WEBVTT - The Plan to Get America Building Big Ships Again 0:00:00.200 --> 0:00:03.360 Hey, they're aud Loots listeners. It's Tracy Alloway. 0:00:03.000 --> 0:00:04.000 And Jill Wisenthal. 0:00:04.280 --> 0:00:07.720 We are very excited to announce that Audlots is going 0:00:07.800 --> 0:00:09.680 to Washington That's right. 0:00:09.760 --> 0:00:11.560 For the first time, we are going to do a 0:00:11.640 --> 0:00:16.439 live public Odd Lots recording in our nation's capital. That's 0:00:16.440 --> 0:00:19.680 going to be March twelfth in Washington, DC at the 0:00:19.760 --> 0:00:23.560 Miracle Theater and guests will be announced in the coming days, 0:00:23.600 --> 0:00:25.960 but in the meantime you can find a ticket link 0:00:26.000 --> 0:00:28.040 at Bloomberg dot com, slash odd. 0:00:27.800 --> 0:00:45.320 Lots, Bloomberg Audio Studios, Podcasts, Radio News. 0:00:46.920 --> 0:00:50.600 Hello and welcome to another episode of the Odd Lots podcast. 0:00:50.760 --> 0:00:53.199 I'm Jill Wisenthal and I'm Tracy Alloway. 0:00:53.320 --> 0:00:57.480 Tracy, let's get back on the supply chain, shipping and 0:00:57.600 --> 0:00:58.639 industrial policy. 0:00:58.680 --> 0:00:58.840 Bee. 0:00:59.120 --> 0:00:59.720 I love it. 0:01:00.040 --> 0:01:01.880 I've been waiting for us to get back on that. 0:01:02.360 --> 0:01:06.080 Although actually, okay, so I'm excited about this for two reasons. 0:01:06.280 --> 0:01:10.319 One is I enjoy talking about supply chains and talking 0:01:10.360 --> 0:01:13.160 about how goods are actually transported. And I think I've 0:01:13.160 --> 0:01:16.039 told you before, I actually wanted to be a commodities 0:01:16.080 --> 0:01:19.920 reporter because like there's this element of romanticism to shipping 0:01:20.080 --> 0:01:24.600 actual things moving actual stuff around the world. But then secondly, 0:01:24.760 --> 0:01:27.679 the reason I'm excited for this conversation is because this 0:01:27.800 --> 0:01:32.040 is a rare example or instance of something that has 0:01:32.120 --> 0:01:33.400 bipartisan support. 0:01:33.840 --> 0:01:37.560 Yes, that's right. And so obviously during the last administration 0:01:37.720 --> 0:01:40.400 we saw these things. Do is the Chips Act, do 0:01:40.560 --> 0:01:44.559 is the Inflation Reduction Act, which primarily focused on energy, 0:01:44.600 --> 0:01:48.240 a lot of alternative energy. There's been some question obviously, 0:01:48.360 --> 0:01:51.200 with the changing of the guard in DC, are we 0:01:51.280 --> 0:01:54.400 going to see some more like activist efforts to shore 0:01:54.520 --> 0:01:59.640 up certain aspects of the US industrial capacity. There's a 0:01:59.640 --> 0:02:02.120 lot of anxiety about that right now, but you know, 0:02:02.160 --> 0:02:05.480 it's obviously an open question where that's going to go. 0:02:05.880 --> 0:02:07.480 But one of the things that has come up in 0:02:07.520 --> 0:02:10.320 some of our conversations that we haven't dived too deep 0:02:10.360 --> 0:02:14.440 into it is American maritime capacity specifically, and it comes 0:02:14.520 --> 0:02:16.839 up when we reference the Jones Act, and it comes 0:02:16.919 --> 0:02:20.359 up when we talk about port automation, and we've talked 0:02:20.400 --> 0:02:23.080 a little bit about icebreakers and things like that, and 0:02:23.120 --> 0:02:27.680 how sort of atrophied US capacity has become. And so 0:02:27.760 --> 0:02:30.680 then there's this question, like, you know, a what can 0:02:30.720 --> 0:02:33.200 we do about it and be how urgent is there 0:02:33.360 --> 0:02:35.120 a reason to rebuild this capacity. 0:02:35.320 --> 0:02:37.240 I was kind of wondering how long it would take 0:02:37.280 --> 0:02:39.600 for us to bring up the Genes Act in this conversation, 0:02:39.680 --> 0:02:43.000 and the answer is about one or two minutes. But 0:02:43.120 --> 0:02:45.440 I think this is it's a really interesting topic. From 0:02:45.480 --> 0:02:48.640 an all blots perspective. We have done shipping episodes in 0:02:48.680 --> 0:02:51.480 the past, and obviously everyone learned during the pandemic that 0:02:51.600 --> 0:02:55.680 shipping costs are really important. But also I'm just interested 0:02:55.840 --> 0:02:59.399 in this discussion from a sort of policy design perspective. 0:02:59.680 --> 0:03:03.160 How do you go about actually designing something like this 0:03:03.360 --> 0:03:07.680 that at first clients seems absolutely sprawling and complicated and 0:03:07.760 --> 0:03:09.480 touching on all these different things. 0:03:09.720 --> 0:03:12.600 Well, I'm excited to say we really do have the 0:03:12.720 --> 0:03:16.400 two perfect guests for this conversation. We're going to be 0:03:16.440 --> 0:03:21.000 speaking with Republican Senator Todd Young from Indiana and Democratic 0:03:21.080 --> 0:03:25.640 Senator Mark Kelly from Arizona. Senator Kelly is a trained 0:03:25.760 --> 0:03:28.960 merchant Marine. I see a class of eighty six the 0:03:29.000 --> 0:03:33.320 Merchant Marine Academy. So, like I said, truly the perfect guests. 0:03:33.600 --> 0:03:36.400 Senators Kelly and Young, thank you so much for coming 0:03:36.400 --> 0:03:37.080 on Outlaws. 0:03:38.440 --> 0:03:39.320 Thanks for having us. 0:03:39.560 --> 0:03:41.600 Yeah, thank you. Joe and Tracy for having us on. 0:03:42.320 --> 0:03:45.360 Why don't we just start what do you describe one 0:03:45.360 --> 0:03:48.880 of you or both of you describe the existing state 0:03:49.000 --> 0:03:53.480 of America's maritime capacity, and just like why it's something 0:03:53.520 --> 0:03:57.560 that we need to in your views address it. 0:03:57.720 --> 0:03:59.960 Joe, this is Mark Kelly. You know, just to start, 0:04:00.200 --> 0:04:04.440 I would say, big picture, the state of our maritime 0:04:04.480 --> 0:04:08.320 industry is really, really poor. I was in a brief 0:04:08.520 --> 0:04:12.760 just yesterday with the Admiral, the four star admiral, Admiral Paparo, 0:04:13.400 --> 0:04:16.599 who's the head of Indopaycom, and we're talking about the 0:04:16.600 --> 0:04:20.160 Western Pacific, and he was talking about the Military Sealift 0:04:20.160 --> 0:04:24.800 Command and how it is in bad shape materially and 0:04:24.880 --> 0:04:26.640 also from a workforce perspective. 0:04:27.440 --> 0:04:30.360 But when you consider where. 0:04:30.080 --> 0:04:33.000 We were and where we are today. So when I 0:04:33.120 --> 0:04:35.880 graduated from the US Merchantary Academy in nineteen eighty six, 0:04:35.960 --> 0:04:39.599 as you mentioned, made about four hundred US flagged ocean 0:04:39.640 --> 0:04:42.599 going vessels, and that was down, by the way, from. 0:04:42.640 --> 0:04:44.720 Thousands after World War Two. 0:04:45.240 --> 0:04:49.760 Today that number has fallen to eighty, so eighty US 0:04:49.880 --> 0:04:55.800 flag vessels in international commerce flying the US flag. China, 0:04:56.680 --> 0:05:00.880 you know, our peer or near peer adversary has five 0:05:01.000 --> 0:05:05.120 thousand five hundred and most of the cargo that comes 0:05:05.400 --> 0:05:07.800 to the United States can come on Chinese ships. So 0:05:08.680 --> 0:05:11.320 if you remember what happened in twenty twenty one twenty 0:05:11.320 --> 0:05:15.640 twenty two is supply chains and bottleneck at seaports, especially 0:05:15.640 --> 0:05:18.040 on the West Coast. I mean, if China wants to 0:05:18.080 --> 0:05:22.360 do that similar effect to US, they can. 0:05:22.920 --> 0:05:26.800 On any day, President she could. 0:05:26.520 --> 0:05:30.760 Say, hey, no Chinese ships take cargo to the United 0:05:30.800 --> 0:05:33.560 States anymore, and it would essentially shut down our economy. 0:05:33.640 --> 0:05:36.839 So this is a problem. It's a national security problem. 0:05:36.880 --> 0:05:37.640 We got to fix it. 0:05:38.760 --> 0:05:40.040 So how did this happen? 0:05:40.200 --> 0:05:44.000 I mean, eighty US flagged vessels versus five thousand, five 0:05:44.080 --> 0:05:48.680 hundred out of China is pretty stunning statistic. What are 0:05:48.720 --> 0:05:51.680 the things that went into making I guess the US 0:05:51.800 --> 0:05:53.880 less competitive when it comes to shipbuilding? 