Identifying Pathways for U.S. Shipbuilding Cooperation with Northeast Asian Allies

The Issue

Military conflict in the Indo-Pacific would demand overwhelming U.S. naval power. Yet the shipbuilding sector faces capacity shortages, industrial base constraints, cost overruns, and delayed delivery, suggesting that Washington should explore alternative pathways for delivering naval capability. One approach is to enhance cooperation with close allies such as Japan and South Korea. Options for cooperation include allied participation in maintenance, repair, and overhaul (MRO); allied purchase and revitalization of U.S. shipyards; various methods of coproduction, including modular construction; and U.S. purchase of allied-built ships. Novel strategies that leverage the United States’ strong and unique network of allies and partners will require thoughtful implementation of industrial cooperation policy, which has historically been challenging. For the United States to strike the right balance between leaning on its allies and partners to alleviate its shipbuilding problems and investing in its own capabilities at home—for these approaches are not mutually exclusive—it should understand the implications of its various cooperative options with its allies.

Introduction

The 2022 National Security Strategy identifies China as the United States’ “pacing challenge,” and recent announcements by the Trump administration have reaffirmed this focus.¹ CIA Director John Ratcliffe said in April 2025 that “no adversary in the history of our nation has presented a more formidable challenge” than China.² Given the vastness of the Pacific theatre, its vital shipping lanes, and the many regional allies and partners depending on a persistent U.S. security presence, sea power is critical to the U.S. strategy for promoting a free and open Indo-Pacific and competing with China. However, the United States has long struggled with shipyard capacity as well as timely and cost-effective construction of naval vessels.³ Policies aimed at maintaining its shipbuilding industrial base have failed to yield a sector that keeps pace with those of potential adversaries.⁴ In April 2024, a 45-day review of the U.S. shipbuilding industrial base by the secretary of the Navy found that many of the Navy’s major shipbuilding programs were one to three years behind schedule.⁵

The lack of adequate naval shipbuilding capacity, as well as the moribund state of the U.S. commercial shipbuilding industry, significantly hinders the country’s ability to increase production of ships. U.S. workforce constraints, facilities limitations, and supply chain challenges have contributed to an inability to deliver necessary capabilities on schedule and at scale. At the same time, China’s share of global commercial and military shipbuilding continues to grow rapidly, accounting for 51 percent of global ship deliveries in 2023, with current trends pointing toward an eventual shift in the maritime balance of power.⁶

In response to this shipbuilding crisis, new modalities are needed, particularly those that lean on the United States’ allies. The U.S. Navy could turn to Japan and South Korea for industrial cooperation to scale warship production, which would represent an important shift in its naval acquisition policy and broader industrial partnerships with allies. South Korea and Japan are the world’s second and third largest producers of ships, respectively, and could contribute significantly to U.S. warship production, whether overseas or at U.S. shipyards.⁷ Carlos del Toro, the secretary of the Navy under the Biden administration, was forward-leaning in considering the possibility of looking abroad to reinvigorate the U.S. shipbuilding industry and maritime production, and recent comments from the Trump administration appear to indicate it is also favorable to rethinking approaches to increase capacity.⁸ An April 2025 executive order entitled “Restoring America's Maritime Dominance” explicitly discusses the possibility of shipbuilders in allied nations undertaking capital investment to help strengthen the shipbuilding capacity of the United States.⁹ However, there is currently a lack of rigorous and public analyses on the potential advantages and challenges of the several ways in which U.S. industry could cooperate with allies on shipbuilding.

There are multiple approaches that United States could take to leverage allied capacity. These include using allied MRO capabilities to free up space in U.S. shipyards, enabling allied purchase and revitalization of U.S. shipyards, working with allied shipyards to coproduce ships through modular construction methods, or purchasing ships directly from allied yards. All these pathways involve trade-offs between time, cost, regulatory and political hurdles, as well as other variables of interest to policymakers.

Each approach to international shipbuilding cooperation comes with its own benefits and drawbacks. These pathways are not mutually exclusive, and the U.S. government may also choose to pursue a combination of pathways; if so, it should also consider whether and how cooperation methods affect each other when pursued simultaneously or sequentially. Such an analysis should take into account the possibility that pathways impact the same underlying factors, such as labor availability or overall demand, as well as potential path dependencies in industrial planning, wherein funding one shipyard approach may require the conversion or use of limited yard space.

While these approaches could each serve as useful measures to enhance naval capability, they would each affect the long-term health of the U.S. shipbuilding industry. Determining the nature of this impact—­­­­­be it positive, negative, or a combination of the two, with variation across different subsectors—is critical for policymakers as they balance meeting the imminent threat from China with the strategic need to ensure the long-term strength of the U.S. shipbuilding industrial base.

