Insights on PBS Hawaii: The Jones Act
From Grassroot Institute of Hawaii Oct 16, 2017
Grassroot Institute of Hawaii President and CEO Keli’i Akina, Ph.D., was part of a panel moderated by Lara Yamada that discussed the federal maritime-related Jones Act on “Insights on PBS Hawai‘i,” Oct. 12, along with Hawaii Pacific University economics professor and Grassroot Scholar Kenneth Schoolland, Randy Swindell, representative for the International Organization of Masters, Mates & Pilots, and Leighton Tseu, retired Matson regional senior port engineer. See the entire show at “PBS Hawaii Jones Act” or read the transcript below:
Sen. Mazie Hirono: Mr. President, I rise today to speak in opposition to an amendment offered by Sen. (John) McCain pertaining to the merchant marine in the act of 1920 popularly referred to as the Jones Act.
Narrator: Once again the nearly 100-year-old Jones Act is being debated locally. Triggered by the temporary waiver to help relief efforts in hurricane-torn Puerto Rico. Hear all sides of the debate. Tonight’s live broadcast and live stream of “Insights on PBS Hawai‘i” start now.
Lara Yamada: Aloha and welcome to “Insights on PBS Hawai‘i.” I’m Lara Yamada.
The recent devastation in Puerto Rico following Hurricane Maria has renewed debate about a World War I-era shipping law that requires ships going from American coast to American coast to be American-built, -owned and -crewed. Goods going from the U.S. mainland to another U.S. port must travel on U.S. ships, even if they’re not the most economical or available method of transport.
Is the Jones Act to blame for delaying recovery efforts in Puerto Rico by preventing foreign vessels from assisting in delivery aid to this U.S. territory? The Trump administration eventually waived the Jones Act in late September to assist Puerto Rico’s recovery effort, as was the case in Texas and Florida in the aftermath of hurricanes Harvey and Urma. The waiver has since expired and the Department of Homeland Security says it will not be renewed.
How could the law impact our own state if disaster strikes? Should the law be repealed? Replaced? Or maybe waived during times of disaster relief efforts?
Joining us tonight are those who will share their different perspectives. We’ll look forward to your participation in tonight’s show. You can email, call or tweet your questions, and you’re going to find a livestream of this program at pbshawaii.org and at the PBS Hawai‘i Facebook page.
All right, now to our guests:
Keli’i Akina is the president and chief executive officer of the Grassroot Institute of Hawaii. Dr. Akina was elected to statewide public office as trustee-at-large for the state Office of Hawaiian Affairs. He is an expert in East-West philosophy and ethics, has taught at universities in China and the United States, and continues as an adjunct professor at the Hawaii Pacific University.
Randy Swindell is the Honolulu port representative for the International Organization of Masters, Mates & Pilots. Mr. Swindell is a Navy veteran who currently serves as one of several small union vice presidents of the Hawaii State AFL-CIO, and as president of the Hawaii Ports Maritime Council.
Ken Schoolland is an associate professor of economics and director of the Entrepreneurship Center at Hawaii Pacific University in Honolulu. Mr. Schoolland served as an international economist in the U.S. International Trade Commission, the U.S. Department of Commerce, and on assignment to the Office of the Special Representative for Trade Negotiations.
Leighton Tseu spent 20 years as a seaman and another 20 years as regional senior port engineer for Matson Hawaii area and Pacific Basin. In that position he was responsible for the maintenance of Matson’s fleet, as well as overseeing all federal safety regulations for ships in the terminal and shipyards. Mr. Tseu is now retired and does volunteer work with the Hawaiian community, especially with opio, the youth.
So thank you so much all of you for being here tonight. Before we begin our discussion, we’re going to take a look at a recent effort by Congress to repeal the Jones Act. Now, in January of 2015, Arizona Sen. John McCain offered an amendment on the Senate floor to repeal the law stating, “I have long advocated for a full repeal of the Jones Act, an antiquated law that has for too long hindered free trade, made U.S. industry less competitive and raised prices for American consumers.”
Hawaii Sen. Mazie Hirono followed with a floor speech to keep the law intact. Her reasons are consistent with the ongoing position taken by most of our congressional team members throughout the years.
Let’s take a look at Sen. Hirono’s reply to the U.S. Senate. It’s about five minutes long, and then we’ll get comments from our panel, starting with Dr. Akina and Mr. Schoolland. Take a listen.
U.S. Sen. Mazie Hirono: I rise today to speak in opposition to an amendment offered by Sen. (John) McCain pertaining to the Merchant Marine Act of 1920, popularly referred to as the Jones Act.
I, of course, start by saying that the chairman of the armed services committee, Sen. McCain has a distinguished record of support for our men and women in the military and cares deeply about our national security, but on this amendment, I respectfully disagree with our chairman.
I’d like to take a few minutes this morning to remind my colleagues just why the Jones Act is an essential component of our national security policy, and shipbuilding is a foundational component of American manufacturing.
The Jones Act requires that maritime vessels engaged in shipping goods between U.S. ports must meet three requirements: They must be built in the United States; at least 75 percent owned by United States citizens and; operated by United States citizens.
The Jones Act helps to shore up our national security by providing reliable sealift in times of war. It ensures our ongoing viability as an ocean power by protecting American shipbuilders.
As a result, the Jones Act provides solid, well-paying jobs for nearly half a million Americans from Virginia to Hawaii.
In short, the Jones Act promotes national security and American job-creation. Therefore, I am unclear why some of my colleagues are opposed to this common sense law.
I don’t simply say this as a member from an island state, where we depend on the reliability offered by American shippers for fresh food, energy and other everyday goods, but I say this as a senator who cares deeply about supporting our strong and growing middle-class and creating American jobs.
First, shipbuilding is a major job-creating industry. According to the maritime administration, there were 107,000 people directly employed by roughly 300 shipyards across 26 states in 2013.
Additionally, shipyards indirectly employed nearly 400,000 people across the country. This amendment would specifically knock out the Jones Act provision that requires U.S. flagships be built in the United States, jeopardizing good-paying jobs middle-class jobs. To me, that’s reason enough to oppose this amendment.
Secondly, this is not the time to create the instability this amendment would directly cause.After struggling through tough times, America’s shipbuilding industry is coming back. Both this Congress and the administration have long stressed (the) need for creating and keeping manufacturing jobs here at home in the United States. According to the Navy League, there are 15 tanker ships being built here in the U.S. right now and slated to join our U.S.-flagged fleet. The fact is, these ships don’t create quick turnaround jobs, but hundreds of thousands of well-paying, long-term manufacturing jobs.
If these ships are not built here in U.S. shipyards by U.S. workers, where will they be built? Where will these jobs go? China, other Asian countries? Europe?
The shipbuilding industry in our country is rebounding. Repealing the Jones Act is a step in the wrong direction. Instead of dismantling a policy that supports American jobs, Congress should be focused on doing more to promote and grow American jobs, American manufacturing.
Repealing the Jones Act requirement to build ships here in the United States will unquestionably cost U.S. jobs and weaken our position as a manufacturing leader. These are two strikes against the amendment.
The third and final strike is the fact that the amendment would undermine our national and homeland security. The Jones Act requirements, along with the American shipbuilding and maritime industries they underpin, provide American-built ships and crews for use by the Department of Defense in times of need. It is easy to see why the Navy and Coast Guard strongly oppose repeal of the Jones Act and all of its components.
The Defense Department has concluded: “We believe that the ability of the nation to build and maintain a U.S.-flag fleet is in the national interest, and we also believe it is in the interest of the DOD for U.S. shipbuilders to maintain a construction capability for commercial vessels.”
Therefore, there’s three strikes against this amendment. If adopted, the amendment would dismantle the Jones Act costing American jobs, hurting American manufacturing and undermining our national security.
I ask my colleagues to stand with me, and I certainly ask the chair of the Armed Services Committee to change his mind on this and stand with nearly half a million middle-class Americans, and vote against this amendment, if it is brought up for a vote.
I yield the floor.
Lara Yamada: So, again, Sen. Hirono a couple years ago talking about preserving the Jones Act as is. It has been the trend with most of our congressional leaders here in Hawaii. Let start with you Dr. Akina. You had talked about reform of the Jones Act, certain parts of it. I’m going to point out one particular aspect of what she said that you have a bone to pick with, when she talks about the Jones Act supporting the middle class. Why, in particular, do you feel that is something that is an issue?
Keli’i Akina: Well, Lara, thank you for having me on the program.
First, let me say: Aloha. Glad to be back on “Insights,” and aloha to all of the viewers tonight and some of my colleagues here whom I’ve known for awhile.
It was interesting to us to watch Congresswoman Hirono because she flipped the argument between two extremes, and that is either repeal the Jones Act or either keep it the way it is.And, you know, I think a lot of energy has gone into promoting either of these extremes. It’s important to recognize that the truth is somewhere in the middle. We can’t repeal a 100-year old law and all of the regulations that go along with it very easily. But at the same time, it’s time to update the Jones Act for the 21st century.
I’d like to suggest this, that there is a solution that Ms. Hirono could go along with very easily. She talked about the fact that the Jones Act, it requires ships to be flagged by the American flag, have American crew, also be owned by American companies. We can keep all of that in place and make one tweak to the Jones Act, and that is simply to let our companies purchase their ships the way the military often does, from our allies. Those ships can still conform to the Jones Act requirements, but they can solve a really big problem, and that affects the middleman that you talked about the, or the ordinary person. And that is that there’s a huge shortage of Jones Act-available ships right now. As a result, the cost is skyrocketing. It costs us five times as much for a Jones Act ship as it does to have an allies-built ship. And as a result …
Lara Yamada: Why is that?
Keli’i Akina: That’s because through the years we have moved from being the most productive shipbuilder on Earth, at the beginning of World War II, to one that now produces less than 1 percent of all ships because of the prohibitions of the Jones Act, and as a result we pay a huge amount more in shipping.
Now, everyone in Hawaii knows we pay more for cost of living — for housing, for food, and other things. The Jones Act is a big part of it.
Let me add this, and then I’ll hand it back over to the other panelists: This is a little outdated, Ms. Hirono’s presentation, because here she’s talking about repealing the Jones Act. In the recent news, she has come out in support of President Trump’s waivers in the hurricane situations in Florida, Texas and Puerto Rico, and has said that she would support the same for Hawaii.
My question is this: If we can support the waiver of the Jones Act in times of emergencies, why not simply pull it back or pull aspects of it back so that we don’t have to go through the process of waiving it?
Finally, the polls show that 84 percent of all people in Hawaii would like to see reform or repeal of the Jones Act, and that would be good news for Ms. Hirono as she seeks public office again, to keep that in mind.
Lara Yamada: (Chuckles) A little extra plug in there. I know you want to respond. There’s a lot to respond to. But just to be fair, because Sen. Hirono’s perspective was supporting and preserving the Jones Act, I’m going to let Ken chirp in here a little bit. Your stance a little bit different from Dr. Akina’s as far as how we should be dealing with the Jones Act or what we should do, in particular having to do with Hawaii and some of the other areas and possible special exemptions. What are your thoughts and your response to what she had to say?
Kenneth Schoolland: I’m fully supportive of what Keli‘i says in terms of focusing on the build requirement. Let me comment about the waiver. I was just in Puerto Rico two months ago just before the hurricane, and I spoke with former governor Luis Fortuno, and he says that the existence of the Jones Act made it much more expensive for them to import and export goods to Puerto Rico. The same ships that go to Florida from Virgin Islands can go at half the cost he said. And they were attributing a lot of their debt problems, and they’ve recently declared bankruptcy, to the high cost of goods that it takes to bring things into Puerto Rico.
Now, the waiver is dependent on President Trump giving it, and, frankly, if we’re in emergency, I would hate to rely on the discretion of President Trump to decide whether we can, or we can’t have the access to 99 percent of the world shipping.
As Henry George said, “Protectionism in this form does to our own nation in peacetime what the enemy would do to us in wartime.” It cuts us off from all of the options and the flexibility of the world shipping.
In fact, we’ve seen in our own state here and Sen. (Daniel) Inouye and Rep. Neil Abercrombie, put a waiver through Congress allowing the Norwegian Cruise Line to operate ships here in the islands, and their stated reason was, it brings jobs, and it brings the availability of more opportunities for tourism and economic growth.
The world has changed a lot since 1920. In those days we didn’t have allies in Japan and South Korea, the biggest ship producers among our allies in the world. They produce 600 ships a year of the commercial variety that are being produced in our shipyards of about two to three per year.
Now, she states in her statement there that the shipbuilding of all the shipbuilding yards and ships that are being produced, but those are mostly for military under military contract. The commercial ships are actually being built in three ports, one of which, the Philly one, is owned by a Norwegian company. The one in Pascagoula, Miss., is owned by a Singapore company that was founded by the government of Singapore as a military contractor who does enormous amounts of business, more business than here. They do it in with the People’’s Republic of China.
So it’s a bit of a stretch to say they’re American shipbuilders when they’re owned by foreigners.
And they, too, outsource their supplies. They get their engines, their designs, their components, as much as their electrical work from foreign sources. It seems to me that when we can rely on, let’s say, airplane companies that that buy from foreign sources, like Airbus, that we ought to be able to allow people in this country to shop around for the best things. If we’re going to station a hundred thousand troops in Japan and South Korea as our allies, pledging in a mutual defense treaty to come to their defense and we have our blood stationed there, we should at least trust them to sell us ships at a fraction of the price that we currently build them in.
Lara Yamada: So there’s a lot to respond to. (Laughs) I’m not sure where you want to begin. I wanted to give these two a chance to respond first, being that we started off with Sen. Hirono supporting the Jones Act. With the work that both of you do, I don’t know who wants to chirp in first. Obviously, there are some points, numerous points, that Ken and Dr. Akina had brought up, that you have issue with and you want to make sure people understand the impact that they may have. I don’t know who wants to start. Who wants to talk?
Randy Swindle: I could start first. First, what the senator said about innovation is correct. Right now for the Puerto Rican trade, there’s two new container ships being built that are fueled with LNG or with the regular bunker C fuel oil. Those are the first container ships in the world that are being built that way. So she’s correct about innovation.
As far as the other arguments about build foreign, these arguments have already been played out over 30 years ago. When I first came into the industry, that was the strategy because they knew that they couldn’t break the Jones Act coalition, because the coalition is the shipyards, the shipping companies and the people that are on the ships, man the ships. So the way to break that up is to go for half a loaf, to break off the shipyard folks. I’m against that, and I think that the community at large is being served well by the way that the Jones Act is going right now. There’s enough in the market, there is enough right now going to Puerto Rico. Puerto Rico problems are not cargo being there. It’s being distributed is what the problem is.
Lara Yamada: Issues with the roads, the infrastructure there, with the workers, the truck drivers, getting out to be able to move that off of the dock.
Randy Swindle: Right. That’s the thing. And whenever you talk about closing shipyards, you’re laying off hundreds of thousands of people, and also there’s other related industries that supply to shipyards that they will be laying off people. So what’s going to happen to them? I mean, they’re going to have to be retrained? They’re going to have to be, probably go on unemployment benefits or worse. So, I’m against that. I’m for keeping the Jones Act just the way that it is. It’s served us well.
Lara Yamada: To Ken’s point about … I think this is an interesting discussion … about, where the ships are being built, where others have been built, in other industries some being in foreign countries as well, what the issue is in particular with that, especially if they have a more efficient system that might produce faster: What are your thoughts on that? I know there’s an issue with national security, but we have other industries and other examples of where, despite any concerns of national security, that’s already happening.
Randy Swindle: Well, the main cost of building the ship is basically the labor and the safety equipment that goes in it. A lot of the expense goes that way. It just costs more for an American worker to do a job than someone in China. I mean, I’m not going to apologize for an American making a living wage over here. And also some of the times, these foreign ships are subsidized. You might not be able to directly track it, but they’re being subsidized by the country that they’re being built in. And we have specific laws over here against that.
