The Jones Act is stupid, but not colonialism

The Merchant Marine Act of 1920 reserves shipping between American ports to American-built vessels with American crews. The reason was to protect the merchant marine from British, Norwegian and (especially) Japanese competition. After all, the U.S. wanted to be sure that it would have a merchant marine in wartime; that meant protecting the industry in peace. The same logic was later applied to airlines.

The problem? Well, the U.S. industry collapsed despite protection. Railroad dieselization and the interstate highways drove down the cost of land transport. The result was the collapse of the merchant marine despite the act. A tiny fleet of 93 Jones-Act-qualified ships schlumps on by having a high-priced lock on transport between the Lower 48 and Alaska, Hawaii, Puerto Rico, and the other insular territories.

This is perverse on multiple levels. First, it forces more U.S. domestic cargo onto the roads. The European Union has no Jones Act equivalent and moves 40% of its domestic freight via coastal shipping (page 22); the U.S. would likely move more considering how close our population centers are to the water. 

Second, it advantages foreign producers in the insular markets. It is cheaper to import from Europe than from the mainland United States.

Finally, it really does screw over exporters from the insular possessions. It is way easier to build up a supply chain when you are in the same country, but the Jones Act cripples Hawaiians and Puerto Rican firms that might want to plug themselves in. 

So we are in the worst of all worlds: high shipping costs but no serious domestic industry. (At least airline protectionism got us a lot of airliners.) Ironically, Malcolm McLean used Puerto Rico to test out containerization back in the day, but now there are no modern container vessels shipping between U.S. ports. One might claim that Puerto Rico is screwed because it is a territory instead of a state ... but Alaska and Hawaii are equally screwed, whereas the U.S. Virgin Islands has somehow wrangled a permanent exception.

So the Jones Act is stupid, but not, as Carlos Yu has pointed out, colonialism. Nor is it the biggest problem right now: supplies are reaching Puerto Rican ports but cannot be distributed due to lack of ground transport. 

What is stupid and colonialism is the refusal by the Trump administration to waive the act in the face of Hurricane Maria, despite such waivers being routine in other disasters. Such disasters include hurricanes which just hit Texas and Florida. Even if the Jones Act is only a marginal contribution to the suffering on the island, the different treatment is unconscionable.

Comments

[Carlos]

We should be clear that the removal of the Jones Act would likely mean a near or total elimination of that remnant of the US merchant fleet, by vessels crewed by people with lower wages and fewer labor and safety protections than at present (possibly far fewer), with more difficult recourse by firms using the foreign-flagged lines.

There would be negative effects: those American crew members, the shipbuilders, a downtick in steel orders. A few thousand people would be out of work, and most of them in industries in severe decline: they would have difficulty finding similar work. But it would be a substantial consumer benefit to six million plus people, on top of the immediate humanitarian usefulness to Puerto Rico.

Of course, we have a leader who would rather protect a handful of symbolic jobs at the expense of millions already.

[Noel Maurer]

Great point on the costs. You could link repeal to substantial payments to the current workers at the shipyards and on the vessels. Somehow I don't think that is on the cards.

The benefit would be to more than just the six million in the insular areas, however: moving more cargo to coastal shipping (a la Europe) would provide substantial benefits to people living on the coasts as well. How much truck traffic would you displace along I-95?

[J.H.]

But what would the truckers have to say about that? I'm sure once they realized that repealing the Jones Act would reduce the need for trucking t people living along the coasts they would fight it tooth and nail.

[Dave K]

Efficiency at the price of blue collar labor may have political repercussions that dwarf the economic benefits.

[Noel Maurer]

If the U.S. fleet weren't down to 93 ships, I'd agree with you! Sadly, we don't live in the world where the Jones Act produced a large-but-expensive domestic industry.

[Noel Maurer]

That said, truckers are a rather more substantial group. Sadly, though, technology threatens them more than a repeal of the Jones Act.