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Jones Act Expensive, Benefits Questionable

May 21, 2019 in Economics

By Colin Grabow, Michael Hansen

Colin Grabow and Michael Hansen

Beyond mere tweaks, reforms to the Jones Act are necessary,
given that the Act’s costs to Hawaii are more substantial and
its benefits far more elusive than indicated.

The Jones Act refers to several federal domestic shipping laws,
the best known of which is Section 27 of the Merchant Marine Act of
1920 regulating the domestic transportation of goods by water.

These laws require a vessel in domestic trade be built and
registered in the United States and mostly owned and crewed by U.S.
citizens.

The argument that removal
of the Jones Act would leave the noncontiguous jurisdictions
— Alaska, Hawaii, Guam and Puerto Rico — without
adequate shipping, meanwhile, is completely specious and used by
Jones Act interests to scare the public.

While most countries with coastlines and navigable rivers have
similar laws regulating their domestic waterborne commerce —
known as maritime cabotage — the U.S. system is the
world’s most restrictive. This is primarily due to the
requirement vessels in domestic trade be constructed at a shipyard
in the U.S. typically at five times the cost of comparable ships
built in Asia.

The Merchant Marine Acts passed between World Wars I and II had
the stated purpose of promoting “a merchant marine of the
best equipped and most suitable types of vessels to carry the
greater portion of its commerce and serve as a … military
auxiliary.” That remains current U.S. shipping policy.

Clearly, these laws and policy have failed. Today, less than 2
percent of the seaborne foreign trade is carried by U.S. flag
ships, domestic ocean shipments have declined by 95% since 1980,
the U.S. flag oceangoing fleet has declined by 93% since 1960, and
effectively none of the privately-owned ships providing military
sealift are drawn from the U.S.-built fleet.

A key failure has been to produce a fleet of suitable ships to
meet the nation’s domestic ocean transportation needs. There
are just 99 oceangoing Jones Act-qualified ships including 57
tankers and 25 containerships in narrow capacity ranges. In
comparison, there are approximately 42,000 foreign-flag ships
trading worldwide incorporating a wide variety of types and
capacities. Most types are absent from the Jones Act fleet
including liquefied natural gas carriers and livestock
carriers.

The argument that removal of the Jones Act would leave the
noncontiguous jurisdictions — Alaska, Hawaii, Guam and Puerto
Rico — without adequate shipping, meanwhile, is completely
specious and used by Jones Act interests to scare the public.

Even if Hawaii were independent as it was before annexation in
1898 and foreign vessels could operate unfettered in trade with the
U.S. mainland, any shipping company using foreign vessels would
have a vested interest …read more

Source: OP-EDS

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