Does the Jones Act lead to robbery?
by Michael Hansen, Hawaii Shippers Council, August 21, 2017
The American Spectator magazine published on August 18, 2017, the opinion-editorial, “How Congress abets seaway robbery,” with the subtitle, “The Jones Act protects a strange mix of piracy and racketeering.”
The author of the piece is Jon Cassidy, a reporter for the Texas Monitor and a contributing editor for the American Spectator. He was formerly the Texas bureau chief for Watchdog.org. The non-profit American Spectator Foundation publishes the conservative online The American Spectator magazine, which was founded in 1924 by George Nathan and Truman Newberry.
A particular target of the piece is five-term Congressman Duncan D Hunter (R-CA-50) who has represented the San Diego area of Southern California since January 3, 2013, and is currently the Chairman of the House Subcommittee on Coast Guard and Maritime Transportation. Previously, Cong. Hunter served three tours of duty as a U.S. Marine Corp officer in the War on Terrorism (two tours in Iraq and one in Afghanistan) joining in September 2001 and discharged honorably in December 2009.
Cong Hunter is a staunch supporter of Jones act cabotage and the General Dynamics NASSCO (National Shipbuilding and Steel Company) shipbuilding yard in San Diego, which is one of the seven active major U.S. shipbuilding yards constructing self-propelled seagoing ships over 1,000 gross tons. NASSCO is the only one of the seven that constructs both commercial merchant and military ships.
NASSCO delivered in late 2015 and early 2016 to the Saltchuk Resources Inc. TOTE Maritime subsidiary two Marlin Class 3,100 TEU containerships for the Puerto Rico trade. Matson Navigation Company Inc. has on order two combination Con/Ro (Container / Roll-on Roll-off) ships (2750 TEU / 500 autos) from NASSCO for delivery in 2020 and employment in the California / Hawaii trade.
Several reports appear4d in the media on March 23, 2017, that the U.S. House of Representatives Ethics Committee referred a complaint against Rep Hunter to the U.S. Department of Justice for the misuse of campaign funds. U.S. News & World Report reported, “On Aug. 26, 2016, the Office of Congressional Ethics, an independent panel, referred Hunter to the ethics committee in August.”
The Los Angeles Times reported, “U.S.. Rep. Duncan Hunter is under criminal investigation by the Department of Justice for possibly misspending tens of thousands in campaign funds.” The San Diego Union Tribune reported, “A federal law enforcement official familiar with the investigation confirmed Thursday that the FBI is investigating Hunter for campaign finance violations.”
Rep. Duncan Hunter, R — San Diego, once spent $600 of campaign money on a plane ticket for his cat.
So you wouldn’t expect Hunter to see the problem with a law that forces ranchers in Hawaii to charter a weekly 747 to get their cattle to market.
Yet Hunter’s views on interstate cargo transportation prevail, for reasons that probably have more to do with the tens of thousands of dollars in campaign funds he has spent on personal items, such as oral surgery, a family trip to Italy, Disneyland gift shop purchases, and dozens of video games on Steam.
You see, there is a simple, pain-free solution to congested freeways in most of our biggest cities, a way to make a lot of those semi trucks clogging the lanes just disappear. It’s simply to put the ships back in shipping.
The reason we don’t is petty bribery: a few companies and unions have a nice racket going, and pay Congress to protect them from competition.
The act has produced two effects: one obvious to anyone with a remedial knowledge of economics, one less so.
The obvious effect of “protecting” the domestic shipbuilding industry has been higher costs. The U.S. International Trade Commission puts these as high as $15 billion annually, but I would venture that the true cost is unknowable, and probably far higher.
The unmistakable effect is felt in Alaska, Hawaii, Puerto Rico, and the island territories. Puerto Rico is in its bankrupt state for three reasons, primarily: its own lawless profligacy, the federal minimum wage, and the Jones Act. To ship a container from the East Coast to Puerto Rico costs double what it does to send one to Jamaica or the Dominican Republic.
Why are these costs so extreme? Is it that hard for the U.S. to build ships competitively? The answer is yes. The reason is the Jones Act.
Consider boxing. Imagine trying to become a world champion sparring with palookas, while forbidding them from hitting you in the head.
Markets work the same way, imposing discipline on fancy. Where there’s a carve-out, a guaranteed source of income, companies will adapt to those political demands, filling up that space even as they become completely unsuited for the larger market.
The U.S. shipbuilding industry represents only about one percent of the world market, as its only customers are Jones Act shippers, who prefer to ride their existing rusty hulks to collapse before spreading any of their legally guaranteed wealth.
The domestic shippers control a legal choke point, and the unions that unload the cargo control the physical choke points. The shippers squeeze the customers, and the unions squeeze the shippers.
Of course, there’s no money in actually choking anyone to death. If you’re in the business of highway robbery, you can’t scare the travelers away. Just take your cut somewhere up the supply chain, share it with a politician, and trust that consumers will never wise up.