Jones Act

Shipping Magnates and Friendly Lawmakers Air-Kiss over Loathsome Law that Torments Poor Hawaiians, Puerto Ricans

The Jones Act drives up consumer prices by protecting U.S. companies from competition. Guess who insists it must be kept intact?

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freight ship
Andrew Parsons/ZUMA Press/Newscom

If you're wondering why it's so hard to get rid of bad laws, a hearing last week at the House Subcommittee on Coast Guard and Maritime Transportation is a useful demonstration.

I'll spare you from having to watch a two-hour congressional hearing. It's about the state of the U.S. shipping industry and the Jones Act. The Jones Act is a deliberately protectionist 1920 federal law that requires that cargo ships traveling between ports in the United States (including its territories) be made in America, owned by American companies, and crewed by American citizens.

It doesn't take a degree in economics to understand this purposefully protects U.S. shipping companies from foreign competition and therefore ends up driving up prices for shipping in some parts of the country, particularly isolated island communities like Puerto Rico or Hawaii.

American consumers and companies that have to ship goods pay the price for protecting an American industry. But this hearing didn't have any representatives from those consumers or from people who have to ship cargo. Instead lawmakers heard from the leaders of the very industries that benefit from the Jones Act.

The trade magazine Marine Log reports:

"In order for us to maintain the way of life as we know it as a nation that is secure and is able to project power, be it Navy power or commercial power, the Jones Act is intrinsic to that It is the cornerstone of all of them," said Congressman Duncan Hunter (R-CA), Chairman of the Subcommittee on Coast Guard and Marine Transportation, in his opening remarks.

In his opening remarks, Ranking Member Congressman John Garamendi (D-CA), stated: "First and foremost, we cannot become complacent in our defense of the Jones Act and our efforts…to raise public awareness of the need for, and the many benefits that flow, from this long-standing maritime policy that has stood for nearly a century."

Hunter represents the San Diego area of California and has received thousands of dollars in campaign donations from U.S. firms connected to shipping and shipbuilding. There's plenty of logrolling going on amid this discussion of shipping.

Less happy about the effects of the Jones Act are the citizens of Puerto Rico and Hawaii, who have to pay out of the nose to ship goods to their islands. One study determined that it costs twice as much to ship something to Puerto Rico as it does to ship to nearby Jamaica, thanks to the Jones Act.

So if the headline for the Hawai'i Free Press's short piece on the hearing sounds a little exasperated—"It's All Kumbaya at Jones Act U.S. House Hearing"—that's not without reason. As the story notes,

All seven of those testifying were pro-Jones Act including two government witnesses and five representatives of the U.S. maritime industry, no critics of the U.S. maritime policy or those who are customers of the industry were called as witnesses. Certainly, no merchant cargo owners—formally known in transportation and law as "shippers"—were invited to this Congressional Jones Act lovefest.

It's easy for lawmakers to ignore the American citizens who are hurt by U.S. protectionism when they don't even invite them to speak. Nor were there any trade economists to explain the law's consequences. The Free Press notes that previous "oversight" hearings have been similar in tone: insisting the law is very important while denying voice to those who have been harmed.

At one point Duncan absurdly insisted the Jones Act "is what allows us to project power and be the greatest country in the world." Clinging to a federal law that protects an American industry from foreign competition is the exact opposite of projecting power. It's an admission that other countries can manage this task better and more cheaply. And if they can, they should; then Americans can apply that money they save from cheaper shipping to grow in other ways.

Below, economist Ken Schooland explains why the Jones Act is awful for Hawaii:

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30 responses to “Shipping Magnates and Friendly Lawmakers Air-Kiss over Loathsome Law that Torments Poor Hawaiians, Puerto Ricans

  1. The land of the free, unless you want to ship between US ports.

    1. Or carry certain things over state lines.

      1. Or NOT carry those same certain things over state lines. Don’t forget, the absence of interstate commerce affects interstate commerce and is therefore interstate commerce.

