It’s time to repeal the Jones Act(discoursemagazine.com)
discoursemagazine.com
It’s time to repeal the Jones Act
https://www.discoursemagazine.com/economics/2022/10/18/its-time-to-repeal-the-jones-act/
328 comments
I am passionate about this issue because I think the US is failing to leverage an extremely valuable asset that could help bring manufacturing back to the states, reduce highway traffic and cut co2 emissions.
I believe the biggest infrastructure change the US could do is invest in a comprehensive inland terminal network. Europe is doing this. They have been working on strengthening hundreds of inland terminals. Check out this example linked below on google of terminal in Basel, Switizerland - literally in the middle of the continent[1]! Below is also a proposed project in Cincinnati, Ohio that never gained traction because of the issues with the Jones Act[2]. Imagine if every city along the Mississippi river network had a terminal like this.
I want to stress that the real use of an inland terminal network like this isn't only for delivering finished goods from outside the US to the interior of the country. The real value is to further integrate manufacturing transportation networks between US states, Canada and Mexico. I think this opportunity will fail to be realized because of our dysfunctional politics in Washington and too many powerful lobbies.
[1] https://www.google.com/maps/place/Swissterminal+AG+COBI/@47....
[2] https://www.soapboxmedia.com/devnews/0605queensgateterminals...
I believe the biggest infrastructure change the US could do is invest in a comprehensive inland terminal network. Europe is doing this. They have been working on strengthening hundreds of inland terminals. Check out this example linked below on google of terminal in Basel, Switizerland - literally in the middle of the continent[1]! Below is also a proposed project in Cincinnati, Ohio that never gained traction because of the issues with the Jones Act[2]. Imagine if every city along the Mississippi river network had a terminal like this.
I want to stress that the real use of an inland terminal network like this isn't only for delivering finished goods from outside the US to the interior of the country. The real value is to further integrate manufacturing transportation networks between US states, Canada and Mexico. I think this opportunity will fail to be realized because of our dysfunctional politics in Washington and too many powerful lobbies.
[1] https://www.google.com/maps/place/Swissterminal+AG+COBI/@47....
[2] https://www.soapboxmedia.com/devnews/0605queensgateterminals...
I’m from Puerto Rico and people there have been fighting for this since I can remember.
This disproportionately hurts the poorest people there the most. Groceries are already exorbitantly expensive, doubly so because of this misguided act.
Never mind the fact that Puerto Rico is in the middle of recovering from a Cat1 hurricane that nearly took the island out for a month (power outages still ongoing). While the island should have been prepared for that, it was still in the middle of recovering from Maria (a cat 5 hurricane in 2017).
How much slower has relief been because of the jones act? How much longer can we keep subjecting people to colonialism?
This disproportionately hurts the poorest people there the most. Groceries are already exorbitantly expensive, doubly so because of this misguided act.
Never mind the fact that Puerto Rico is in the middle of recovering from a Cat1 hurricane that nearly took the island out for a month (power outages still ongoing). While the island should have been prepared for that, it was still in the middle of recovering from Maria (a cat 5 hurricane in 2017).
How much slower has relief been because of the jones act? How much longer can we keep subjecting people to colonialism?
Repealing the Jones Act would be great for the US economy. It is an artificial constraint on internal trade, and trade is the single most useful tool for prosperity.
It does not achieve its goal. Its goal is to ensure internal trade is not foreign dependent. However, what really happens is domestic trade is replaced by international trade!
A great example is liquid natural gas in Massachusetts. Massachusetts cannot buy LNG from sellers in the US because there are no Jones Act compliant ships that carry LNG.
So we buy from Trinidad instead. Literally billions of dollars flowing out of the country because of this regulation.
It does not achieve its goal. Its goal is to ensure internal trade is not foreign dependent. However, what really happens is domestic trade is replaced by international trade!
A great example is liquid natural gas in Massachusetts. Massachusetts cannot buy LNG from sellers in the US because there are no Jones Act compliant ships that carry LNG.
