Why the United States, South Korea, and Japan Must Cooperate on Shipbuilding
China accounts for around 50 percent of the global production of commercial vessels, South Korea produces about 30 percent and Japan 10 percent, which means that these three countries dominate the global market with over 90 percent of the commercial shipbuilding capacity. The United States, meanwhile, accounts for less than 1 percent of the global shipbuilding market.
All Hands on Deck
The Trump administration is working on various measures to revitalize the U.S. shipbuilding industry, including the Executive Order on Restoring American Maritime Dominance on April 9. Restoring U.S. maritime superiority has been one of the few goals to receive bipartisan support, given the urgent need to counter China’s ocean dominance. President Trump, in his speech to Congress on March 5, said that he will create a new Office of Shipbuilding in the White House to make America a shipbuilding power again. While other measures being considered include the proposal to charge U.S. port fees on Chinese-flagged or Chinese-built ships, there are other proposals to create Maritime Opportunity Zones and a Maritime Security Trust Fund where South Korea and Japan can play major roles in strengthening U.S. shipbuilding supply chains.
It is critical to have support and investment from the U.S. government to revive the U.S. shipbuilding industry, but there should also be a realistic strategy to match the level of support the Chinese government offers to its state-owned shipyards. Since the former Premier Zhu Rongji laid out a plan for China to become the world’s #1 shipbuilding superpower in 2002, China has provided more than $90 billion in subsidies, as well as other benefits such as tax incentives and land at below-market rates. While the revenue from fees on Chinese ships and cranes at U.S. ports could fund the U.S. domestic maritime investment, it won’t likely provide enough financial support to U.S. shipbuilders.
The South Korean defense company Hanwha’s recent $100 million acquisition of Philly Shipyard demonstrates that Korean industry is willing to invest directly in U.S. shipbuilding. The U.S. government could structure the Maritime Security Trust Fund to be open to allied membership allowing Japan and South Korea to participate, along with other countries such as the United Kingdom and Australia. The U.S. government could also seek targeted joint investments with Japan and South Korea to develop Maritime Prosperity Zones for shipbuilding along U.S. waterfronts. Foreign companies could be eligible for incentives such as preferred tax treatment for new investments that increase the competitiveness of U.S. shipyards, as well as foster economic growth and job creation in the United States.
Allied Joint Production?
Japan and South Korea have begun aligning their foreign investment screening mechanisms with the United States to protect critical defense industries. These are the building blocks of a genuine allied industrial strategy, and the three countries could reap mutual gains in both commercial and national security contracts by working together to revitalize the U.S. shipbuilding industry. South Korea’s shipyards, including Hyundai Heavy Industries and Hanwha Ocean, have efficient mass production techniques that allow for the rapid delivery of high-quality warships, with expertise in modular construction and advanced ship design. Japan’s shipyards, such as Mitsubishi Heavy Industries, also possess world-class expertise in naval engineering and systems integration which allow them to build some of the most advanced destroyers and submarines in the world.
Rather than operating in silos, the United States, South Korea, and Japan could work toward a shared production model, potentially including the development of common hull classes across their fleets. Next-generation destroyers and other major surface combatants like Constellation-class frigates and a new class of high-endurance missile corvettes could be developed with allied cooperation in mind. Standardizing key elements—hulls, propulsion systems, combat systems—would reduce costs, improve interoperability, and accelerate production cycles.
Washington could embrace allied coproduction through reforming the Jones Act. A full repeal may be infeasible, but targeted reforms could unlock the potential of allied collaboration without undermining national and economic security. One more realistic option is to allow limited coproduction with close treaty allies, permitting Japanese and South Korean firms to help build strategic vessels while still maintaining American ownership and operation. Another is to create a defense carveout, allowing foreign-built ships to support military logistics and auxiliary operations without conflicting with commercial protections. The United States could also streamline foreign direct investment rules, making it easier for allied firms to invest in and modernize American shipyards.
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“Rather than operating in silos, the United States, South Korea, and Japan could work toward a shared production model, potentially including the development of common hull classes across their fleets.”
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Other nations have already recognized the benefits of such flexibility. Australia, despite its robust shipbuilding ambitions, is acquiring foreign-built frigates to bolster its navy, and recently saw South Korean industry purchase a major stake in a leading shipbuilding company. The United Kingdom has turned to Spanish and South Korean shipyards to construct critical fleet replenishment vessels. Even Canada, which has its own domestic shipbuilding protections, has outsourced warship construction to Germany and the Netherlands. The United States remains largely an outlier in its refusal to integrate allied capacity into its naval strategy.
Time is running out. China’s naval expansion will not wait for the U.S. Navy’s shipbuilding challenges to be resolved. As the executive order clearly stated, U.S. maritime power has been weakened by decades of shifting priorities and failed procurement programs. If the United States continues to rely on its undersized and overstretched shipbuilding industry alone, it will cede maritime superiority. The president’s order calls for an action plan by November and a solution seems clear: tap into the industrial muscle of America’s closest allies and build a truly integrated allied fleet.
Miyeon Oh is Distinguished Chair in Korea Policy and senior security and defense researcher and Michael Cecire is a policy researcher at RAND. This article is published courtesy of RAND.
