Crisis in Strategic Sealift

Lieutenant Stephen P. Ferris, USNR

Army Logistician March 1995

Strategic mobility is critical to the success of U.S. military strategy in the post-cold war security environment. Our military planners must monitor a global network of interests and a multiplicity of threats. Warfighting and threat response require a sophisticated logistics capability that can transport vast amounts of materiel to distant theaters. Our military history clearly demonstrates that almost all of this materiel will be transported by sealift.

In spite of its overwhelming importance, the strategic sealift capability of the United States has been allowed to wither. The size of the U.S. commercial fleet has fallen constantly since World War II, with predictable results for the availability of trained merchant seamen to support a prolonged military campaign. The National Defense Reserve Fleet (NDRF) does not have extensive seaworthy capacity, as the recent Persian Gulf War illustrated.

The issue of sealift adequacy has both immediate and long-term implications. The immediate challenge is ensuring that sufficient sealift is available to support Army or Marine Corps ground forces that may be deployed in a crisis. The long-term issues that we must consider are establishing a national policy on subsidizing the maritime industry and crafting a domestic response to foreign protectionism.

Critical Shortfalls in Strategic Sealift

Sealift consists of ships that transport cargo and mariners who operate those vessels. The United States currently has a shortfall in both areas. In many ways, however, the shortage of ships is more critical. This is because the number of licensed and qualified merchant seamen ultimately depends on the size of the commercial fleet.

Both the projected volume of U.S. military needs and the geographic expanse of our defense commitments will combine to overtax the sealift assets now available for a military emergency. Sealift capacity either directly controlled by or under contract to the U.S. Government is insufficient to sustain any prolonged Army ground campaign. Airlift cannot meaningfully correct this shortage because of its inherent cargo-carrying limitations and expense. Thus, if projecting military force is to remain a viable option for U.S. policymakers in the post-cold war era, we must address the inadequacy in sealift.

The underlying cause for the shortage in sealift capability is inadequate capital investment in the U.S. shipping industry. But the determinants of capital formation within an industry are not magical; they derive from the simple economics of investment. The commercial shipping industry in the United States has declined because it no longer provides an attractive rate of return to investors. As the Department of Defense (DOD) downsizes, naval shipbuilding has been reduced, and that, in turn, has had an adverse impact on industry demand.

Perhaps even more important has been the reduction in demand for U.S. shipping by domestic businesses as foreign shipping has become more cost-competitive. U.S. firms find it economically advantageous to contract with foreign rather than domestic shippers in their business operations.

Largely because of programs and subsidies offered by their governments, these foreign shipping lines enjoy a more competitive cost structure than U.S. companies. Many foreign governments are active partners with their private shipbuilding companies, providing them with construction and operating subsidies, low-interest loans, cargo preferences, tax benefits, and various credits. This protectionism by foreign governments has resulted in an economic environment in which the unsubsidized U.S. shipping industry cannot compete.

As a result of the shrinkage of the U.S. shipping industry, the supply of qualified mariners has also declined. Once again, the phenomenon is economic. As the demand for U.S. shipping falls because of an unfavorable cost structure, the demand for U.S. mariners is likewise reduced. This creates an exodus of seamen from the industry and deters entry by new individuals. Although the mariner labor market may be in equilibrium from an economic standpoint, there will be an insufficient supply of skilled merchant seamen to satisfy the surge requirements of a military emergency.

Future of U.S. Strategic Sealift

Assessing the sufficiency of U.S. strategic sealift is highly situational. In contingencies like Operations Desert Shield and Desert Storm, our sealift capacity appears adequate. That conflict was characterized by a long lead time before actual hostilities began, which allowed our forces to establish forward logistics bases and transport needed materiel in an orderly fashion. Worldwide approval of the campaign resulted in a multinational effort rather than a unilateral U.S. operation, which ensured that foreign shipping was available to supplement U.S. capacity.

If, however, a conflict does not fit the Desert Shield-Desert Storm framework, then the future looks grim for U.S. strategic sealift sufficiency. A prolonged war, an internationally unpopular conflict, or a war with interdiction of U.S. transports by enemy forces will reveal the shortages in U.S. sealift.

The reasons for such a shortage are numerous, and no easy solutions are apparent. Current shipbuilding in the United States is negligible, and there are no signs of a likely turnaround. Moreover, given the long lead times associated with shipbuilding, any newly constructed vessels would only join the fleet a number of years into the future. Naval construction also continues to shrink, with the Navy falling below 400 ships for the first time since 1945.