0:05:54.279 --> 0:05:55.479 God, I don't know if you want to take that 0:05:55.600 --> 0:05:59.680 or I could kin, yeah, I'll speak at a high level. 0:06:00.000 --> 0:06:03.800 I mean, what we have seen over the years is China, 0:06:03.839 --> 0:06:08.159 in a number of different sectors of the economy, they've 0:06:08.200 --> 0:06:14.080 subsidized their activities in furtherance of national security and domestic 0:06:14.200 --> 0:06:21.080 job creation and to master certain technologies and crafts so 0:06:21.120 --> 0:06:27.039 that they can leverage those for geopolitical purposes and also 0:06:27.360 --> 0:06:32.719 for commercial purposes to put other industries and other countries 0:06:32.760 --> 0:06:37.480 out of business. So examples, one example would be semiconductors, 0:06:37.920 --> 0:06:40.920 and it's not just the Chinese, many other Asian nations 0:06:41.120 --> 0:06:45.560 understood back You could point to the nineteen eighties. They 0:06:45.640 --> 0:06:51.239 understood that having some measure of control and expertise over 0:06:51.279 --> 0:06:57.040 semiconductor technologies was important to their growth and also important 0:06:57.160 --> 0:07:02.239 to their military using these technologygies, embedding them in different 0:07:02.360 --> 0:07:07.680 military platforms, and so they invested in them. We instead, 0:07:07.760 --> 0:07:11.120 we have a more efficient economic model that doesn't lead 0:07:11.200 --> 0:07:14.760 to the sort of over investment and waste by our 0:07:14.800 --> 0:07:19.960 capital markets and others that the Chinese do. We also 0:07:20.120 --> 0:07:25.280 don't look at economic exchanges historically through a military lens. 0:07:25.720 --> 0:07:25.880 Well. 0:07:25.880 --> 0:07:29.440 The disadvantage of that is when other countries are subsidizing 0:07:29.480 --> 0:07:34.000 their businesses, in this case shipbuilding, and we're not subsidizing, 0:07:34.120 --> 0:07:38.440 they will undercut us on price, and given enough practice, 0:07:38.920 --> 0:07:43.200 sometimes undercut us on quality. So we have gotten out 0:07:43.240 --> 0:07:46.520 of the business, in the case of semiconductors, of making them, 0:07:46.560 --> 0:07:50.080 and over time we became vulnerable the interruptions in the 0:07:50.120 --> 0:07:54.840 supply chain, the interruption that we might experience in shipbuilding 0:07:55.080 --> 0:07:58.440 our maritime industry that Mark just alluded to is one 0:07:58.480 --> 0:08:01.800 we're trying to prevent. We don't want a situation, whether 0:08:01.840 --> 0:08:07.480 it's a pandemic or a military conflict, in which we 0:08:07.840 --> 0:08:13.600 are dependent on our chief adversary, China to move materiel 0:08:13.800 --> 0:08:17.080 and personnel to other places, and on a day to 0:08:17.160 --> 0:08:21.240 day basis, as our government leaders are making foreign policy, 0:08:22.000 --> 0:08:25.320 we don't want to be coerced into making certain decisions 0:08:25.360 --> 0:08:29.080 by the mere threat of Chinese interruption of our economy. 0:08:29.160 --> 0:08:31.920 So that's why, at the highest level this is very 0:08:31.960 --> 0:08:36.640 important and why some sort of government intervention is needed 0:08:36.640 --> 0:08:39.280 because this, in the end is an economic security issue 0:08:39.520 --> 0:08:41.520 and also a national security issue. 0:08:42.040 --> 0:08:45.720 And Tracy to add on to that just a little, 0:08:45.880 --> 0:08:47.880 in the nineteen eighties, we used to do this differently, 0:08:48.000 --> 0:08:51.680 and before there was some more government involvement. We got 0:08:51.720 --> 0:08:55.640 out of that kind of left the maritime industry totally 0:08:55.679 --> 0:08:58.080 on its own, and it just decayed. 0:08:58.440 --> 0:09:01.480 Over decades for the last forty years. 