        1. I..I don’t know what to say to this.

          Is there a gas leak in the federal buildings? I’m really thinking that something must be wrong.

          1. That gas leak has been going on for a long time then. See, Wickard v. Filburn.

            1. Blowing your nose affects interstate commerce in booger rags. Therefor, Congress can dictate when, where, and how you may blow your nose!

        2. And if all else fails just implement a penaltax.

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  2. It’s easy for lawmakers to ignore the American citizens who are hurt by U.S. protectionism when they don’t even invite them to speak. Nor were there any trade economists to explain the law’s consequences.

    Come on, Scotty. You can’t believe that the outcome would have been different if there were.

  3. We must protect our precious shipping business, that can’t compete without a very big boost.

    And “projecting… commercial power”, Congressman? Living up to the stupid party moniker.

  4. It’s a bit lame, that you ignore history and the broader national security interests that brought about the Jones Act and the reasoning behind maintaining it.

    If we concede that one of the Federal Government’s core responsibilities is coordinating bare minimum National Security infrastructure to avoid mass starvation due to war or catastrophe….which shouldn’t be that much of a stretch for most libertarians….then it is not unreasonable for a minimal port-to-port cargo capacity to be maintained in US hands. This can be federally owned/run like the Navy, or allowed to exist in the free market with artificial strictures to keep it national. The Jones act only restricts US port – to -US port….the most basic of cargo routes where supplies can move from Mainland to Island/territories. Hawaii and PR can receive any ships from any other port.

    Complaints about the Jones act have been typically used as an excuse for PR’s rampant corruption and economic idiocy. It’s all bull.

    Sure its a market skewing force and has an inherent cost. But it is arguable that that cost is minimal relative to other infrastructure items, the Feds own/maintain/manipulate for NatSec reasons. Everything from waterways, roads, pipelines, railways, utilities, is not solely free market but has Federal controls to maintain a basic infrastructure.

    1. Complaints about the Jones act have been typically used as an excuse for PR’s rampant corruption and economic idiocy. It’s all bull.

      Sure its a market skewing force and has an inherent cost. But it is arguable that that cost is minimal relative to other infrastructure items, the Feds own/maintain/manipulate for NatSec reasons. Everything from waterways, roads, pipelines, railways, utilities, is not solely free market but has Federal controls to maintain a basic infrastructure.

      Agreed. Without a doubt, the Jones Act should be sunsetted. However, the overtures made about it being responsible for PR current state of affairs (and Hawaii’s state of affairs?) is just noise. Even if the contrast between HI and PR weren’t such a stark contrast, the Jones Law’s lack of effect on hurricane recovery in the age of abundant and cheap air travel should be all the proof you need that it’s not *the* source of *the* problem.

    2. American shippers are just too weak and fragile to compete with dirty furrners. The only way they can stay afloat is to have the rules skewed in their favor by the heavy hand of Uncle Sugar.

      1. Ah ah ah ….. not “shippers”. As stated above, “shippers” are those who own the cargo. Ship owners are the cronies here.

    3. What war scenerio are you imagining that every foreign shipper would abandon the US market?

      1. One in which the USA wants to take over the local galactic cluster!

        Today, America; Tomorrow, the local galactic cluster!

    4. This guy again……

      [narrows gaze]

      Can’t tell if slaver or mentally deficient.

  5. You can’t expect global shippers to compete in a global market.

    #JustStayInOnePlace

  6. In the video, the Hawaiian econ prof. said that they were in the middle of the Atlantic. Clearly he’s an idiot, and I should discard everything else he says.

    Clinging to a federal law that protects an American industry from foreign competition is the exact opposite of projecting power. It’s an admission that other countries can manage this task better and more cheaply.

    Ouch. True this.

    1. But …people could STARVE

  7. tldr; Islanders must be sacrificed to the National Security gods. For the children.

