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Comment by gk1 | Hacker News Reader

Commercial shipbuilding in the US has long sailed. The industry leaders are now Japan, South Korea, and China. Nobody in the US is even trying to keep up, because there's no way to compete with the cheap labor force and efficient yards of those countries. For the most part, the only ships still being built in the US are for the military.

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I was shocked to hear this so I did some research. As it turns out, it has a lot to do with foreign subsidies, similar to solar power.

Apparently up until 1981, the US had the Construction differential subsidy program [1][2] that subsided shipbuilding construction. During the Regan administration, the US eliminated subsidies whereas countries in Asia did not. Now the top 10 shipbuilding countries are in China, Korea, or Japan [3][4].

Outside of a few exceptions, such as a 1920 law forcing US-based natural gas to only be transported on American made/manned ships [5], the US shipbuilding industry has one customer: the military. Without additional subsidies it's unlikely the US can effectively compete with places like China, which continue to increase subsidies for shipbuilders [6].

In this political climate (especially post-Solyndra, post ethanol-subsidy) I think it's unlikely the federal government would increase subsidies for a private industry. On one hand, this might not be a bad thing: Chinese-subsidized industries don't always work out the way they planned (e.g., the construction of ghost towns). However if the military doesn't keep the industry up-to-date technologically, a shipbuilding tech gap could form, which might impact national security.

[1] http://en.wikipedia.org/wiki/Long_Range_Shipbuilding_Program

[2] http://www.marinelink.com/article/shipbuilding/the-future-am...

[3] http://www.marineinsight.com/marine/marine-news/headline/top...

[4] http://thediplomat.com/2012/11/u-s-navy-take-notice-china-is...

[5] http://www.foxnews.com/us/2013/09/20/boom-in-natural-gas-pro...

[6] http://www.reuters.com/article/2013/12/09/us-china-shipping-...

You're completely right.

The U.S. is so far ahead of the rest of the world in almost all defense technologies that it's a hard pill to swallow politically that there could be one relatively-small segment (non-nuclear surface warships) that we'd be better off actually buying from our closest allies.

We export so much defense equipment to our allies, that you'd think it would be okay to maybe possibly import one thing that's built better and cheaper elsewhere. But no, we'd rather subsidize our shipyards to continue churning out ships designed in the 1980s...

The '1920 law' aka 'Jones Act' is not limited to natural gas. It deals with transport of goods where both the source and destination are American ports.

http://en.wikipedia.org/wiki/Merchant_Marine_Act_of_1920

You're right with regards to the claim that South Korea and China have lower labor costs. You're not right with regards to Japan.

http://www.bls.gov/news.release/pdf/ichcc.pdf

If you have better data, I'm happy to take a look at them, but in my limited association with high-tech Japanese manufacturing this was basically the canonical example of "Ridiculously untrue things the Americans believe about us."

China has a cheaper labor force, but Japan and South Korea? And how does this fit with their intensive use of robots, which are presumably meant to reduce labor costs?

Both Japan and Korea used to have cheaper labor costs and they used that advantage along with manufacturing improvements to maintain their industries to the present day through economies of scale and lack of competition from other countries (once they've been driven out of the industry, like the U.S. and Greece).

It's roughly analogous as if the rise of Honda and Toyota in the 1960s ran all the U.S. car manufacturers out of business.

Good-sounding theory, but I can't help noticing the continued existence of several US car manufacturers, even if they've been through bankruptcy proceedings along the way.

They've always been rescued / bailed out (IIRC) by the US government whenever they were on the verge of collapse - they're pretty big employers (direct and indirect), and I'm pretty sure it's also a matter of pride for the US ('Murca, yeah!). I somehow doubt the US government would be as inclined to bail out, for example, Google or another major tech company if they got into trouble.

On the other hand, there's plenty of competing companies that could bail out / buy (parts of) Google (or some other company) if they got into trouble - see MySpace and Digg and major web companies like that that became obsolete and effectively went out of business.

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