Lara Yamada: You’ve been so deeply involved for so many decades, Leighton, with the maritime industry. Your thoughts to Sen. Hirono’s comments, as well as the comments from the other panelists here? A lot of different viewpoints raised.
Leighton Tseu: First, mahalo for having me here, and aloha kakou to all of the viewers and people of Hawaii. For me, because I’m born and raised here, kānaka maoli, my thinking is different, because we still believe the Hawaiian kingdom still exists, and there’s no treaty of annexation, and yet we are still following the Jones Act. We need to.
The reason we need to follow the Jones Act is because, No. 1, environmental, very important.
Engineering, construction, very important. The quality of work that the United States does and the requirements that the ABS (American Bureau of Shipping)-United States Coast Guard-regulation law to build a ship is the most stringent in the world. We got the most safest ships. You compare the material that they use to build ships, like in China, compared to the United States, the steel grade is so different; their’s got a lot of alloys. So what it’s telling you, the life of the vessel is less when from outside of our country.
No. 2, here, what’s so important is the environment. If the Jones Act had to be removed, who’s going to inspect the ships? No. 1, invasive species in the ballast. By law, all the ballast in U.S. ships have to log and deballast 200 miles from the state limit. By law, they have to change, especially coming from different countries. Who’s inspecting these foreign ships? And catching that limo growing on the hull from a foreign country.
They had an experience in Michigan,up in the lakes. A foreign ship came up with some kind of mussel on the hull. It got into all the piping systems. They had a major problem. Our laws are so strict; the Jones Act is very strict. I know a lot of local people, our kānaka maoli, they don’t want the Jones Act. But I say, for now, we have to protect it until the day comes when our independence come back, and our kingdom comes back again. Then we can re-establish our own maritime law. That’s the key.
But right now is very important. You look what happened to Pearl Harbor. You cannot fish in there anymore. Cannot. You have signs, “No fishing.” The key part where this, when come to the ships and I’m listening to them, and everybody has their own opinion, but the most important thing is our environment, our waters. All it takes is one foreign flagship to run aground, and Waikiki turns black oil. Who’s going to clean it up?
Lara Yamada: So we’re talking about the environmental issues, as well as when it comes to the Jones Act, protecting workers’ rights, workers themselves; different standards there. What are your thoughts there? Why doesn’t everybody get a chance to chat a little bit and then just kind of open it up, to respond to whatever aspects of what we talked about?
That is another important point that people bring up with a Jones Act. There’s very specific regulations as to how the crew is treated, what type of standards. When it comes to foreign ships there aren’t the same standards, and that’s been recognized not only in this industry but also the longline fishing industry, for example; that’s a big issue here in the islands. What are your thoughts on that? If you have a structure in place that is providing these securities whether it be from a job standpoint, possibly, or an environmental standpoint or also from a worker standpoint?
Keli’i Akina: Lara, I’d be glad to respond to that, if I may. You spoke about the environment as well as about national security, I think we have to understand with the environment that what Leighton says is very insightful. He says, “What if one ship, a foreign ship, had an oil spill in Honolulu Harbor and turned it black? How terrible that would be?” That’s hypothetical.
The reality is that the worst oil spill in the United States history was a Jones Act-compliant ship, because Jones Act ships are so scarce, we keep on servicing them and operating them long beyond their lifetime. So the Jones Act actually contributes to environmental damage rather than prevent the environmental damage.
In terms of job losses and so forth, there’s a big misconception that has to be cleared up. Ms. Hirono made a terrible mistake in her statistics, and Ken Schoolland pointed that out. She talked about thousands of jobs, from hundreds of shipyards. The truth is those figures don’t apply to Jones Act ships. Jones Act ships are produced only in three shipyards, and we now produce so few Jones Act ships that, the job loss of buying our ships from any foreign country would not be significant whatsoever. That’s important to keep our statistics lined up straight.
I think also it’s important to recognize, all throughout the discussion so far, we’re not talking about a full repeal of every aspect of the Jones Act. We can do exactly what the military does: Buy vessels from our allies and still there American-lagged, their American-crewed, they’re owned by an American company, all of the regulations of OSHA, Homeland Security, Coast Guard, and so forth would still apply to these ships as they do with the military. So it’s important to keep our definitions lined up straight.
Kenneth Schoolland: I might add that I don’t mind if they want to keep a restriction against the ships of China, or a country that we don’t have any quality control over, but we’re talking about 600 ships a year for export alone from South Korea and Japan. Now, these are our allies, and I think that it’s not realistic to assume that they don’t have good quality inspection. When I compare a Toyota with a Ford, I think that no one would say, “Well, the foreign cars aren’t good quality vehicles because they were made in Japan or made in Korea.”
Furthermore, I think the oil spill that he’s referring to is the Exxon Valdez, which is something that everybody’s familiar with; it was a terrible disaster. But more than that, because of the age of these ships, American ships are two to three times older than the new ships. They’re state-of-the-art, have all the latest environmental and efficient operations. The older ships, like the El Faro that sunk in the Caribbean in a storm, that was a Jones Act ship and lost 33 lives there. It was a disaster, as was the BP oil spill.
