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?
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: