USTR: China’s dominance in maritime industry takes a toll on US commerce

China’s ‘targeted dominance’ in maritime, logistics, and shipbuilding sectors is ‘unreasonable’ and ‘burdens or restricts U.S. commerce’, the U.S. Trade Representative (USTR) has concluded.

In this respect, China is therefore “actionable” under Section 301, according to the USTR. Any responsive actions would be considered at a later date in the next stage of the investigation, the US federal government agency added.

“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,” Ambassador Katherine Tai, who is the principal trade advisor, negotiator, and spokesperson on U.S. trade policy, said.

“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.”

Specifically, USTR’s investigation found the People’s Republic of China’s (PRC) targeting for dominance ‘unreasonable’ because it 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.

As per the USTR, the PRC’s targeting for dominance is also unreasonable because of Beijing’s extraordinary control over its economic actors and these sectors.

The USTR further found that PRC targeting for dominance burdens or restricts U.S. commerce by undercutting business opportunities for and investments in the U.S. maritime, logistics, and shipbuilding sectors; restricting competition and choice; creating economic security risks from dependence and vulnerabilities in sectors critical to the functioning of the U.S. economy; and undermining supply chain resilience.

In April 2024, following a petition of five national labor units, the USTR initiated an investigation of China’s acts, policies, and practices targeting the maritime, logistics, and shipbuilding sectors for dominance under Section 301 of the Trade Act of 1974. Section 301 of the Trade Act allows the U.S. Trade Representative to address unreasonable or discriminatory acts, policies, or practices that burden or restrict U.S. commerce.

“For nearly three decades, China has targeted the maritime, logistics, and shipbuilding sectors for dominance and has employed increasingly aggressive and specific targets in pursuing dominance of the maritime, logistics, and shipbuilding sectors,” according to the USTR report.

In the shipbuilding and marine equipment sectors, China has set production targets broadly since 2006. China’s industrial targets have become more ‘aggressive and sophisticated’ over the years. For example, in the area of high-technology ships, China initially set a target of 20 percent of global market share by 2011, but now aims to achieve 50 percent global market share by 2025.

For maritime engineering equipment, China initially targeted 10 percent of the global market share by 2011 and now seeks a 40 percent market share by 2025.

As explained, China’s targeting of these sectors for dominance has undercut competition and taken market share with dramatic effect: raising China’s shipbuilding market share from less than 5 percent of global tonnage in 1999, to over 50 percent in 2023; increasing China’s ownership of the commercial world fleet to over 19 percent as of January 2024; and controlling production of 95 percent of shipping containers and 86 percent of the world’s supply of intermodal chassis, among other components and products.

As the petitioner U.S. unions have highlighted, the entrenchment of the PRC’s dominance means 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.”

Last month, U.S. lawmakers introduced “the SHIPS for America Act” to bolster America’s commercial maritime industry and enhance its competitiveness amid China’s growing influence in the international shipping arena.

The bill aims to revitalize the U.S. Merchant Marine to transport vital goods and military cargo during times of conflict while reinforcing American supply chains in peacetime.

Currently, about 80 U.S.-flagged ships are engaged in international commerce compared to over 5,500 China-flagged vessels. 

In related news, China’s state-owned COSCO Shipping Holdings was placed this January on the US Department of Defense’s (DoD) sanctions list, together with 130 other Chinese companies, for their alleged ties to the country’s military.

The primary objective of this list, which now comprises a total of 134 companies, is to restrict the entities’ economic and technological interactions with the US and curb China’s military modernization efforts.

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