0:09:02.440 --> 0:09:06.800 And you know, the other concern here about you know, 0:09:06.840 --> 0:09:10.320 it's not only the number of ships, but you know, 0:09:10.360 --> 0:09:13.680 the Chinese ships, the ocean going their ocean going vessels 0:09:13.760 --> 0:09:19.360 fifty five hundred or so that they have requirements put 0:09:19.400 --> 0:09:20.720 on them by the PLA Navy. 0:09:21.360 --> 0:09:24.440 So these ships are you know. 0:09:24.440 --> 0:09:29.439 Well equipped and configured to be what they need if 0:09:29.480 --> 0:09:32.160 they were in a conflict with US. Now, we rely 0:09:32.400 --> 0:09:38.600 on the Military Sealift Command for our initial capacity to 0:09:38.679 --> 0:09:44.160 move combat equipment and troops in some cases troops overseas, but. 0:09:44.200 --> 0:09:45.640 Those numbers are rather limited. 0:09:46.520 --> 0:09:49.240 And the reason why you want a large maritime fleet 0:09:49.320 --> 0:09:52.880 is not only you know, peace time to move you know, cargo, 0:09:53.080 --> 0:09:57.040 and it's healthy for our economy and it also helps 0:09:57.320 --> 0:10:01.080 us shipbuilding. But the other reason, as in time of conflict, 0:10:01.120 --> 0:10:05.560 we might have to rely on this capacity of ocean 0:10:05.600 --> 0:10:09.720 going merchant vessels to get combat power across the Pacific 0:10:09.880 --> 0:10:10.480 or Atlantic. 0:10:10.679 --> 0:10:13.800 Sorry, I was just going to build on Mark's point 0:10:13.960 --> 0:10:18.199 and emphasize the capacity that Mark just alluded to. Is 0:10:18.440 --> 0:10:20.160 what we're essentially trying to do is we're trying to 0:10:20.200 --> 0:10:24.720 train more mariners, build more ships, and then create more 0:10:24.840 --> 0:10:29.559 yard space in our existing yards and perhaps some older 0:10:29.640 --> 0:10:32.560 yards that need to be refurbished, create more yard space 0:10:32.640 --> 0:10:38.680 that can support additional military shipbuilding and repair during a 0:10:38.720 --> 0:10:51.000 wartime situation. 0:10:56.000 --> 0:10:59.160 It's interesting, you know, we're having this bipartisan conversation, and 0:10:59.200 --> 0:11:01.360 you laid it out the sort of tension very well, 0:11:01.400 --> 0:11:05.160 which is that sort of American economic philosophy has been 0:11:05.200 --> 0:11:09.600 optimized for efficiency and profit. And obviously we're extraordinarily wealthy 0:11:09.640 --> 0:11:13.280 as a country, probably enlarge part of that. But A 0:11:13.559 --> 0:11:18.679 there's the geopolitical risks that emerge with losing basically the 0:11:18.720 --> 0:11:21.720 ability to build stuff, and you mentioned semiconductors and ships, 0:11:21.760 --> 0:11:24.240 and there's a lot of this and so A, you know, 0:11:24.480 --> 0:11:27.000 you run the risk it's overseas, and then over time 0:11:27.360 --> 0:11:30.040 perhaps they don't even need the subsidies anymore because they 0:11:30.080 --> 0:11:32.720 just have years and years and years of practice getting 0:11:32.840 --> 0:11:36.120 better and better at it. Do you see this sort 0:11:36.160 --> 0:11:39.760 of framework, this sort of lens with which to view 0:11:39.840 --> 0:11:44.679 economic policy is fundamentally changing in DC because we're trying 0:11:44.679 --> 0:11:48.000 to sort of understand, you know, how much momentum and 0:11:48.080 --> 0:11:52.200 continuity there will be for just this general notion of 0:11:52.600 --> 0:11:54.400 what people call industrial policy. 0:11:55.200 --> 0:11:59.720 I do. I believe a lot of minds have been 0:11:59.800 --> 0:12:06.120 changed changed, and policy makers pensient for embracing these sorts 0:12:06.120 --> 0:12:10.720 of policies has fundamentally changed. Mark was helpful to me 0:12:11.200 --> 0:12:13.360 as we tried to push through the Chips and Science 0:12:13.360 --> 0:12:17.000 Act dealing with the semiconductor challenges, and I think through 0:12:17.080 --> 0:12:20.120 that exercise, many of us had to make what were 0:12:20.400 --> 0:12:23.959 challenging arguments to colleagues about why we needed to bake 0:12:24.080 --> 0:12:30.280 in a national security premium to the price of certain products, 0:12:30.960 --> 0:12:34.000 knowing that if we didn't make them here have the 0:12:34.040 --> 0:12:37.120 capacity to make them here in the future, there would 