There were 17 countries that had ships in the area that could have sent to help us clean up and prevent the spread of that oil, but they were disallowed by the Jones Act. People had to go and plead with the president to give a waiver so that they could come and clean up the shorelines, and it depended on national security, which I’ve got to say, if it’s really all for national security, then it should be paid for by the nation, not by Hawaii.
I mean, no one would ask us to pay for all the expenses of Pearl Harbor or Schofield Barracks out of the expenses of higher prices in Hawaii. We expect the nation to pay for that. If they want to have just a ship that’s just built in America, then have the American population as a whole pay for that through a subsidy, but not through just demanding that we buy higher-priced ships and we have to pay for that in the prices of all of our food, our milk, our bread, our cattle feed, everything that we buy from the mainland or that we want to sell.
I would say that our sugar industry was damaged enormously by having have to pay higher costs at sending our sugar to the mainland than the cost of the Philippines sugar or Latin American sugar that could take non-Jones Act ships and sell them in competition with American sugar workers.
Lara Yamada: I want to make sure that two of you get a chance to respond, but just to kind of maybe incorporate some of the questions that are coming in, no doubt, and e not surprising that a lot of them are focused on the cost of living here in Hawaii and what they believe this impact is having, one saying, “Opposed to the Jones Act due to the high cost of living here in Hawaii and weak agriculture infrastructure. How are these issues change if the Jones Act were overturned?” I gather, not surprised, that people would, in the public here in Hawaii — surveys have been done recently — and their main issue for supporting a repeal is that they feel that will have an impact on the cost of living here in Hawaii.
Randy Swindle: OK, I’ll grab part of that. First of all, there’s a little misconception here about the Jones Act fleet. There’s actually 40,000 vessels under the Jones act fleet. They do transportation in the rivers in the east and in the Midwest and coming down. Those vessels are in the Jones Act trade. They go from city to city on the rivers. If you would repeal the Jones Act, you would open up all of that territory to noncitizen mariners.
Right now, Leighton and I are credentialed with the TWIC card; it’s a transportation worker credential, and without it, we can’t work. But, if you get rid of the law, that’s not required. And our credential, the TWIC card is issued by the Transportation Security Agency. We’re vetted. Every American seaman is vetted, by the TSA, and then they go to the Coast Guard. So what people do is they hone in on “my island” or that they don’t have the overall arching picture of the entire industry. So, I’d just like to make that point.
And as far as the cost, well, the GAO did a study on Puerto Rico in 2013, and they looked at it and it’s such a complicated issue with so many variables about cargo, that they couldn’t come up with a number, if it cost or if it didn’t cost. But what they did know is because of the system that was in place, their infrastructure, and just-in-time delivery, and not having to have warehouses, pay the real estate price for warehouses, that the consumers were actually saving money.
I have right here, from a website called Numbeo, that compares the cost of living between Puerto Rico and the U.S. Virgin Islands, and you all know that the Virgin Islands are exempt from the Jones Act, though. According to this, the cost of living in Puerto Rico is quite a bit cheaper than the Virgin Islands. So how would the Jones Act …
Leighton Tseu: Affect.
Randy Swindle: You know, they’re exempt from the Jones Act, and this is the case. Where is that savings that you guys think is going to happen? It’s not going to happen.
Lara Yamada: Here’s a quick question from Paul: “Do you really think anything besides removing the foreign-built requirement for Jones Act carriers would have any material impact on the Hawaii transportation outcomes?” Let’s take that one. [Crosstalk] A little confusing in the question?
Randy Swindle: A little too fast for me there.
Lara Yamada: Sorry. “Do you really think anything besides removing the foreign build requirement for the Jones Act …” — that’s what you brought up on Dr. Akina. — “for Jones Act carriers would have any material impact on Hawaii transportation outcomes?”
Randy Swindle: I don’t think so. I don’t think so. If you were a businessman and somebody reduced your cost, but you knew what the traffic was going to bear, would you lower your cost? I don’t think so, I think your profit margin would go up. It’s the philosophy that I would have on that.
Keli’i Akina: I wonder if I could respond to a couple of things Randy has said, if that’d be alright? Well, first going back to what he said a little bit earlier about the thousands of Jones Act ships that are out there, it’s important to understand that we’re really talking about the difference between a ferry, which might go between the islands here as being under the Jones Act, versus real deep-bottom cargo ships.
In 1960, we had 3,000 ships that were capable of carrying cargo across the world under the Jones Act. We now have 169 only. There is a huge scarcity of American Jones Act ships when we’re talking about the definition of a ship that actually carries large amounts of cargo. So it’s important to keep our statistics straight, and that’s a comment we made about Sen. Hirono earlier as well. In terms of the jobs that are related to the Jones Act, there are so few that come from only three shipyards all together.
Now, the question you just raised here from Paul … is that his name?
Lara Yamada: I think it was Paul, yes.
Keli’i Akina: … Has to deal with the build requirement. That’s just one of the aspects of the Jones Act. Remember, as you mentioned earlier, the Jones Act says that a ship that takes cargo between American ports has to be American-flagged, American-crewed, American owned. I would agree that if you allowed us to keep those requirements, but purchase our ships from our allies just as our military does, you’d have no harmful effects to the job market, no harmful effects to national security. That’s an important point to make. We’re not talking about repealing the Jones Act; we’re talking about updating it for the 21st century.
Lara Yamada: Quick question from Roger: “Do fishing vessels need to be made in the United States?”
