When you think of elements important to national security, the maritime industry might not pop up. But it actually contributes a lot. That’s according to a study by the Center for Strategic and Budgetary Assessments. For more, senior fellow Bryan Clark joined Federal Drive with Tom Temin.
Insight by Citrix: During this webinar executives from the Department of the Navy, U.S. Army Corps of Engineers, Census Bureau and Citrix Systems will discuss how federal leaders can use their experience over the last 20 months to continue to reduce costs and complexities and move further into the cloud and other modern approaches to technology.
Tom Temin: Mr. Clark could have you back.
Bryan Clark: Great to be here. Thank you Tom.
Tom Temin: First of all, tell us about the maritime industry quickly. I mean, most people see ships shipping stuff, and they’re all from Panama, Korea. Is there a maritime industry in the United States?
Bryan Clark: Absolutely. There’s a maritime industry, it’s just not as prominent as those from other countries. So in the U.S., you’ve got shipbuilders that build ships for the U.S. Navy, for the Coast Guard, for other parts of the government. They also build ships for the domestic U.S. Fleet. And something I think people don’t realize is that every ship that goes between U.S. ports has to be built and is owned by a U.S. operator. So you have to build those ships in United States, that creates a business for a shipyard industry.
Tom Temin: So that is to say, if you’re shipping safe from Los Angeles to the Gulf of Mexico.
Bryan Clark: Right? You go from Los Angeles to the Gulf of Mexico. You go up the coast of California, cruise ships that go along to California or the Eastern Coast. They have to be built in the United States, and they have to be owned by U.S. operators and manned by U.S. Mariners. That creates a need for a shipping industry in the U.S., in addition to the shipbuilding industry that supplies the U.S. Navy and Coast Guard with their ships.
Tom Temin: Right. In fact, there’s an expansion of naval ship providers as they get into smaller, lighter ships. They’re going to barge builders. Not all gigantic industry.
Bryan Clark: An interesting finding of the study is that we were trying to look for you what the contribution of the commercial maritime industry was to national security and one of the major contributions is the ability of these smaller shipbuilders that tend to build these domestic fleet ships that operate around the U.S coast. They’re also going to be needed to build these smaller ships that are gonna be a larger portion of the U.S. Navy’s fleet in the coming decades.
Tom Temin: So those are ships that might be fairy sized as opposed to destroyer sized or carrier sized.
Bryan Clark: Exactly. These ships are much more like what you would see in coastal trade rather than the big aircraft carriers that you see going across the ocean.
Tom Temin: All right, so the maintenance of shipbuilding is one of those strategically important things. What are some of the other national security implications of having a maritime industry?
Bryan Clark: So another big contribution is the shipping industry itself. So carriers that move goods and material cargo between U.S. ports and between U.S. ports and those overseas are big contributors to national security. So when U.S. goes to war, when we had the Operation Iraqi Freedom, Operation Enduring Freedom over in the Middle East, future conflicts that may occur, a humanitarian assistance that occurs in places like Indonesia or the Philippines. All that material gets shipped, has to get shipped on U.S. flagged vessels. Those flag vessels may be built overseas, but they’re operated by U.S. carriers and manned by U.S. Mariners so that shipping industry is something that has to be fostered by the United States. There’s a set of programs that subsidized the ship owners that operate these ships, and there’s a set of regulations that require the government to ship its material on U.S. flag ships.
Tom Temin: So in time of need then those private operators could get a call and say, sorry, you got to stop what you’re doing and transport U.S. military people and stuff.
Bryan Clark: Exactly. And one major funding of the study was that although there’s enough U.S. flagged ships to carry the cargo and the vehicles and the tanks and the things you think you need overseas, there are not enough tankers to carry the fuel and the lubricants that you would need, the oil that you would need to move across the ocean to support U.S. operations overseas. This was a big challenge during Operation Iraqi Freedom. Just getting fuel to troops that are out in the field in the middle of Afghanistan somewhere was a major trial for the United States military. So the U.S. flag ships are needed to do that, and the U.S. Only has about 1/3 of the U.S. Flag ships needed to support a major contingency right now.
Tom Temin: And is that changing? I wonder because over the past five or 10 years, the United States has become a major oil exporter, exponentially more than it exported years ago. Is there any increase happening?
Want to stay up to date with the latest federal news and information from all your devices? Download the revamped Federal News Network app
Bryan Clark: It’s interesting those ships are not required to be U.S. flagged because they go between U.S. ports and overseas ports. So a lot of those tankers that you see are actually operated under a foreign flag, even though they might be a U.S. company like Exxon, Mobil or Chevron. It’s a U.S. company owning a ship that’s actually flagged under another country’s flag. So that’s something that Congress has been looking at is do we want to make all oil exports required to be under U.S. flag to increase the number of tankers that would be available for U.S. service in a contingency or crisis? Another thing that we found in our studies that there’s a U.S flagged fleet that’s government owned, that is aging. This is something that maritime administrator has talked about a lot because he’s in charge of this fleet of 46 to 60 ships. They’re all greater than 40 years old. They need to be recapitalized, and this is a concern right now is how do you buy those new ships, right? How do you afford that and also is their options to charter those ships from the commercial industry and provide that service and make it more flexibly available.
