by Michael Hansen, Hawaii Shippers Council
U.S. News & World Report published on May 15, 2017, an opinion-editorial, “Put the Jones Act Out to Sea,” calls upon President Donald J Trump to seriously consider Jones Act reform as a low cost economic development strategy.
The author is Thomas Grennes is professor of economics emeritus at North Carolina State University and affiliated with the Mercatus Center at George Mason University.
President Donald Trump has issued executive orders to reduce business regulation and to relax restrictions on domestic energy production. Along with many Democrats and Republicans, he supports improvements to our deteriorating national infrastructure. Is it possible to do all three, all without doing further harm to the federal budget?
Reforming or repealing the venerable Jones Act might just provide a good start.
Because it costs more to build and operate American ships, the act has imposed a significant shipping cost within the American economy for nearly a century.
The prohibition on the use of foreign ships is a form of protection, like a tariff or import quota. For each dollar transferred to builders and operators of ships, consumers and other end-users lose more than one dollar. It results in a net loss to the economy.Defenders of the Jones Act claim that this criticism ignores its contribution to national security. Training more builders and operators of merchant ships, they say, complements the Navy's foreign military operations and improves the ability of the domestic fleet to respond to domestic disasters.
But if the Jones Act was designed to preserve a large ship-building industry and American-flag fleet, and thus bolster our national security, it has been a clear failure.
If the Jones Act is so costly to the nation, why has it lasted for nearly a century? The reason is simple, and all too common.The act benefits a few well-organized interests, while the costs are spread across an entire country that barely knows it exists. In the regions where the costs are more visible, the losers have little political power. Among the largest losers are the states and territories that need the most goods shipped by sea: Hawaii and Alaska, with small populations and little political clout, and Puerto Rico, which lacks representation.
One compromise could exempt Hawaii, Alaska and Puerto Rico from the American-built ship requirement.
Reform of the Jones Act would contribute to less intrusive economic regulation and greater American energy production. It would also be a low-cost way to improve transportation infrastructure.