0:12:37.160 --> 0:12:40.840 be national security consequences to that. And we've done that 0:12:41.120 --> 0:12:44.880 on so many other technology areas in the past. The 0:12:44.960 --> 0:12:48.440 only difference now is that we have an adversary that 0:12:48.960 --> 0:12:52.400 does not really look at any commercial transactions through a 0:12:52.520 --> 0:12:57.120 purely commercial lens. There's always a geopolitical or military overlay 0:12:57.200 --> 0:13:00.319 to it. So we have to extend the long standing 0:13:00.720 --> 0:13:04.080 philosophy to other areas of our economy in order to 0:13:04.120 --> 0:13:09.439 protect our people. So if we continue to make the arguments, 0:13:09.520 --> 0:13:12.280 I think more people in Washington will embrace what most 0:13:12.320 --> 0:13:18.080 people across America already intuitively understand, which is yes. I 0:13:18.200 --> 0:13:21.000 remember during the global pandemic when I tried to get 0:13:21.000 --> 0:13:25.160 at Walmart and buy a consumer electronic and the shelves 0:13:25.200 --> 0:13:28.840 were half empty. They understood why that was and why 0:13:28.880 --> 0:13:32.720 it's hard to run a modern economy without more resiliency 0:13:33.360 --> 0:13:36.440 and a little more just in case instead of just 0:13:36.559 --> 0:13:37.160 in time. 0:13:38.640 --> 0:13:40.600 So one of the things that comes up quite a 0:13:40.600 --> 0:13:44.280 lot on this show is the importance of institutional knowledge. So, 0:13:44.559 --> 0:13:47.520 you know, you can have people in DC agree that 0:13:47.559 --> 0:13:51.240 the US should build, you know, more big and complicated things, 0:13:51.320 --> 0:13:55.480 whether those are semiconductors or ships, but you actually need 0:13:55.520 --> 0:13:57.640 people who know how to do that. And if we 0:13:57.800 --> 0:14:01.320 haven't been building these things for decades, then there probably 0:14:01.360 --> 0:14:04.320 aren't that many people around who have practical knowledge or 0:14:04.400 --> 0:14:07.000 experience of how to do this. And in fact, I 0:14:07.000 --> 0:14:10.760 don't think there's any major shipbuilder that is actually headquartered 0:14:10.800 --> 0:14:14.080 in the US, although there are some subsidiaries. How do 0:14:14.120 --> 0:14:18.840 you actually go about building up institutional knowledge for shipbuilding? 0:14:19.840 --> 0:14:23.200 Tracy So, one of my classmates from the US Merchant 0:14:23.200 --> 0:14:25.400 Many Academy in nineteen eighty six is a woman named 0:14:25.560 --> 0:14:30.360 Jennifer Boykin. She's the president of Newport News Shipbuilding, And 0:14:30.440 --> 0:14:32.720 before I was in this job, I remember going down 0:14:32.760 --> 0:14:33.720 there to visit her. 0:14:33.640 --> 0:14:36.200 And talking about some of the workforce issues. 0:14:36.240 --> 0:14:41.360 She builds aircraft carriers and Virginia Class submarines. You know, 0:14:41.560 --> 0:14:45.280 one of the pre eminent shipbuilders in the world. When 0:14:45.280 --> 0:14:49.320 you consider just the capability of these vessels, a US 0:14:49.400 --> 0:14:51.920 aircraft carrier or the Ford class aircraft carrier and the 0:14:52.000 --> 0:14:56.120 Virginia class attack submarines are you know, there's nothing better. 0:14:56.240 --> 0:15:01.440 So we can build really, really good and capable ships. 0:15:02.040 --> 0:15:04.800 But one of the challenges, you know, the chief faces 0:15:04.880 --> 0:15:07.960 is what you're talking about, is the workforce, you know, 0:15:08.080 --> 0:15:11.160 constantly trying to find people that will do these jobs 0:15:11.200 --> 0:15:13.520 and do them well and have the skills. Now, they 0:15:13.560 --> 0:15:18.560 train a lot of their own people welders and pipe fitters, electricians, 0:15:19.360 --> 0:15:25.960 but they often run into challenges and finding, you know, 0:15:26.240 --> 0:15:29.400 people to go into these jobs, and when they need 0:15:29.560 --> 0:15:35.000 people that are trained already, that ecosystem of shipbuilders doesn't 0:15:35.040 --> 0:15:38.480 really exist anymore in the