Economic issues are also prominent in justifying pessimism. The U.S. will need to subsidize its shipbuilding and shipping industries if it is to possess adequate domestic sealift. A reserve program may also be necessary to ensure a sufficient supply of ready and able mariners. But who will pay for these subsidies and programs? Given the recent trend toward economic deregulation, the intense political interest in domestic affairs following the cold war, and the historic U.S. inability to anticipate warfighting requirements, the future does not appear promising.

There also is no indication that the distorted economics of U.S. shipping wrought by international protectionism will correct itself in the near future. The current cost structures of the international shipping industry continue to remain unfavorable for developing competitive U.S. shipping rates. Concessions on this issue are doubtful, as foreign shipping interests continue to lobby their home governments to maintain their subsidies.

Two other issues further suggest that future U.S. sealift will continue to be inadequate. First, in spite of the fact that nearly 70 percent of the commercial shipping industry is containerized, DOD has made only limited progress in fully using container ships. Second, the Persian Gulf War revealed the poor state of readiness of many ships in the NDRF. The extent to which the NDRF can serve as a useful reserve of sealift capacity remains highly uncertain.

Satisfying Our Contingency Requirements

We have noted that, under highly specific circumstances, the current U.S. sealift capacity can satisfy national contingency requirements to support foreign-deployed ground forces. These circumstances involve the conflict's duration, the magnitude of required materiel, the theater's distance from the United States, and the international popularity of the war. Under appropriate circumstances, the Military Sealift Command fleet, the Ready Reserve Fleet (RRF), and ships pre-positioned abroad might be able to provide the sealift needed to respond to a military contingency.

The more interesting question, however, concerns the ability of the United States to satisfy its contingency requirements under a different set of assumptions. If the conflict is prolonged, and unaccompanied by a 7-month logistics buildup, then sustainment becomes more uncertain. As a conflict moves away from the characteristics of Desert Shield-Desert Storm, contingency sustainment becomes increasingly difficult.

A number of factors will either contribute to or exacerbate the inadequacy of current strategic sealift during a prolonged crisis. The first is the limited shipping assets that are presently available in the United States. The existing inventory of commercial shipping is meager, with no new construction under order. A unilateral military campaign by the U.S. might worsen the shortage if the conflict was unpopular abroad and access to foreign shipping deteriorated. Although the RRF can become operational within a period of 30 days, the NDRF is a much less useful asset. The long lead time needed to make the NDRF seaworthy prevents it from satisfying surge requirements, while the obsolete technology of many NDRF ships reduces their ability to provide sustainment support. Lastly, the trained mariners needed to man the ships providing the logistics sealift are simply not available in the United States. Nor can the labor market respond quickly enough to satisfy contingency requirements, given the time required to train a merchant seaman.

I conclude that current sealift capacity makes it extremely difficult for the United States to satisfy its present contingency obligations. It is only in the context of a highly popular and short war that current sealift would prove adequate. A prolonged conflict that fails to permit a pre-hostilities logistics buildup will overtax U.S. sealift capacity. A major reorientation of U.S. public policy toward subsidizing and nurturing the domestic shipping industry is probably necessary before sufficient sealift capacity becomes available.

The U.S. shipping industry is in a pronounced state of decline. Moreover, as the industry contracts, so does the pool of qualified mariners. The national security implications of these twin trends are significant. As the commercial fleet shrinks, so does our domestic sealift capacity. This suggests that the strategic mobility of U.S. ground forces may become compromised at the very point in time when their mobility is most critical. The ability of the United States to satisfy its contingency obligations is threatened when domestic sealift is insufficient and foreign shipping must be substituted. A shortage of trained merchant seamen further complicates the problem.

Although the solution to these problems is not simple, it nevertheless reduces to one of economics. The subsidization of foreign shipping lines by their governments has made American shippers uncompetitive. Federal programs to stimulate and protect the domestic shipping industry may be necessary if we are to possess an adequate and independent sealift capability. ALOG

Lieutenant Stephen P. Ferris, USNR, is attached to Fleet Industrial Supply Center Yokosuka in St. Louis, Missouri. He is department chairman and professor of finance at the University of Missouri at Columbia. He holds a bachelor's degree from Duquesne University and M.B.A. and Ph.D. degrees from the University of Pittsburgh. He is a graduate of the Naval War College and the Army Logistics Management College's Logistics Executive Development Course.