【Cooperation between European and Indo-Pacific Powers in the US alliance system project：Policy Paper Vol. 3】
How NATO-IP4 Cooperation Can Secure Sealift Capacity and Industrial Resilience

Publication of Policy Papers for the SPF Project “Cooperation Between European and Indo-Pacific Powers in the U.S. Alliance System”

　IINA (International Information Network Analysis) hosts a series of policy papers featuring analyses and insights from U.S., Japanese, South Korean, Australian and European experts, which discuss constructive cooperation among U.S. allies in Europe and the Indo-Pacific. The series aims to provide readers with valuable perspectives on the future of NATO-IP4 (Indo-Pacific 4) cooperation for regional and global security.

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The conflict in Ukraine has demonstrated the importance of land-based logistics, which should remind policymakers about the importance of sea-based logistics. Without the ability to resupply a conflict zone with necessities such as food, ammunition, new weapons, and energy, military forces cannot sustain a conflict for long. In a 2023 Hudson Institute report, Michael Roberts estimates that more than 200 cargo ships—including roll-on/roll-off vessels (ro-ros), ferries, product tankers, and container ships—are necessary to manage and win a confrontation with China in the Western Pacific.[1] A European confrontation with Russia would likely involve a similar sealift challenge between North America and Europe. Meanwhile, the United States and its allies do not have the sealift capacity and infrastructure—including ports and other facilities—they need to transport sufficient forces and capabilities across the Atlantic to defend a European NATO country. This lack of sufficient sealift capacity and infrastructure undermines the US commitment to NATO’s Article 5.

During the past decade, Chinese shipyards have become leaders in commercial shipbuilding. They are competitive in building all commercial ship types relevant to military sealift—container ships, product tankers, and ro-ros. China has outproduced Europe and the United States, winning large market shares from Japanese and South Korean shipbuilders. China has also used the ecosystem developed for commercial shipbuilding to build a very capable and expanding navy. The Chinese strategy of integrated civil-military R&D means that, in a conflict, China’s navy will likely have access to vast sealift capacity from state-owned operators. A recent report from Institut Montaigne points out that Beijing uses the Chinese shipping company COSCO’s dominance in maritime logistics to support the People’s Liberation Army Navy.[2]

Some might suggest that South Korea might help NATO-IP4 countries overcome China’s dominance. But although South Korean shipyards remain competitive, the country’s geographic proximity to China and the possibility of conflict in the Western Pacific make it a high-risk alternative for sealift ships. Catching up with China is impossible. For the foreseeable future, China will remain the dominant shipbuilding country due to its vast capacity.

The mission ahead is to stabilize the situation, ensuring that China does not completely outproduce US and European ship manufacturing. NATO-IP4 collaboration can help solve these challenges by focusing on allies’ and partners’ strengths in the shipbuilding industries, including the following:

• World-class sealift technology. Although China’s market dominance is a challenge, Europe, Japan, and South Korea have superior technology. For example, Danish engineers develop and then China and South Korea manufacture under license more than 80 percent of two-stroke propulsion technologies used for sealift ships. Engineers at the Japanese company Mitsubishi develop 5–6 percent of two-stroke engines. WinGD engines, engineered in Switzerland and owned by the Chinese government, hold the remaining market share. Companies in the United States, Europe, Japan, and South Korea control the intellectual property for most of the technology necessary to build modern, fuel-efficient commercial sealift ships. The United States and its allies can use this position of strength to establish a useful and competitive alternative to China.
• Leading shipping operators. Europe has some of the largest shipping companies that could help with sealift operations. For example, Maersk operates more than 700 container ships globally and controls a significant number of container terminals. In the product tanker segment, two Danish shipping companies are in the global top five. In the ro-ro and car carrier segment, Japanese and Norwegian companies are leading operators.
• Globally competitive ship design. European, Japanese, and South Korean companies are competitive globally in designing sealift ships. Available designs are at the forefront of technological developments. The proximity of maritime technology companies and world-class shipping companies in these countries creates competitive ecosystems for innovative designs focusing on energy and payload efficiency.
• Efficient software. Modern ship manufacturing requires advanced design software and data, which companies in the United States, in collaboration with companies in Denmark, Japan, and South Korea, have developed. Artificial intelligence can advance data-driven software even further, allowing for improved designs with shorter production time. US software companies have a lot to contribute to this area.
• Manufacturing strongholds. Denmark has been a pioneer in shipbuilding robotics. Labor shortages and high labor costs have facilitated the development of advanced automation solutions. Design for robotics resulted in leaner products. For example, the world’s first double-hull tanker, built in Denmark, had 30 percent fewer steel parts than the previous generation because the shipbuilder used robotics extensively. Denmark is at the forefront of automating ship construction, using automatization targets as a driver for simplifying ship designs.

