The Jones Act is an enduring piece of legislation that benefits only a few select invested interests. The costs are borne by the rest of the country in the form of higher shipping rates and retail prices. June marked the 100th anniversary of the law, yet it is seldom discussed in public discourse. Due to the relative obscurity of the Jones Act. Considering the number of unforeseen externalities caused by the law it would be worthwhile to reexamine the law. Even entertaining the possibility of a total repeal.
Because of the crewing and U.S. build requirements imposed by the Jones Act operating cost of a U.S. flagged ship are 2.7 times more than that of a foreign vessel. These higher costs are reflected in shipping rates which are based down the supply-chain in retail prices to the consumer. The costs of the Jones Act is not relegated to the costs of goods and services. The American taxpayer also pays for the Jones Act in the form of higher maintenance costs for infrastructure. Many U.S. to U.S. bound shipments travel by rail or truck when watercraft could be utilized. Due to the high costs. Trucks account for over 75 % of the maintenance cost on public roads in the United States. Also, the Jones Act has contributed to environmental externalities. Logistics companies opting to use more cost-efficient, but less fuel-efficient trucks. Contributing to the increases in greenhouse gas emissions. The higher shipping costs have generated the opportunity cost of lost business. For example, the states of Virginia and Maryland import road salt from foreign suppliers to avoid the costs of using a Jones Act compliant vendor.
The Jones Act is section 27 of the Merchant Marine Act of 1920. This clause implements what is known as cabotage laws. Laws that govern the transportation of goods between two domestic ports. For example, goods sailing on a vessel departing Boston and bound for Miami would be subject to the Jones Act. The bill was signed into effect on June 5th, 1920. The bill’s vociferous proponent Senator Wesley Jones (R-WA) promoted Section 27 as a national security measure. Due to the utilization of foreign-flagged ships for sealift in World War I. Presenting a grave national security concern. Some find the notion of this being a national security matter to be dubious. Rather it was an attempt to pander to his constituency by protecting the railroads from the competition of foreign-flagged ships. However, the law also aimed to give a boost to the domestic shipbuilding industry. An industry that enjoyed a comparative advantage due to North America’s dense woodlands. Until the later half of the 19th century when steel displaced lumber as the primary building material for watercraft. Relinquishing the U.S. domination of the shipbuilding market.
The United States has had cabotage laws in one form or another since the nation’s infancy. One of the earliest examples dating back to 1789. The Jones Act as a more stringent version of previous laws. Boosting a domestic flagging requirement, requiring the crew to be made primarily of U.S. citizens, domestically owned, and to be the U.S. built. There are a few stipulations concerning the U.S. built and domestic ownership requirements. Foreign cooperation can own a Jones Act vessel providing 75 % of their stock is owned by U.S. citizens. The U.S. build requirement does allow for minor components of the ship to be foreign-made parts. For the vessel to remain Jones Act compliance major upgrades to the ship cannot be done abroad, even if it is required for a repair. These requirements have resulted in higher U.S. port-to-port shipping rates and ultimately passing down higher costs to the consumer.
It is difficult to pinpoint an exact party that benefits from the Jones Act. Mainly because there are so many that stand to benefit from it. Ranging from domestic shipyards, labor unions, to merchant marines. It could even be said that the Railroad companies and drayage enterprises are silent beneficiaries. The business lost due to the high naval shipping rates becomes their gainful opportunity. It seems fitting to assign the role of bootleggers to the merchant marines operating complaint U.S. flagged vessels. This is since the salaries of the crew are the largest contributor to the costs throughout the supply chain. 68 % of the operating costs are due to the salaries of the crew members. This accounts for U.S. vessel operations being nearly three times that of a foreign-flagged ship. As previously mentioned, these costs are spread passed on down to consumers. The factions in favor of the merchant marines are not arguing from a moral standpoint. Rather they are arguing in their self-interest. Making them Yandle’s proverbial bootleggers.
One of the flimsy arguments used to justify keeping the Jones Act enacted is national security concerns. These half-baked repudiations tend to fall apart quickly under the scrutiny of factual analysis. The point of needing the Jones Act to maintain a commercial fleet to provide sealift capacity in times of national emergency is spurious at best. During the first Persian Gulf War, the United States heavily relied on foreign ships for sealift assistance. The lack of a domestic fleet was a direct result of the Jones Act placing restrictions that have drastically reduced domestic ship production. Utilizing the pretext of the threat of terrorism is weak at best. Incidents of foreign terrorism are rare. Your odds of being injured in a terrorist attack on U.S. soil are 1 in 678,399. The odds of being injured in an act of terrorism influenced by Islamism on U.S. soil are 1 in 106,110,338.
The Baptists in this scenario are national security-minded Neo-Conservatives. Many are vestiges of the Bush administration. Swiftly being supplanted by the Trumpian Republican of the populous right. The “country-club” Republican is becoming an endangered species. They are the ones providing the moral smoke-screen for the invested interests who are shielded from innovation and competition by the Jones Act. It could be argued that the Reaganite conservatives support the Jones Act for security reasons. That the populous conservatives that have infiltrated the GOP are the bootleggers of not just the Jones Act. But of all protectionist measures. Typically, the country-club dwelling conservatives would not bother with protectionism. However, if it is in the name of national security, they are onboard.