Background and Analysis

The Strategic Situation

Sea control will likely play a key role in any potential conflict with China given the vastness of the Pacific Ocean and the location of flashpoint areas such as Taiwan, the South China Sea, the Korean Peninsula, and Guam.¹⁰ A series of wargames conducted at CSIS in 2024 indicated that in the case of a conflict over Taiwan, the United States would likely incur significant losses of ships, submarines, and planes, including naval aviation assets.¹¹ While the U.S. Navy retains a qualitative and tonnage edge over China’s People’s Liberation Army Navy (PLAN), the pace of PLAN construction greatly exceeds that of the U.S. Navy.¹² Chinese shipbuilding, both naval and commercial, has been thriving. Due to substantial industrial subsidies, China’s shipyards have gone from producing 5 percent of the world’s commercial ships in 1999 to over 50 percent in 2025, and many of these shipyards embrace the Chinese Communist Party’s military-civil fusion strategy and produce warships for the Navy.¹³

In a protracted great power conflict that leads to significant losses, the United States would have to rapidly repair and replace its ships and invest in new vessels to maintain control of sea lines of communication. Given the well-documented struggles of U.S. shipbuilding, the United States should explore supplementing domestic production with other options for sustaining and growing its naval might. Cooperation with shipbuilding heavyweights South Korea and Japan offers one possible approach to solving this issue.

The United States’ Shipbuilding Challenge

The U.S. naval shipbuilding sector faces critical hurdles. The most commonly cited are skilled-workforce constraints, antiquated shipyard infrastructure and equipment, insufficient use of new technology including digital tools and modular construction techniques, and legacy organizational structures.¹⁴ Analysts point to issues in U.S. design capacity, hyper-specialization of military shipyards that holds back scalability, and a 20-year backlog of maintenance and repairs that constrains the Navy’s ability to practice and train with its existing ships.¹⁵ Some of these issues stem from the closure of U.S. shipyards during the 1990s, which hindered the domestic production of ships and left significant gaps that in industrial readiness.¹⁶ The reasons behind the U.S. shipbuilding challenge are the subject of a substantial and growing body of literature, including recent analyses from policymakers such as Senator Jack Reed (D-RI) and former Senator Jim Inhofe (R-OK); public institutions such as the Government Accountability Office (GAO) and the Congressional Research Service; and various think tanks.¹⁷

A near universally agreed-upon challenge for the U.S. shipbuilding industry is the need for a larger skilled workforce. A demographic shift away from manufacturing careers, coupled with the retirement of workers with shipbuilding skills, has created recruitment and retention issues, resulting in an inexperienced workforce that lacks proficiency in skilled trades and requires increased supervision to avoid quality problems.¹⁸ A March 2025 Congressional Research Service report found that part of the difficulty in recruiting and retaining new workers lies in the relatively low wages and benefits of shipbuilding jobs. While such jobs still pay better than service and retail, the differential in wages has narrowed, and the latter are less likely to involve risk of serious injury, are often located in areas with easier commutes, and are generally done in cleaner indoor settings. Although increasing total wages for shipbuilding workers could reestablish a large differential in wages and benefits, it would also substantially increase ship procurement costs.¹⁹

Simultaneously, shipbuilders also struggle to acquire land for expanding existing shipyard facilities, building new shipyards, or providing housing for workers near shipyards. In 1988, the first Base Realignment and Closure (BRAC) process prompted the selling of land access along coastlines, resulting in the closure of four naval shipyards in the 1990s.²⁰ In some places, land could theoretically be repurchased, but at a steep price, given that it has since been put to new productive uses. Greenfield development along coastlines is generally difficult, as there are few appropriate locations that are both unused and affordable to buy and build on.²¹ Even when land itself is inexpensive, shipyards can face high costs when developing it—whether for industrial use or worker housing—due to the potential for industrial contamination, which requires expensive remediation.²²

For many shipyards around the world, civilian shipbuilding is a critical supporter of naval construction due to the scaling benefits of sharing skillsets and material inputs, as well as the smoothing of demand over time.²³ The United States has rarely been a world-leading constructor of civilian vessels, except during and immediately after World Wars I and II.²⁴ Consequently, maritime historians argue that the United States’ strategic culture is split between alignment with territorial land empires such as Germany and true sea power states such as the United Kingdom—and therefore is less likely to maintain a consistent engagement with the sea via commercial shipbuilding the way a fully maritime state would.²⁵ This lack of persistent cultural and strategic interest is reflected in the poor state of U.S. shipbuilding today relative to the rest of the world.²⁶

While analysts debate the root cause of the United States’ shipbuilding issues, the U.S. Navy’s demand is only increasing. Its requested shipbuilding budget has risen 38 percent from FY 2020 to FY 2024, according to the Navy’s 2024 plan.²⁷ The disconnect between supply and demand of shipbuilding capacity is a strategic problem for the United States as it faces stiffer global competition from China.

U.S. Policy Options

In response to these clear challenges in the face of growing strategic demand, the United States has several possible options, some of which have engaged leaders’ interest and support. Senior political figures such as Senator Mark Kelly (D-AZ) and former National Security Advisor (and former Congressman) Mike Waltz (R-FL) have been at the forefront of efforts to revitalize shipbuilding via domestic investments.²⁸ Their “Congressional Guidance for a National Maritime Strategy,” published alongside other members of Congress, proposes both incentives for building ships in the United States and carrying cargo on U.S.-flagged commercial vessels.²⁹ This congressional effort, in the form of the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) for America Act of 2025, advances a domestic approach focused on revitalizing shipbuilding within the United States.³⁰

The SHIPS for America Act, like other current efforts, focuses on generous subsidies and legal privileges for the U.S. shipbuilding industry. This domestic approach draws upon a wide and deep body of literature that aims to diagnose the issues facing domestic shipbuilding; it has many political and intellectual champions within the United States, including from powerful industry groups that have been active since the 1930s.³¹

Some of the most promising—yet less comprehensively studied or advocated—policy options involve the United States partnering with Asian allies. Statements from officials in the Trump administration, such as Secretary of Defense Pete Hegseth, as well as from the Biden administration, including former Secretary of the Navy Carlos Del Toro and former Ambassador to Japan Rahm Emanuel, suggest that U.S. policymakers are interested in exploring cooperating with South Korea and Japan to overcome challenges to the naval shipbuilding industry.³² Even the SHIPS for America Act’s explicitly domestic strategy includes references to assistance from international actors, especially treaty allies such as South Korea and Japan. The associated congressional guidance notes that the United States should “seek mutually beneficial relationships with treaty allies, exploring comparative advantages to lower cost, time, and the complexity of rebuilding America’s domestic shipping and shipbuilding industry.”³³ Indeed, analysts have proposed a variety of international cooperation options, from realistic ones grounded in statements by Navy and political leaders to more theoretical and creative options.³⁴

Why Cooperate Internationally? Examining Allied Strength in Shipbuilding

Unlike the United States, South Korea and Japan have impressive shipbuilding industries, making them valuable potential partners. While China builds more ships overall due to its greater number of shipyards, South Korean and Japanese shipyards continue to lead the world in contemporary productivity due to technical advancements. However, China is rapidly closing the productivity gap.³⁵

South Korea rose as a commercial shipbuilding power between 1970 and 1990 as significant government subsidies, technological advancements, and favorable economic conditions such as low labor costs enabled it to outpace U.S. and European industry during a challenging period for the global shipbuilding market.³⁶ South Korea has retained its cost-competitive edge even as its labor has grown more expensive alongside the development of its economy. Advancements in automation and control systems within its shipbuilding industry have shifted the sector from labor-intensive to technology-driven.³⁷

Japanese shipbuilders maintain a strong market presence, building on their long period of dominance that began after World War II.³⁸ The country nevertheless faces challenges in competing with South Korean and Chinese shipyards that excel in increasingly high-value and rapid ship construction.³⁹ Japan’s focus on high quality standards and adoption of automation could be enhanced to meet military demands, especially with increased collaboration across maritime technology sectors. Much like South Korea, Japan has a strong focus on automation in its shipbuilding sector for both simple vessels and highly complex naval ships.⁴⁰

Despite the appeal of working with allied shipbuilders, U.S. policymakers should also consider the impact that international approaches to shipbuilding may have on the health of the U.S. shipbuilding industry. Some pathways explored below, such as international companies purchasing U.S. facilities and incorporating their advanced production techniques, have the potential to boost domestic productivity and competitiveness. Other approaches could undermine the industry’s long-term health, particularly if they direct production to foreign shipyards at the cost of domestic order books—which could have downstream impacts on labor force retention and the capacity of U.S. shipbuilding in the long run.

South Korea and Japan are not the only U.S.-aligned countries with innovative and effective shipbuilding industries. Other nations may have much to offer the United States, particularly regarding cost-effective warship construction. However, South Korea and Japan are logical starting points for possible cooperation owing not only to their dominance of the commercial shipbuilding market, which gives them significant scale advantage on cost, but also their history of close industrial cooperation with the United States on military production and sustainment.
 

