Why China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance is Important to the United States

By Salvatore R. Mercogliano, Ph.D., What’s Going on With Shipping

As a historian and analyst of American maritime policy, the actions by China do demonstrate an unreasonable targeting of the maritime, logistics, shipbuilding sectors, and can serve to dominate or restrict U.S. commerce.  

This situation is not a unique one, as the United States encountered a similar situation over a century ago when the First World War broke out in 1914.  At that time, the U.S. merchant marine only accounted for 8 percent of the world fleet and most American imports and exports were shipped on foreign flag ships, particularly those of the British merchant marine.  American ships only transported 11 percent.  At the time, the British merchant marine held a similar dominant position in shipping that China holds today.  

With the declaration of war, ships of the British and German merchant fleets were withdrawn from service and American exports. The United States’ largest export product – cotton – accumulated on the docks of U.S. ports.  The New York Stock Exchange closed, and the nation experienced an economic recession.  Fortunately, for the United States, it had a large coastal merchant marine and a domestic maritime industry to fall back upon.  In 1916, the Shipping Act aimed to jump start a renewed shipping program by creating the U.S. Shipping Board – the forerunner of the modern Federal Maritime Commission and the Maritime Administration.  The concern was the dominance and monopoly that foreign shipping lines were exerting against American commerce.  

These efforts, along with the creation of the Emergency Fleet Corporation in 1917, led to a massive shipbuilding program and the United States challenging the British for maritime dominance in trade with new oil-fueled cargo ships that could range the oceans. To ensure that the wartime fleet was put into international and domestic trade, Congress passed the Merchant Marine Act of 1920.  Known as the Jones Act, it provided for federal oversight of international shipping rates, efforts to promote shipbuilding, protection for American mariners, free competition of American ships in international trade, and to protect the coastal trade, known as cabotage.  This effort, along with Merchant Marine Acts in 1928 and 1936 safeguarded that the United States was prepared for the Second World War and capable of shipping the Arsenal of Democracy from the home front to the war front.  

In the period after the Second World War, the United States decided to back away from its commercial shipping dominance and ensure the freedom of the seas, by using its Navy to protect them.  This allowed for the development of a new system of ocean transportation that lowered costs and guaranteed that all nations could benefit from global trade. 

The Ship Sales Act of 1946 sold 1,113 ships to repopulate the merchant marines of our allies.  The Marshal Plan of 1948 provided loans to rebuild shipyards in Europe and Japan and incorporate the concepts of Henry J. Kaiser and modular ship construction.  The concept of open registries in Panama, Liberia and the Marshall Islands permitted for lower shipping costs by allowing ships to be built around the world and hire crews from nations such as the Philippines to make ocean transportation cheaper.  

The United States pioneered new methods of transportation afloat, such as Malcolm McLean’s containerization, Daniel Ludwig’s supertanker, and Ted Arison’s cruise ship.  What the world witnessed was a vast reduction in ocean shipping costs and a rise in tonnage being shipped.  From half a billion tons in 1950 to six billion tons in 2000.  

At the same time, the United States allowed its merchant marine to remain status quo, while global ocean trade grew exponentially.  But it was the decision in the 1980s to end the subsidies for construction and operation of ships in the international trade, along with decision to build a 600-ship Navy and therefore displace commercial ships in American shipyards, that marked the true decline in American shipping.  Instead of investing in America’s maritime infrastructure the United States government decided there was only room for one sector – commercial or military – and they chose the latter.  With the end of the Cold War, the 600 ship Navy went down to less than 300 and the nation’s shipyards could only rely on a small anemic commercial sector to support the closed cabotage trade.  

It was at that moment that China made its appearance onto the world’s oceans.  It coincided with a doubling of the world’s maritime trade from six billion tons in 2000 to twelve billion tons in 2024.  China, in 2003 expressed their desire to become a strong maritime, shipbuilding, and shipping nation. A decade later, General Secretary Xi Jinping included a Maritime Silk Road in his Belt and Road Initiative. 

While the United States made a conscious decision to seed its position in the maritime sector it did so with the understanding that its trade would not be dominated by any single nation or group and allow free trade to continue.  Since 2000, the maritime industry has experienced consolidation in nearly all areas.  The number of shipyards has dropped 60 percent since 2007.  The number of ships that can be built annually has fallen from 2,000 to 1,200.  The top ten container firms that controlled fifty percent of the container capacity afloat in 2000 now control eighty-five percent.  The United Nations reported that China built fifty-one percent of all commercial ships in 2024, up from five percent in 1999 and are on track to have seventy-five percent of all orders in Chinese yards.  The Chinese Overseas Shipping Corporation, a state-controlled entity, is now the larges shipping line in the world.  China is also dominant in sectors of container construction, container leasing, ship repair, and growing in the number of Chinese seafarers in the world’s fleet, along with a massive presence in ports.  

In the years before the First World War, the United States identified the dominance of Great Britain and Germany in shipping.  When war was declared, the U.S. initiated actions to protect its merchant marine and maritime sector.  Before the Second World War, realizing that the nation started too late in the previous war, Congress passed the Merchant Marine Act of 1936 to get work back into the shipyards and have a merchant marine that was number two in the world when the United States entered the conflict in 1941.  It also prepared the industry for when the Two-Ocean Navy Act was passed in 1940.  

While there is no indication that the United States and China are on a direct path to conflict, the failure to adequately have a commercial merchant marine and maritime industrial base would be a major handicap should a great power confrontation emerge in the Pacific.   It appears that Chinese efforts to dominate these sectors has the goal to give China superiority and dominance in key areas of oceanic trade, shipbuilding, and shipping at the expense of the United States, Korea, Japan, and other European shipbuilding nations.  

Note: This editorial was submitted as a comment to the USTR’s proposed actions in the Section 301 investigation on China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance. A public hearing on the proposed actions is scheduled for Monday, March 24, 2025.

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