Jones Act

The Jones Act Is an Antiquated, Protectionist Policy Failure. Mike Lee Is Aiming to Kill It.

The Utah senator wants a world where "Alaskans, Hawaiians, and Puerto Ricans aren't forced to pay higher prices for imported goods."

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Glow Images/Newscom

If you wanted to ship some widgets to Jamaica, you could hire literally any ship on the open oceans to make the delivery. But if you wanted to send the same cargo to Puerto Rico, you'd be allowed only to hire a ship that was built in America, crewed by Americans, and operating under the American flag.

The reason? The Jones Act, a vestige of the 1920s that prohibits non-American ships from carrying cargo from one American port to another American port—including ports in American territories, such as Puerto Rico, Guam, and other far-flung islands. You don't have to work in the export business or have a degree in economics to see how that this is blatant protectionism for American shipping companies. And, indeed, shipping costs from the U.S. mainland to Puerto Rico are twice as high as prices to ship the same goods to neighboring islands.

Those higher costs get passed along to consumers in American territories and in states like Hawaii and Alaska, which import much of their food from the lower 48. But those states don't get much of a say in Congress, so the Jones Act has persisted for decades. It's a clear example of public choice theory: American shipping companies enjoy concentrated benefits (being able to charge higher prices because of artifically limited competition) while the residents of Alaska and America's island states and territories pay the diffuse costs.

"Restricting trade between U.S. ports is a huge loss for American consumers and producers," says Sen. Mike Lee (R–Utah), who introduced a bill this week to repeal the Jones Act. He's from a landlocked state himself, but Lee says it's long past time to act, "so that Alaskans, Hawaiians, and Puerto Ricans aren't forced to pay higher prices for imported goods—and so they rapidly receive the help they need in the wake of natural disasters."

Lee's bill, the Open America's Water Act of 2019, would simply allow any otherwise qualified vessel to engage in trade between U.S. domestic ports. If a ship can carry cargo from Miami to Jamaica, it could also carry cargo from Miami to Puerto Rico.

The Jones Act got a bit of attention back in 2017, when President Donald Trump waived the law for a brief period after Hurricane Maria devastated Puerto Rico. An attempt to permanently exempt Puerto Rico from the Jones Act failed in Congress as shipping companies argued that their right to earn artifically higher profits was important enought to force hurricane-ravaged Puerto Ricans to continue suffering artificially higher prices.

One of the great ironies of the Jones Act is that, for all the economic damage it causes, it hasn't even achieved its primary policy goal of strengthening the U.S. shipbuilding industry. The number of ships that meet the Jones Act's requirements for operating between American ports has shrunk from 193 in 2000 to just 99 in 2018. It costs more than three times as much to build a cargo ship in America as it does in some other countries, according to a 2017 report from the Cato Institute, and American shipping companies respond to that incentive by buying foreign-built ships. That means there are fewer ships capable of serving American ports, and fewer ships means higher prices.

Meanwhile, the median income in Puerto Rico is less than half of what it is in the poorest U.S. state. But thanks to nonsensical laws like the Jones Act, the cost of living there is higher than the U.S. average.

Lee's proposal should be a slam dunk in Congress. Unfortunately, it likely faces a difficult path forward.

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  1. A similar law, probably passed around the same time also mucks up the cruise industry

    There is to my knowledge, only a single large cruise ship that operates in the US. Norwegian’s Pride of America which sails the Hawaiian Islands. That ship is only allowed to operate as it does because Norwegian was given an exemption. The ship was partially constructed in the US for another cruise company that went bankrupt (despite subsidies to build and operate that ship)

    1. There is to my knowledge, only a single large cruise ship that operates in the US. Norwegian’s Pride of America which sails the Hawaiian Islands.

      As someone who’s cruised to multiple locations within and outside the US and her territories across multiple lines on multiple ships, either you’re going to have to be more specific, or this says more about your lack of knowledge than anything else.