Leighton Tseu: Yes. Anything to do with vessels, they have to be a Jones Act, because it has to have a bottom made in the United States, to be able to be part of it. But also, I’m not too sure but the fishing rules that they have now, there’s been so many changes.
Lara Yamada: OK.
Yeah. But can I go back to some few things that they said about the Valdez oil spill? That was an American company — the Jones Act ship — they paid the bill. They paid every penny. They cleaned up every dead bird. They cleaned it all up and Alaska is getting back to where it was. You get one foreign ship from Liberia, they break up, who’s going to pay the bill? At least we have somebody to get. If they go deal with a foreign ship, you going to have to deal in their courts. They ain’t coming here to deal with you. So there’s a difference.
And the material to build the ship? At least we use the best deal, and our engineering is excellent. I’ve been an engineer, and even though the ships are old, they run.
Keli’i Akina: Well, Leighton, you’re a great engineer, but you’re a better debater because you’ve shifted the issue from the environmental flaws of Jones Act ships to whether they would pay. So I’d agree with you that we can make Americans pay, but the point is, I’d like our viewers to know, that you haven’t denied the fact that the Exxon Valdez, a Jones Act ship, caused a terrible environmental disaster. That’s the point we need to stick to.
Leighton Tseu: They fixed it. They cleaned it. That’s the difference.
And then another thing that we mentioned, about the cost. The real estate here, ho, that’s a big deal. Look at the condos they’re building: $650,000, $800,000. How many local people … It’s nothing do with the food coming in. It’s the real estate and the immigrants who buying into it, who’s got the money. They’re driving the cost up.
Lara Yamada: People were asking whether or not this is going to have an impact on the cost of living. You’re saying … Actually there’s one question from somebody who said,”What does the Jones Act cost the average Hawaiian resident per year? Please give an example of the cost of an item with and without the Jones Act in addition of the Jones Act.”
I mean, this is what I think is so hard for people to wrap your brain around. They see that we’re so incredibly reliant on the shipping industry, and you see the goods that they buy at the store and they have in their houses every day, the price is going up, up, up, up, up. It’s hard not to relate that in some shape or form to whatever is happening within the shipping industry. So how do you then sort of separate that and say, “Well, actually it really has to do with the cost of living as far as the real estate here and other people coming in.” I think that’s a hard thing for people to separate.
Randy Swindle: That’s right.
Leighton Tseu: Well, take a box of cornflakes. What do you think it costs to make a box of Corn Flakes? What would you say?
Lara Yamada: Not as much as we buy in the store.
Leighton Tseu: That’s right. Because a box of cornflakes, you get about five different hands in it. That’s why it cost so much. Everything that moves here, you got about everything you can think up. Somebody’s got their finger in that pie. That’s the problem. Federal regulations, taxes, the owner’s profit; everything is add to that box. That’s why it’s so high, and that will never change.
Now, if the Jones Act, if we work it out the way I feel, take a good example: OK? We repeal the Jones Act, but I like what he says: American ship, American crew, everything American except the way it’s built. If the Jones Act were repealed and we allowed foreign ships to compete, it I was an American shipping company, I’d change to a foreign flag like that (snaps his fingers). I take a Micronesia-flag country, I’ll get away from the taxes, I’ll get away from labor costs, everything’s down. Then the price is going to come down. But that’d be the advantage. The problem is that you gonna … I mean, if the company really sees they got a problem … If I was the owner of an American …, “OK, you guys don’t wanna play the game? I go foreign.” And what you going to do?
Kenneth Schoolland: I think we’re talking about two different things …
LeightonTseu: No, we’re talking about money.
Kenneth Schoolland: Yeah, that’s true.
Kenneth Schoolland: But in a sense, what Keli‘i is talking about is just allowing American companies to buy lower-cost foreign ships made from an ally.
Lara Yamada: Like free trade …
Kenneth Schoolland: What is involved with the larger discussion here is, well, who’s allowed to operate that? We’re not disputing that. And besides, even today, we have foreign ships to come into all of our harbors, and they all could be vulnerable to, you know, an accident or a tragedy. That happens today. That’s not going to change with this change in the build requirement, because it could still be under the requirement that an American company has to own the ship to go from one port to another. It could still be subject to all the same regulations that exist today. So that’s not being changed by what Keli‘i is proposing.
Leighton Tseu: What changes is the education of our young students.
Kenneth Schoolland: Well, yeah, that could be true, yeah. But I’’d say we have a lot more … If we’re able to lower the cost — and I agree with you that it’s possible that the companies, your Matson company, might not lower the cost to the consumers — but I’m hoping that they would. I’m hoping that they would be under pressure from their overseers, the regulators, that they would have to follow along a little bit with their costs. Instead of raising their rates, they’d be lowering their rates. The competition always helps.
I mean (holds up a smart phone), we would have never known what would have been possible without the competition. We would still be with … you know, if AT&T still had their monopoly over telephone lines, we’d have a single-line coming into the phone and everybody would pay $10 to make a phone call to the mainland. But today, no one could have seen the advantages of competition with the smartphone and thousands of apps, that innovation brings with competition and lower cost.
And I would say also that there’s many more jobs. If we’re able to lower our costs through this competition and lower prices, we have many more jobs in the port service industry. There are many more big jobs for his union, both on the mainland and here, because there’s more ships going, there’s more job, more need, for the employees to service them.
