The market niche for U.S.-flag international carriers will decline dramatically in coming years as the U.S. military global footprint is reduced. There have been sizable reductions in forces in Germany and Korea, with more possible; there are major structural changes under way in Japan; there is an ongoing and apparently total withdrawal from Iraq by the end of 2011; and there is great uncertainty concerning NATO’s future mission in Afghanistan.
Altogether, there could be upward of a 50 percent reduction in global U.S. military traffic by 2015. This is significant for a U.S.-flag shipping industry that basically is sized over the long term according to the dimensions of the cargo preference markets. Of course, all forecasts are subject to geopolitical developments.
Also, there likely will be new challenges to U.S. government maritime support programs such as the Maritime Security Program and cargo preference, driven by the rationale to reduce government spending, and deficits. The U.S.-flag international fleet has proved remarkably reliable and extremely cost effective over several years, as it has carried the great majority of military traffic to Iraq and Afghanistan. The MSP and business model has been shown to be less costly, by a factor of 10 to one, than a government-owned, -maintained and -managed fleet. Yet, the case to maintain a U.S.-flag international fleet will have to be made again.
Between now and 2015, these developments are likely to drive a considerable downsizing of the U.S.-flag shipping industry.