The real name of the Jones Act is the Merchant Marine Act of 1920. It is now nearly a century old but has been revised and updated several times.
The fundamental intent of the Jones Act remains unchanged. It is essentially a national security measure aimed at controlling commerce within American waters. Today’s Jones Act also protects the U.S. domestic maritime industry by requiring that our domestic seaborne freight — called cabotage — be carried on U.S.-owned, -built, -crewed and -flagged ships. A similar concept covers our domestic airspace but is more regulatory than industry-protective.
The Jones Act also applies to passenger ships, which today are almost exclusively cruise ships. Foreign-flag cruise ships carrying passengers from Seattle to Alaska, for example, have to stop in Canada, usually at Victoria or Vancouver, on the way in order to comply with the Jones Act.
Recently, the focus of attention has been on Puerto Rico, which, being a U.S. territory, requires U.S.-flag ships to deliver things like fuel oil, gasoline and a host of other products needed for a modern economy. The need became acute after Hurricane Maria devastated the island in 2017, and a 10-day waiver was given so that emergency supplies could be delivered. But no action has been taken since.
Nothing involving maritime law is simple and the Jones Act is no exception. And it is especially difficult to sort out its economic effects. One of the intentions of the legislation was to ensure a healthy shipbuilding industry for national defense reasons as well as commercial interests.
Our domestic shipbuilding industry, though, marches to the beat of its own drummer. For a variety of reasons — labor, materials and physical space costs among them — our shipbuilding facilities have pretty much priced themselves out of the market.
Unsurprisingly, consolidations and shrinking total output followed and our current ability to build ships is but a sad fraction of what would be required to ramp up in a national security emergency. It is possible that the changing nature of warfare makes that issue irrelevant, but it would be comforting to know that with certainty.
Puerto Rico’s slow recovery from the Hurricane Maria devastation, and its chronic financial problems, have added an accelerant to an argument over the Jones Act that has been smoldering for decades. Unfortunately, the two differing sides are mostly focused on an all-or-nothing approach; the “jettison the failed Jones Act” bunch vs. the “keep it, we need it” group.
Supporters of each side tend to fall into familiar groups. Many economists oppose all industry-protection laws on the principle that they raise consumer prices. The principle is correct, but there might be offsetting issues and benefits such as national security. Additionally, a number of conservatives oppose industry protection because it encourages and, in effect, subsidizes, inefficiency.
Those who support the Jones Act believe that the maritime industry needs protection because of two overarching factors. The first is that national security benefits might offset the economic costs. The second is the unfair underpinnings of the international market. Foreign countries subsidize their maritime industries, making them artificially more competitive compared with the United States. Also, supporters claim that much of the industry, internationally, benefits economically by the exploitation of labor.
There is no easy way to resolve this sort of head-butting argument, but it may help to raise another possibility. It is possible, for example, that for national security purposes our maritime industry needs economic protection, but there may be a better way to achieve this than the Jones Act as it is currently structured.
The domestic freight and passenger service — cabotage — is a bit more complicated. It is not clear just how much foreign competition there would be for our riverine, lake and coastal freight traffic, but ship acquisition is another matter. In recent years, domestic cruises — on the Mississippi and Columbia rivers and coastal New England, for example — have become a mini-industry and, because of the Jones Act, a captive market for our domestic shipbuilders.
Domestic freight operations create a captive market for shipbuilding and because of their cargoes, which include oil, natural gas and other strategic materials, also add another area where national security considerations might outweigh the costs of market inefficiencies.
Whatever the merits and faults of the Jones Act are, we need to set aside temporarily the arguments for keeping or dumping it. Instead we should focus on a more pressing issue.
We don’t have to be maritime experts to see that the trend in our shipbuilding capability is not good for our national security. We need something that actually works and restores the health of the industry. Otherwise, someday soon we might find ourselves ordering our next aircraft carrier from Beijing.
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