Wednesday, November 20, 2019
Hawai'i Free Press

Current Articles | Archives

Sunday, October 20, 2019
Cabotage Sabotage: Jones Act Reduces Water Trade Between US States
By UHERO @ 3:04 AM :: 574 Views :: Jones Act

Jones Act

From UHERO,  October 7, 2019

The Merchant Marine Act of 1920, commonly known as the Jones Act, is a cabotage law that requires that all goods transported via water between two U.S. points be carried on ships that are American built, owned, crewed, and flagged1. The Jones Act was passed in response to World War I, with the goal of ensuring that the U.S. had a merchant marine fleet that was capable of assisting in times of war or emergency. Proponents also contend that the Jones Act supports domestic employment in the maritime industry.

While other countries also place limitations on international vessels, the U.S. is ranked as having the most restrictive maritime transport industry among all OECD countries. Critics argue that the Jones Act is a form of protectionism that impedes domestic trade and increases prices. The Act has been politically controversial, especially during recent hurricanes when the U.S. has temporarily waived these restrictions. The need for these waivers raises questions about whether the Jones Act has successfully maintained a domestic fleet capable of assisting in times of emergency. Furthermore, the U.S. does not impose similar American-built restrictions on rail, truck, or air transportation.

In the century since the Jones Act was passed there has been a dramatic rise in the Asian shipbuilding industry, due to improved production methods, specialization, and standardized designs. It cost about 20% more to build a large merchant ship in the U.S. than in a foreign shipyard in the 1920s, but now it costs approximately 400-500% more (see Figure 1) The number of private U.S. shipyards capable of making large merchant ships has plummeted (from 64 post-WWII to 3 today). As a result, the number of American-built Jones-Act-eligible ships has decreased from 195 in 1997 to 92 in 2016, while the number of non-Jones Act eligible has remained relatively stable (see Figure 2). The U.S. was the preeminent shipbuilding nation post WWII, but now 91% of large merchant ships are built in Japan, Korea, and China. Thus, the requirement that domestic water shipments be transported on American-built vessels has become more onerous over time.

Figure 1

Figure 2

In a recent UHERO working paper titled “Cabotage Sabotage: The Curious Case of the Jones Act,” I use a large data set on the movement of 43 different commodities by mode of transport (i.e. air, water, truck, rail) between every U.S. state over the period 1997 to 2016, to investigate whether the Jones Act has indeed reduced domestic water shipments. Using consumer price data, the paper also examines whether the Jones Act has increased prices. The causal effect of the declining capacity of Jones Act ships on both domestic shipments and prices is identified using econometric techniques.

The first set of results show that the Jones Act has reduced domestic water shipments relative to shipments via other modes of transport and relative to imports from abroad. These are useful counterfactual groups because neither imports nor shipments via other modes of transport are regulated by the Jones Act. The findings show that a ten percent decline in the capacity of Jones Act ships reduces domestic waterborne shipments by 4.7% relative to other modes of transport and by 11.4% relative to waterborne imports. The effect of the Jones Act on domestic water shipments is found to be stronger in coastal states and for commodities that are typically transported via water. Overall these findings confirm an intuitive but important point that as domestic water trade becomes more difficult, due to the Jones Act, shipments shift to other modes of transport or the U.S. acquires these goods from abroad instead.

The second set of results show that as domestic shipments into coastal states decline, due to the Jones Act, prices increase. Using a back of the envelope calculation, these findings indicate the decline in Jones Act ship capacity can explain 2.6% of the observed increase in prices from 1997 to 2016.

These findings support common, but to date unverified, claims that the Jones Act has reduced domestic water trade between U.S. states and this in turn has increased domestic prices. Whether these drawbacks outweigh the potential benefits to the domestic maritime industry is an open question. However, at the very least these findings indicate that the costs associated with the Jones Act are empirically important and should be taken into account by policy makers.

- Will Olney

UHERO BLOGS ARE CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS.

1 -- In order to be classified as American built the hull and superstructure of the ship must be produced in the U.S. and all assembly must occur in the U.S. American ownership is defined as U.S. citizens holding at least a 75% controlling interest in the business entity. The ship must be flagged (i.e. registered) in the U.S. and is thus subject to U.S. laws. Finally, the crew is required to be U.S. citizens or permanent residents, but no more than 25% of the crew can be permanent residents and all officers and engineers must be U.S. citizens.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

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 Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

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

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

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

MentalIllnessPolicy.org

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

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

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

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT