Commentary
Another year, another series of hurricanes, another series of disasters. At least—at least—for coastal communities like those about to take a beating from the likes of Florence, there will be time to evacuate, and multiple supply chain options for a swifter recovery. For those like Hawaii that just got hit from Tropical Storm Gordon, or now Puerto Rico and the Virgin Islands, who are currently under risk getting pummeled by Hurricane Isaac, there are few options. Stranded island markets are especially dependent on vessels coming to their aid, and it’s these very markets that are so dependent on the antiquated Jones Act.
That’s right. A year later, nothing has changed. Even the hurricanes keep coming on strong. It’s like a bad dream all over again.
In light of this year’s cyclone season (which has suddenly grown volatile when predictions were that it might be the opposite of last year’s hyperactive season) we thought it would be worth a re-examination of the stubborn, protectionist, century-old legislation that has done nothing but harm to the U.S. economy. Let us also pick up the torch of the late Senator John McCain, a long-time advocate for a free-market, and who fought tirelessly against the Jones Act even in the face of withering and vested interests.
Understanding the full implications of the Jones Act is complicated, as it reaches into a variety of sectors and interests. There are no less than 16 congressional committees and 6 federal agencies that have some form of oversight authority on the Jones Act. Nevertheless, the incumbent interests, regulators, and politicians inured to the privileges of a system that benefits a concentrated and well-organized few, persist.
In 2016, Senator John McCain proposed legislation that would do away with one aspect of the Jones Act, calling the act itself “an antiquated law that has for too long hindered free trade, made U.S. industry less competitive and raised prices for American consumers.” His specific amendment targeted the U.S.-build requirement of the Jones Act.
“I have long advocated the repeal of the Jones Act, an archaic and burdensome law that hinders free trade, stifles the economy, and ultimately harms consumers,” said McCain in reference to his final legislative attempt. “My legislation would eliminate this regulation, freeing American shippers from the requirement that they act against their own business interests. By allowing U.S. shippers to purchase affordable foreign-made carriers, this legislation would reduce shipping costs, make American farmers and businesses more competitive in the global marketplace, and bring down the cost of goods and services for American consumers.”
“The protectionist mentality embodied by the Jones Act directly contradicts the lessons we have learned about the benefits of a free and open market. Free trade expands economic growth, creates jobs, and lowers costs for consumers. I urge my colleagues to support this bill and finally repeal the outdated and protectionist Jones Act,” McCain added.
To date there are about 38,000 ships in the world capable of hauling one of those cargo containers—ships above 1000 tons—in the world. Of that number, only about 90 qualify for the Jones Act ships. It costs five times as much to build a ship in the U.S. than it does to build a comparable ship in Japan, South Korea, or China. Of the ships being built in those other countries, over 10,000 of those containers can carry larger tonnage than the Jones Act compliant ships. Thus it costs $790 to ship a cargo container from Los Angeles to Shanghai, and $8,700 to ship the same container from Los Angeles to Honolulu due to ships having to be complaint with the Jones Act.
While the world eyes the imminent devastation of Hurricane Florence, other storms such as Hurricane Isaac are also barreling headlong toward North American island communities. Puerto Rico estimates the recovery costs from last year’s hurricane to be upwards of $139 billion, five times the annual budget of the entire island. Their entire energy grid was knocked out. It looks like they very well may get hit again. Among all the impediments standing in their way on the long road to recovery, the Jones Act won’t be going anywhere. It’s like a bad dream all over again.