Possible Pathways for International Cooperation with U.S. Allies

This study identifies several approaches for international cooperation on naval shipbuilding with South Korea and Japan, including:

• allied maintenance, repair, and overhaul of U.S. ships to free up U.S. shipyard capacity;
• allied acquisition of U.S. shipyards to revitalize their production capability;
• joint distributed production of warships via modular construction methods; and
• U.S. purchase of existing allied warship designs from allied shipyards.
   

Although there are additional avenues for cooperation, these four pathways have emerged as the most likely based on a survey of public discourse, existing U.S. government policies such as the Regional Sustainment Framework, and CSIS interviews with U.S. and allied industry, as well as with government officials, over the past year.⁴¹ Other policy options outside the scope of these pathways, and this report, have been floated, including various combinations or divisions of the above ideas, as well as proposals that depend on outside parties, such as the global naval export market.

The following sections discuss these possible pathways for cooperation in greater detail. They review the extant literature relevant to each pathway and describe the most viable forms of cooperation within it, as there is often more than one form of activity that the pathway could take.

International Cooperation on U.S. Maintenance, Repair, and Overhaul

MRO activities are essential for ensuring a fleet’s operational readiness and long-term availability for action. MRO activities range from routine inspections and maintenance actions (for example, applying surface coatings) to major service life extensions or refits of weapons systems.⁴² Robust MRO capacity enables a nation to maintain combat power during prolonged conflicts and ensure cost-effective and timely servicing of ships during peacetime.

However, MRO operations in the United States are under severe stress. Due to shipyard capacity, the U.S. Navy is estimated to be 20 years behind on maintenance work; this has led to the decommissioning of viable ships as a result of its inability to conduct core MRO, modernization, and service-life extensions.⁴³ A February 2025 GAO report identified a lack of infrastructure and workforce capacity as the main obstacle to ship repairs, resulting in an inability to perform unplanned work such as emergency repairs. Even if hiring and retention efforts for skilled labor are successful in ameliorating the widespread workforce shortages, new employees will still be inexperienced, which will likely result in reduced efficiency in the short term.⁴⁴

The report also notes that workforce and infrastructure capacity is dependent on “fleet concentration areas,” or places where ships are homeported and undergo repair at domestic facilities. The GAO identified the five such areas that conduct major repair: one each in California, Florida, Hawaii, Virginia, and Washington. If slated repair work exceeds the capacity of one fleet concentration area, it may have to be done at another location.⁴⁵ To address these physical capacity constraints, two out of seven shipbuilders interviewed for the GAO study have outsourced work to their suppliers, with “plans to expand the volume of material they are outsourcing.” Another shipbuilder has plans to use outsourcing, and an additional one is considering outsourcing if it is awarded a new contract by the Navy. While outsourcing can reduce physical constraints at shipyards, suppliers often “have their own workforce and infrastructure problems.”⁴⁶

Because of these challenges, enabling greater use of allied MRO in the Indo-Pacific region is critical for U.S. strategic goals and those of Japan and South Korea.⁴⁷ Allied MRO could help the United States by strengthening supply chains, leveraging the strategic positioning of allied ports, and expanding MRO capacity. Some scholars believe the United States could solve its shipyard dilemma by empowering domestic yards to focus on facilities and process modernization by having allied yards take on maintenance work.⁴⁸

The United States has already begun laying the groundwork for greater MRO cooperation across the Indo-Pacific through the Regional Sustainment Framework.⁴⁹ One of the core goals of the framework is to leverage existing regional MRO capacity within partner nations, particularly for shared weapons systems operated by allies and partners.⁵⁰ Close MRO cooperation with Indo-Pacific treaty allies has already been pursued in Australia, where the United States has begun an initiative to advance combined regional MRO solutions in support of the framework.⁵¹ Another venue for cooperation is the U.S.-Japan Defense Industrial Cooperation, Acquisition, and Sustainment (DICAS) Forum, which aims to accelerate joint development and sustainment of defense equipment. DICAS oversees multiple working groups, including the Ship Repair Working Group, which seeks to identify opportunities and challenges for U.S. naval ships to be maintained by Japanese shipyards.⁵²

