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Thursday, October 29, 2015
Investment Advice: Repeal the Jones Act
By Michael Hansen @ 3:23 AM :: 4703 Views :: Jones Act

by Michael Hansen Hawaii Shippers Council, October 28, 2015

The Cabot Investing Advice posted on October 27th an op-ed by its president Timothy Lutts advocating for repeal of the Jones Act.

Lutts mentions the Jones Act in the context of the Puerto Rico financial crisis, the loss of the EL FARO, and the distortions it causes in the economy.

Key excerpts:

As to the reasons behind Puerto Rico’s bankruptcy, there are many, including poor management, lack of autonomy and bloated government. Fixing those is not simple.

But the one contributing factor that would be simple to fix, at least from my point of view, is the Merchant Marine Act of 1920, commonly known as the Jones Act for its sponsor, Senator Wesley Jones.

The Jones Act, which became a law immediately after World War I, governs cabotage, which is the transport of goods or passengers between two points in the same country. Originally pertaining to sailing vessels, the word cabotage is derived from the French caboter, meaning to sail along a coast, which is close to the Spanish cabo (think Mexican beaches) and stems from the Latin caput, for head.

Nowadays, cabotage applies to transport accomplished via any mode, including rail and air. Cabotage regulations, for example, are the reason that foreign airlines can’t sell Americans tickets to fly between two American cities, despite the fact that they fly there.

But back on the high seas, the Jones Act still exerts enormous power. It restricts the carriage of goods or passengers between U.S. ports to U.S. built and flagged vessels. This applies to barge operators on the inland waterways, freighters on the Great Lakes, and deep-sea ocean carriers serving Hawaii, Alaska, Puerto Rico and Guam.

In 2003, Representative Ed Case (D-Hawaii), attempted to repeal the Act, arguing that it increased the cost of living in the islands and claiming that savings of 40% would be gained in some sectors by repeal.

There are Republicans and Democrats who want it repealed to lower barriers to trade and thus costs for their constituents. But there are Democrats who defend it for the job protections it provides to seamen and shipbuilders, and there are Republicans who defend it for its contribution to national security.

But then there’s the El Faro.

The El Faro was a 735-foot United-States-flagged cargo ship, built in 1975 in Chester, Pennsylvania, and until recently spending her golden years (rusty years, some might say), shuttling between Jacksonville, Florida and Puerto Rico.

If we can repeal the Jones Act, we can not only avoid a repeat of the El Faro sinking, we can also remove one of the impediments to Puerto Rico’s economic health, and—most important of all—end the protectionism that’s distorted the free markets of shipping in this country for so long.

read … Repeal the Jones Act

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