So we buy from Trinidad instead. Literally billions of dollars flowing out of the country because of this regulation.
A recent post from the Cato Institute shows that their push to repeal the Jones Act seems to have touched a nerve inside the U.S. Maritime Administration (MARAD).
"Almost at the end of the 41‐ page document is what appears to be a set of recommendations related to a March 2020 meeting of the Marine Transportation System National Advisory Committee (MTSNAC)’s International Shipping Subcommittee. Among them: “Charge all past and present members of the Cato and Mercatus Institutes with treason.”
https://www.cato.org/blog/charge-all-past-present-members-ca...
"Almost at the end of the 41‐ page document is what appears to be a set of recommendations related to a March 2020 meeting of the Marine Transportation System National Advisory Committee (MTSNAC)’s International Shipping Subcommittee. Among them: “Charge all past and present members of the Cato and Mercatus Institutes with treason.”
https://www.cato.org/blog/charge-all-past-present-members-ca...
According to this article, New England is risking winter blackouts due to strong LNG demand in Europe and the Jones Act making delivery of domestic supplies nearly impossible: https://www.wsj.com/articles/new-england-risks-winter-blacko...
I think it's a fair criticism of the jones act that it hasn't delivered on its goals of keeping a vibrant commercial shipbuilding and shipping industry in the US for the purpose of supporting our military in case of war. Is seven active shipyards sufficient if we need to mobilize a war effort? Do ships matter as much to logistics in modern warfare? Is our domestic production capable of building trans-oceanic capable ships when international shipping is not protected?
Similarly, the costs of the act are not evenly distributed, with Puerto Rico and Hawaii particularly burdened by higher shipping costs.
Similarly, the costs of the act are not evenly distributed, with Puerto Rico and Hawaii particularly burdened by higher shipping costs.
The Jones Act in combination with the Passenger Vessel Services Act (1889) also forces foreign-flagged cruise ships (which is basically all of them) to stop at a foreign port even if they loop back to the same starting US port or all passengers will be charged a fee of several hundred dollars.
A Seattle to Alaska to Seattle cruise will need to stop in Canada, even for an hour, just to avoid the extra fees. Starting at one US port and ending at another requires a stop at a "distant" foreign port which makes it difficult from cruise lines to offer routes like Los Angeles to Hawaii.
https://thepointsguy.com/guide/what-is-the-jones-act-for-cru...
A Seattle to Alaska to Seattle cruise will need to stop in Canada, even for an hour, just to avoid the extra fees. Starting at one US port and ending at another requires a stop at a "distant" foreign port which makes it difficult from cruise lines to offer routes like Los Angeles to Hawaii.
https://thepointsguy.com/guide/what-is-the-jones-act-for-cru...
Also the Foreign Dredge Act [1]…
[1]https://en.m.wikipedia.org/wiki/Foreign_Dredge_Act_of_1906
[1]https://en.m.wikipedia.org/wiki/Foreign_Dredge_Act_of_1906
I had to read in a ways to find out what the Jones Act is. It says that maritime cargo traffic in internal US waterways has to be carried by US-flagged vessels. Repealing it means e.g. that Panama-flagged vessels could carry the cargo instead. The article starts out saying that the importance of repealing it has been propounded by the Cato Institute and by Lawrence H. Summers. So that says what the Act is, and who wants to repeal it. I figured at that point that my curiosity was satisfied.
The Jones Act is a problem and a blessing. It ensures a US maritime industry, albeit tiny. Still, due to lack of competition, it has left the US maritime industry so far behind the world standard that the minute it is removed, the entire sector will go bankrupt from international competition.
The Decline of the U.S. Merchant Marine | What's Going on With Shipping?
https://www.youtube.com/watch?v=kJn0bCWx_9g
The Decline of the U.S. Merchant Marine | What's Going on With Shipping?
https://www.youtube.com/watch?v=kJn0bCWx_9g
I'm no fan of the Jones Act, I think it should be repealed in its entirety. However, there is a political reality that several special interests are united in keeping the law on the books.
