US to levy fees on China-linked ships, push allies to do likewise, draft executive order says

Introduction to the Executive Order

The United States is considering a significant shift in its maritime policy with a proposed executive order aimed at imposing fees on certain ships docking at US ports. This move targets any vessel part of a fleet that includes Chinese-built or Chinese-flagged ships. The draft, dated February 27, 2023, and reviewed by Reuters in early March, outlines a strategy to revitalize the domestic shipbuilding industry while challenging China’s growing dominance in global shipping. The initiative reflects a bipartisan concern among US lawmakers about China’s increasing influence over the seas and the decline in US naval readiness. This policy is part of a broader effort to strengthen American industries and counterbalance China’s expanding economic and military presence.

The Drive to Revitalize US Shipbuilding

The US shipbuilding industry, once a powerhouse in the mid-20th century, has significantly declined since its peak in the 1970s. Today, it contributes only a small fraction to global output, raising concerns about national security and economic competitiveness. The proposed executive order aims to reverse this trend by penalizing fleets with Chinese connections, encouraging companies to invest in American shipyards. This strategy could lead to job creation and technological advancements in the sector. However, critics argue that such protectionist measures might provoke trade retaliations and increase costs for American consumers. The policy’s effectiveness hinges on its ability to balance national interests with global trade dynamics.

The Rise of China in Global Shipping

China’s ascent in the global shipping industry is remarkable, rising from a mere 5% of global merchant vessel cargo capacity in 1999 to over 50% today. This growth has come at the expense of competitors like Japan and South Korea, as China leverages its large workforce, efficient production, and state support to dominate the market. This dominance not only boosts China’s economy but also enhances its geopolitical influence, a concern for the US and its allies. The data from the Center for Strategic and International Studies underscores China’s strategic position, prompting the US to act decisively to protect its interests.

Reactions and Retaliation

The proposed policy is likely to face significant backlash from China and other trading partners. Companies relying on Chinese ships might oppose the fees, and China could retaliate through trade restrictions or diplomatic measures. The US plans to urge allies to adopt similar policies, potentially straining international relations. However, the global shipping industry’s interconnected nature complicates such efforts, as unilateral actions by the US could disrupt supply chains and provoke broader trade conflicts. The effectiveness of this strategy depends on the willingness of other nations to support US initiatives without triggering economic instability.

Potential Implications for the Global Economy

Implications of this policy extend beyond the shipping industry, affecting global trade and consumer prices. Increased fees on certain ships could raise transportation costs, potentially passed on to consumers. This might lead to inflation and slower economic growth, particularly if China retaliates. Additionally, aligning with US policies could strain the relationships of other countries with China, reshaping global trade alliances. The long-term effects remain uncertain, but the initiative signals a significant shift in US strategy to counter China’s global influence.

Conclusion

The proposed executive order reflects the US’s strategic move to bolster its shipbuilding industry and counter China’s dominance. While the policy aims to protect American interests, its implementation poses risks of trade wars and economic instability. The success of this initiative depends on balancing national security with global trade dynamics, ensuring that measures do not harm consumers or provoke unnecessary conflicts. As the situation unfolds, the world watches closely to see how this policy will shape the future of global shipping and trade.