MRO cooperation with South Korea and Japan is hardly new. The U.S. Navy has been collaborating with Japanese industry on MRO since the end of World War II, with NIPPI beginning to service assets in the 1950s.⁵³ In 2019, Mitsubishi Heavy Industries (MHI) conducted maintenance on the USS Milius, an Arleigh Burke–class guided missile destroyer, and signaled their desire for more contracts with the U.S. Navy.⁵⁴ In 2024, U.S. Ambassador to Japan Rahm Emanuel announced plans to build on the 2019 maintenance collaboration with MHI, saying that the U.S. Navy would send some of its vessels to Japanese shipyards for MRO.⁵⁵ Japanese companies have also performed MRO activities on some U.S. auxiliary vessels.⁵⁶ Similarly, in August 2024 South Korean naval shipbuilder Hanwha Ocean received their first MRO contract with the U.S. Navy to provide services to one of their cargo and ammunition ships, the USNS Wally Schirra, which has since been completed.⁵⁷ In November 2024, Hanwha Ocean received another contract to perform MRO services on the USNS Yukon, a replenishment oiler.⁵⁸ Another South Korean shipbuilder, HD Hyundai, signed a Maintenance and Ship Repair Agreement (MSRA) with the U.S. Navy, which qualifies them to bid for maintenance projects for U.S. combat and support ships.⁵⁹

However, some existing literature highlights that shifting MRO work to foreign yards could have negative economic consequences for the U.S. ship-repair and shipbuilding sector, namely the potential loss of business.⁶⁰ Other sources indicate that certain parts of MRO operations, such as routine maintenance, constitute only a limited part of shipyard economies; as such, shifting some MRO operations abroad is unlikely to damage the U.S. shipbuilding industry and broader economy.⁶¹ Nevertheless, naval MRO activities between World Wars I and II were a source of stability for cash-strapped shipyards that were otherwise out of work—even if these activities only constituted 0.3 percent of the value of U.S. private shipyards’ total commercial and naval work from 1920–39.⁶²

This pathway requires close study to ascertain its potential value to the U.S. Navy, especially in terms of how much it may free up new production capacity in the United States and how offshoring these small but routine (and therefore valuable for long-term financial stability) contracts to U.S. allies may affect the domestic shipbuilding industry. A critical factor in determining the viability of this approach will be its anticipated ability to create new shipbuilding capacity—as the facilities, machinery, and skilled workforce used in MRO operations are not necessarily the same as for shipbuilding and may require substantial time and money to switch. For U.S. allies and partners, the economic appeal of this pathway will depend on the potential magnitude of the market as foreign shipbuilders consider whether to dedicate existing facilities to U.S. naval MRO, expand capacity to support U.S. Navy ships in their home country, or expand capacity in third countries such as the Philippines.⁶³

Allied Acquisition of U.S. Shipyards: Tech Transfer and Productivity Improvements

Allied companies’ acquisition of U.S. shipyards offers another approach for Japanese and South Korean shipbuilders to support U.S. shipbuilding via entering the U.S. market. The goal would be for the purchasers to impart the home nation’s shipbuilding expertise. The foreign company would need to set up a U.S. subsidiary that can prove it is not under foreign ownership, control, or influence—meaning it qualifies as a U.S. company for both Jones Act considerations and “Buy America” clauses in military contracting.⁶⁴ In a relevant example, Hanwha Ocean completed its purchase of Philly Shipyard in 2024, having received the necessary regulatory approval.⁶⁵

There is not just one way for international shipbuilders to become involved in the U.S. domestic shipbuilding market. Through reviews of the literature, qualitative research, and interviews with industry over the past nine months, the following have emerged as possible sub-pathways:

• international purchase of existing operational U.S. military shipyards;
• international purchase and renovation of defunct or nonmilitary U.S. shipyards;
• creation of new government-owned, commercially operated (GOCO) U.S. shipyards with foreign shipbuilders considered in the operator bidding pool; and
• creation of a joint venture or consortium between U.S. and international industry to produce ships within an existing U.S. shipyard.
   

The key question regarding international acquisition of U.S. shipyards in any of these sub-pathways is whether new ownership can improve shipyard performance. Given that the U.S. workforce and material input costs will largely remain unchanged, the key theorized drivers of improvement would be altered management practices, possible training of U.S. shipyard workforces by experts from shipyards in allied countries, and technology transfer of more advanced foreign shipbuilding techniques to the United States, as well as the accompanying capital infusion required to implement those new techniques.⁶⁶ Some of these methods have been publicly discussed by officials from Hanwha as ways to improve their newly acquired Philadelphia yard.⁶⁷ These sub-pathways are not mutually exclusive, and selecting one for a given situation would depend on both local conditions and an assessment of how its particulars would facilitate—or not—productivity gains in general.

