Save our Shipyards
Two major shipbuilders (Northrop Grumman owns two first tier yards in the Gulf Coast and one in Newport News Virginia; and Aker Philadelphia Shipyard) are issuing layoff notices that will eventually hit as many as 12,000 or 13,000 workers. The ultimate job casualties will be ten times that total. Once they are destroyed, these shipbuilding jobs will be gone forever.
For every direct shipyard job there are three additional jobs in the shipbuilding supply chain nationally that depend on that shipbuilding activity as a customer; and seven more in the immediate community where the shipyard operates— the vendors, suppliers, contractors, shopkeepers, grocery stores, bars, barbershops and gas stations that will evaporate when the shipyard jobs go away.
This is the web of economic prosperity that shipyards create and that closing shipyards destroys. In New Orleans—when 5,000 shipyard jobs disappear, then the support network collapses—the loss is 35,000 jobs. Businesses in 43 other states provide materials, equipment and supplies to Avondale’s shipbuilding business—subtract another 15,000 jobs. Suddenly, the decision to padlock a business that supports 5,000 good jobs expands to a loss of 50,000 jobs. America in 2010 can’t afford that.
As the threat to shut down Avondale evolves America gets another lesson in just how fragile our national economy has become. Overnight after Northrop Grumman issued layoff notices last month, real estate prices in the immediate area dropped 40 percent—and they were already at rock bottom!
Shutting down Northrop Grumman’s two shipyards on the Gulf Coast represents a loss of $12.6 billion dollars a year to the regional economy. To put it into context, the combined value of the entire Gulf seafood and tourism industries is $4 billion dollars a year.
When the auto industry was about to implode and take 3 million jobs into oblivion, the federal government stepped in to rescue two of the big three American automakers—to the tune of $87 billion. Now that all the bills are in and all three American car makers appear to be healthy and competitive once again, even President Obama’s harshest critics have been forced to begrudgingly agree that the rescue was worth the cost.
Unlike the auto industry, in the case of shipbuilding the federal government actually created the problem that it must now solve. Taxpayer costs involved in buying a little more breathing time for the shipbuilding industry would be negligible by comparison. In fact, the cost of doing nothing is huge.
Washington has neglected the shipbuilding industry for decades while our global competitors have nurtured and subsidized their domestic shipbuilding activity both because it is a profitable business and one that ensures a strategic military industrial base that is good for their national defense.
The proof of the economic value of shipbuilding is in the statistics: China, Korea and India have aggressively pursued shipbuilding as a cash cow and a strategic industry anchoring and nurturing basic steel and infrastructure initiatives. Korea currently leads the world in shipbuilding with 50 percent of world output; China is a close second. The U.S. accounts for less than 1 percent. China expects to eclipse South Korea to become the world’s leading shipbuilder in the next few years. Those nations recognize the employment bonanza that a vigorous shipbuilding industry provides. More importantly, they understand that no nation can be a world power if it does not have a shipbuilding industry.
By contrast, Congress and the White House have failed to fund loan guarantee programs that would help owners and operators finance new ship construction—despite the growing need for double-hulled tankers to replace aging tankers that carry environmentally volatile cargoes such as oil. Unlike direct appropriations, loan guarantees are typically a bookkeeping transaction reserving funds to be used only if a shipbuilding loan defaults.
Although the Jones Act is perennially attacked, it remains in effect. Even under administrations that are empathetic to the idea of sustaining U.S. built vessels, crewed by U.S. sailors we don’t see aggressive application of the law—such as a requirement that offshore oil rigs and service vessels inside the 10-mile coastal limit should also be covered by the Jones Act.
For years, our friends in Congress have told us, “don’t worry, we’ve got laws on the books to require the Department of Defense to buy only American-made ships.” Well, how’s that working out? In 2008 alone there were 67,000 waivers from Buy American restriction requested by DOD and granted by Congress. Contrary to the intent of the law, there are at least 11 foreign built vessels operated by the strategic Military Sealift Command under five year leases that are routinely renewed without question.
When the Congressional Research Service broached this topic with the DOD, they got this circular argument: “Unfortunately, very few commercial ships with high military utility have been constructed in U.S. shipyards in the past 20 years,” as if these ships are ordered and built by some unseen hand in the market. The DOD explanation argues that imposing stricter limits on leasing ships for this purpose would make leasing more expensive. Yet, DOD goes on to say, it has a plan in effect to greatly reduce long term leasing by 2012. If that’s true, why haven’t we seen any indication that the Navy or DOD have plans to put a few such ships in the order books?
If Congress and/or the Administration fail to act, the U.S. shipbuilding industry will shrink to just three or four first tier yards over the next year. Where will the U.S. Navy go to find efficient shipbuilding capacity and competitive pricing? Will America be forced to rely on Australia, Europe, South America or Asia to build vessels for our Navy? That may be our only alternative.
For lawmakers concerned about jobs, for those concerned about America’s defense industrial base, for those concerned about the economic health of America’s Gulf region—it’s the same answer: act now to sustain the two imperiled Gulf Coast shipyards.
Page Last Updated: Oct 03, 2012 (12:12:41)