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Outsourcing Navy shipbuilding weakens the United States

A Philly Shipyard employee waits to hear from U.S. President Joe Biden during a visit in July 2023.

Posted on April 1, 2024

The Pentagon’s first-ever industrial base strategy is rightly looking to address critical areas of America’s supply chain resilience, workforce readiness, flexible acquisition and economic deterrence.

But rather than looking to invest in American shipbuilding and repair capacity, our military leaders are actively exploring outsourcing the U.S. maritime-industrial base, weakening our nation and undermining American sovereignty.

For years, top executives in the U.S. shipyard-industrial base have repeatedly communicated to Congress and military officials the importance of a comprehensive industrial base policy. Absent a companion maritime strategy, the offshoring of American industries and jobs critical to our national security and readiness will be inevitable.

Meanwhile, China —– our principal maritime adversary — is seeking to overtake the U.S. Navy as the world’s most capable naval superpower. It has aggressively expanded its efforts to dominate global supply chains and increase capacity and capability through commercial markets as a flywheel for military size and ship count.

From 2010 to 2018, China provided $132 billion in direct subsidies for shipbuilders, driving a substantial decrease in the number of shipyards globally. This volume-centered approach, subsidized by the Chinese government, saturated the market and effectively drove out global competitors.

The U.S. maritime strategy should focus on building and maintaining more ships in existing U.S. shipyards. Not only is the U.S. not prioritizing shipyard capacity, but we are also imposing thousands of pages of regulation on shipbuilders that add cost and weigh down the industry while our global competitors play by a far less restrictive set of rules.

The current defense acquisition strategy myopically views competition to be only among U.S. players. These strategies leave excess capacity and capability untapped and pitted against each other as opposed to working together to optimize shipyard throughput. There is more than enough capacity to accomplish all the fleet’s maintenance needs, and yet the Navy is looking abroad for ship maintenance, as well as the capability to build combatant and logistics ships, plus vessels for the Coast Guard and the Army. These efforts are driving layoffs to the very domestic workforce Navy leadership says it wants to preserve.

This shortsighted approach creates market uncertainty and instability, complicating additional investments in the industrial base, and undermines the substantial capital investments the U.S. shipbuilding industry has made in its workforce and facilities.

Japan, Korea and now China all became global shipbuilding leaders, producing for roughly 95% of the worldwide market. Each country recognized its shipbuilding industries as strategic resources and infused hundreds of billions of equivalent dollars into their industries.

Meanwhile, the billions in private capital invested by major U.S. shipyards in recent years to increase efficiency and throughput is met by the U.S. government with inconsistent, multi-tranche shipbuilding plans (or none at all), canceled and deferred programs, myriad change orders, and empty promises of workforce development incentives. Many of the capabilities Navy leaders recently touted during overseas travel can be found right here at home, in American shipyards operated by an American workforce.

A more strategic U.S. approach would put the maximum amount of volume through each shipyard to both build ships faster and repair ships on time. An economies of scale approach applied to the overall shipbuilding and ship repair industrial base would yield many of the results the Navy is looking for, while at the same time building strength in the U.S.’s ability to compete on a global playing field.

Just take the recent delivery of the first in a series of National Security Multi-Mission Vessels being built for U.S. maritime academies to train the next generation of the merchant marine. The U.S. Maritime Administration employed a Vessel Construction Manager program to use commercial ship design and construction best practices.

In her February 2023 remarks to the Navy League, MARAD Administrator Ann Phillips touted the innovative approach, including $428 million in savings per ship.

This program represents a model for the Pentagon. A win for the U.S. government. A win for mariners. A win for industry. And a win for taxpayers.

The shipyard industrial base appreciates the continued dialogue with Navy leadership on what we all want to achieve, which is providing for the most capable, lethal and mission-ready naval fleet in the world.

The time to course correct is now. We should not outsource our national and domestic security and assets. The last thing we should cede is our ability to build our own ships and defend our nation.

Matthew Paxton serves as president of the Shipbuilders Council of America.


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