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Monday, October 05, 2015
“Time to repeal the Jones Act”
By Michael Hansen @ 4:15 AM :: 2589 Views :: Jones Act

by Michael Hansen, Hawaii Shippers Council, October 2, 2015

The Hill newspaper posted an op-ed on October 2, 2015, to their blog page from Joshua Sharp entitled “Time to repeal the Jones Act.”

The author is a student at West Virginia University studying for a major in economics and minors in math and political science. He recently published the results of his research on the Puerto Rico Power Authority (PREPA).

Key excerpts:

According to a 2014 report by the Congressional Research Service, the cost of an American medium range product tanker is over three times the worldwide price of the same vessel. Even worse, the operating cost for American flagged vessels is almost 2.7 times more than their foreign flagged competitors. This increases the cost of expanding the supply of vessels in the market, creating an inability to meet demand, and ultimately a higher cost of transportation.

The same report found that the cost of transporting crude oil from the Gulf Coast to the American northeast is almost triple the cost of transporting the same oil to eastern Canada, with an additional cost of approximately $5 to $6 per barrel.

The northeast imports oil from a wide variety of countries, including Canada, Saudi Arabia, and Nigeria, all at a lower cost than the Gulf Coast. Even though the law intended to protect domestic commerce, it has resulted in an increased reliance on foreign oil.

The contiguous states are negatively affected by the law, but the islands receive the worst of it. Unlike the contiguous states, the islands are distant from their mainland partners. This increases the cost of transporting goods from one port to another. As a result the cost of electricity per kilowatt in the noncontiguous states is almost three times that of the mainland states. Islands such as Hawaii and Puerto Rico import most of their fuel sources.

Far from increasing commerce, the limitations on supply and increased costs of transportation have disrupted foreign and domestic trade. This leaves national security as the sole remaining justification for the law. But the United States Navy is now the largest and most technologically advanced in the world, so our waterways are already protected from hostile threats. And it’s unclear how security would be increased by having vessels owned or built by Americans.

The Government Accountability Office’s analysis of a 1995 report by the International Trade Commission found that removing the barriers to domestic shipping could increase gross domestic product by $2.8 to $9.8 billion annually. A report by Justin Lewis of Tulane University also found that eliminating these regulations would reduce the cost of coastal transportation by 61%.

Though the intentions were noble, the law has wreaked havoc on American commerce. As the law nears its one-hundredth anniversary, Congress should bring a peaceful end to an era of protectionism. Congress should repeal the Jones Act.


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