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A Better Way to Unclog NYC Streets: Repeal the Jones Act

April 7, 2019 in Economics

By Daniel J. Ikenson, Colin Grabow

Daniel J. Ikenson and Colin Grabow

Bumper-to-bumper traffic. Degraded bridges and potholed
highways. Excessive fuel use and carbon emissions. Inflated
transportation rates. Higher prices on store shelves. It’s time for
New Yorkers to connect these dots and take full notice of the
burdens the Big Apple endures as a consequence of what is possibly
the most expensive, distortionary, protectionist failure in US
history. It’s time to blame the Jones Act.

The Jones Act — technically, Section 27 of the Merchant
­Marine Act of 1920 — is a 99-year-old law that was
originally sold as a national-security necessity. The law was
supposed to ensure a ­domestic shipbuilding capacity, a reliable
and diverse fleet of ships and a ready reserve of merchant mariners
that could be deployed in times of war or other national
emergencies.

The law requires that domestic waterborne cargo be restricted to
ships that are US-built, US-owned, US-flagged and US-crewed. It has
thoroughly backfired.

Over the last century, there has been a near total absence of
any compelling evidence that the Jones Act has contributed
meaningfully to national security. We have witnessed continuous
­declines in the number of US merchant mariners. The range of ships
built in America’s dwindling shipyards has narrowed; the volume has
dropped.

Meanwhile, the US government has remained dependent on foreign
ships during national emergencies such as the Gulf War, when the
Pentagon was so desperate for ships for transporting military
equipment that it asked the Soviet Union — twice! — to
borrow one of theirs.

Meanwhile, the Jones Act has saddled the US economy with a bevy
of serious problems that have grown worse over time.

First, the law mandates that ­domestic carriers use US-built
ships, which are up to eight times more expensive than those built
in foreign shipyards.

A recently christened Jones Act containership, for example,
featured a price tag $50 million higher than a South Korean-built
containership with six times greater cargo capacity than the
domestic one.

Second, the US carriers that purchase these overpriced ships are
only able to make the economics work because of the Jones Act’s
­requirement that domestic transport be provided by ships that are
owned and crewed by Americans, and registered under the US
flag.

Without foreign competition, US carriers are free to charge
exorbitant rates. According to the best available data, the freight
rates charged by these Jones Act carriers are double to triple the
rates charged to ship similar volumes and distances in voyages
involving a foreign port, where the Jones Act doesn’t apply.

Exorbitant waterborne rates push cargo onto congested US
highways and railways. That, in turn, boosts demand for truck and
rail transport, which means higher transport costs for businesses
that move merchandise …read more

Source: OP-EDS

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