A New Maritime Policy Agenda
In 1890, legendary naval strategist Alfred Thayer Mahan wrote, “Whoever rules the waves rules the world.” That axiom remains true today.
Today, between 80 and 90 percent of all goods traded worldwide are moved by sea. U.S. naval power remains a core tenet of not only U.S. foreign policy but also maritime security. Indeed, it is difficult to overstate the importance of seapower to economic strength and national security.
Yet, despite this reality on a planet that is over 70 percent water, the U.S. has, in recent years, failed to invest in the state capacity and regulatory structures to ensure continuous and stable maritime access. As the COVID-19 pandemic showed, a robust, resilient shipping industry is essential to maintaining supply chains and access to ordinary and critical goods. Yet even today, years after the pandemic, the United States’ merchant fleet is made up of less than 200 vessels, and the country is reliant on the more than 43,000 boats operated by other countries.
In two new white papers published today by the Vanderbilt Policy Accelerator, Dr. Mary Bridges and Daniel Zhao tackle two of the most important aspects of revitalizing maritime shipping: domestic shipbuilding and the regulation of maritime shipping exchanges. Together, these two papers chart a bold new course for American maritime power and resilience.
In her new paper, Liberty Yards: The Case for Public Shipbuilding, Dr. Mary Bridges focuses on the sorry state of U.S. domestic shipbuilding capacity. U.S. commercial shipbuilding declined steadily following the end of federal subsidies in the 1980s. While domestic policies faltered, foreign competition surged. Shipyards in Asia—particularly China, South Korea, and Japan—now claim the lion’s share of the global market. Today, they produce more than 90 percent of the world’s ships. Indeed, American shipyards currently build less than one tenth of one percent of total global commercial capacity.
The most popular proposals for addressing this shortage rely on some combination of subsidies and calls for greater involvement of private equity. Indeed, the proposed SHIPS Act reflects this instinct: it strengthens incentives, broadens grant programs, and aims to draw private capital back into the sector through a clearer demand signal.
But even an improved incentive framework will not be enough to overcome the structural constraints that have hollowed out U.S. shipbuilding—limited scale, uneven productivity, a shrinking workforce, and an industrial base that no longer has the capacity to respond to strategic needs. The other fixes often proposed in Washington face similar limits: modernizing the Jones Act cannot substitute for competitive production; leaning on naval shipyards strains facilities already behind on repairs; and friend-shoring can address shortfalls in critical sectors but leaves the United States dependent on overseas yards for critical tonnage.
Dr. Bridges’ paper argues that meeting today’s challenges requires a different foundation: public shipyards paired with durable institutional scaffolding that can rebuild commercial capacity at meaningful scale. This public production ecosystem would be comprised of three elements:
Four publicly owned Liberty Yards, shipyards with a regional specialization that have the scale, focus, and staying power to match global competitors.
A Maritime Infrastructure Bank that would use existing financing models to make vessel acquisition and fleet upgrades financially attainable for both public and private operators.
A Maritime Workforce Reserve to transform modern shipyard work into a compelling, twenty-first century career, building on existing shipyard workforces.
Beyond a resilient domestic production capacity, U.S. shippers need stable, reliable access to the carrier market. Shipping exchanges have recently emerged as a viable way to connect large and small shippers to competitively priced carrier services. In his new paper, Regulation of Shipping Exchanges, Daniel Zhao offers an important analysis of the regulatory framework necessary to ensure that these exchanges serve as neutral marketplaces that serve all shippers.
Shipping exchanges—digital platforms that match shippers with vessel capacity in real-time—are quickly becoming a key player in maritime transport. In an industry marked by volatile prices and frequent disruptions, these digital platforms promise to increase price transparency, improve contract performance, and streamline booking processes. Yet, as shipping exchanges grow in adoption, they may also become powerful gatekeepers that can dictate who can access global shipping networks, on what terms, and at what prices. During the COVID-19 pandemic, for example, farmers and manufacturers saw how market power among carriers could lead to higher costs and worse service for American exporters. For these shippers, shipping exchanges have the potential to further make or break their ability to access global markets.
The Ocean Shipping Reform Act of 2022 (OSRA 2022), passed by Congress in the wake of the COVID-19 pandemic, requires the Federal Maritime Commission (FMC) to set clear rules of the road that facilitate the development and adoption of shipping exchanges. In his paper, Zhao sets forth a regulatory framework for shipping exchanges that promotes price transparency for shippers, encourages carriers to compete to offer the best rates and service, and protects against harmful market manipulation. It has five key components:
Nondiscrimination and equal access requirements to ensure that exchanges provide fair access to both shippers and carriers, regardless of their size or any favored status
Price transparency requirements for exchanges and shipping indexes to provide market participants with up-to-date pricing information and maximize exchanges’ potential for improving price discovery
Requirements prohibiting common ownership and other conflicts of interest to ensure that all shippers and carriers play on the same level playing field
Requirements prohibiting exclusionary conduct that could entrench certain exchanges over other exchanges, creating dominant gatekeepers that dictate market access and depriving shippers and carriers of the benefits of competition between exchanges
Market manipulation mitigation requirements to promote market integrity and ensure that exchanges provide reliable pricing for market participants
A strong U.S. shipping exchange is necessary to ensure shippers have access to carrier capacity, but without clear regulation, U.S. shippers will continue to fall to the whim of a volatile and concentrated market.
Together, these papers highlight different aspects of the same vulnerability: the United States has ceded control of the maritime infrastructure that underwrites modern seapower, and with it, U.S. prosperity and security. Unless the U.S. restores domestic shipbuilding capacity and establishes fair, transparent rules for access to carrier markets, it will remain dependent on foreign shipyards and unregulated platforms, as incremental quick fixes slowly take on water.