Tom Temin: I wanted just to follow up on the tankers because then I want to get to MARAD. The trend in tankers is super tankers, and these are even bigger than cruise ships, bigger than carriers, being built in Korea and places like that. Is the thinking that for national security purposes, maybe that’s not the way to go because you don’t want to put all your oil in one basket?
Bryan Clark: Right. The idea would be to try to create a domestic industry building those kinds of ships. So currently some of those ships are built to support the domestic trade, so moving oil between Alaska and the coast of the United States is done on U.S. flagged ships that were built in the United States. So there are companies that, like NASSCO down in San Diego that build tankers in the United States. But they’re not very many of them. And so some Congress people have been looking at options to expand that number of ships by making all egg oil exports have to be on us flagged and U.S. built ships
Tom Temin: And with respect to MARAD, which, as you mentioned, has its 40 or so mostly old ships. When something comes up in national security and they’re needed, does the country go to the married ships first and then to the commercial providers?
Bryan Clark: So they go to the commercial providers first because they’re probably the most ready and available and the most flexibly used. You can get one or two ships out of the commercial fleet if you need them. Now for a major mobilization, they’ll go to the commercial fleet first, and then we’ll go to the government owned ships, which take usually 5 to 15 days to mobilize.
Tom Temin: Why is that? Because they’re just sitting there most of the time?
Bryan Clark: Right, they’re inactive and so they don’t have crews assigned to them normally, and they’re just sort of maintained in a ready status. So you’ve got a caretaker crew. They have to get mariners that are basically off duty mariners from the rest of the merchant fleet to come on duty joined the MARAD force, and then they take these ships to sea, so that usually takes a couple of weeks at least to do. Last year they did a major activation exercise to evaluate the ability of the fleet to do this. They were only able to get about 60% of the ships that were supposed to be called up able to get underway in time.
Tom Temin: Sort of like the floating F-22s or something,
Bryan Clark: Right. So the readiness of that fleet is really in question. And the MARD administrator Admiral Buzby has made this clear, they do have problems, and there it’s mostly due to age.
Tom Temin: Does the study find that they should recapitalize MARAD so that there are new ships that sit around? Or should there be no MARAD ships and simply somehow encourage through tax benefits and assigned work the commercial fleet and MARAD would just simply be there as an agent for dragooning that fleet when the need arises.
Bryan Clark: Yeah, exactly. So what we found is that there is about, of the 60 or so ships that our government owned that provide sea lift, only about 15 or 20 or specialized ships that are not available on the commercial market. So government would have to build some number of government built ships to support those specialized needs. Ships that have cranes on them, that support tanking of special materials like fuels that you’re not going to be able to put into commercial tankers, some other special classes of ships. The rest of them, though, could be chartered from the commercial market and maintained in a ready status by a commercial provider and then just called up by the government when they needed to. It would save a lot of money and that the government wouldn’t own the ships and have the risk of having to maintain them for decades as they deteriorate. And it also allows you to be more flexible in terms of how much you really mobilize or how much of a reserve fleet you maintain, because it’s up to you to decide how much to charter and maintain under that readiness condition.
Tom Temin: And that sounds like it would be something of a political push uphill because when Congress hears leasing back something that somebody else owns for long periods of time, they tend to get their ears pricked up,
Bryan Clark: Right. I mean, there’s a desire on the part of Congress to get the shipbuilding industry more business. So there’s a desire to buy ships and have the government own them. But that model we’ve seen is not really worked very well, because it doesn’t give you any flexibility because you own the ships now and you’re stuck with that maintenance cost. And then also, there’s a lot of upfront costs cause these ships cost hundreds of millions of dollars apiece because they’re large roll on roll off ships, large cargo ships. They’re not inexpensive vessels. So you’re you’re looking a significant investment upfront, and then some downside risk as you go along.
Tom Temin: And finally, one of the findings of the study is that China is a growing threat to American maritime superiority and national security. We know what they’re doing in the South China Sea and challenging the Navy, but how is China challenging the maritime industry?
Bryan Clark: So China is taking this very comprehensive approach to trying to gain basically a foothold and then control over the maritime industry worldwide. So they’ve invested with the one belt one road initiative in ports overseas to gain control of ports around the Indian Ocean and also ports in Australia, and try to get control of ports in the United States so that they can manage those ports and then may get control of them in some future conflict. They’re the largest owner of shipping in the world right now. The Chinese companies are, most of them are state owned enterprises, so in effect the government owns them. And they’ve crowded out European and U.S. carriers and a lot of lines of business. So, for example, right now float on float off ships, which is the kinds of ships we used to to bring the coal back from being attacked over in Yemen, floats the entire ship onto this thing, and it carries it back. Those ships are almost entirely owned by the Chinese right now, so that the Chinese fleet is able to, because they’ve been subsidizing it with government investment, and they’ve been buying ships with government money to go put into the commercial service, they’d be able to crowd out other providers that are mostly European into some degree American
Tom Temin: Lots to think about.
Bryan Clark: Yes.
Tom Temin: Bryan Clark is non-resident senior fellow at the Center for Strategic and Budgetary Assessments. Thanks so much for joining me.
Bryan Clark: Thank you Tom. It was great.