Lara Yamada: I think a big part of this discussion is what kind of impact it’s going to have nationally. A lot of the question we’re getting in, though, are people really wanting to know more specifically what’s happening here in Hawaii. What could be done, if anything should be done that might have some type of a change or impact here in the islands? I’m not surprised people want to know what’s going to happen to them.
So here’s one from Niko: “Why not carve out an exception for Hawaii and island territories, which are enroute, yet so far away from non-U.S. shippers …” — I’m not sure I completely understand the question, if you do — “… to the detriment of domestic consumers and the environment.”
Let me say that again: “Why not carve out an exception for Hawaii and island territories which are in route, yet so far away from non-us shippers, to the detriment of domestic consumers and the environment?”
Are you catching that from me? I think it’s mainly just an exception for …
Randy Swindle: Well, what people might not realize is that our islands are 2,000 miles away from the mainland. They might know that, but they might also not know that we are the farthest civilization away from any other civilization on the planet. It costs money to get stuff here.
Now, if folks got what they wanted, and they get a total exemption, then this is what would happen, as far as I believe: The shippers would hire foreign workers and pay them almost nothing. They would have ships, cheap ships, that they paid very little for, and the people here would pay the same amount, or more, because there would be no regulation of these folks. And that’s why we are against any exemption for that. [crosstalk]
Lara Yamada: I think, that’s the expectation by a lot of people, that it’s going to bring the cost down, as it to other industries.
Randy Swindle: They think to the goodness of a shipper’s heart that the price would come down and it’s not; it’s not going to happen.
Lara Yamada: A couple of quick questions here I want to get in here; we got an awful lot questions: “Who paid for the molasses spill in Honolulu Harbor? Is that related?” This is from David.
Leighton Tseu: Yes. What I understand about that is, No. 1, it wasn’t Matson property. That’s the state pipe property. Matson did from the good of their heart to pick up the tab. I know that whole system, how was it for 20 years. When that system gave, when that pipe gave, I said, “This is going to be interesting.” That’s not our pipe. That’s a state Harbors Division pipe.
Lara Yamada: Yeah, little bit of a sidebar.
Leighton Tseu: But Matson did pay for it.
Lara Yamada: Here’s another one real quick, sorry. “Please clarify: Does the Jones Act apply to air cargo as well?”
Randy Swindle: They have their own regulations that are similar to the Jones Act, as do the truckers.
Kenneth Schoolland: But they have an ability to purchase airplanes from other countries. That’s why they are able to fly Airbus anywhere in the United States, because they aren’t required to only buy from Boeing or Lockheed or Grumman. They can buy from Airbus or the Bombardier up in Canada.
Randy Swindle: But the big plane makers, there’s only two left, and that’s Boeing and Airbus.
Keli’i Akina: Lara, I’m wondering if we can go back to a question and not get too far from it. One of your viewers asked, “How much does it cost us to have the Jones Act here in Hawaii?” I think that’s an important question because people know that our cost of living is one of the highest in the nation, and in the world, in terms of real estate, food and other things. And people also know that virtually everything has to be shipped over here, and, as Randy pointed out, we are so isolated, that (we’re) the most isolated archipelago, there is going to be a cost to everything that has to be shipped here. That’s why it’s important to go to actual research studies. There’s been a range of research studies that show on the low end that the impact is as low as 7.5 percent, but on the high end, $3,000 a year per family.
The point is this: Different people sponsor studies, so we have to know what their motives are. We have a complete set of studies available at the grassrootinstitute.org, but the important point is to recognize the Jones Act affects shipping costs because it makes ships cost more. Therefore, cargo being shipped costs us more and affects the consumer. That’s something people know. And the biggest thing we have to recognize is that it’s possible to change that.
It’s possible to reduce the cost simply by letting us do what our military does, and that is to buy our ships from our allies. When we do that, we have high-technology ships, we have ships that cost a fraction of what our American-build ships cost — only 20 percent of the actual total — and ships that can still conform to the Jones Act rules of having American crew, American flag and American ownership.
And I think that’s very promising, and the people of Hawaii deserve to have lower costs through an updating of the Jones Act for the 21st century.
Lara Yamada: You guys are generating an awful lot of questions.
Lara Yamada: I’m trying to get some of them. This is tough. There’s too many. I’m losing track. Really quick. We don’t have a lot of time left. I really want to make sure we get to a couple questions.
Kenneth Schoolland: I’m amazed that you can keep up with it all.
Lara Yamada: I’m trying to. Sorry out there. There’s an awful lot.
We started off talking about Puerto Rico and the emergency situation there and how this generated some fresh discussion about the Jones Act. So, of course, not surprisingly, people here are concerned about emergency situations in the island. Here’s one: “Do other developed countries have similar laws? If so, how do they handle emergencies such as natural disasters?Is there some type of maybe ‘Good Samaritan’ situations that could override for emergencies here in the islands?”
What’s the situation here? Emergency situations here in the islands: What do you see as far as how the Jones Act will actually impact that or not?
Leighton Tseu: Well, Hawaii is different because we’ve got the Air Force, we’ve got the Navy, we’ve got all kind of assistance. If it had to come to a major disaster like that, we’ve got all kinds of help besides the Jones Act ships.
Lara Yamada: So you don’t think that would be …
Leighton Tseu: No. I think we’ll be pretty well-covered.
Randy Swindle: But I think politically that they would issue a waiver, just in case, if they need it, for humanitarian reasons. And our folks in Congress would go along with it. All the governor would have to do is ask for it and they would give him a waiver.
