The Merchant Marine Act, a federal law also known as the Jones Act, deals with cabotage (the movement of water transportation between domestic ports). This law, however, requires more than simply all goods transported by water between U.S. ports to be carried only by U.S.-flag ships.
WASHINGTON (infolog): The ships also must be constructed in the U.S., and owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents.
The act was introduced by Senator Wesley Jones in 1920. It was presented as a plan to ensure adequate domestic shipbuilding capacity and ready supply of merchant mariners to be available in times of war or other national emergencies.
A century of evidence shows that the Jones Act has failed in its main objectives, and as The Cato Institute’s recent overview of the Jones Act asserts:
“The protected domestic shipbuilding industry has a captive market from which it benefits handsomely and seeks to preserve by promoting fallacious arguments about the law’s necessity to national security, while the vast costs are dispersed across the economy in the form of higher prices, inefficiencies, and forgone opportunities that few people can even tie to the cause.”
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.
Yet full repeal anytime soon seems unlikely because of the intransigence of incumbent interests, regulators, and politicians inured to the privileges of a system that benefits a concentrated and well-organized few.
One of the main arguments is to keep “a strong merchant class on the waters.” In 1920, the original intent of the legislation was to foster a vigorous domestic maritime industry, and avoid the reliance on foreign shipping during times of war.
Yet, among other things, the Jones Act is no longer relevant to this form of U.S. national security. Consider the growing divergence between the characteristics of Jones Act fleet vessels, and the needs of the armed forces. According to the Congressional Research Service, the military prefers ships with speed and versatility that “unload diverse cargos in shallow harbors lacking shore-side cranes.”
Jones Act shippers, by contrast, prefer vessels that operate at slower, more fuel-efficient speeds, are specialized for specific types of cargo, and are designed to operate in modern port facilities.
In fact, because of the decline in U.S. shipbuilding, in recent crises and natural catastrophes, the U.S. has had to strongly rely on foreign-made vessels. From Desert Shield, to Desert Storm, to deployment in the early 2000s in the Persian Gulf, to the Iraq War, the Jones Act has continuously proved itself irrelevant.
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 Senator McCain in reference to his most recent legislation.
“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,” Senator McCain added. To date, his attempts for reform have been scuttled.
Cato’s report calls the domestic shipbuilding requirements a “particularly onerous aspect” of the Act.
They write, “Of 56 countries surveyed by the U.S. Maritime Administration, only Brazil, Egypt, Indonesia, Peru, Spain, and the United States have domestic-build requirements.” (freightwaves.com/ac)