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**JANUARY 17, 2025**
On the Prospect website
The Essential Incoherence of the End of the Biden Presidency [link removed]
One reason the president goes out with low approval ratings is that his agenda was internally contradictory. BY DAVID DAYEN
Fire Sale [link removed]
Luxury real estate brokers want Los Angeles to cancel a mansion tax for damaged homes so they can feed off them. BY LUKE GOLDSTEIN & MAUREEN TKACIK
After Building Service Workers Mobilize, FTC Stops Secret No-Hire Agreements [link removed]
A key tool that enables contractors to trap building services personnel in low-wage work has been upended by a bipartisan majority at the Federal Trade Commission. BY SARAH LAZARE
Kuttner on TAP
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**** How China Dominates Global Shipbuilding
And the strategic challenge facing the always-conflicted Donald Trump
China's massive subsidy program to take over the world's shipbuilding industry is laid out in great detail, in a new report by the U.S. Trade Representative. The report was written in response to a formal complaint filed by five unions under Section 301 of the Trade Act. Now it's up to President-elect Trump to decide what kinds of sanctions to apply.
The unions, led by the Steelworkers, include the International Association of Machinists and Aerospace Workers, the International Brotherhood of Boilermakers, and the International Brotherhood of Electrical Workers-all active in shipbuilding.
The USTR report explicitly finds China's policies "actionable" under Section 301, meaning that the president can choose from a large menu of possible retaliations. It depicts, in one industry, the China challenge writ large-and the folly of the U.S. free-trade policy pursued since Reagan, with the complicity of Democratic presidents until Biden.
China extensively subsidizes its domestic industry, and restricts competition from non-Chinese shipbuilders. This "displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition and creates dependencies on the PRC, increasing risk and reducing supply chain resilience," the report found.
The numbers are staggering. The U.S. commercial shipbuilding sector has fallen to less than five ships a year, down from 70 in 1975, while China now builds 1,700 ships annually.
The result, the USTR investigation found, is that U.S. international trade is "carried out on vessels made in China, financed by state-owned Chinese institutions, owned by Chinese shipping companies, and reliant on a global maritime and logistics infrastructure increasingly dominated by China."
Until it was killed by the Reagan administration in 1981, the U.S. had a robust program of promoting and subsidizing the domestic shipbuilding industry via the Maritime Administration at the Commerce Department. The program dates to 1936, and came in very handy during World War II, when a strong U.S. Merchant Marine helped win the war. As recently as 1975, for example [link removed], 25 new U.S.-built oceangoing merchant ships were delivered and 83 more were on order.
As a national-security problem, the lost domestic industry has alarmed even conservative libertarians. In June 2021,
**National Review** published a cover piece calling for the revival of an industrial policy for shipbuilding [link removed]. It concluded:
Commercial ships could carry merchant trade, but they could also carry logistical supplies for the military in wartime. Shipyards could build new ships for civilian fleets as well as the Navy, but they could also repair ships damaged in wartime operations. Shipyards also drove other portions of the economy. For every shipyard blue-collar job, five to seven well-paying positions were created in upstream parts and component suppliers.
Even the hyper-libertarian Cato Institute published a post endorsing much of the National Review piece [link removed].
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As always, Donald Trump is conflicted. On the one hand, he has positioned himself as an ultra China hawk. On the other hand, he's always on the lookout for a deal, especially one that could enrich him personally, as his flips on TikTok show. His billionaire allies, such as Elon Musk and much of Wall Street, are eager to keep doing business in China.
This ambivalence is further complicated by Trump's commitment to across-the-board tariffs, even against friendly countries whose industries play largely by market rules. That tactic is dubious in its own right and could water down the richly deserved targeted retaliation against China's predatory policies.
There are a variety of measures that the president could take, and they perfectly illustrate the connection between trade policy, industrial policy, and the health of the American workforce.
For starters, the U.S. could charge a dockage fee on Chinese-built ships. The fee would be a deterrent against shippers buying ships produced by China at heavily subsidized low prices. As the unions' petition to USTR suggested, the revenue from the dockage fee would go into a shipyard commercial revitalization fund-so, like the federal Highway Fund Trust, it would be self-funded.
There are also demand-side strategies. Bipartisan legislation introduced by Republican Sen. Roger Wicker of Mississippi (once a center of U.S. shipbuilding) and Democratic Rep. John Garamendi of California would require a percentage of energy shipments (LNG, other petroleum products) to be transported on U.S.-built and -manned ships. A variant of this could be done via executive order.
Trump might be tempted just to retaliate with higher and more targeted tariffs, but tariffs are a blunt instrument and would be less effective than measures explicitly connected to the industrial-policy goal of reviving U.S. shipbuilding. And, as USTR's report explains, shipyard jobs are at the very high end of U.S. manufacturing wages. Some workers earn upwards of $200,000 a year.
"The incoming Trump administration needs to restore America's maritime power with an integrated set of actions," said Michael Wessel, who coordinated the 301 case for the Steelworker-led union coalition.
In his last weeks in office, President Biden has added more sanctions against China. They include new rules [link removed] to restrict Chinese access to semiconductors and new penalties [link removed] on companies in mining, real estate, and solar energy, as well as sanctions against forced labor and deceptive transshipping via third countries to disguise Chinese origin.
In response, China has threatened to escalate its own trade weapons, taking advantage of U.S. supply chain vulnerabilities [link removed] and dependence on China for critical minerals. In a sense, the U.S. has almost waited too long to take a hard line against Chinese predatory trade and industrial policies. China now has substantial leverage over us.
As the shipbuilding story suggests, U.S. countermoves need to be thoughtful, carefully crafted, and strategic-not exactly adjectives associated with the impulsive and blunderbuss Trump.
~ ROBERT KUTTNER
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