The history of the American shipbuilding industry goes back to before the Revolutionary War. The United States is blessed with three extensive coastlines, as well as numerous ports and harbors that have been the sites of shipbuilding companies for more than 250 years.
Although it is no longer true, at one time in the not too distant past the U.S. commercial shipbuilding industry led the world in quality and output.
This article will focus on the U.S. merchant shipbuilding industry in the 20th century.
Between the wars
Following the end of World War I and the mid-1930s, the U.S. merchant fleet, including its cargo and passenger ships, was in danger of becoming obsolete and declined in absolute numbers.
However, Congress passed the Merchant Marine Act of 1936, which led to a national shipbuilding program to upgrade and increase the size of the fleet. It was the start of World War II in Europe that intensified those efforts and eventually led to a shipbuilding program that produced 5,500 vessels in just a few years. Among them were 2,710 mass-produced ships known as Liberty ships.
President Franklin D. Roosevelt served as Assistant Secretary of the Navy during World War I, loved naval vessels and had an eye for ship design. While reviewing blueprints of the Liberty ships at the White House, the president said to Maritime Commission administrator Admiral Emory S. Land, “I think this ship will do us very well. She’ll carry a good load. She isn’t much to look at, though, is she? A real ugly duckling.” The president’s comment led to the Liberty ships’ second nickname, “the ugly ducklings.”
When the Japanese bombed Pearl Harbor on December 7, 1941 and plunged the United States into World War II, the shipbuilding program of the previous five years had put the country on a path to a modern merchant fleet.
But Germany’s lethal submarines (U-boats), preyed on American merchant ships, sinking thousands of tons of shipping and often sinking ships within sight of the American coastline. Unfortunately, the Liberty ships were too slow and too small to carry the vast tonnage of supplies needed to win the war. Convoys protected by U.S. Navy ships were organized to get war materiel to the United Kingdom, the Union of Soviet Socialist Republics and other war-time allies. While merchant and naval vessels were still sunk by the U-boats, the numbers were lower thanks to the convoy strategy.
Because of the limitations of the Liberty ships, the U.S. began a new shipbuilding program. The new ships were faster, larger and if they survived the war, would be able to carry cargo in peacetime. These ships were named Victory ships.
As foretold by President Roosevelt, the Liberty and Victory ships served the United States and its allies in war and peace. But those ships were built between 76 and 85 years ago. Of the thousands of Liberty and Victory ships built, only a handful remain (and most are floating museums).
After World War II, American commercial shipbuilding was at its peak and led the world in output and tonnage. As noted in a 1985 article, “Thirty years ago, U.S. shipyards built most of the world’s fleets.” In 1975, the U.S. was building more than 70 commercial ships annually. Within a few years, however, the U.S. commercial shipbuilding industry had almost vanished.
More than 90% of global shipbuilding takes place in just three countries – China, South Korea and Japan. In 2019. China completed ships with a combined gross tonnage of approximately 22.3 million tons. China State Shipbuilding Corporation (CSSC) is China’s leading shipyard, and as the name implies, is controlled by the government.
By contrast, only four U.S. shipyards construct large oceangoing commercial ships. The U.S. ranks 19th in commercial shipbuilding, accounting for only about 0.35% of new commercial ship construction. This is despite the fact that the U.S. formerly led the world in this category and the nation boasts the world’s largest economy. What happened?
Government subsidies tilt the playing field
Many issues contributed to the decline of the U.S. commercial shipbuilding industry, including global oversupply, recessions and changing economic fundamentals. However, one government policy decision is the key to the decline. For decades, nations around the world have subsidized their national shipbuilding industries – including the United States. Shipbuilders received construction differential subsidies (CDS); however, these subsidies were halted in 1981. Because foreign shipbuilding companies had the advantage of subsidies from their governments but U.S. shipbuilding companies did not, it was impossible for the American shipbuilding industry to compete.
Moreover, there was no government action to enforce fair market policies, and so the U.S. commercial shipbuilding industry declined steadily during the 1980s as it tried to compete against subsidized foreign competitors. According to a U.S. Navy report, between 1987 and 1992, the U.S. shipbuilding industry “sold only eight commercial ships over 1,000 gross tons, compared to 77 ships annually in 1975.”
This contrasted with “The Japanese, Korean and European governments made it a standard practice to support their shipbuilding subsidy programs,” according to a maritime analysis. Another analysis by Dun & Bradstreet concluded, “Japanese and South Korean shipbuilding industries received substantial government support during the 1970s and 80s, which helped them to emerge as top players in the world. While the South Korean government significantly bolstered the industry under its Heavy and Chemical Industrialization (HCI) policy, which included capital incentives, trade incentives and tax holidays, the Japanese government provided large subsidies in the form of easy finance and loan deferments.”
Because of these government subsidies and a lack of U.S government action to resolve the imbalance, the U.S. shipbuilding industry slowed significantly and the orders for new ships were filled in other countries.
For reasons that are very hard to explain, the Reagan Administration stopped the construction subsidies for U.S. shipyards without seeking reciprocal action from other shipbuilding nations. The result was that the U.S. commercial shipbuilding industry collapsed while subsidized Asian shipbuilding companies captured the market. In less than a dozen years, the U.S. went from the leading commercial shipbuilder in the world to producing virtually no vessels for international trade.
Other U.S. industries met similar fates during the last decades of the 20th century, including the textile and shoe industries for example. And not to make light of those job losses, the U.S. cannot move the materiel for war without a merchant fleet.
This article also provides a cautionary tale. Industries and jobs that are lost do not come back – or come back only with a great deal of money and effort. The shipbuilding portion of the U.S. industrial base has been gone for nearly 40 years, devastating companies, communities and significantly impacting our national defense. The loss of this vital industry to subsidized foreign companies significantly damaged a key American industry.