Jones Act Attack

[tugsailor]

How a Disaster Called the Jones Act Blocks Disaster Relief: View

By the Editors Jan 1, 2013 6:30 PM ET

To get gasoline flowing in the New York area after Hurricane Sandy, President Barack Obama temporarily suspended the Jones Act, a statutory relic of the post-World War I era that bars foreign ships from carrying freight between U.S. ports. Within days of the president’s action, gasoline prices declined and filling-station lines, which had required police patrols to keep the peace, soon disappeared.

That raises a question: Should the Jones Act still be on the books?

The answer is no.

Enacted in 1920, when memories of American ships being torpedoed off the East Coast were fresh, the Jones Act was designed to ensure that the U.S. had a fleet of loyal merchant ships in times of national emergency. The law, formally known as the Merchant Marine Act, required all vessels carrying goods between domestic ports to have been built in the U.S., as well as owned and crewed by Americans. Other provisions granted crew members the equivalent of health and disability protection.

By shutting out foreign competition, the law limits shipping capacity and inflates U.S. freight rates. Like most forms of protectionism, it benefits a few to the detriment of many. One analyst estimated that shipping oil from the Gulf Coast to the Northeast on foreign vessels would cost $1.20 a barrel versus $4 on U.S. ships. Although no one is quite sure of the overall economic burden imposed by the act, a 1999 study by the U.S. International Trade Commission found that ending it would save more than $1.3 billion a year.

Hawaii’s Costs

U.S. islands such as Puerto Rico and Hawaii, along with the state of Alaska, feel the effects of the Jones Act more than most localities. Some of Hawaii’s political and business leaders have long complained that the restrictions mean all goods shipped from the U.S. mainland must go via the two carriers serving the state. By some estimates, this makes goods in Hawaii a third more expensive than they otherwise should be.

In November, a group of businesses in Hawaii sued to overturn the law. The higher freight costs paid by the state’s businesses, their suit says, are evidence of monopolistic pricing and in violation of the Constitution’s Commerce Clause.

The courts will decide the legal merits of the suit, but the economic case is clear: The Jones Act interferes with the normal functioning of the market. This is one reason the federal government keeps resorting to temporary waivers, such as the one signed by Obama. President George W. Bush, for example, suspended the law after Hurricane Katrina hit the Gulf Coast in 2005, letting foreign ships ferry fuel to the region. Obama also suspended the law after BP Plc’s Gulf oil spill in 2010, clearing the way for foreign ships to help with the cleanup in U.S. waters.

The law has many supporters, mainly labor unions and inefficient U.S. shipbuilders, which by some accounts charge more than double the rates of overseas builders. Rail and trucking companies don’t mind the Jones Act because it tends to shift freight from transport on waterways to land.
Jones Act defenders also say the law is necessary for security reasons in our post-Sept. 11 world. Yet thousands of foreign ships engaged in international trade enter U.S. ports every year without incident, as Senator John McCain, a national- security hawk and long-time opponent of the Jones Act, has pointed out.

Two parts of the Jones Act should be dismantled.

Obsolete Fleets

First, the U.S. should abandon the requirement that ships used in domestic trade be built in the U.S. Because American shipyards have been shielded from international competition, they have failed to modernize and adopt the innovative production methods used overseas. The higher costs of building in the U.S. have deterred domestic cargo carriers from upgrading and their ships are less efficient and twice as old, on average, as international fleets.

Then, the U.S. needs to allow foreign shippers to compete in U.S. coastal waters.

To be sure, ending the Jones Act shouldn’t be a unilateral move. Dozens of other nations have similar protectionist laws, and the U.S. should only allow competition from ships that are registered to nations that agree to reciprocal rollbacks. Foreign freight carriers must be required to comply with U.S. labor and workplace protections. Furthermore, countries that offer unfair subsidies to builders should be barred from selling to U.S. shipping companies.

With those provisos, the Jones Act needs to go. It was designed to help the U.S. deal with national emergencies, yet presidents have had to suspend it in three major crises to accomplish just that. We aren’t likely to get better evidence that the law is outdated and counterproductive.

To contact the Bloomberg View editorial board: view@bloomberg.net

[LI_Domer]

Dozens of other nations have similar protectionist laws, and the U.S. should only allow competition from ships that are registered to nations that agree to reciprocal rollbacks. Foreign freight carriers must be required to comply with U.S. labor and workplace protections. Furthermore, countries that offer unfair subsidies to builders should be barred from selling to U.S. shipping companies.
With those provisos, the Jones Act needs to go.

How likely would that happen if it was repealed. You expect other countries to stop subsidizing their shipbuilding? It would just cut out ANY companies from wanting to register ships in the US. And does anyone really think foreign flagged ships operating here would ever comply with US labour protections, such as personal injury, work hours, and workplace safety? This article was ridiculous. The kind of thing that's going to put us all out of a job if these ideas start gaining support from all the unaware people outside the industry.

[tengineer]

How likely would that happen if it was repealed. You expect other countries to stop subsidizing their shipbuilding? It would just cut out ANY companies from wanting to register ships in the US. And does anyone really think foreign flagged ships operating here would ever comply with US labour protections, such as personal injury, work hours, and workplace safety? This article was ridiculous. The kind of thing that's going to put us all out of a job if these ideas start gaining support from all the unaware people outside the industry.

The US has some rather weak cabotage laws compared to many other countries and US flag vessels have to comply with other countries laws while under contract in other countries waters, so quid pro quo is not too much to ask.

[LI_Domer]

I agree it's not too much to ask. But what I think is that the asking will get lost in any final solution. I mean look its been one huge downhill battle for a long time already. Look at the cruise industry. All those companies mostly foreign owned/flagged/crewed, with vast majority of the profits coming from US citizens. All that revenue basically getting funneled overseas.

[tugsailor]

Let's replace the $1 million salary per year reporters and news commentators with cheap foreign help --- before we replace the $100,000 per year mariners.

[troy]

Let's replace the $1 million salary per year reporters and news commentators with cheap foreign help --- before we replace the $100,000 per year mariners.

We could also repeal the law that requires you have to be a US citizen to be a senator and ship McCains job over to India.

[dredgeboater]

We could also repeal the law that requires you have to be a US citizen to be a senator and ship McCains job over to India.

US Merchant Mariners would almost certainly be better off in that instance.

[seriously]

I don't understand there arguments against the Jones Act. As for Hawaii, The Jones Act, 1920. Hawaii joined the Union, 1958. Perhaps they should consider secession?

I guess I am just an isolationist/nationalist.

[texamerican1]

Too many people these days are spinning "Protectionism" to be a bad thing. With all the sellout, traitorous, spineless bureaucrats in the world today wouldn't it be preferable to think that support for the Jones Act industry would be support for American jobs? I can see tugsailor's point if he is on some skank foreign vessel and can't work US because of his visa status, but if he is an American MMD holder the decline of the Jones Act would put him in the soup line.
My guess is he is neither. More likely he is just a politico mouthpiece drumming anti-Jones Act sentiment to the beat of his fat cat industry drummer.

[tugsailor]

I looks like either somebody hacked my post, or I had a senior moment while typing late at night.

The JONES ACT is the key to our survival as mariners. I want to keep it.

Protectionism is a lot better for America than this so-called free trade that we have now --- where everyone else but us is given a trading advantage.