The Shipbuilding Gap with China Is an Industrial Story Before a Navy Story

A navy is not a collection of ships. A navy is a flow. Ships enter it from the yards, leave it when they are lost or retired, and spend the years in between waiting their turn for repair. If the flow in is smaller than the flow out, the navy shrinks, whatever the budget says and whatever the admirals promise.

That is the argument of this post, and I want to make it from structure, not from a list of current ship counts. Counts change every year, and they invite the wrong debate, in which two sides trade numbers and nobody asks how the numbers are produced. The better question is whether the country can make, mend and replace ships at the rate a serious conflict would demand. The answer begins in the yards, long before it reaches the fleet.

The terms

Let me define the words, because a lot of confusion comes from using them loosely.

• Shipbuilding capacity is the ability to design and construct hulls, which depends on yards, cranes, dry docks, steel, specialized components and a trained workforce.
• Repair capacity is the ability to maintain and fix ships already built, which depends on dry docks and skilled labor in a different mix.
• Surge is the ability to raise output sharply in an emergency, within months or a few years, not a decade.
• Industrial base is the whole network of firms and workers that supplies the yards: the foundries, the electrical and machinery makers, the pipe and valve shops, the welders and the engineers.

The claim is simple. A country with a large and active commercial shipbuilding industry has the ingredients for surge. A country without one has to create them from scratch while the war is on.

The argument in numbered premises

1. A navy's strength over time is the sum of what it can build and repair, not of the ships it has on a given day.
2. Naval construction and repair draw on the same yards, workers and suppliers that serve commercial shipping.
3. When a country stops building commercial ships, those yards, workers and suppliers decline, and the naval base declines with them.
4. A rival that has a large commercial shipbuilding industry has a latent naval base many times the size of ours, whether or not its government has chosen to use it for warships.
5. Therefore, the gap in shipbuilding between the United States and China is first an industrial gap, and only second a naval one, and closing it requires industrial policy, not only naval procurement.

You can accept the premises without accepting any particular remedy. The point is to see the problem correctly, because a wrong diagnosis produces the wrong cure.

How the yards closed

In 1987 the American Navy reached about 594 ships by one common count, close to the 600-ship goal of the Reagan years. That fleet was built in part by a shipbuilding base that included many yards busy with both Navy and commercial work. In the decades since, the picture changed dramatically.

Three developments stand out.

1. The subsidy ended. For years the federal government paid construction differential subsidies to cover part of the gap between American and foreign costs on certain ships built in American yards. Congress ended them in 1981. The economic case against permanent subsidy has force, but the practical effect, in a world where other governments continued to support their own yards, was that American commercial shipbuilding lost its foothold in the international market.
2. The commercial orders went elsewhere. Yards in Japan and then South Korea, and later China, took the business, helped in various degrees by their governments' policies. American yards that depended on commercial orders closed or shrank, and many of the survivors depended on Navy contracts and the protected domestic market.
3. The base narrowed. With fewer yards came fewer suppliers, fewer trained workers and fewer people who knew how to run a production line at volume. A skill that is not used for a generation is not simply dormant. It is gone.

I do not have to quote the latest tonnage tables to make this point, and I would encourage you not to trust any writer who gives you a precise figure without a source and a year. You can find the industry's own statistics from the international shipbuilding trade bodies. The general picture is not in dispute among serious analysts: the great bulk of the world's commercial shipbuilding takes place in East Asia, China holds the largest share, and the American share is a sliver.

The workforce and the dry docks

Two constraints deserve special mention, because they cannot be solved by writing a check.

The workforce. A shipyard needs welders, fitters, electricians, pipefitters, crane operators, naval architects and engineers, and many of these crafts take years to master. A worker who spent a decade in a yard has a skill that a classroom cannot supply. When yards close, the workers move to other trades, and when new demand arrives there is no one to hire. Anyone who has run a business knows that you cannot hire a ten-year veteran in a month, whatever the order book says. A press release is not a pipefitter.

