The Future of the Maritime Industry under a Trump Administration – Part II

Mainbrace | January 2017 (No. 1)

Jonathan Waldron, Joan Bondareff, Sean Pribyl, and Kate Belmont

 

 

 

In offering his views on foreign policy and national security, President Trump’s “Put America First” policy proposes to make the interests of the American workforce and national security his top priorities. In a step generally considered to be in direct support of that policy, President Trump has nominated retired Marine Corps General John Kelly to head the Department of Homeland Security (“DHS”). As a career Marine and former head of the United States Southern Command (“SOUTHCOM”), Kelly is tapped to lead an agency primarily responsible for managing U.S. borders, protection of critical infrastructure, enforcing immigration laws, preventing terrorism, and overseeing cybersecurity, among other issues. Kelly appears to be up for the challenge, possessing unique experience in maritime and national security issues, both of which may bode well for the DHS and Coast Guard, as well as U.S. domestic maritime interests.

Arctic

As a DHS component agency, the Coast Guard will certainly continue to play a direct role in national and border security, missions deemed priorities by the Trump administration. One area of significance could be the changing Arctic environment, which presents several security challenges that makes it a national priority. The Coast Guard is responsible for preserving and protecting American sovereign rights and resources in the polar regions. The National Security Strategy of May 2010 outlined U.S. Arctic interests, stating in part that the United States, as an Arctic nation, must meet national security needs in the Arctic region. This was followed by the Coast Guard Arctic Strategy of May 2013, again reiterating the national security interests in the Arctic.

Ensuring the integrity of sovereign borders and security of U.S. Arctic waters, however, requires adequate Coast Guard and national assets, and polar icebreakers enable the United States to maintain defense readiness and support national security activities. Unfortunately, shortfalls in Coast Guard polar capabilities have been evident for years, including the need for additional icebreakers, an issue necessarily linked to the evolution of U.S. Arctic strategy. In response, the Coast Guard signaled a FY17 budget priority that includes meeting future challenges in the polar regions by accelerating the current acquisition of a heavy icebreaker and plan for additional icebreakers.

The Coast Guard Commandant, Admiral Zukunft, has recently reaffirmed the stance that the Coast Guard is the main sea service for protecting the Arctic, in essence since the Navy has historically devolved Arctic security responsibilities to the Coast Guard. Accordingly, Admiral Zukunft believes the Coast Guard needs a new icebreaker not merely for breaking ice, but as “an instrument to enforce sovereignty.” Notably, Admiral Zukunft also cited an independent High Latitude analysis that suggested the Coast Guard needs not just one icebreaker, but three heavy and three medium icebreakers. The commandant highlighted that without a new icebreaker, the United States will merely be observers in the Arctic, as opposed to active and effective participants in shaping regional safety and security. President Trump has also indicated that he wants to revive shipbuilding in the United States, albeit for naval shipbuilding for a “350-ship” Navy. The FY17 National Defense Authorization Act (“NDAA”) already authorized funding for nine new ships for the Navy—including a $490 million plus-up for shipbuilding programs above the president’s budget request, but unfortunately President Trump has not expressed specific intentions on Coast Guard shipbuilding.

Secretary Kelly clearly brings a robust national security background, although his national security views on polar operations are yet-to-be defined. Under the new administration, building a polar icebreaker in domestic shipyards would of course directly support three of President Trump’s top priorities—U.S. job creation, shipbuilding, and national security—and may very well continue to be Coast Guard priorities in a FY18 budget.

South China Sea

Additionally, under President Trump’s administration and a Secretary Kelly-led DHS, the Coast Guard may find itself even further from U.S. shores as the Coast Guard has expressed an interest in expanding its role in patrolling the waters of the South China Sea. The area has been host to a longstanding maritime dispute between China and several Asian countries (see “Foul Weather and Heavy Seas May Follow South China Sea Ruling” in Blank Rome’s September 2016 edition of Mainbrace), and President Trump has already signaled an ability to ratchet up tensions between the United States and Beijing on South China Sea topics. While the U.S. Navy has historically served as the visible extension of U.S. interests in the regions, the Coast Guard has proposed it could play that role in a less threatening way, with Admiral Zukunft even suggesting the establishment of a permanent Coast Guard presence in the South China Sea. It remains to be seen to what extent the White House or DHS will ask the Coast Guard to stretch its assets and manpower in support of national security in Asia while still serving its many other statutory missions, such as icebreaking and border security. The Coast Guard has signaled their priorities, which appear to align, at least in part, with President Trump’s national security vision, and with Secretary Kelly at the helm, the Coast Guard may very well be poised for increased budgeting and DHS allocations to support these budget requests. The question remains which national security priority will prevail first—the southern border, polar regions, or South China Sea.

Cybersecurity

The DHS is also tasked with protecting the 16 critical infrastructure sectors that provide the essential services that support the U.S. economy and national security—sectors such as transportation (i.e., maritime) and energy. These sectors are deemed vital to the United States, the incapacitation or destruction of which would have a debilitating effect on the economy and national security. Critical infrastructure is vulnerable to a range of threats, including cyber attacks. In fact, the Center for Strategic and International Studies Cyber Policy Task Force recently issued a report, A Cybersecurity Agenda for the 45th President (“CSIS Report”), citing critical infrastructure as the area of greatest risk from a cyber attack, with the transportation and energy sectors being the most likely targets for such an attack.

Significantly, President Trump has publicly expressed a controversial intention to ask the Defense Department (“DOD”) and the chairman of the Joint Chiefs of Staff “to develop a comprehensive plan to protect America’s vital infrastructure from cyberattacks and all other form of attacks”—on day one. Such a transfer of cyber responsibilities would, in essence, shift the federal government’s private sector cybersecurity responsibilities to the military, placing the military in charge of protecting the private sector from cyber risk, a contentious issue in both government and civilian circles.