Technology transfer is difficult to catalyze and manage properly.⁶⁸ The United States’ experience managing military technology transfer—especially through the Department of Defense, where national competitiveness and security are paramount concerns—has overwhelmingly been as the provider, rather than the recipient.⁶⁹ This lack of DOD experience may be a complication for this pathway, necessitating further close study so policymakers and implementers are fully aware of potential hurdles and best practices.

A limited literature supports the possible beneficial returns of technology transfer from advanced shipbuilding nations like Japan to companies in the United States. One 1987 study examined Japan’s Ishikawajima-Harima Heavy Industries’ (IHI) technology transfer efforts to U.S. shipbuilders, which built on IHI’s advanced techniques, such as block construction, process lane systems, and a strong emphasis on material management and design standardization. It found that IHI was able to improve productivity, but could not bring the U.S. shipyards up to Japanese standards.⁷⁰ More recent comprehensive studies are lacking, however, providing an opening for scholars to contribute to the literature on the possible returns and tradeoffs of technology transfer to U.S. shipbuilders.

This pathway has been pursued in recent history. Italian shipbuilder Fincantieri purchased the Wisconsin-based Marinette Marine shipyard in 2009, with Lockheed Martin as a minority owner.⁷¹ The new company won the competition to build the Constellation-class guided missile frigate in 2020, although construction setbacks, including workforce limitations and requirements creep, have contributed to late delivery of the first-in-class ship.⁷² Austal, an Australian shipbuilder, started operations in Alabama in 1999 and began to expand rapidly in 2005 after winning a contract to design the Independence-variant Littoral Combat Ship for the U.S. Navy.⁷³ Foreign shipbuilder acquisition in these cases has brought in new investment and modernization efforts. Fincantieri has invested over $300 million in its yards in Wisconsin.⁷⁴ It also has leased new yard space in an existing Florida shipyard near Commodores Point in Jacksonville, and announced plans to invest $30 million into improvements and modernization there to support its sustainment and repair work.⁷⁵

These examples of international acquisition offer some insight into the opportunities and challenges of foreign ownership that could be applied to future cooperation with South Korea and Japan. The benefits of foreign ownership are clear. Foreign parent firms with commercial shipbuilding enterprises—a rarity in the United States—can bring the energy, expertise, and innovative capabilities of the advanced commercial market to U.S. shipyards.⁷⁶ For example, these shipbuilders often use more robotics and automation in processes such as panel making than U.S. defense shipyards do, which can reduce strains on a depleted workforce and improve efficiency.⁷⁷ Foreign ownership by large shipbuilders can also enable buying certain inputs in bulk, especially if they are not exclusively military in nature. At a minimum, parent firms can help provide information and negotiation power to their U.S. subsidiaries as they buy components for ships, contributing to lower costs.⁷⁸

Regulatory barriers such as complying with Committee on Foreign Investment in the United States (CFIUS) and Foreign Ownership, Control, or Influence (FOCI) mitigation are unlikely to pose major barriers provided there is government support. However, International Traffic in Arms Regulations (ITAR) are likely to pose challenges. Ship designs are controlled by ITAR, down to the nonmilitary design elements that could benefit from foreign owners’ commercial expertise, including galley and berth plans.⁷⁹ Even visits by experts from potential parent companies can involve ITAR, and long-term residency permits to allow foreign expertise to benefit U.S. yards can be difficult to obtain. A further complication is that U.S. Navy standards and procedures are unique, and communicating these requirements to foreign parent firms can require an additional ITAR waiver, making it more cumbersome for the U.S. shipyard to benefit from foreign expertise.⁸⁰

Modularity in Shipbuilding via Distributed Construction

Modularity is part of the advanced shipbuilding approaches employed by South Korean and Japanese shipbuilders. For commercial shipbuilding of massive cargo and tanker ships, it is analogous to taking 250–300 modules manufactured in workshops and assembling them like bricks in a drydock.⁸¹ For this report, “modularity” in shipbuilding refers to two separate but related methods, both of which have the potential to improve U.S. shipbuilding capacity.⁸² The first is advanced outfitting, or the construction of a ship by assembling pre-furnished modules, such as horizontally and vertically joining sections of a ship. The other method is the use of modular systems, or the integration of various components—from weapons systems to power plants—onto a hull using common standards for key interfaces, enabling different contractors to be involved in the manufacture of the ship and the system.⁸³

Modularity is a key enabler of the distributed approaches that could bring in both international shipyards and U.S. subsidiaries of international firms.⁸⁴ In the international context, therefore, possible complementary pathways for the United States to work with its allies include:

• a business-to business distribution system in which U.S. shipyards subcontract or enter joint ventures to assemble ships from complete, pre-furnished hull modules and systems built by the United States and its allies;
• a government-furnished equipment system in which the U.S. Navy procures U.S.- and allied-built hull modules and systems directly and provides them to U.S shipyards; and
• a system assembly approach in which U.S. shipyards integrate modular systems (such as weapons and propulsion systems) onto pre-built, complete ship hulls from South Korea and Japan.
   