United States. So part of 0:15:38.520 --> 0:15:41.920 the benefit of this and in the legislation itself, is 0:15:41.960 --> 0:15:47.880 a strategy to provide help for training programs so to 0:15:47.920 --> 0:15:50.880 build the workforce. You can think of this as kind 0:15:50.880 --> 0:15:53.680 of a three legged stool. One of them be in 0:15:53.720 --> 0:15:58.359 the shipyards, one of them being the US flag the vessels, 0:15:58.440 --> 0:16:03.600 and the third being the and by supporting the schools 0:16:03.720 --> 0:16:06.240 like the US Merchant Marine Academy and the state Maritime 0:16:06.280 --> 0:16:10.520 Academies and also the you know, the schools that train 0:16:10.840 --> 0:16:17.160 the unlicensed mariners, but then also programs to you know, 0:16:17.280 --> 0:16:23.000 help shipyards find pipe fitters and train them, and welders 0:16:23.040 --> 0:16:28.280 and electricians and all those trades will then grow this 0:16:28.600 --> 0:16:33.800 entire ecosystem. So there's extra capacity of a workforce that 0:16:33.960 --> 0:16:37.720 existing shipbuilders that build naval combatants can rely on. 0:16:38.400 --> 0:16:39.920 And then that extends not only. 0:16:39.760 --> 0:16:43.480 To the workforce, but to the companies that build the parts, 0:16:43.640 --> 0:16:48.120 you know, pumps and pipes. If you grow that, there's 0:16:48.200 --> 0:16:52.960 a more competitive economic environment, there's more availability in some 0:16:53.120 --> 0:16:57.920 cases now when when they're buying, you know, a pump 0:16:58.040 --> 0:17:01.160 or pipes, they might have only one or two vendors 0:17:01.200 --> 0:17:04.879 that they can rely on. So the idea here is 0:17:04.960 --> 0:17:10.040 by building the US merchant marine and the shipbuilding workforce, 0:17:10.440 --> 0:17:12.639 we're also going to help our naval shipbuilding. 0:17:13.520 --> 0:17:15.800 Well, this is actually just a good moment. Why don't 0:17:15.880 --> 0:17:19.280 you describe what give us the outline of the Ships 0:17:19.320 --> 0:17:22.560 for America Act. How much do you underspend, what does 0:17:22.600 --> 0:17:25.040 it hope to achieve? What would the US industry look 0:17:25.119 --> 0:17:27.200 like if all successfully implemented. 0:17:27.720 --> 0:17:31.000 Well, it's a three hundred page piece of legislation. 0:17:32.160 --> 0:17:35.920 It touches every aspect or nearly. 0:17:35.640 --> 0:17:38.800 Every aspect of the maritime industry. I guess I'll just 0:17:38.840 --> 0:17:41.560 start kind of in a random place here. Provide for 0:17:41.680 --> 0:17:45.800 a maritime Security Advisor within the White House who would 0:17:46.240 --> 0:17:50.560 lead an interagency maritime Security Board to make some whole 0:17:50.560 --> 0:17:54.720 of government strategic decisions on how to implement a national 0:17:54.760 --> 0:17:59.320 maritime strategy. It also establishes a Maritime Security Trust Fund 0:17:59.320 --> 0:18:04.200 that would rein asked duties and fees that are paid 0:18:04.200 --> 0:18:11.000 by the maritime industry into maritime security programs and infrastructure programs, 0:18:12.040 --> 0:18:14.359 with the goal here of having two hundred and fifty 0:18:15.280 --> 0:18:17.879 ocean going merchant vessels in ten years. 0:18:18.400 --> 0:18:21.360 We would create a strategic commercial fleet program. 0:18:22.080 --> 0:18:25.480 We would change or establish a rule making committee on 0:18:25.520 --> 0:18:29.720 commercial maritime regulations and standards, and then we would do 0:18:29.800 --> 0:18:33.800 things like requiring government funded cargo to move on US 0:18:33.880 --> 0:18:39.160 flag vessels and require a portion of the cargo imported 0:18:39.160 --> 0:18:41.959 from China to go on US flag vessels starting at 0:18:41.960 --> 0:18:46.960 a later time. There's tax credits, there's Title eleven Federal 0:18:47.000 --> 0:18:51.680 ship financing, there's shipbuilding financial incentive. 0:18:51.200 --> 0:18:52.679 Programs in the legislation. 