For almost 50 years, beginning in the late 1930s, our government actually helped get U.S.-flag merchant ships built, utilizing the Construction Differential Subsidy (CDS) program. The CDS covered up to 50 percent of the additional cost to build ships in a U.S. shipyard instead of a foreign yard. The money was paid by the U.S. Maritime Administration (MarAd) directly to shipyards and/or shipowners, and was only allowed to go toward the construction of U.S.-flag ships in the international trade. Between the end of World War II and the early 1980s, about 250 U.S.-flag tankers, containerships and break-bulk cargo vessels were built in the United States using CDS funds, with tens of thousands of citizens owing their livelihoods to this government program.
I have known of many ships in my seagoing career that were originally built using construction subsidies, and even sailed on a few as well. Once I caught an asphalt tanker in Morehead City, N.C., filling in for a young third mate so he could be home for the holidays. I had a good time on my 60-day relief as we visited ports such as Savannah, Ga., Rio Haina in the Dominican Republic, and the island of Curacao in the Lesser Antilles, where I paid off the ship. Not long after joining the vessel, I found out that it was built with CDS funds and launched as Falcon Champion in 1984, the last commercial ship produced at the famous Bath Iron Works on the Kennebec River in Bath, Maine. Another ship built with CDS funds that is still operating today is the fish processing vessel Ocean Phoenix, which originally entered sea service as the break-bulk freighter Oregon Mail and flew the American President Lines house flag before it began its latest incarnation. Mark, a longtime captain who was a year behind me at Cal Maritime, once served as the master of the 680-foot Coast Guard-inspected fish factory ship.
Very early in my career, I ran a crew boat for a large West Coast towing company in Southern California. One evening, I dropped off a tankerman on a barge that was pumping bunkers to a huge crude oil tanker, ARCO Independence. A number of my Cal Maritime schoolmates ultimately worked on that 1,100-foot ship, which was originally built with CDS funds at the Bethlehem Steel shipyard at Sparrows Point, Md., in 1977 as the tanker American Independence. As mariners say, the ship is now “razor blades” after being scrapped in 2010.
Our government established the CDS program to help keep the U.S.-flag commercial fleet viable, and to level the playing field by counteracting the financial support many other countries provide for their shipbuilding industries. In the 1970s and 1980s, Japan, South Korea and China rose to become shipbuilding powers by paying huge government subsidies to their shipyards. In contrast, the Reagan administration killed the CDS program, a move that immediately placed U.S. shipyards at a terrible disadvantage because the foreign yards competing against them were still receiving financial support from their respective governments. With no CDS payments from MarAd, the American shipbuilding industry was gutted. Nearly 50 percent of the private shipyards in the United States closed in the 1980s, with tens of thousands of U.S. citizens losing their jobs as a result.
When the CDS was eliminated, U.S.-flag shipping companies that had been ordering about 20 new vessels a year for the foreign trade from American shipyards abruptly stopped doing so. With no financial incentive to build those commercial ships in the United States anymore, a number of shipping companies began replacing their U.S.-flag international fleets with foreign-built and foreign-crewed vessels. Other companies continued operating their CDS-constructed ships until they reached the end of their service life, and then got out of the market altogether after either scrapping the vessels or selling them — often to foreign vessel operators. From 1982, the year the CDS was defunded, until 2016, more than 100 U.S.-flag unlimited tonnage oceangoing ships in the international trade were lost, a nearly 60 percent reduction in the fleet that resulted in thousands of American merchant marine jobs being eliminated.
In hindsight, it is clear that President Reagan’s egregious decision to do away with ship construction subsidies not only hurt our industry and cut jobs, but in my opinion it also put our country at risk. Today, foreigners control the movement of 99 percent of our seaborne international trade. We are now at the mercy of companies operating ships registered in countries that may hate us and seek to do us harm, manned by mariners who have no allegiance to the United States or commitment to our maritime security, economic security or national security. If the current rhetoric about tariffs and embargoes becomes more strident and we get into an extensive trade war, we may soon find out how long it takes for the store shelves to empty if the foreign-flag ships that now control our economic destiny decide to stop shipping here altogether.
Our government has not offered any monetary subsidies for the construction of new U.S.-flag commercial vessels for over 37 years, yet it continues to subsidize the oil industry to the tune of $4 billion a year. In fact, in 2018 the Trump administration proposed $10 billion in subsidies for the coal and nuclear industries, but not one penny toward subsidizing the construction of any new U.S.-registered commercial vessels.
If we ever hope to reclaim our economic dominance and get out from under the thumb of foreign control, then our government needs to invest in our shipbuilding and maritime industries. Personally, I would like to see a return to the days when MarAd construction subsidies helped get 20 new U.S.-flag oceangoing vessels for the international trade built in American shipyards each year. Failing that, everything from tax breaks and direct cash subsidies to interest-free ship construction loans and vessel-specific financial incentives should be considered. It’s time to make America’s shipyards and merchant marine great again.
Till next time, I wish you all smooth sailin.’
Kelly Sweeney holds a license of master (oceans, any gross tons), and has held a master of towing vessels license (oceans) as well. He sails on a variety of commercial vessels and lives on an island near Seattle. You can contact him at firstname.lastname@example.org.