How the Jones Act transfers critical industry and jobs overseas

by Jonathan Helton, Grassroot Institute, April 25, 2022

A Washington Times article claims the 1920 law is “pro-American,” but with friends like the Jones Act, who needs enemies?

It is a popular misconception that the federal maritime law known as the Jones Act supports American industry and jobs.

A recent commentary in the Washington Times, for example, was headlined “Stop the transfer of U.S. critical industry and jobs overseas: Support the pro-American Jones Act.”

Written by Richard Balzano, CEO of the Dredging Contractors of America, the article sought to defend the 1920 federal maritime law against the increasing number of voices calling for its reform

However, without its subtitle, “Support the pro-American Jones Act,” the headline could have just as easily been suggesting the need for Jones Act reform.

That’s because the Jones Act actually undermines U.S. industry and jobs. Its alleged purpose was to bolster America’s domestic maritime fleet and ensure national security. But with only 96 large oceangoing Jones Act-qualified ships left — down from 257 in 1980 — it is pretty clear the law has failed.

To put that in perspective, there are more than 41,000 large oceangoing merchant vessels worldwide, leaving the U.S. with less than 1% of the international market share.

U.S. shipyards capable of building oceangoing commercial ships, meanwhile, had declined to a mere four as of 2021, during which they did not deliver a single Jones Act ship.

Commercial shipyard jobs have been steadily declining as well, from 180,000 in 1980 to 94,000 in 2018 – and few of those 94,000 are employed at those four yards.

Not only that, three of the remaining four large commercial shipyards are largely foreign-owned. Plus, much of the design and technology used in the construction of Jones Act vessels comes from foreign sources.

Further, U.S. shipyards are so expensive that most Jones Act carrier companies send their vessels to foreign shipyards, such as in China, for repair and maintenance. Even a 50% U.S. tariff on using foreign shipyards isn’t enough to discourage the practice.

Pasha Hawaii, for example, is currently retrofitting its 42-year-old Horizon Reliance containership at a Chinese shipyard to run on LNG. Similarly, Matson announced this month that it will be sending its Daniel K. Inouye — the largest containership ever built in the U.S. when it was completed in 2018 — to a Chinese shipyard next year, also have it converted to LNG propulsion.

Nevertheless, in Balzano’s view, the Jones Act is vital to America’s economic, national and energy security.

“The Russian invasion of Ukraine is teaching us about energy independence,” Balzano wrote. “We must as a nation be able to supply our own energy and transport it around the nations when and where it is needed.”

Balzano is correct that the Russia-Ukraine conflict has highlighted America’s energy situation. But he misses the boat when he declares that the Jones Act “protects our critical maritime infrastructure and workforce to ensure the movement of energy, agriculture and other critical commodities.”

For example, even though the United States is the world’s top natural gas producer, there are zero Jones Act tankers capable of carrying the fuel between U.S. ports. That’s because these ships cost an estimated two to three times more to build in U.S. shipyards than overseas. As a result, Puerto Rico cannot access cheap liquefied natural gas from Texas and Louisiana. Instead, it imports all of its LNG from abroad — sometimes from Russia.

At the opposite end of the country, Hawaii has become almost wholly dependent on foreign fuel imports, in large degree because of the Jones Act. In normal years, for example, the Aloha State buys a quarter to a third of its crude oil from Russia. Most of the rest comes from Libya, Angola and other countries that also don’t necessarily align with U.S. interests.

The high price of building and operating a Jones Act tanker means it’s more attractive for Hawaii’s only refinery, Par Hawaii, to source oil from abroad. Thus, U.S. dollars and jobs flow abroad, and U.S. states and territories end up dependent on geopolitical rivals such as Russia.

The sad truth is that while a small and shrinking subset of the U.S. economy has been reaping the benefits from the Jones Act, American consumers — especially in areas dependent on ocean transportation — have been paying the price.

Businesses have suffered too. Farmers and agricultural interests have long complained about the Jones Act, and it has been causing headaches for the U.S. offshore wind industry all across the country.

Balzano also mentioned that the law supports 650,000 U.S. jobs overall, a number that independent researchers are unable to substantiate, and which has mysteriously ballooned in recent years, even as America’s maritime industry has declined; in 2014, the Jones Act lobby said the total was 500,000.

In any case, no matter how many jobs the domestic maritime industry actually supports, the Jones Act has nothing to do with it, and those jobs would not disappear if the law were reformed. To the contrary, reform would likely lead to more maritime jobs, since that would allow for greater shipping competition and more work at American ports.

Balzano concluded that U.S. policymakers should, “Stand up for American jobs, American-made products and America’s security.”

Yes, and the best way to do that would be to reform the Jones Act.
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For more articles about the Jones Act, go here.