Monday, January 18, 2021
Hawai'i Free Press

Current Articles | Archives

Saturday, June 15, 2019
OECD Jones Act Study generates very large impact numbers
By Michael Hansen @ 9:43 PM :: 1953 Views :: Jones Act

Theoretical new Jones Act Study generates very large impact numbers

by Michael Hansen, Hawaii Shippers Council, June 13, 2019

The Paris, France-based Organization of Economic Development Cooperation (OECD) recently released a new study of the local content requirements (LCR) for maritime services in Brazil’s offshore oil and gas sector and in the U.S. under the Jones Act defined as Section 27 of the Merchant Marine Act of 1920.

The OECD was established in 1948 as the Organization for European Economic Development (OEED) to operate the U.S.-funded Marshall Plan with the purpose of rebuilding Europe after World War II. The OEED became the OECD when its authorizing international convention came into force on September 30, 1961.

The study, “Local content requirements and their economic effect on shipbuilding: A quantitative assessment,” was written by Karin Gourdon, Economist, OECD, Paris, and Professor Joaquim Jose Martins Guilhoto, Economics Department, University of Sao Paulo, Brazil.

With regards to the impact of the Jones Act on the national economy, the authors defined two reform scenarios:

  1. elimination of the domestic build requirement only; and,
  2. removal of maritime cabotage restrictions on foreign vessels operating in domestic service.

They also looked separately at the U.S. shipbuilding sector assuming that the impact would be the same under either scenario 1 and 2.

The methodology was to use an inter-country input-output (ICIO) framework, the OECD’s trade-in-value added (TiVA) data base, applied static inter-country input-output model to simulate the shipbuilding sector, and applied general equilibrium (AGE) model to estimate the effects of the two scenarios on the national economy.

The estimated increases in the national economy in billions of U.S. dollars for the two scenarios are:

Scenario No. 1:

  • Final Demand (FD) $22B, Total Output (TO) $40B, and Value Added (VA) $19B

Scenario No. 2:

  • Final Demand (FD) $74B, Total Output (TO) $134B, and Value Added (VA) $64B

The estimated increases for the shipbuilding sector only in millions of U.S. dollars are:

  • Shipbuilding: Final Demand (FD) $589M, Total Output (TO) $612M and Value Added (VA) $44M

As the authors noted, the potential gains in the national economy are far larger than current levels of the shipbuilding sector in millions of U.S. dollars annually:

  • Original Shipbuilding: Final Demand (FD) $841M, Total Output (TO) $859M and Value Added (VA) $44M US dollars.

That is the potential magnitude of the increase in the national economy for either scenario 1 or 2 is orders of magnitude greater than the current contribution of the commercial shipbuilding sector on an annual basis.

The authors caveat in their report is stated:

The results refer to the economic gains in the long-term such that the US economy will have structurally adjusted to the shock associated with the abolition of the [Jones] act, i.e., the shipbuilding industry will have reached international productivity levels, water transportation services will have approached the price levels of non-Jones Act conform vessels, and the intra-US maritime trade will have been stimulated by lower freight levels.

As the numbers are very large, we contacted the authors to verify their assumptions and received their advice as follows:

The results presented in the simulation refer to the long-term, after all the effects are have taken place in the economy, with no time frame.

We didn’t assume any vessel sizes as we’re working with elasticities.

We applied a top-down rather than bottom up approach. Hence our projections include all vessels.

The projections include the inland waterways cargo volume and vessels.

No provision was made for the restrictions imposed by the domestic regulatory system and behind the border restrictions on foreign vessels operating in domestic trade.

As the inland waterways cargo volume is approximately 80% of the nation’s waterborne transportation and inland waterways vessels represent approximately 85% of all Jones Act eligible vessels (in terms of numbers of individual vessels), inclusion of this transportation mode substantially increases the potential impact of either scenario 1 and 2 on the national economy.

The inland waterways sector with push towboats and river barges is unique, highly competitive with multiple shipbuilding yards and transportation operators, fully enveloped by the domestic regulatory system, and unlikely to be displaced by foreign vessels even with a full elimination of all Jones Act cabotage.

The domestic shipbuilding industry would likely contract significantly before ever rebounding in the long-term.

Although a largely theoretical look at the impact of Jones Act cabotage on the national economy, it certainly provides insights into the potential magnitudes of these impacts.


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

ACA Signups Hawaii


Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni


Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Ballotpedia Hawaii

Better Hawaii

Blaisdell Memorial Project

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

Coffee Break

DVids Hawaii

E Hana Kakou Kelii Akina


Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes


Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii


National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii


OHA Lies

Opt Out Today

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

Sink the Jones Act

Statehood for Guam

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii