Shipbuilding: Colin Grabow of the Cato Institute Brings the Free-Market Viewpoint

The conversation opens with Colin Grabow outlining the Jones Act, the 1920 Merchant Marine provision that mandates U.S.-flagged, owned, built, and crewed vessels for domestic water transport. Grabow argues that the act functions as a self‑imposed embargo, inflating costs without delivering clear security benefits. From a free‑market perspective, he contends that commercial shipowners should be free to purchase the cheapest suitable ships, even from foreign yards, unless a compelling national‑security case exists. This stance challenges the traditional justification that domestic shipbuilding is essential for national defense, suggesting that strategic procurement could balance cost and capability.

Historically, the United States was a leading shipbuilder in the early‑to‑mid‑20th century, but its share has collapsed to well under one percent of global output. Grabow attributes the decline to a lack of scale, specialization, and an integrated supply chain that rivals Asian clusters. Chinese yards launch roughly 800 vessels annually, while U.S. yards average single‑digit builds, forcing American shipbuilders to import engines, propellers, and steel at premium prices. Without a captive domestic market, economies of scale disappear, making investments in modern gantry cranes or advanced welding technology financially untenable.

Government contracts now sustain about 80 % of U.S. shipyard revenue, effectively backstopping the industry but also crowding out commercial opportunities. Grabow recommends removing counterproductive regulations, streamlining environmental reviews, and eliminating steel tariffs that double domestic input costs. By exposing shipyards to genuine competition and allowing them to source affordable materials, the United States could rebuild a viable commercial base while preserving a strategic defense capability. Targeted subsidies for critical defense vessels, rather than blanket protectionism, would align incentives, lower procurement costs, and restore a modest but resilient shipbuilding sector capable of meeting both market and security needs.