0:18:53.640 --> 0:18:56.879 There's also a part of this it's about manufacturing and 0:18:56.920 --> 0:19:00.760 innovation and coming up with the next generation of ships 0:19:00.800 --> 0:19:04.439 and ship energy systems, and I could go on. 0:19:05.880 --> 0:19:08.840 Yeah, the bill in its official format is actually three 0:19:08.920 --> 0:19:11.560 hundred and forty four pages long, and I will confess 0:19:11.640 --> 0:19:12.959 I did not read all of it. 0:19:13.040 --> 0:19:13.800 Did you upload it? 0:19:15.000 --> 0:19:17.200 I did not. That's a good idea, Actually I did. 0:19:17.640 --> 0:19:20.560 One of the things I was wondering is, you know, 0:19:20.600 --> 0:19:24.520 this is kind of a Devil's advocate question, but a 0:19:24.560 --> 0:19:27.119 lot of the ACT, as you just outlined, is about 0:19:27.119 --> 0:19:31.600 creating incentives to build ships through things like tax credits 0:19:31.760 --> 0:19:36.480 or providing some subsidies for construction or training. Why can't 0:19:36.480 --> 0:19:39.760 the US government just fund ships directly? If ships are 0:19:39.840 --> 0:19:44.480 so important for national security and trade, why even try 0:19:44.520 --> 0:19:46.560 to leave it to private capital to build? 0:19:47.840 --> 0:19:50.119 Well, that's a good question. 0:19:50.160 --> 0:19:52.679 I mean, I guess that's what China does, right, They 0:19:52.960 --> 0:19:55.639 build them, you know, they put them out there on 0:19:55.680 --> 0:19:59.119 the oceans. They really belong to the Chinese government in 0:19:59.119 --> 0:20:03.679 a way. You know, we are a democracy, we're capitalist society. 0:20:03.920 --> 0:20:10.320 We believe in private markets and private ownership, and we 0:20:10.400 --> 0:20:13.760 believe in, you know, to some extent, maybe helping companies, 0:20:13.760 --> 0:20:16.840 but eventually getting them to the point where they're on 0:20:16.880 --> 0:20:20.800 their own. They're profitable, they're creating good paying jobs. These 0:20:20.840 --> 0:20:23.199 are jobs often that you can raise a family on, 0:20:23.320 --> 0:20:25.960 that do not require a four year degree. So these 0:20:25.960 --> 0:20:30.080 are you know, great you know jobs that are you know, 0:20:30.119 --> 0:20:32.719 provide an economic benefit not just to the people who 0:20:32.800 --> 0:20:33.400 work them, but. 0:20:33.320 --> 0:20:35.679 To our country, and they help us grow the economy. 0:20:36.160 --> 0:20:36.800 I don't think the. 0:20:36.800 --> 0:20:42.320 Government operating its own you know, fleet vessels to move 0:20:42.440 --> 0:20:47.119 commercial cargo, you know, makes a ton of sense, because 0:20:47.160 --> 0:20:50.080 this is this is an important part of our economy. 0:20:50.520 --> 0:20:54.040 It's deteriorated over the years. But you know, what you're 0:20:54.080 --> 0:20:58.240 suggesting would be really like a you know, wholesale pivot 0:20:58.280 --> 0:20:59.840 to government owned industry. 0:21:00.560 --> 0:21:02.080 Let me ask you another question. You know, we've done 0:21:02.119 --> 0:21:05.520 a lot on industrial policy in the past, and one 0:21:05.560 --> 0:21:12.920 of the preconditions or you know, industrial policy can fail easily, 0:21:12.960 --> 0:21:17.000 and you can have cronyism, and you can have companies 0:21:17.040 --> 0:21:20.639 overbuilding the government for mediocre products. And this is just 0:21:21.000 --> 0:21:23.919 one of the pitfalls of anytime there's a lot of 0:21:24.119 --> 0:21:26.960 public money going to something. But one way that this 0:21:27.040 --> 0:21:31.880 gets addressed historically in some markets is this idea of 0:21:32.440 --> 0:21:36.800 the domestic champion has to be competitive on the global market. 