Combatting Chinese Maritime Dominance with the Trade Act
The MOC
By
Luke Lorenz
January 30, 2025
The Office of the United States Trade Representative (USTR) has released the results of an extensive investigation into Chinese practices related to their shipbuilding industry. The report states unequivocally that the People’s Republic of China (PRC) has deliberately and maliciously pursued policies to bolster its own shipbuilding industry and harm the shipbuilding industries of other nations without regard to the rules and regulations of free trade and fair business practices. In short, the PRC sought nothing less than dominance in the shipbuilding sector in furtherance of its global geopolitical ambitions.
“Today, the U.S. ranks 19th in the world in commercial shipbuilding, and we build less than 5 ships each year, while the PRC is building more than 1,700 ships. In 1975, the United States ranked number one, and we were building more than 70 ships a year. Beijing’s targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks, and is the greatest barrier to revitalization of U.S. industries, as well as the communities that rely on them. These findings under Section 301 set the stage for urgent action to invest in America and strengthen our supply chains.”
The efforts of the PRC to target this particular sector are not coincidental. Dominance of global logistics, shipping, and supply chains provide China a critical leverage over other nations. With Beijing’s extensive and increasing control over all aspects of its “private sector”, there can be no mistake: the actions of China’s shipbuilders and suppliers are centrally directed in pursuit of the state’s national security aims.
As a result of these conditions, a coalition of U.S. industries filed a petition with the USTR on March 12, 2024. This petition sought an investigation into the actions and policies of the PRC related to the shipbuilding industrial base and the harm that China’s practices have inflicted on American shipbuilders. This investigation was pursued under Section 301 of the Trade Act of 1974 which allows the United States to respond to “unjustifiable, unreasonable, or discriminatory foreign government acts, policies, and practices that burden or restrict U.S. commerce”.
The results of the investigation were staggering, though not surprising. They found that Beijing deliberately targeted the shipbuilding sector for nearly three decades and has become increasingly aggressive in its efforts to dominate shipbuilding, maritime commerce, and logistics. It is noteworthy that this effort began shortly after the end of the Cold War as America’s interest in its own shipbuilding capabilities rapidly diminished with the fading specter of the Soviet threat. One cannot help but notice that America gave China an opening which they rapidly and ruthlessly exploited. This does not alter the fact that China engaged in unfair practices which run counter to the agreed upon rules of fair commerce and reciprocal trade. It was these actions which allowed China to rise so quickly and directly harm American shipbuilders. But we cannot, for the sake of future policy and national security strategy, overlook the fact that America turned a blind eye to its eroding shipbuilding capacity allowing a malicious foreign actor to step in and take advantage.
And press this advantage they have. Through a conscious top-down effort, the government of the PRC has sought to make American industries—in the maritime sector and elsewhere—dependent on Chinese suppliers while artificially depressing the prices of their output through state subsidization. This brutal one-two punch has put multiple American industries on the ropes. China undercuts American manufacturers on prices through its state-backed subsidy programs, thus eliminating them as competitors and making larger U.S. industries wholly dependent on China for components and materials. According to the report, “China has set targets for shipbuilding, marine equipment, maritime engineering equipment, high-technology ships, and shipping, among others.” Chinese dominance in these industries would make America dependent on China for much of its maritime industries and commerce.
In simple terms, China has done three things: implemented a state-backed program to disrupt and dominate the global shipbuilding industry; deprive market-oriented companies and countries of the ability to compete in the shipbuilding sector; create dominance of and dependence on Chinese industries. These practices have resulted in (according to the report) harm to U.S. businesses, hindrance of investment in U.S. shipbuilding industries, restriction of competition and choice in maritime commerce, and instability in supply chains and economic security for the United States.
What actions or remedies which the United States will take to address these unfair Chinese practices remains to be seen. However, Section 301 provides the United States Trade Representative with multiple avenues for seeking recourse. These include:
“(1) impose duties or other import restrictions,
(2) withdraw or suspend trade agreement concessions, or
(3) enter into a binding agreement with the foreign government to either eliminate the conduct in question (or the burden to U.S. commerce) or compensate the United States with satisfactory trade benefits”.
In the past, the United States sought to address unfair trade practices through the World Trade Organization, but recent administrations have developed a preference for unilateral action through the use of the Section 301 law. Both President Donald Trump and President Joe Biden utilized Section 301 trade investigations as justification for protective trade practices.
While the resulting remedies from the Section 301 investigation into Chinese shipbuilding will depend on the course of action decided by the second Trump Administration, it seems unlikely that these unfair Chinese trade practices will go unanswered. This investigation could be the catalyst for a second round of Trump tariffs on China, building on the tariffs imposed by his first administration and sustained under the Biden administration. A robust domestic shipbuilding industrial base is essential to maintaining the premier status of the U.S. Navy as well as to American national defense writ large. A world in which China dominates maritime commerce is a dangerous and uncertain world. It is imperative that the United States—and our allies—fight back against decades of foul play by Beijing and correct this imbalance as soon as possible.