The dry docks. A dry dock is the great basin in which a ship can be lifted out of the water for repair. It is expensive to build, takes years to complete and cannot be improvised. The Navy's own public shipyards, four of them, are old, and a significant part of the work of repairing the fleet has long been done in a mix of public and private yards. In a war, damaged ships have to be repaired and returned to the fight. A navy with too few dry docks is a navy whose wounded ships queue up outside the hospital, and the waiting room has no chairs.

The Constitution recognized this kind of logistical truth in its own way. Article I, Section 8, Clause 12 gives Congress the power to raise and support armies, but it adds that "no Appropriation of Money to that Use shall be for a longer Term than two Years." Clause 13, which gives the power "To provide and maintain a Navy," has no such limit. The contrast is usually explained this way: an army can be raised in a season, but a navy cannot, so the Constitution leaves naval appropriations without that limit. Ships take years. The base that builds them takes decades.

Mahan, and the oldest lesson

Alfred Thayer Mahan, in The Influence of Sea Power Upon History, published in 1890, argued that national greatness at sea rested on more than a battle fleet: it rested on a nation's capacity to produce, to carry its goods in its own ships and to hold overseas colonies and bases. He did not think of a battle fleet as an isolated ornament. He thought of it as the visible tip of a maritime economy. Whatever you make of the rest of Mahan, that part is hard to dispute, and it explains why the commercial and the naval cannot be separated.

If the Mahanian argument is right, then the question is less what the American Navy has and more what the American economy can make. A fleet that cannot be replaced is a wasting asset. A rival whose commercial yards turn out hulls at industrial scale has built the foundation of a navy without needing to announce it.

The Jones Act debate among conservatives

Now the controversy. The Jones Act, which is Section 27 of the Merchant Marine Act of 1920, requires that cargo moving between American ports travel on ships that are built in the United States, owned by Americans and crewed by Americans. It is the best-known piece of maritime protection in the country, and conservatives disagree about it.

The case for repeal is a free-market one. The law raises the cost of moving goods between American ports, it limits competition, and the protected fleet is small and aging. Critics say it has not saved American shipbuilding, which shrank anyway, and that it works as a subsidy paid by consumers to a few firms and unions.

The case for keeping it is a defense one. The law sustains a pool of American ships, mariners and yards that would be needed in a war, and repealing it would end commercial shipbuilding in the United States almost completely, leaving the nation dependent on foreign yards. Supporters point out that the Navy relies on American merchant mariners to crew its sealift ships in an emergency.

I will say what I think, and I will mark it as a judgment and not a fact. Both sides are right about something. The law does raise costs, and a protection that has not rebuilt the industry in a century has a poor claim to be its savior. But repeal by itself does not rebuild anything. If the law ended tomorrow, the yards that remain would face foreign competitors with deep subsidies, and the likely result would be fewer yards, not more. The honest conservative position is that the Jones Act is a symptom. The disease is a high-cost, low-volume industry, and the cure is to lower the cost of building here, not to argue forever about the shield.

The steelman: missiles make hulls obsolete

The strongest objection to the whole argument is one that deserves a fair hearing. It says that in the age of precision missiles, large surface ships are vulnerable. A rival with thousands of cheap anti-ship missiles can threaten a fleet worth billions. If hulls can be sunk in minutes, then pouring resources into yards to build more of them is preparing for the last war. The nation should invest in missiles, drones, submarines, long-range strike and distributed forces, and spend less on large ships that become expensive targets.

I take that objection seriously, and I think it is partly right. The cost exchange between a cheap missile and an expensive ship is a real problem, and the Navy is right to explore smaller, more distributed and unmanned systems. A fleet that is concentrated in a few high-value targets is a fleet in a crisis waiting to happen. Putting all the eggs in one very expensive basket is a strategy only if you are fond of omelets.

But it does not overturn the argument, for four reasons.

