by Paul Slater (excerpt)

…The stated purpose of (The Jones Act) is to support the U.S. maritime industry.

The Jones Act has singularly failed to deliver on its declared objectives of "supporting foreign and domestic commerce and creating a merchant marine of the best equipped and most suitable types of vessels." The "must build in America" clause is the biggest problem. Today the U.S. builds 1 percent of the world’s commercial ships — with 95 percent being built in Asia.

Yet, U.S. shipping companies trading under the Jones Act today are still required to build their ships in the U.S. even though they have outdated designs and cost nearly four times as much as an Asian-built ship.

The result is an over-aged fleet providing very expensive services mainly to the U.S. regions of Puerto Rico, Hawaii and Alaska and virtually no coastal shipping at all. Our highways are clogged with trucks carrying cargoes that could be shipped by sea if foreign-built ships were allowed in.

Why is it that we have no problem that 50 percent of our passenger airplanes are built in Brazil, Canada and Europe, but none of our ships?

Hawaii estimates that the extra cost of shipping caused by this act is $1 billion per year or $3,000 for every household in Hawaii.

The largest U.S. flag shipping company, Horizon Lines, was recently fined for price fixing and is now on the verge of bankruptcy. Its fleet has an average age of 37 years while most foreign shipping companies scrap their ships at 25 years of age.

The U.S. shipbuilding industry is mainly focused on military contracts and cannot compete with foreign shipbuilders on price or quality and the U.S. no longer has any capability of building the large marine diesel engines that power today’s ships.

It is time to throw out the shipbuilding provisions of the Jones Act and allow foreign built ships to operate in the U.S. commercial trades.

read more

Slater is a financial adviser to global maritime and energy industries. He specializes in mergers and acquisitions and project finance. He is founding chairman of the Maritime Industry Foundation and a member of the executive committee of Intertanko, the worldwide organization that represents the interests of independent tanker owners. He is a regular contributor to trade and international press. E-mail Slater at paulslater@firstintl.com.