Each form of modular cooperation involves its own advantages and challenges. In general, the literature on the role of modularity in shipbuilding is overwhelmingly positive, with many studies highlighting how flexible and modular designs could reduce costs, enhance international cooperation, and support modernization and adaptability. Rains, for example, highlights the benefits of the potential reduction in ship size, while Malone and Rubeša, Fafandjel, and Kolić emphasize pre-outfitting in modules in workshops to minimize the work that must be done in dry docks.⁸⁵

In particular, three types each of modularity and flexibility are identified as having potential for the modernization and adaptability of the U.S. Navy. For modularity, these include common modules, self-contained modules, and modular installations. For flexibility, types with potential include ship infrastructure, additional space, and additional ship services.⁸⁶ The U.S. Navy could additionally benefit from a more optimized and comprehensive approach to modularity, for example by integrating standardized components and standardized weapons systems into a collection of ready hull designs.⁸⁷

Studies of recent shared-build warship programs in the United States, France, and the United Kingdom identify risk reduction areas, key costs, and potential benefits of international modular shared-build programs. These studies highlight the conditions and circumstances under which multi-shipyard, modular-build strategies can be adopted.⁸⁸ In addition, the works of Friedman, Lombardi, and Rudd, who outline recent challenges faced by the United Kingdom with joint shipbuilding, become particularly useful for understanding how the United States might leverage international partnerships to fill in its aforementioned gaps in production.⁸⁹

One international shipbuilder thought it could potentially subcontract to U.S. shipbuilders to provide either modules produced in a U.S. subsidiary yard or generators built in other inland facilities.⁹⁰ The business-to-business path was seen as a low-margin but nevertheless appealing opportunity to generate revenue and build trust with other shipbuilders who might be otherwise inclined to see new entrants primarily as competition.⁹¹ Modularity, referred to as “federated shipbuilding” or “nation as a shipyard,” has also been proposed as a solution to domestic U.S. shipbuilding constraints.⁹² If these approaches are adopted, allied firms could plug into these domestic modular approaches as suppliers, leveraging workforces and materials not just in the inland United States but across allied nations as well.

Skeptics of modularity, however, point to inefficiencies in the field that can counterintuitively lead to higher procurement costs and delayed timelines. This is due to the high degree of skill that complete modularity requires and is evidenced by the case of the U.S. Littoral Combat Ship, where design for mission modularity is one of many contributors to the program’s high cost and other challenges.⁹³ As an additional challenge, some of the efficiency of high-productivity shipyards comes from the equipment they employ to move the largest of modules, so additional capital investments may be required for some U.S. producers to take advantage of offsite module production, particularly across the long distances involved.

U.S. Purchase of Ships from Allied Yards

The final pathway identified by this work is that of the U.S. Navy purchasing ships that are produced in allied yards. There are numerous sub-pathways for this form of cooperation, including:

• allied yards building licensed U.S. designs;
• allied yards building a new codeveloped design; and
• the United States buying allied-built and allied-designed ships.
   

However, the existing literature on such approaches is sparse due to the limited political support for this idea throughout U.S. shipbuilding history. The U.S. has a long history of protectionist policies towards its shipbuilding industry, most often characterized by the Jones Act, a law designed to ensure that cargo being shipped within the United States is aboard U.S.-built, -owned, -registered, and -crewed vessels.⁹⁴ These same protectionist tendencies apply to naval shipbuilding, and many on the Hill and in the Navy may be reluctant to see U.S. naval ships be built abroad.

This is perhaps the most difficult and unlikely pathway explored in this paper. For instance, although reusing the existing designs for foreign ships would likely offer the most cost effective and rapid solution to at-sea capacity gaps, these ships might not meet the U.S. Navy’s specific operational requirements, including full interoperability with U.S. systems.⁹⁵ Past experience in trying to adapt foreign designs shows that the U.S. Navy’s tendency to “gold plate” design requirements can cause scope creep, raising costs and time frames.⁹⁶ Moreover, its standards and procedures are not shared by other navies, requiring a major rework of allied designs to be acceptable for domestic use. The Navy’s attempt to have the existing Italian design of the European multipurpose frigate (FREMM) quickly converted into the U.S. Navy’s Constellation class, for example, has resulted in a final U.S. design that reportedly bears less than a 15 percent similarity to the FREMM, down from a planned 85 percent, at great cost of time and money to the United States government.⁹⁷ Some allied designs are similar to existing U.S. designs, such as South Korea’s KDX-III Batch I Aegis destroyers, which are said to be based on the DDG-51 Arleigh Burke–class of the U.S. Navy.⁹⁸ Use of these mostly shared designs could potentially ease the compatibility issue. Alternatively, cooperation on building fleet auxiliaries or support ships may encounter less difficulties with requirements and political sensitivity.