1. Everything that replaces the hull also needs a yard. Submarines, unmanned vessels, missile ships, supply ships and the tankers that fuel them are built in shipyards and repaired in dry docks. A missile-based navy still sits on a maritime industrial base.
2. A navy that loses ships needs to replace them. If missiles make attrition more likely, then the ability to build and repair quickly becomes more important, not less. The more vulnerable the hulls, the more valuable the yard that can replace them.
3. Logistics ships are hulls too. The fleet that carries fuel, ammunition and supplies across the Pacific is made of large vessels that cannot be replaced by missiles. A distributed force is also a force that needs more support, not less.
4. The argument proves too much. If hulls are obsolete, so are airfields and ports. A conflict does not end because the first volley was expensive. It ends when one side can keep producing and the other cannot.

The lesson of the Second World War, told in How America Built 2,710 Liberty Ships and Why It Could Not Do So Today, is that it was the ability to out-produce losses, rather than any single weapon, that decided the Atlantic. Technology changes. The arithmetic of replacement does not.

What follows for policy

From the argument I draw several conclusions, and they are about incentives and obstacles more than about spending.

• Treat the shipbuilding base as a defense asset in budget and in law. Congress and the Pentagon should count the commercial and naval base together and not as separate debates.
• Lower the cost of building here. Permits for yards and dry docks, tax treatment of capital investment, and regulations that add cost without adding safety are all in Congress's hands. A conservative should want these to be examined line by line.
• Stabilize demand. Yards cannot invest when orders swing from year to year. Multi-year procurement, within sensible oversight, lets firms hire and train. The record of failed programs, covered in Zumwalt, the Littoral Combat Ship and the Lessons of Procurement Failure, shows what happens when requirements keep changing.
• Train the workforce through employers. Apprenticeships, run by the firms that need the skills, work better than a federal program run from Washington.
• Work with allies. Friendly shipbuilding nations are a resource. A coalition of allied yards, with sensible rules on repair and construction, adds capacity without requiring America to rebuild everything alone.
• Keep the oversight real. Money for shipbuilding has to be tracked. The department that cannot pass an audit, as discussed in The Pentagon Has Never Passed an Audit, and Conservatives Should Mind, will have a harder time proving that its shipbuilding dollars are well spent.

Why this is a Taiwan question

None of this is abstract when you look at the strategic problem in the Western Pacific. A conflict over Taiwan, if it ever came, would be fought at the end of a very long supply line, against a rival close to its home waters and backed by an immense industrial base. The questions that would matter are not only how many ships the Navy has on the first day, but how many it can replace on the hundredth, and where the damaged ones can be repaired. The history of the Taiwan Strait, told in When Clinton Sent Two Carrier Groups to the Taiwan Strait in 1996, shows that the United States once relied on its ability to send carriers quickly and with confidence. The question now is whether the confidence rests on a base that can sustain it.

I am not predicting a war, and nobody should. Deterrence is the aim, and deterrence, as I argued in Deterrence Fails When an Enemy Thinks You Will Not Pay the Price, rests on capability and on the credibility that capability supports. An adversary who studies our yards will draw conclusions about our staying power. The best way to avoid a test is to fix what he is studying.

The case in brief

1. A navy is a flow of ships in and out, and its long-run strength depends on the yards, workers and suppliers that build and repair them.
2. Commercial shipbuilding and naval shipbuilding share a base, so the end of construction subsidies in 1981 and the loss of commercial orders weakened both.
3. Workforce and dry dock limits cannot be fixed quickly, which is why surge capacity must be kept alive in peacetime.
4. The Jones Act debate matters less than the underlying problem of high costs and low volume; the answer is to lower the cost of building here.
5. Missiles make hulls vulnerable, which makes the ability to replace and repair them more valuable, not less.

What you can do: ask your representative, using the my-representatives page, whether he or she supports multi-year shipbuilding contracts with strict oversight, and read the shipbuilding sections of the next defense bill on Congress.gov.