Lara Yamada: So that wouldn’t have to go through the president?
Randy Swindle: Well, that goes through the president. It goes to …
Lara Yamada: And I think that was the concern that Ken brought up initially, is when you have a disaster that’s so huge and immediate, it took a little bit of a time to get a response, and I think that’s a concern that someone else brought up, that maybe we’d have a week’s worth if there were an ultimate disaster here, and would the response be fast enough for a waiver?
Kenneth Schoolland: And would Trump say, “Well, I’m sorry, after 10 days you’ve gotten enough waiver and assistance. We think you should take care of yourself.” You know, that’s the way he’s treated Puerto Rico, and I would hate to have him be in the position to say, “Well, I’m sorry, that’s enough help for you.”
Randy Swindle: Well, you know, the thing with Puerto Rico, though, that was a political decision to do that, to issue the waiver because he was getting so much flack for it. That was really not needed, but he did it because of public opinion and some-biting. The thing is, Puerto Rico, when they knew that hurricane was coming, they pre-positioned 11,000 containers over there full of goods, they got there ahead of time, and after the port was reopened, the ships were already there waiting to unload again, and they couldn’t because the other stuff was stuck on the pier.
Leighton Tseu: That’s right.
Kenneth Schoolland: That’s absolutely true, but the issue wasn’t the availability of the containers, it’s the cost. If the cost is much more, then it’s much more of a burden for a whole island that’s trying to recover, and an island that’s in bankruptcy already because of high costs.
Now, you mentioned earlier that it’s a higher cost living in Virgin Islands, but I know that the shipping rates for Jamaica, Dominican Republic and Virgin Islands are half what they are for Puerto Rico. There may be other factors for the reasons for the high cost of living in the islands.
Lara Yamada: Plenty to discuss.
Lara Yamada: … We’re getting close to running out of time here. I’m going to give you … I got about 20 seconds left. I’m going to give you a chance to say a few more thoughts.
Leighton Tseu: OK.
Lara Yamada: We’re testing your abbreviation skills.
Leighton Tseu: No. 1, the Jones Act is a very important now, even though there’s no treaty between the United States and Hawaii Kingdom. We still have to hold it. The reason is No. 1, not only security but environmental purposes and education purposes. We have students who need to understand the maritime industry and to learn the engineering and the navigation and to get a license, this is the key. This is a ticket, right here. And this ticket is hard to get. Education is the right way to go.
Lara Yamada: All right, jan ken po: I’ll give you — I’m testing your abbreviation skills — 20 seconds.
Keli’i Akina: I think it’s time to update the Jones Act for the 21st century. We’ve got to stop putting all our energy into opposing it completely for repeal or into defending it completely as it is. Instead, the answers lies somewhere in the middle. If we work together to preserve the features of the Jones Act that are good for labor and national defense, but at the same time, allow our ship companies to buy our ships from our foreign allies just like our military does, that will help the economy and that will bring prices down a great deal.
Lara Yamada: I would love to have you (Randy Swindle and Kenneth Schoolland) respond as well, but unfortunately I believe we’re out of time.
Thank you so much all of you. I know we’re really just hitting the tip of the iceberg on a lot of these discussions because it is a complicated issue, it’s very complicated.
So mahalo to all of you for joining us tonight and thank you so much to our guests, Dr. Keli’i Akina from the Grassroots Institute of Hawaii, Kenneth Schoolland from the Hawaii Pacific University, Randy Swindell from the International Organization of Masters, Mates & Pilots, and Leighton Tseu, a retired Matson regional senior port engineer.
All right, next week on “Insights,” a United States territory since 1898, Guam’s relationship with they U.S. military has played a profound role in the lives of the people and the territory’s economy. So join a live discussion immediately before the PBS Hawaii presentation of the documentary “War for Guam.” That’s coming up next week.
I’m Lara Yamada for Insights on PBS Hawai’i. A hui hou.
[END OF AUDIO]
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Jones Act debate was insightful
From Grassroot Institute, October 20, 2017
The Grassroot Institute of Hawaii has spent years making the case that the Jones Act is badly in need of modernizing.
So it should not be surprising that when PBS Hawai'i invited me and Grassroot Scholar Ken Schoolland to defend our position on its "Insights on PBS Hawai’i" television show, we leapt at the opportunity. We were well prepared to debate the Act on TV, in front of a large statewide audience; in fact, we were eager, pining, champing at the proverbial bit.
What was surprising was to find people willing to defend the Act and its rationale, in the face of all the arguments against it.
But there they were: Randy Swindell, representative for the International Organization of Masters, Mates & Pilots, and Leighton Tseu, retired Matson regional senior port engineer, who appeared on the panel to defend the Act. They did their best with a tough position, and I enjoyed meeting them both.
If you've ever been in a similar debate over the Jones Act, whether online or in person, you might appreciate watching the video below. (A transcript of the debate is online at the Grassroot Institute website.)
In the video you can see how Jones Act supporters rely on the job-loss and national-security arguments to defend the Act — with a touch of environmental scare tactics to boot.
Of course, there are counters to these points, and Ken, in particular, did a great job discussing the problems of protectionism while debunking some of the unfounded claims of the Jones Act lobby.
I encourage you to watch the program and let us know what you think. Did it help you look at Jones Act reform (or the Jones Act defenders) in a new way?
E hana kakou (Let’s work together!),
Keli'i Akina, Ph.D.