A new codeveloped design could take advantage of partner shipbuilding expertise to incorporate manufacturability in the design phase. However, designing new ships is a notoriously hard and slow process. Modern warships are incredibly complex machines; even a single amphibious assault ship contains 4.7 million parts from over 700 companies.⁹⁹ The lengthy process of designing and building new destroyers means this approach would have a long time horizon, making it susceptible to changing political winds. While some experts float this option, linking it to potential export sales as a way to spread out production costs across more customers, its technical and political challenges are daunting.

The approach of allies building U.S. ships alleviates many of these considerations but raises new challenges of its own. Designs will need to be licensed to allied yards, which will take time to negotiate, as will securing funding for intellectual property rights. It can take two years for even a comparatively expedited technical-assistance agreement to address export controls and the release of closely held U.S. weapons-system designs.¹⁰⁰ However, the United States has managed to share its advanced capabilities with Korean shipbuilders before. For instance, HD Hyundai recently delivered the Republica of Korea’s Jeongjo the Great to South Korean Navy; it is the first of the new KDX III Batch II Aegis destroyers and the fourth domestically designed and built South Korean Navy ship to incorporate the U.S. Aegis system.¹⁰¹

These alternative approaches can all be used to build warfighting capability through the delivery of additional ships. It remains unclear, however, whether and how they might address core concerns about the capability and capacity of the U.S. shipbuilding industrial base—a broader strategic issue that needs to form part of any consideration of an alternative approach. While the United States has some partnerships with other nations on specific programs, relying on allies as a complete solution to capability gaps would be unprecedented. Moreover, given South Korea’s and Japan’s location close to China, U.S. policymakers should also consider the possibility of damage to their shipyards during any active conflict. Finally, the health of the U.S. shipbuilding industry is not only a national security concern but also a political one given the well-documented impact of shipyards on their local economies and the interest of Congress in ensuring domestic capability.¹⁰² 
 

Implications for Policy

It is no secret that the United States has a shipbuilding problem. The U.S. policy community has long studied this issue and has produced a strong body of work exploring a wide range of possible domestic solutions. However, a continual lack of progress within the United States, the increasingly pressing threat of a naval war with China, and recent shifts in political support for more creative solutions means a window of opportunity is opening for the Navy to consider adopting novel strategies that leverage the United States’ strong and unique network of allies and partners. To date, policymakers lack a clear and comprehensive analysis of the options for industrial maritime cooperation.

Security cooperation policy is difficult to get right, and industrial cooperation policy can be even harder due to its inherent complexity. For the United States to strike the right balance between leaning on its allies and partners to alleviate its shipbuilding problems and investing in its own capabilities at home, it will need to properly understand the advantages and challenges inherent to each kind of international cooperative activity in isolation and, critically, as they relate to one another. Recent history is littered with attempts at international cooperation that were partially or completely stymied by their starting conditions. For example, Constellation-class ships face three years of delays due to alterations to meet U.S. Navy requirements that lowered commonality with FREMM designs from 85 to 15 percent; both Australia and the United Kingdom have ratified technology-control treaties that go largely unused because industry is not confident in the regulatory implementation; and the F-22 fighter jet ended production rather than being exported because there were no initial investments in addressing technology-release concerns and the systems proved too expensive to retrofit.¹⁰³ Policymakers pursuing any of the pathways would greatly benefit from understanding the prerequisites for success as early in the process as possible.

As the Department of Defense will likely need to come to a decision on this key issue in the coming years, this paper aims to support policymakers as they grapple with these difficult but critical decisions. Future work will evaluate these pathways using various assessments of interest to policymakers, including time to implement, cost to government, economic viability for industry, political and regulatory viability, and creation of new U.S. shipbuilding capacity.

Henry H. Carroll is a research associate with the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies (CSIS). Cynthia R. Cook is director of the Defense-Industrial Initiatives Group and a senior fellow in the Defense and Security Department at the Center for Strategic and International Studies.

This research was made possible by the support of the Smith Richardson Foundation.

Please consult the PDF for references.