The Tides Turn for Trump’s Maritime Industrial Policy

Ian Bennitt, the senior director of the Office of Maritime and Industrial Capacity (OMIC), recently left his post within the National Security Council (NSC) for the private sector. His departure follows that of five of the seven staffers at the maritime office this past July. This seems to indicate a waning momentum in the Trump administration’s push for a maritime sector industrial policy. If so, that’s good news.

The White House insists that shipbuilding is still a priority. The administration started out with an aggressive push to revitalize the shipbuilding industry. President Trump signed an executive order (Restoring America's Maritime Dominance) calling for a maritime action plan to spur America’s maritime industry, and also established the OMIC.

Congress mirrored the president’s early interest in American shipbuilding. The House of Representatives passed the American Cargo for American Ships Act, which would increase from 50 to 100 percent the cargo preference, that is, the percentage of goods that must be carried on U.S.-flagged ships for the Department of Transportation. The Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act (SHIPS), which would expand maritime industrial policy, was reintroduced this year.

However, now that the OMIC has lost its senior director and has been bleeding staffers, the push for maritime industrial policy appears to have lost momentum.

That is good for America. For too long, American shipbuilding has been stagnant because of burdensome regulations and intensive industrial policy; the answer to stagnation is not more government intervention. However, the Maritime Trades Department of the AFL-CIO defends the current state of government intervention when it describes the Jones Act, the Maritime Security Program (MSP), and the cargo-preference laws as the “three-legged stool that keeps Old Glory flying on the high seas and along the coasts.”

Instead of promoting the maritime industry, those government interventions cripple it.

The Jones Act has done so by protecting domestic ship producers from competition. Under the act, to engage in cabotage, shipping goods between two U.S. ports, ships must be U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-crewed. Shelter from competition has scuttled American shipbuilding. America produces just 0.04 percent of global commercial shipping; American ships cost four to six times as much as foreign ships; and ships are typically retired late to avoid the cost of new ones.

Under MPS, the federal government pays stipends to private shipping companies that make their ships available to the U.S. military for sealift capacity. MPS costs taxpayers hundreds of millions of dollars annually, further protects American merchants from competition, limits U.S. military investment in its own sealift capacity, and potentially drives up commercial shipping prices by diverting private ships from commercial use.

Cargo-preference laws, as noted, require a certain percentage of goods for government projects to be shipped via U.S.-flagged ships. Currently, military contracts require 100 percent of cargo (measured in gross tonnage) to be carried by U.S.-flagged ships; civilian projects require only 50 percent. These laws drive up costs on government projects because U.S.-flagged ships are significantly more expensive to operate than foreign ships. The American shipping industry gets a protected stream of revenue while the taxpayer foots the bill.

In short, American shipping programs and regulations have been a disaster for the taxpayer and have smothered our commercial fleet. What the American fleet needs is less government, not more. With the senior director of OMIC gone, there is now greater hope that American maritime policy will shift in a positive direction.