This is the Last Article on the Jones Act you Ever Need to Read (Really)
I first heard about the Jones Act from my father in 1976. He had just become part of the US maritime community and one day came home and started to tell me about the differences between the US maritime community and the Dutch maritime community.
Two things stood out; the heavy US union influence and the Jones Act. My father despised unions, as a lifelong non unionized shipping company employee (but a very benevolent one, sponsoring employee vacation resorts and excellent employee housing, and later found to have one of the most generous pension plans one can imagine). In later years his stance softened as he gradually realized that unions keep pressure on bad employers, and make it easier for good employers to compete against the bad ones.
The Jones Act was a funnier subject, because he pointed out that the prime reason for the Dutch fighting wars with Great Brittain in the 1600’s was Britain’s insistence on cabotage.
To him cabotage was an artificial means of protecting inferior abilities against superior commercial and maritime skills. He may have been right about the British, but not so much about the Americans.
In later years my father became a strong Jones Act supporter. Not because he liked the concept, but rather because it made sense for America and, weirdly, the world at large.
It is bizarre that the Jones Act has been a subject of discussion for over a century. It is a simple concept, but somehow manages to ruffle random feathers particularly of politicians who don’t take the time to think through the issue. I even remember John McCain criticizing the Jones Act and dragging out the standard stale arguments that it hindered competition, and raised prices in Hawaii, Alaska and American territories.
He did recognize the national security aspect, but never suggested a better solution.
Let’s make things simple. The Jones Act or rather US cabotage can be expanded at will to increase the US flag merchant fleet by, in the extreme case, only allowing US built US flag vessels to carry goods into the United States.
It quickly becomes clear this is madness and while there can be less dramatic expansions, the Jones Act is sort of the simplest most barebones version of cabotage.
Let’s consider what will happen if the Jones Act is repealed.
- Almost immediately lower cost foreign shippers will start to move cargo (and passengers) between US ports, and what little ocean going commercial shipbuilding exists in the United States will also disappear.
- The impact on the US ocean going skill base will be even more significant. In a matter of years, the US will have no active skilled ocean mariners and shipyard workers and zero young entrants into the industry.
What will be the benefit? Shipping costs to some locations will come down resulting in lower consumer prices in those locations.
How much lower will those prices be? Let’s take Hawaii as example, since it is a long ocean route which aggravates the cost difference between US flag and foreign flag vessels. An extreme example suggest that the Jones Act adds $5 per day to each Hawaiian citizen’s cost of living, which would be $1,800 per year.
It is almost certainly an overstatement, but if it is true, one cannot escape the fact that this premium for living in Hawaii has existed for over 100 years and, as such, is a free choice from the moment that every living Hawaiian was born. The issue is equally flawed as people buying a house under an airport runway and then arguing that the airport should close because it makes too much noise.
Bizarrely, the effect of the Jones Act was much higher between 1920 and 1960, because the most significant cost difference between US Flag and low cost foreign flags is the cost of crews.
Since the advent of containerization, the crew cost fraction per ton cargo has declined dramatically and, as such, the cost difference between US and foreign flag vessels has declined. Moreover the overall cost of ocean freight has declined due to the efficiencies of containerization. Those in Hawaii who want to repeal the Jones Act are actually arguing for something that used to be much more burdensome in the past. Moreover, globalization has reduced the Jones act trade fraction to Hawaii, which is now a smaller fraction of all cargo imported into Hawaii than in the past.
The major truth is that the Jones Act is one of the most cost effective methods for ensuring that the US maintains a modicum of ocean going shipping ability, and this is money in the bank with regard to national security. In time of war the Jones Act fleet cannot provide all the sealift needed, but at least there will be a skills and infrastructure starting point to build from.
Let’s suppose that there is a national emergency and it is the US against the world. Without a Jones Act do the Hawaiians know who will provide them with the goods to survive on their islands?
What would have happened to Hawaii in World War II without the Jones Act? And what would have happened in the Vietnam War, the Korean War and the various Middle East wars without a Jones Act?
Living on an island has its own benefits and burdens. That balance is a complex choice, but it is completely unrealistic to think that repeal of the Jones Act will provide a benefit that will dramatically alter the balance of those complex choices.
The Jones Act has existed for over 100 years and for that period it has provided a modicum of national maritime security for very little cost. Over those 100 years it has not harmed any person in a way that it altered their lives and since it is a competitive commercial proposition, rather than a government program, it is more cost effective than using tax money to create an equivalent level of maritime security.
In over 100 years, nobody has raised any new argument against (and for) the Jones Act and it has worked at no cost to the taxpayer. Unless there is a novel argument against it, or the arguments for it disappear (lasting and stable world peace) discussing the Jones Act any further is a massive waste of time.
For every column I write MREN makes a small contribution to an organization of my choice. For the foreseeable future I am selecting SL7Expo, an industry wide effort to develop a Smithsonian level exhibit center for commercial maritime.