Luke Lorenz is the Vice President of Legislative Affairs of the Navy League of the United States
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
Center for Maritime Strategy
By Luke Lorenz
The Office of the United States Trade Representative (USTR) has released the results of an extensive investigation into Chinese practices related to their shipbuilding industry. The report states unequivocally that the People’s Republic of China (PRC) has deliberately and maliciously pursued policies to bolster its own shipbuilding industry and harm the shipbuilding industries of other nations without regard to the rules and regulations of free trade and fair business practices. In short, the PRC sought nothing less than dominance in the shipbuilding sector in furtherance of its global geopolitical ambitions.
According to former Biden Administration U.S. Trade Representative Katherine Tai:
“Today, the U.S. ranks 19th in the world in commercial shipbuilding, and we build less than 5 ships each year, while the PRC is building more than 1,700 ships. In 1975, the United States ranked number one, and we were building more than 70 ships a year. Beijing’s targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks, and is the greatest barrier to revitalization of U.S. industries, as well as the communities that rely on them. These findings under Section 301 set the stage for urgent action to invest in America and strengthen our supply chains.”
The efforts of the PRC to target this particular sector are not coincidental. Dominance of global logistics, shipping, and supply chains provide China a critical leverage over other nations. With Beijing’s extensive and increasing control over all aspects of its “private sector”, there can be no mistake: the actions of China’s shipbuilders and suppliers are centrally directed in pursuit of the state’s national security aims.
As a result of these conditions, a coalition of U.S. industries filed a petition with the USTR on March 12, 2024. This petition sought an investigation into the actions and policies of the PRC related to the shipbuilding industrial base and the harm that China’s practices have inflicted on American shipbuilders. This investigation was pursued under Section 301 of the Trade Act of 1974 which allows the United States to respond to “unjustifiable, unreasonable, or discriminatory foreign government acts, policies, and practices that burden or restrict U.S. commerce”.
The results of the investigation were staggering, though not surprising. They found that Beijing deliberately targeted the shipbuilding sector for nearly three decades and has become increasingly aggressive in its efforts to dominate shipbuilding, maritime commerce, and logistics. It is noteworthy that this effort began shortly after the end of the Cold War as America’s interest in its own shipbuilding capabilities rapidly diminished with the fading specter of the Soviet threat. One cannot help but notice that America gave China an opening which they rapidly and ruthlessly exploited. This does not alter the fact that China engaged in unfair practices which run counter to the agreed upon rules of fair commerce and reciprocal trade. It was these actions which allowed China to rise so quickly and directly harm American shipbuilders. But we cannot, for the sake of future policy and national security strategy, overlook the fact that America turned a blind eye to its eroding shipbuilding capacity allowing a malicious foreign actor to step in and take advantage.
And press this advantage they have. Through a conscious top-down effort, the government of the PRC has sought to make American industries—in the maritime sector and elsewhere—dependent on Chinese suppliers while artificially depressing the prices of their output through state subsidization. This brutal one-two punch has put multiple American industries on the ropes. China undercuts American manufacturers on prices through its state-backed subsidy programs, thus eliminating them as competitors and making larger U.S. industries wholly dependent on China for components and materials. According to the report, “China has set targets for shipbuilding, marine equipment, maritime engineering equipment, high-technology ships, and shipping, among others.” Chinese dominance in these industries would make America dependent on China for much of its maritime industries and commerce.
In simple terms, China has done three things: implemented a state-backed program to disrupt and dominate the global shipbuilding industry; deprive market-oriented companies and countries of the ability to compete in the shipbuilding sector; create dominance of and dependence on Chinese industries. These practices have resulted in (according to the report) harm to U.S. businesses, hindrance of investment in U.S. shipbuilding industries, restriction of competition and choice in maritime commerce, and instability in supply chains and economic security for the United States.
What actions or remedies which the United States will take to address these unfair Chinese practices remains to be seen. However, Section 301 provides the United States Trade Representative with multiple avenues for seeking recourse. These include:
“(1) impose duties or other import restrictions,
(2) withdraw or suspend trade agreement concessions, or
(3) enter into a binding agreement with the foreign government to either eliminate the conduct in question (or the burden to U.S. commerce) or compensate the United States with satisfactory trade benefits”.
In the past, the United States sought to address unfair trade practices through the World Trade Organization, but recent administrations have developed a preference for unilateral action through the use of the Section 301 law. Both President Donald Trump and President Joe Biden utilized Section 301 trade investigations as justification for protective trade practices.
While the resulting remedies from the Section 301 investigation into Chinese shipbuilding will depend on the course of action decided by the second Trump Administration, it seems unlikely that these unfair Chinese trade practices will go unanswered. This investigation could be the catalyst for a second round of Trump tariffs on China, building on the tariffs imposed by his first administration and sustained under the Biden administration. A robust domestic shipbuilding industrial base is essential to maintaining the premier status of the U.S. Navy as well as to American national defense writ large. A world in which China dominates maritime commerce is a dangerous and uncertain world. It is imperative that the United States—and our allies—fight back against decades of foul play by Beijing and correct this imbalance as soon as possible.
Luke Lorenz is the Vice President of Legislative Affairs of the Navy League of the United States
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.