      1. Foreign flagged cruise ships cannot transport passengers between US ports.

        Apparently this law is even older than the Jones Act
        https://bit.ly/2VFJ2s2 < Wiki on the act Only the Pride of America operates exclusively in Hawaii. Every other big ship takes you on a couple days trip to some island outside the US. This is the only cruise I've ever taken, and that foreign port (and the extra 3 days it took) is why we used Norwegian's Pride of America. On an Alaskan cruise you depart from Vancouver and end in Anchorage (or the reverse), or you depart from Vancouver, cruise the southern parts of Alaska and then return to Vancouver. I don't know how they do it in the Caribbean but I suspect in a lot of cases, you leave from some port in Florida or Puerto Rico, sail to non-US islands, then return to the port you originally left from.

        1. Miami to, e.g., St. Maartins (Dutch), St. Maartins to Virgin Islands (U.S.),, Virgin Islands to Jamaica (Brit.), Jamaica to Miami (U.S.).

          Where there’s a will, there’s a way.

          1. Where there’s a will, there’s a way.

            Well and, from a cruise ship perspective it can be a bit dumb to flag the Cruise ship itself out of the US for this purpose (not to lend support to the act). Belize, Honduras, and Turks and Caicos didn’t effectively have a port when we went there. Weigh anchor off shore and ferry in on a smaller boat that can be flagged out of wherever.

            You can, in fact, take cruises between U.S. ports, you just can’t do it with 2,000 other people, midnight buffets and a different lounge act every night of the week. Some/plenty of boats that are flagged out of the US and depart/arrive in the U.S. Probably not the sort of thing your average cruise goer would enjoy taking to Hawaii, if they even offered it, though.

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        2. Every other big ship takes you on a couple days trip to some island outside the US.

          Couple days is incorrect but I see what you’re otherwise saying now. Several cruise lines depart Seattle to Vancouver and then Vancouver to Hawaii.

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  2. One of the great ironies of the Jones Act is that, for all the economic damage it causes, it hasn’t even achieved its primary policy goal of strengthening the U.S. shipbuilding industry. The number of ships that meet the Jones Act’s requirements for operating between American ports has shrunk from 193 in 2000 to just 99 in 2018.

    It seems like its goal is to “strengthen” the shipping companies, not the shipbuilders. Of course the shippers are going to allow their fleets to shrink if the rest of the world’s shippers aren’t allowed to compete with them. They don’t have to buy new ships, but they still get all the shipping orders they usually get and can charge an ever increasing price for it.

    1. It requires both a US shipping company and a US-built ship, so it seems to be intended to protect both

  3. How about Mike Lee sponsor the Samoa, Guam, Northern Mariana Islands, Puerto Rico and Virgin Islands Independence act.

    1. Every one of those places can vote for independence at any time. None have chosen to do so. We can’t just force them to declare independence.

      1. Neither did they vote for dependence. Nor did US American citizens vote to acquire them. It was pure colonialism. The south voted for independence and were denied the choice. Maybe the citizens of the 50 states should be allowed to vote on the issue.

        1. Let’s fix that: “the white people of the south voted for independence so that they could continue to hold slaves.”

  4. An attempt to permanently exempt Puerto Rico from the Jones Act failed in Congress as shipping companies argued that their right to earn artifically higher profits was important enought to force hurricane-ravaged Puerto Ricans to continue suffering artificially higher prices.

    I’d like to know what he thinks has actually changed.

    1. Dems took the House. Trump didn’t make his EO permanent so he must love the Jones Act. Ergo the Dems hate the Jones Act.

  5. We need to bring back the lash.

    1. Don’t forget the rum and sodomy.

  6. Use one law to defeat the other: Sue all the American shipping companies and charge them with violation of the Sherman Anti-trust Act. And, after those protesting the government-created monopoly reap some triple-damage awards that force American ships benefited by the Jones Act to lower their prices to world levels, my guess is that there won’t be any business opposition to repeal of the Act because there won’t be any (domestic) businesses left to oppose it.

  7. Looks like the same proposal was made in the last Congress – sponsored by McCain and cosponsored by Flake and Lee. So — why aren’t the Sens from Alaska and Hawaii sponsors or co-sponsors? Something weird with this

    1. I’m not sure about Lee’s bill, but I am highly skeptical that it is the Port to Port stuff that McCain and others hate and progressives support.

      There are quite a few protections for US Mariners within the bill, namely that if you get hurt while at sea, the company is liable for 100% of all medical costs and lost wages.

      But the real issue for the McCains of the world is that without the Jones Act, the Navy would need to drastically increase its Sealift fleet and would need to train a lot more mariners. More money for the MIC.

      1. In other words, the Navy would have to build, maintain and man tankers and other vessels in order to ensure it had them in times of war. They would most likely be idle, with no value created for the money spent.

        The purpose of the Act is reasonable, imo. Whether it is doing what is intended is another question, but I’m not sure it would be a benefit to anyone (except Navy contractors) to get rid of it when you look at it from a national defense perspective.

        1. I’m not sure how many more oilers and cargo ship the Navy would need in time of war, but the present number of MSC (Martiime Sealift Comand) ships should be adequate for supporting fleet operations. They are owned by the Navy, commanded by a Naval Officer and have a Merchant Marine crew of civilians with small staff of Naval personnel.

          Now, if you are thinking of troop transport ships and such to send large numbers of armored equipment, there are likely some in mothballs, but likely nowhere enough to support a D Day type operation, but that is a very unlikely scenario in this day.

          I would certainly agree, the Jones Act has never accomplished the purported purpose and should be repealed forthwith.

          1. Wish for an edit function; MSC = Military Sealift Command. Apologies.

        2. For some reason… protectionist acts always lead to higher costs and higher taxation. People don’t see it [because it isn’t labeled as a tax], but the machinery survey for US flagged vessels is a key component that forces the highest operating cost possible. There are places that are stricter [I think Netherlands is], but the total picture at home is brutal – mainly on account of our antiquated coast guard that is in dire need of being shredded and a new agency formed [or have DHS just absorb it]. Whatever is done, by no means keep any officer trained in the old system, or transfer any directive – a clean sheet of paper [and a few real naval officers to start it up]. What happens today is effectively… uscg serves as the department of redundancy department, overlapping 98% of what ABS already does, for no apparent reason – nearly everything is double inspected. Doubters need to look at the Macondo incident: pure wheel spinning for an entire week with ready to go clean up assets either being blocked [thanks to Jones Act], or not receiving permissions to move into the exclusion area as directives were re-written on a shift by shift basis to allegedly improve operational efficiency in a frenetic political effort to maximize coastal damage for tv reporters. They were able to pop an exclusion zone offshore so reporters could ONLY get their info on the blowout as the executive branch chose to dispense it, which did zero for any mariner, the environment or the people.

      2. With the US Merchant Marine fleet so small, the act has failed to preserve the sea lift capacity anyhow.

  8. “Restricting trade between U.S. ports is a huge loss for American consumers and producers,” says Sen. Mike Lee (R?Utah), who introduced a bill this week to repeal the Jones Act. He’s from a landlocked state himself, but Lee says it’s long past time to act, “so that Alaskans, Hawaiians, and Puerto Ricans aren’t forced to pay higher prices for imported goods

    But are they paying higher prices?

    This article point to a study that says they do not.

    The study only concerns Puerto Rico though, so maybe prices are higher because of the Jones Act in HI and AK but maybe they’re not.

    From Forbes comes this list of reasons to keep the Jones Act.

    Maybe these reason do not appeal to you, but they are the main ones you will have to overcome if you want the act to go away. So perhaps formulate some counter-arguments?

    It costs more than three times as much to build a cargo ship in America as it does in some other countries

    From that article I learned of the “construction differential subsidy” which was ended by Reagan. Bring that back and maybe the number of cargo vessels will increase.

    1. The study you site is self-refuting as is your comment. You are PR flack hired by the AMR (American Martime Parternship) in order to defeat attempts to repeal the Jones act. But the question is why anyone would hire you in the first place to post sham comments and sham studies if indeed there was no money to be made by the Jones act.

      Obviously the fact that the make enough money to post sham comments on as lowly trafficked a site as Reason magazine is proof enough that the Jones act is highly profitable to AMP partners which implies that costs would be lowered and service improved if the act were repealed.

      Incidentally I think you suck at your job and should be fired immediately.

    2. Anyone that says the Jones Act doesn’t affect prices in the territories is just plain lying. I’m from Guam and my family still lives there, and my sister married into a Hawaiian family.
      If you went to a shipping company today in Los Angeles and said you needed the price to ship two identical 40 foot containers, one to Hawaii, and the other one to Taiwan which is double the distance, the price to Taiwan $800 -$1,000. The price to Hawaii: almost ten thousand dollars.
      It is unjust and unfair to make a small set of our people, subsidize an entire industry. If you don’t want to abolish the Jones Act, then at least do it like the U.S. does with farmers. Which is why milk is so cheap.
      Let the people of the territories pay $800 to ship a container of goods for their stores and livelihood, and give the shipping companies $8,000 from the U.S. taxpayer. Then the burden is shared.

      1. Give the shipping companies $8k from the taxpayer? Given the ultra low efficiency of government, that means about $14k in taxes has to levied – but that’s just the takeoff point in year one before it goes logarithmic, as shippers gain access to the trough of our treasury. That turns into $30k in short order. I get your point though: longshoreman each side with six figure salaries, etc plus the smaller the destination, the higher average container cost is as minimum crew serves less goods. The Jones Act isn’t a cost in and of itself, but rather it traps vessels intended for commerce under the sum total of federal regulations with no relief which forces the costs. Do we want Filipino or Chinese crew running everything in the US? Probably not. But there other places to find savings while preserving the ability of keeping a shock absorber in place [in the form of experienced sailors] that supports merchant marine personnel as an asset to the nation. There’s a reason why marine assets get flagged in places like Liberia etc: lower registration costs, and minimum manpower requirements that don’t break the bank/weren’t written in the 1800’s during a time of coal fired steam and open rotating machinery that required an oiler to be present on a non-stop basis – bathroom breaks not allowed until relieved and all that while underway. Tech changed, but US laws are a good 50 years behind the curve.

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  10. Government mandated monopolies are okay! Private sector monopolies are bad. Even big private sector companies are bad. Hooray for the single payer healthcare crowd. Bring on another state mandated monopoly. . . Or just let us deplorable buy what we want from whomever we want.

  11. The Jones act maintains the robustness of the fleet. If shipments went to the lowest bidder, the American merchant fleet would go out of business. It would be replaced by vessels owned by Greek magnates with Panamanian registration and Flag. In war scenario, these shippers might bail where merchant marines would have been compelled. That’s why we maintain reuduntancy ? its robust. The cheapest alternative is weakness. Of course, strength comes at a cost. As does the privilege of living on a remote island.

    1. Another AMR sockpuppets posting sham comments. I really wonder which PR firm was hired to do this. I guess the PR firm that hired Reaves and Associates which is obviously a sham management consultancy.

      1. Interesting how these people none of the site regulars have ever seen suddenly show great interest in a Reason article. Hmmm…

    2. What kind of crap is that? Privilege of living on a remote island? Meaning the Hawaiians, and Chamorro people of Guam who were just minding their own business on their own islands for thousands of years should leave? And the reason is because some coddled, noncompetitive, inefficient companies and workers who are too afraid and incompetent to compete on a level playing field, feel justified to scam perfectly innocent citizens with rip-off prices that are literally up to a thousand percent higher than anywhere else. You’re full of it.

  12. Getting rid of the Jones act should be a libertarian strong point.

    There is no reason for it and never was other than government control over a vital commerce and manufacturing interest.

    Pure socialist bullshit and still is.

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  16. There is to my knowledge, only a single large cruise ship that operates in the US. Norwegian’s Pride of America which sails the Hawaiian Islands.

    As someone who’s cruised to multiple locations within and outside the US and her territories across multiple lines on multiple ships, either you’re going to have to be more specific, or this says more about your lack of knowledge than anything else.

  17. Your confusion is understandable, but this blog is called The Volokh Conspiracy.

  18. Wait a minute… doesn’t Hawaii get 80% of it’s junk from China, just like the mainland? So the problem can’t be too big. They could solve their “export” woes by bouncing produce through Mexico or Canada but nobody [I mean nobody] is going to believe that a pineapple came from the great white north.

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