Want Americans to Buy U.S. Products? Dump the Jones Act.
by Colin Grabow, Cato Foundation, November 4, 2019
Jones Act supporters often argue that the law, which mandates the use of U.S.-flagged, U.S.-built vessels that are at least 75 percent U.S. owned and crewed for purposes of domestic transport, epitomizes President Trump’s philosophy of “America First.” But as a new Wall Street Journal editorial points out, the truth is perhaps closer to the opposite:
[The Jones Act is] a particular problem for liquid natural gas, since there are zero LNG tankers that meet Jones Act rules. That means Puerto Rico effectively is barred from importing gas from LNG terminals in Georgia or Louisiana. As a result, it apparently turned to Siberia. The same happened two winters ago in New England, where gas is short due to a lack of pipeline capacity. A tanker of Russian gas was unloaded in Boston. How is this an “America First” policy?
The problem goes well beyond LNG. There are no Jones Act-compliant liquefied petroleum gas (LPG) carriers either, so Hawaii, New Hampshire, and Puerto Rico must meet their propane needs by importing it from as far away as West Africa. This is happening even though the United States is the world’s top LPG exporter. The United States is also one of the world’s leading exporters of asphalt, but the absence of Jones Act asphalt carriers means that Hawaii must import it from abroad.
Even when the appropriate Jones Act ships actually exist, they are typically much more expensive to use. Their high costs are such that California imports oil from Nigeria—going around the tip of South America—instead of the Gulf Coast. The journey may be far longer, but the cost of Jones Act shipping helps tip the math in favor of African oil.
That’s no surprise. A 1999 GAO report found that it was three times more expensive to send oil from Alaska to the Gulf Coast than to the Jones Act-exempt U.S. Virgin Islands. Amazingly, that’s despite the latter journey, via Cape Horn, taking twice as long (84 versus 41 days). A 2014 Congressional Research Service report found that shipping oil aboard Jones Act tankers from Texas to refineries in the Northeast was up to three times more expensive than shipping the oil to Canada.
A 2013 GAO report examining the Jones Act’s impact on Puerto Rico, meanwhile, described expensive Jones Act transport being a decisive factor in the decision to source products such as corn, potatoes, and fertilizer from abroad instead of domestically. The importation of jet fuel from Venezuela was also mentioned. This, according to the report, was due to the “difficulty in finding available Jones Act vessels to transport jet fuel and, when vessels are available, the high cost of such shipments compared to shipping the product from foreign countries.”
Let’s be clear: there is absolutely nothing wrong with Americans purchasing foreign products. Access to imports raises both productivity and consumer welfare. But just as the United States should not shun goods made abroad, neither should the U.S. government effectively place its thumb on the scale in favor of imports through misguided policies such as the Jones Act. At the very least, Americans should have the option of buying U.S. products, which is a current de facto impossibility for many given the Jones Act fleet’s decayed state.
Truly putting "America first" should mean substantial reform or repeal of the Jones Act.