I think a better solution would be to amend the Jones Act to remove the American built requirement. I'm fine with American flagged and crewed ships if we want to ensure that we have available merchant marines. (which we don't have now) However, there is no such thing as an "American built" ship anymore. The ships we "build" in the USA have had their design and critical components outsourced. The only thing we do is assembly, and that is the easiest part of shipbuilding to ramp up in a war.
You can sell this plan to the defense department by stating that you will actually have ships and crew members if you need them. Right now almost the entire fleet of Jones Act ships is reaching their end of life and there is a point which we will reach soon where they will go extinct.
I think a better solution would be to amend the Jones Act to remove the American built requirement. I'm fine with American flagged and crewed ships if we want to ensure that we have available merchant marines. (which we don't have now) However, there is no such thing as an "American built" ship anymore. The ships we "build" in the USA have had their design and critical components outsourced. The only thing we do is assembly, and that is the easiest part of shipbuilding to ramp up in a war.
You can sell this plan to the defense department by stating that you will actually have ships and crew members if you need them. Right now almost the entire fleet of Jones Act ships is reaching their end of life and there is a point which we will reach soon where they will go extinct.
Repealing this will be difficult, because you have a small focused organization supporting it, and you have a large, diffuse, and distractible public.
And those maritime guys are hardcore union guys, which will make Democratic support a given.
The only reason it has a chance to pass now is because the repeal may reduce costs for millions of consumers. If it's hurting home heating oil customers in New England then the NE delegation may get behind it. That'll put them against every state that's contiguous to water (including inland waterways). I'd put the chance of it passing at 15% unless something exciting happens.
And those maritime guys are hardcore union guys, which will make Democratic support a given.
The only reason it has a chance to pass now is because the repeal may reduce costs for millions of consumers. If it's hurting home heating oil customers in New England then the NE delegation may get behind it. That'll put them against every state that's contiguous to water (including inland waterways). I'd put the chance of it passing at 15% unless something exciting happens.
It seems to me that the Jones Act is a tariff on the activity of shipping itself. Unless one wants to argue the globalist stance that all tariffs should be abolished, the Jones Act should be examined with a careful eye to what it prevents, not only what costs it incurs. I.e. if the Jones Act was repealed, would all shipping suddenly be done by foreign actors, who, by virtue of being cheaper, would have a virtual monopoly on (and insight into, and control over) all shipping within the US? Maybe this might not actually be bad, but such consequences should be considered.
Fees for non-US ships might be a compromise that helps the opposing side get more comfortable with a repeal
I wanted a bit of education outside this, so Wikipedia tells me the Jones act declares that cargo between US ports must be on US-flag, US-created, largely US-crew, US-owned ships. The Lexington Institute, a center-right thinktank focused on domestic security policy, has claimed(June 2016) it strengthens border security and reduces terrorism.
I guess my question is: how much is a stronger border security and terrorism reduction worth, economically?
I guess my question is: how much is a stronger border security and terrorism reduction worth, economically?
A straight forward fix would be a gradual repeal. Start with foreign territories and Hawaii allowing for non-US vessels. Then in the US allow for 10% of all traffic to be serviced by an international company, and keep increasing that until some X% that allows for a US maritime industry and international competition.
Although I do think that elements of the Jones Act make sense to repeal (the shipbuilding aspects are an example of something that has really bad outcomes on the whole), I think there are also aspects that ought to be retained and enhanced.
It is true that foreign owned vessels can't move goods between US ports. These vessels sail under flags of convenience and are crewed by poorly treated Filipino sailors earning a pittance. Do we really want to move _more_ shipping to them?
It seems appropriate to me that cargo between US ports should be effectively regulated. I would hate for the outcome of a repeal to be yet more abusive labor practices.
It is true that foreign owned vessels can't move goods between US ports. These vessels sail under flags of convenience and are crewed by poorly treated Filipino sailors earning a pittance. Do we really want to move _more_ shipping to them?
It seems appropriate to me that cargo between US ports should be effectively regulated. I would hate for the outcome of a repeal to be yet more abusive labor practices.
Pointlessly protectionist law. What's worse - it hurts primarily other americans... like most protectionist laws.
This is simply outsourcing. We know what happens when you outsource. You cannot simply export an industry and then expect to have more money flowing in the nations economy at the end of the day, will the company be richer? sure, but the individuals who actually make that currency flow will be less. This is what happens in a lot of states that are fighting just so there's an amazon or any industry inside of it. To implement this in a national scale is extremely dangerous. Completely decimating the economic import/export balance of any nation.
As one (very wise) commenter here on HN once said, you have to prefix “We would like you to believe that…” to the title of publications like this.
“We would like you to believe that it’s time to repeal the Jones act.”
“We would like you to believe that it’s time to repeal the Jones act.”
Hard pass.
This is no different to any other neoliberal effort to move more profits to the capital-owning class by offshoring more jobs under the mirage of reducing costs to consumers by paying people in the third-world peanuts.
The US (and the EU) are able to use their significant market power to benefit consumers and workers by imposing regulation on those who want access to their markets. Access to the US financial system is one way the US can impose its will (for better or for ill) on foreign financial institutions, as one notable example.
This article makes no mention of "flags of convenience" and that really gives the game away at the agenda of the neoliberal thinktanks that produced it.
Maritive law is complicated. A big factor is what flag a ship flies under. Often commercial shiping will fly under a flag of a country that has next to no worker protections so countries like Liberia and even Mongolia (yes, land-locked Mongolia) ostensibly operate large commercial shipping fleets. To further escape any liability form, say, spilling millions of barrels of oil this will be further complicated by a corporation registerd in a different country operating the ship flying a flag of yet another country.
The US is a huge destination for commercial shipping. The US thus has a ton of power to require certain standards of the ships that want to visit its ports and the conditions the crews operate under. Under no circumstances should we give this up for the false promise of neoliberal cost-cutting.
This is no different to any other neoliberal effort to move more profits to the capital-owning class by offshoring more jobs under the mirage of reducing costs to consumers by paying people in the third-world peanuts.
The US (and the EU) are able to use their significant market power to benefit consumers and workers by imposing regulation on those who want access to their markets. Access to the US financial system is one way the US can impose its will (for better or for ill) on foreign financial institutions, as one notable example.
This article makes no mention of "flags of convenience" and that really gives the game away at the agenda of the neoliberal thinktanks that produced it.
Maritive law is complicated. A big factor is what flag a ship flies under. Often commercial shiping will fly under a flag of a country that has next to no worker protections so countries like Liberia and even Mongolia (yes, land-locked Mongolia) ostensibly operate large commercial shipping fleets. To further escape any liability form, say, spilling millions of barrels of oil this will be further complicated by a corporation registerd in a different country operating the ship flying a flag of yet another country.
The US is a huge destination for commercial shipping. The US thus has a ton of power to require certain standards of the ships that want to visit its ports and the conditions the crews operate under. Under no circumstances should we give this up for the false promise of neoliberal cost-cutting.
The Cato Institute is a conservative think tank.
Repealing Jones would effectively kill a huge amount of the US maritime industry and related jobs. Literally offshoring those jobs to foreign ships and wage slave crews. Just like we offshored union manufacturing jobs to China in the 80s and 90s.
We can discuss ways to make it more efficient but keeping jobs onshore has very real benefits. It's the core of our middle class.
Repealing Jones would effectively kill a huge amount of the US maritime industry and related jobs. Literally offshoring those jobs to foreign ships and wage slave crews. Just like we offshored union manufacturing jobs to China in the 80s and 90s.
We can discuss ways to make it more efficient but keeping jobs onshore has very real benefits. It's the core of our middle class.
I lost about $700 due to the Jones Act.
What happened was that my friend had booked a cruise for us, that sailed out of Orlando. But I couldn't join them in Orlando. "No worries," I thought, "I'll just meet up with the ship at the very next stop" -- which I did, I took an uber there. We had done the same with MSC cruises in the Mediterranean -- missing the ship in Rome and taking a train up to meet it in Civitavecchia.
Well, as I got on the ship, they said I owe $700 or so. I was really wondering why! Turns out that unless the ship drops off the passenger at the exact same US port as they picked them up, it is considered that the ship is "transporting cargo" and therefore has to pay taxes.
I asked whether I could be dropped off at the port I got on: no.
I asked whether I could get off in the Bahamas and fly back: no. (Well, yes but I'd still owe the money).
So, I had to pay. The ship otherwise risked getting fined for not paying its tax.
What happened was that my friend had booked a cruise for us, that sailed out of Orlando. But I couldn't join them in Orlando. "No worries," I thought, "I'll just meet up with the ship at the very next stop" -- which I did, I took an uber there. We had done the same with MSC cruises in the Mediterranean -- missing the ship in Rome and taking a train up to meet it in Civitavecchia.
Well, as I got on the ship, they said I owe $700 or so. I was really wondering why! Turns out that unless the ship drops off the passenger at the exact same US port as they picked them up, it is considered that the ship is "transporting cargo" and therefore has to pay taxes.
I asked whether I could be dropped off at the port I got on: no.
I asked whether I could get off in the Bahamas and fly back: no. (Well, yes but I'd still owe the money).
So, I had to pay. The ship otherwise risked getting fined for not paying its tax.
Zvi is tackling Jones Act repeal: https://thezvi.substack.com/p/announcing-balsa-research.
One interesting point he makes is that it can be cheaper to simply buy out the special interests; in this case, can we support the shipbuilder unions and manufacturing capacity by committing to increase direct navy contracts in some way?
The general argument being that the special interests capture some value X, and the diffuse costs borne by society are Y, and Y >> X. So if we just pay ~X from some other pot, we still come out ahead as a society. Put differently, is there a more targeted way of achieving the original goals of the Jones Act, without distorting the markets and raising costs as much? It seems likely.
One interesting point he makes is that it can be cheaper to simply buy out the special interests; in this case, can we support the shipbuilder unions and manufacturing capacity by committing to increase direct navy contracts in some way?
The general argument being that the special interests capture some value X, and the diffuse costs borne by society are Y, and Y >> X. So if we just pay ~X from some other pot, we still come out ahead as a society. Put differently, is there a more targeted way of achieving the original goals of the Jones Act, without distorting the markets and raising costs as much? It seems likely.
Some things are more important than price efficiency.
The USA has a prime example of what would happen if they removed the patriot act, that is shipbuilding industry in Canada. The industry need doesn't sustain itself at those costs and Canada's cost for labour are much lower than the US's.
We are trying to reboot the industry here and I am not kidding when I say it will take 2-4 decades so I can only imagine what the US will lose if they give up the Jones act.
We are trying to reboot the industry here and I am not kidding when I say it will take 2-4 decades so I can only imagine what the US will lose if they give up the Jones act.
If you're sympathic to these types of ideas you might find these entertaining
https://www.youtube.com/watch?v=5hwuRkJMo_4&list=PLBuns9Evn1...
Sometimes I am and sometimes I'm not but I still find them entertaining
https://www.youtube.com/watch?v=5hwuRkJMo_4&list=PLBuns9Evn1...
Sometimes I am and sometimes I'm not but I still find them entertaining
I'm not sure we even have to think about it. Whenever the sophistry is mostly name dropping "deep state" authorities whom all agree its a great idea, its certain to screw over everyone not at the top of the pyramid. Its like that every time, and this is not likely to be an exception.
[deleted]
Also, as the article itself states:
> [The Jones act] aims to promote and maintain the American merchant marine fleet for commercial and defense purposes.
The act has nothing to do with making things cheaper. Any earnest proposal to repeal the Jones act should address how the goals of the act can be met in other ways.