How can the US and its allies coordinate these complementary strengths to create sealift capacity and industrial resilience at the same time?

Michael Roberts suggests finding a US solution to a US problem. If NATO-IP4 cooperation develops, one ambition should be to create a coordinated, networked sealift fleet across the Euro-Atlantic and the Indo-Pacific to mitigate the challenge from China’s formidable sealift capabilities. The sealift fleet needs to be sufficiently large to deter aggression, and this would require around 500 to 1,000 sealift ships. The ships’ propulsion systems should be state-of-the-art, running on multiple fuels, such as regular and synthetic fuel, to ensure maximum fuel resilience during conflict and war. The maritime industry should also design sealift ships for small crews and extensive automation.

NATO-IP4 countries can address current problems in two steps. First, they can launch Step 1 immediately by assigning existing ships to the fleet, which would solve the sealift problem. However, China builds many of the ships that would be useable for this step, giving rise to security concerns. Step 2 involves building resilience by gradually replacing older vessels with modern sealift ships. Traditional shipyards should not manufacture these sealift ships for Step 2, but instead highly automated ship factories in Japan, South Korea, the United States, and Europe should build them to establish industrial resilience in all three regions. The ship factories should have a high capacity, which would not necessarily be fully utilized in peacetime. The NATO-IP4 countries should construct the factories for flexibility while using distributed dual-use supply chains.

The NATO-IP4 fleet should operate on the commercial market through existing shipping companies and compete on the world market as commercial ships. To ensure interoperability and economies of scale in procurement, manufacturing, and service, manufacturers of the NATO-IP4 sealift fleet in the different regions should use the same product systems across factories to effectively utilize design similarities and reuse critical ship components. These shipbuilders should follow the example of the American yards that in World War II built more than 2,700 Liberty ships by following a standardized product system and a highly optimized manufacturing concept.[3]

All NATO-IP4 sealift ships should be converted for dual-use purposes, so they can carry sensors and weapons in wartime. In a conflict, this capability would allow the allies to mobilize the sealift fleet quickly and fit the vessels with containerized military payloads for self-defense and strike. If ships are prepared in advance, the allies could also add pre-engineered systems for features such as lifting, helidecks, and moonpools in a mobilization situation. Such systems would allow sealift ships to perform as drone motherships. This “prepared for but not with” concept requires standardization of interfaces between ship platforms and payload modules across the fleet. The interfaces include both physical interfaces, such as plugins and sea fastening, and software to allow for seamless integration between payload modules and ship software systems.

The sealift fleet can be a force multiplier for regular combat ships. If navies add sensors and weapons to the sealift ships, they should operate those features from land or from regular combat ships, as they are intended for large optionally crewed surface vessels.

The allies should construct the business model for the NATO-IP4 sealift ships carefully to prevent disruption of the shipping industry. Operators or other private owners can own the fleet, for example. Operators, managers, and owners do not need to be the same legal entity if NATO-IP4 approves them, and the ships will retain their operators’ ordinary branding such as company logos.

The design criteria above will make the NATO-IP4 ships in Step 2 slightly more expensive to build. Governments participating in the scheme will need to pay a readiness and industrial resilience fee large enough to ensure that the vessels can compete against an equivalent standard commercial ship built in China. To prevent disruption of the shipping market due to the NATO-IP4 scheme, the system should allow an operator that has 25 ships under the NATO-IP4 scheme and 25 ships outside the scheme to make similar profits from all 50 vessels.

In sum, NATO-IP4 cooperation is an optimal way to reestablish industrial resilience and secure sealift capacity across the NATO alliance and its Indo-Pacific partner countries. Only in this way can the United States and its allies mitigate the threat from China’s global control of shipping companies and fleets.

(2025/03/14)