    1. That’s a tldr for the hearing, not this article.

    2. Islanders aren’t the only ones. Cruise ships are affected, too.

      Cruises from the West Coast to Alaska must stop in Canada or depart from a foreign port (usually Vancouver) if they’re not American enough for the Jones Act and Passenger Vessel Services Act (crew, ownership, builder, steel suppliers, etc).

      Cruises from Los Angeles to Hawaii must stop in a foreign port in between (usually Kiribati) or depart from outside the US (usually Ensenada).

      Viking River Cruises was going to start river cruises in the US but couldn’t get around the Jones Act and PVSA so no cruise up and down the Mississippi for you.

      Passengers can be affected, too: If you get off a cruise ship in a US port, you can find yourself in violation of the Jones Act/PVSA and be fined.

      1. Viking River Cruises could buy and refurbish the S.S. United States and run a circuit among West Coast ports and Hawaii.

        The ship’s passenger and crew capacity is about the same as the small ones they operate in Europe. It would solve the must be US built and registered part of the Jones Act. It’s (AFAIK) the only US built passenger hull afloat.

        As-built, the United States could run between any point on the US west coast and Hawaii in 3 to 5 days. Modify the bow and other below waterline features to take advantage of modern hydrodynamic technology and it’d be even faster, or could run the same speeds more efficiently.

        Keep the original steam turbines and upgrade the boilers for improved efficiency. That would make it (most likely) the only steamship in commercial service. Converting to diesel or diesel-electric just wouldn’t be right.

        Improving efficiency as much as possible would be very important. Filling the fuel tanks on cruise ships can be the most expensive part of their operating expense, but the United States can hold enough in one fillup to make over 2 round trips between Hawaii and the west coast. So either reduce its tankage or just never fill over half. Less fuel weight = less needed to burn to move it. Keeping the full tank capacity would allow for trans-ocean trips.

        1. Since it wouldn’t be hauling any cargo, a large part of its cargo hold could be refurbished into entertainment space. How about a dance hall/bar called the “Cargo Club”?

          Trips on the ship could be combined with airliner flights. Float to Hawaii then fly back, or fly to Hawaii and float back, if you don’t have the time for a round trip on the ship.

          I’d bet there are enough people willing to throw down some coin to take a fast ocean liner vacation trip, *without* packing in with 5,000 other people, to make putting the United States back into service a profitable venture. Giving away some trips on game shows like Wheel of Fortune would be good publicity.

          “You and a guest will depart Los Angeles on the luxurious S.S. United States…” Four days on the ship, a couple of days in Honolulu then fly back. Sounds like fun, sounds like money.

  8. Um, when they said “projecting power”, they didn’t mean “creating an image of power in the minds of foreigners”, they meant “being able to move mat?riel overseas”.

    The idea being that if you find it necessary to ship, say, several armored divisions overseas on short notice, it’s useful if you have a domestic merchant marine to press into the task. The alternatives being depending on foreign-flag shippers whose countries could choose to say no, or having to maintain a huge usually-idle cargo capacity as part of the Navy.

    1. If the USA wanted to fight some war, of a nature such that no other nation with significant sea-cargo capabilities was willing to support us…

      Then I would say that this is a FEATURE, not a BUG!!! We need to put our dicks back in our pants, and NOT fight any of these kinds of internationally-unsupported “wars for American Empire”.

  9. Garamendi/Hunter, cronies of a feather flock together, at least it’s a bipartisan consensus. The science is settled!!!!!!!

  10. While it’s bad economically, at the same time, if your stuff is being shipped by foreign powers, you are essentially giving those foreign powers control over your government policies.

    “Do what I want or we’ll stop shipping and your people on islands will die because they can’t get food”

    1. Or… “Do what I want or we’ll stop shipping and our own people won’t get revenue from people on your islands and people on your islands will pay shippers from other countries…”

      I don’t think markets work the way you think they do.

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