha Systems and Hanwha Ocean announced the acquisition of Philly Shipyard, a leading U.S. shipbuilder that has delivered approximately half of the large U.S. Jones Act commercial ships in the United States since 2000.
Another example is the Biden administration's support for Japan's PACECO/ Mitsui's establishment of a U.S. based ship to shore manufacturing facility. The Biden administration has instituted a 25% tariff on Chinese built cranes to support the new U.S.- Japanese venture from unfair price cutting by China. Unfortunately, that tariff is opposed by the American Association of Port Authorities.
Another area of collaboration that could help modernize U.S. steel-making and support new shipbuilding is the proposed acquisition of U.S. Steel by Nippon Steel Corporation. The opposition from U.S. steelworkers and the Biden administration is aimed at keeping steel-making ownership domestic.
However, the Nippon's Steel acquisition has the potential to inject new capital and technology into U.S. steel making and complement efforts to engage in new shipbuilding by U.S. Navy Secretary Del Torro with Korean and Japanese shipbuilders.
On April 12, 2024, David B. Burritt, President & Chief Executive Officer of U. S. Steel commented on the vote by U.S. Steel stockholders to support the Nippon Steel Corporation deal: “The overwhelming support from our stockholders is a clear endorsement that they recognize the compelling rationale for our transaction with NSC. This is an important milestone as we progress toward completing the transaction. We are one step closer to bringing together the best of our companies and moving forward together as the ‘Best Steelmaker with World-Leading Capabilities.’
This transaction truly represents the best path forward for all of U. S. Steel’s stakeholders – union and non-union employees, customers, communities and stockholders – and for the United States and our home in Pennsylvania. By creating the best steelmaker in the world, we will have a stronger company to sustain our talented employees and fulfill all commitments to them, including all of the obligations under the agreements in place with our unions. We will deliver enhanced capabilities and innovations for our customers in the United States and globally, and be able to invest in greener steel to meet our climate commitments. And we will maintain the U. S. Steel name and Pittsburgh headquarters, with even more capital to invest in Pennsylvania.
This transaction will make U. S. Steel and the domestic steel industry stronger and more competitive, enhancing the legacy of steel that is mined, melted and made in America, in the face of unfair competition from China.”
Another area of collaboration is happening through the CHIPS Act with the establishment of Taiwan Semiconductor Manufacturing facilities in the US. This venture will help the United States rebuild lost semiconductor manufacturing.
TSMC is now building semiconductor manufacturing facilities in Arizona financed by the CHIPS Act with $6.6 billion in U.S. funding.
TSMC said in a media release: “As the company makes progress in completing its first fab and continues construction of its second fab at its Arizona subsidiary, the third fab brings TSMC’s total capital expenditure for the Phoenix, Arizona site to more than US$65 billion, making the site the largest foreign direct investment in Arizona history, and the largest foreign direct investments in a greenfield project in U.S. history.”
Offshore Wind?
Another area of collaboration could be in the support and construction of floating offshore wind farms and ports being planned off the U.S. Pacific Coast starting in California. Korean, Japanese, and Taiwanese shipbuilders could support these installations and create a new source of renewable wind energy to transition away from fossil fuels. That collaboration could be expanded to support offshore developments around Asia and South America.
A possible offshoot of the offshore wind efforts would be to repurpose some new renewable electricity to power new desalination plants that could provide fresh water during drought years and inject water into depleted water tables to reduce subsidence and soil contamination. California, which has suffered from prolonged droughts could be one market for these efforts.
Role Model: Nvidia’s Jensen Huang
A catalyst for enhancing the U.S. collaboration with Asian and Pacific Rim nation could be Nvidia Corp. cofounder Jensen Huang who was born in Taiwan but has built up Nvidia as an AI leader in the United States.
While visiting Taiwan in June, Huang thanked Taiwanese semiconductor manufacturers including TSMC for their support in building up Nvidia. While in Taiwan, Huang recently spoke out in favor of Taiwan as a country angering China. Huang apologized saying he did not mean to make a geopolitical statement.
Huang could act as a role model for continued collaboration between the United States and its allies in the Pacific.