As stated in the CSIS Report, the military’s responsibilities include “defending the military’s networks and systems, providing offensive cyber support to regional military commands, and defending the nation from a cyber-attack of significant consequences.” Notably, the divergent DOD and DHS cyber responsibilities and authorities do not easily overlap, and would run counter to established roles and initiatives under the Cybersecurity Act of 2015, Presidential Policy Directive 41, and Cybersecurity Information Sharing Act of 2015. That said, Secretary Kelly may face immediate pressure to prioritize immigration and border enforcement over such issues as cybersecurity. Accordingly, an argument could be made that the DOD and/or the National Security Agency should assume DHS cyber activities.

If President Trump tasks the DOD with assuming cybersecurity roles traditionally reserved to the DHS, it remains to be seen what role the Coast Guard, as maritime industry regulator but member of CYBERCOM and CGCYBER, will play in a military DOD-led vice civilian DHS-led cybersecurity approach. More importantly, such a move to militarize cyber defenses may not be well-received in the civilian maritime sector. If President Trump strips the DHS of their cybersecurity authority in favor of the DOD, the military could potentially upend current maritime industry cybersecurity practices. The maritime industry currently enjoys limited formal requirements for reporting, compliance, and information sharing, and is essentially self-regulated.

In reality, removing such well-entrenched responsibilities from the DHS in favor of the DOD may prove a daunting task, both politically and practically. House Homeland Security Chairman Michael McCaul (R-TX) has recently warned that reallocating cyber defense authorities from the DHS to the military would be a “grave mistake.” He has noted that removing DHS authorities would conflict with the CSIS Report conclusions that favor reinforcing DHS capabilities over transferring DHS cybersecurity responsibilities to the DOD, particularly for critical infrastructure, calling such a decision “unwise.”

Importantly, the CSIS Report recognizes “that the best approach is to strengthen the DHS.” The CSIS Report also notes the private sector generally prefers a civilian agency when dealing with cyber issues.

The Coast Guard and maritime industry have a vested interest in whether there is federal regulation of cybersecurity. Cyber risks to the maritime sector have received significant attention over the past several years both domestically and internationally. Consequently, the Coast Guard has placed emerging cyber risks as a strategic and budgetary priority for 2017, in furtherance of its cyber strategy, although the Coast Guard has stopped short of promulgating formal cybersecurity regulations.

Nonetheless, as previously reported in our June 2016 maritime advisory, “Updated Guidance on the Cybersecurity Information Sharing Act of 2015,” even absent formal regulations, the maritime industry has made a significant commitment to addressing cyber risk management by introducing Industry Guidelines on Cyber Security Onboard Ships, issued by the BIMCO working group in January 2016, and has welcomed the IMO Interim Guidelines on Maritime Cyber Risk Management, approved in June 2016. However, the maritime industry has been reluctant to support formal cybersecurity regulations, and both the Coast Guard and IMO have been hesitant to issue such regulations.

While President Trump has indicated that cybersecurity will be a significant focus in the early days of the new administration, a transition of power from the DHS to the DOD would have significant impact throughout the transportation and energy sectors, particularly for the maritime industry. Congressman McCaul has signaled intentions to introduce legislation to reorganize the DHS during President Trump’s first year in office, legislation that would likely be included into the House National Defense Authorization Act for FY17. Accordingly, cybersecurity initiatives should be monitored during the first months of the new administration given the potential impact on the private sector, with significant implications for the maritime industry.

Maritime Security Program

The Maritime Security program (“MSP”), administered by the Maritime Administration (“MARAD”), may continue to be a vital element to national security in support of the U.S. military’s strategic sealift and global response capabilities. The MSP maintains a core fleet of U.S.-flag privately owned ships, logistics management services, and infrastructure and terminals facilities. This fleet supports DOD requirements during war and national emergencies, and without the MSP fleet, the United States would not have assured access to U.S.-flag commercial vessels to support DOD operations. The MSP also retains a labor base of skilled American mariners who are available to crew the U.S. government-owned strategic sealift and U.S. commercial fleets. With an U.S.-flag fleet composed of approximately 80 ships engaged in foreign trade, the U.S. merchant marine is dwarfed by, for example, the Chinese deep sea fleet of close to 4,000 vessels. At a time when President Trump has publicly touted challenges to China in foreign policy and trade, the MSP and focus on U.S. shipping interests may very well become more important than ever.

President Trump’s pick of Elaine Chao as Transportation Secretary adds a Cabinet member with extensive maritime experience and a background supporting the MSP. Secretary Chao will have direct oversight of MARAD, and has a decadeslong positive relationship with U.S. maritime labor organizations, who have enthusiastically endorsed her. Fortunately for President Trump, he also inherits a viable MSP on which to build upon as he looks to enhance American seapower and U.S. jobs. The FY17 NDAA Conference agreement significantly increased the authorization for the MSP above the level in the president’s budget request, bringing the total FY17 authorization for the program to $300 million. The FY17 NDAA increases the annual stipend for the 60 vessels participating in the MSP fleet from $3.5 million per vessel to $5 million per vessel.

Overall, national security remains at the forefront of the Trump administration’s focus. What is missing is a clear mandate that outlines the defined roles of those agencies with a maritime nexus. The first President Trump budget will give us a better sense of what his priorities are. Maritime stakeholders should closely monitor his first 100 days of office as policies take shape and views on maritime security issues become clearer.

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