0:21:36.840 --> 0:21:39.080 And so if you're a car company or a chip 0:21:39.119 --> 0:21:42.680 company in China or something like. You know, you don't 0:21:42.680 --> 0:21:46.240 have any guaranteed buyers overseas because the chip maker is 0:21:46.280 --> 0:21:49.560 still competing with Texas Instruments or BYD is still competing 0:21:49.600 --> 0:21:53.120 with Tesla. What are the mechanisms that you have in 0:21:53.160 --> 0:21:56.880 place or that you envision to still have that sort 0:21:56.960 --> 0:22:00.640 of market discipline so to speak, so that yes, there 0:22:00.680 --> 0:22:03.520 is this public money going, but there is still this 0:22:03.680 --> 0:22:07.040 element that, yeah, we want the ships to be really 0:22:07.160 --> 0:22:12.360 good and competitive and competitively priced and to sort of win, 0:22:12.520 --> 0:22:14.440 so to speak, so that we know we're getting value 0:22:14.480 --> 0:22:15.040 from the spending. 0:22:15.680 --> 0:22:17.240 Well, yeah, let me take that. 0:22:17.920 --> 0:22:21.800 And frankly, this builds off of the previous question. First, 0:22:22.040 --> 0:22:25.440 I've learned a lot and frankly thought a fair amount 0:22:25.560 --> 0:22:28.760 about industrial policy in recent years through. 0:22:28.600 --> 0:22:29.440 The Chips Act. 0:22:30.600 --> 0:22:35.480 From a purely economic standpoint, there would be no difference 0:22:35.920 --> 0:22:41.960 when it comes to direct payments to grantee companies that 0:22:42.119 --> 0:22:46.879 are charged with building ships on behalf of both our 0:22:46.880 --> 0:22:53.920 commercial industry and for future national security reasons. But administratively 0:22:54.600 --> 0:22:59.400 you can cut down on any concerns over croniism or 0:22:59.480 --> 0:23:06.720 waste by having a neutral arbiter. And despite some anomalies 0:23:06.920 --> 0:23:11.240 over time. Our IRS is a pretty neutral arbiter. So 0:23:11.359 --> 0:23:17.480 when you are funding this shipbuilding initiative through the tax code, 0:23:17.600 --> 0:23:21.639 it does provide a neutral arbiter. Sometimes the downside to 0:23:21.720 --> 0:23:24.119 that approach is that you end up funding through the 0:23:24.200 --> 0:23:29.760 tax code more enterprises and certain enterprises the would otherwise fund. 0:23:29.800 --> 0:23:33.000 So there are trade offs when you make decisions about 0:23:33.040 --> 0:23:38.600 how you administer your industrial policy. That would be point one. 0:23:38.640 --> 0:23:44.560 Point two about establishing market discipline is very important. If 0:23:44.600 --> 0:23:49.240 you look at semiconductors, that market is incredibly distributed and 0:23:49.440 --> 0:23:53.000 ramified all across the world. We will see for any 0:23:53.000 --> 0:23:58.240 given semiconductor it going across international borders dozens and dozens 0:23:58.240 --> 0:24:02.679 of times before it becomes assembled component. In the case 0:24:03.000 --> 0:24:05.920 of ships, of course you're going to have components going 0:24:05.960 --> 0:24:09.680 in and out of the country some but it's less distributed, 0:24:10.560 --> 0:24:14.679 and it will be the job in the main of 0:24:14.760 --> 0:24:19.320 our diplomats and of our private enterprises to sell our 0:24:19.400 --> 0:24:23.200 ships into other markets. We need to open up other 0:24:23.359 --> 0:24:27.520 markets through trade policy, something I'm also an advocate of 0:24:27.560 --> 0:24:31.280 and will continue to argue for. In part, and this 0:24:31.359 --> 0:24:34.479 is a rarely mentioned dimension of trade policy, but one 0:24:34.520 --> 0:24:36.760 of the reasons we want to trade with the rest 0:24:36.760 --> 0:24:39.600 of the world is to enforce a certain efficiency and 0:24:39.680 --> 0:24:43.320 discipline on our own economy so that we will see 0:24:43.320 --> 0:24:47.560 a deployment of resources efficiently and we can grow faster 0:24:47.840 --> 0:24:51.480 and all become more wealthy. So I mean, that's how 0:24:51.520 --> 0:24:54.840 this will be accomplished. But what we have right now 0:24:55.880 --> 0:25:02.639 is we have a more concentrated shipbuilding industry in particular 0:25:02.680 --> 0:25:05.280 countries because they see not only the commercial but also 0:25:05.359 --> 0:25:10.800 the national security upside to excelling in shipbuilding. And it 0:25:10.840 --> 0:25:13.719 will take some work from our government to open up 0:25:13.760 --> 0:25:16.360 foreign markets for our ships down the road, so we're 0:25:16.359 --> 0:25:19.520