"I’m not sure how many readers are aware of the Merchant Marine Act of 1920, generally known as the Jones Act. For 90 years, this piece of protectionist legislation has been a politically sacred cow. It requires that all water-borne shipping from one U.S. port to another—whether along inland waterways, along coastwise routes, or between the mainland and Alaska, Hawaii, Guam, and Puerto Rico—be provided only via U.S.-made vessels, owned by U.S. companies, and operated by U.S. crews. The original rationale for this was national defense—but post-World War II, the military has made voluntary deals with major U.S. airlines to make certain planes available in times of military need, and the same could be done for ocean vessels. Today, the Jones Act is supported mostly by the seafarers unions and the dwindling number of companies that own and operate Jones Act ships.
The consequences of this legislation are many, and nearly all negative. My MIT classmate William Hockberger (naval architecture) described the impact on the U.S. marine industry to me this way:
“Our coastal and seagoing fleet is pathetic*, along with the marine industry that is supposed to provide and sustain it, as a result of the ‘protection’ that has prevailed for most of our country’s existence. If ship operating companies could buy ships on the open market, if shippers could use ship services provided by any company in the world (subject to some basic rules regarding human and environmental safety), if the money to buy the ships could come from anywhere, and crews didn’t have to be mainly U.S. citizens, we could have a marine industry much larger than it is and the economics would be very different. The cost of using a ship [versus some other mode] would be much lower, and in many cases a ship would be the preferred alternative.”
The very high costs resulting from the Jones Act have basically killed nearly all proposals for so-called “marine highway” shipping. Recent reports from the Maritime Administration, the Congressional Research Service, and the Center for Commercial Deployment of Transportation Technology have all blamed the high costs imposed by the Act for the lack of progress in coastwise shipping.
Other victims of the Jones Act are the people and industries of Alaska, Guam, Hawaii, and Puerto Rico, who pay what amount to monopoly prices for transportation of the food, consumer products, and energy that must be shipped in from the mainland.
And then there are U.S. ports and waterways. The Jones Act also applies to all dredging vessels, ballooning the cost of maintenance dredging of inland waterways and deepening of major harbors.
Although the Jones Act has long been a sacred cow, there are several straws in the wind suggesting that change might be possible. Last November Honolulu attorney John Carroll filed a class action lawsuit against the federal government, arguing that the Act violates the Commerce Clause of the Constitution and subjects Hawaiians to a shared monopoly on shipments of imported goods. It seeks damages and a halt to enforcement of the Act.
Last month Americans for Tax Reform took up the cause, arguing that the Jones Act should be repealed because, among other things, it is driving up the cost (and reducing the extent) of shipping gasoline by water from the Gulf Coast to the Northeast.
And then there is the proposed free-trade agreement between the United States and the European Union. Among the items on the agenda for this proposed deal, according to The Economist, is to eliminate the protectionist restrictions on shipping imposed by the Jones Act.
As I noted in last month’s issue, Congress is planning to enact a new Water Resources & Development Act this year, dealing with both harbors and inland (as well as coastwise) waterways. This would be a good opportunity to tackle the reform or repeal of the Jones Act, a precondition for new investment in America’s maritime industry."