Knowledge is key to Jones Act reform

by Keli'i Akina, Ph.D., President / CEO, Grassroot Institute of Hawaii

As you might have heard, the Grassroot Institute of Hawaii hosted two forums on the Jones Act this week on how we can make the Jones Act work for everyone.

The featured speaker was Colin Grabow, a trade policy analyst at the Cato Institute, a Grassroot Scholar and co-editor of the book “The Case Against the Jones Act” — which includes an essay by me, by the way.

Many of you have heard me talk about the Jones Act before. In a nutshell, the 1920 law limits shipping competition between U.S. ports by requiring all goods moved between U.S. ports to be on ships that are built and flagged in the U.S., and mostly owned and crewed by Americans.

It’s a law that works great for the few U.S. shipyards, ocean carrier companies and mariners involved in domestic oceangoing shipping. But for the rest of us, especially those of us who live in places like Hawaii and Puerto Rico, it means higher prices during normal times and life-threatening product shortages during times of emergency.

Grabow gave two talks about the law, one on Oahu and the other on Maui. The Oahu talk, which I moderated, is already posted on the Grassroot Institute of Hawaii website, and what a great talk it was. 

The format was for Colin to answer questions throughout, initially from me and then from the audience. The purpose was to make it clear how the law actually works compared with its alleged goals — and also how it might be changed for the benefit of the greater good while giving its protected beneficiaries a graceful way to eventually stand on their own two feet. 

It was a tall order, but Colin did great, and so did the audience.

On Maui, my Institute colleague Joe Kent moderated the event, which also turned out great. A video of that gathering will be posted to the Institute’s website within the next few days. Both videos also will be accompanied by full transcripts.

As on Oahu, the attendees had some terrific questions for Colin. 

For example, one voiced a very common concern, namely that changing the Jones Act could possibly hurt Hawaii by leaving us dependent on new competitors that would come into the market when it's profitable, then abandon us in a time of crisis.

Colin responded that this is a hypothetical situation that doesn’t reflect economic reality. He used the example of the two grocery stores he uses on the mainland, pointing out that if one were to go out of business, someone would come along to replace it. Similarly, shipping is very competitive, where not restricted by law, so if Matson or another company were to go out of business, others would definitely fill the gap. 

It’s good to remember, he said, that American Samoa and the U.S. Virgin Islands are both exempt from the Jones Act — and they like it that way. Both have resisted being included in the Jones Act, because neither has had problems with shipping reliability.

Asked if Hawaii has enough warehouse space to accommodate foreign shipping lines with longer trade routes, Colin responded that the answer should always return to competition and cost.

Trying to excuse higher costs of the Jones Act based on warehouse availability, he said, ignores the fact that the free market can decide what method has the best value. Why prevent that competition when local merchants and consumers are the ones who stand to gain the most?

Some audience members worried about the quality of ships built in other countries. But Colin explained that the designs being used in U.S. shipyards are already mostly foreign and that all ships are built to the same standards. Moreover, because of the way that shipbuilding works these days, components are often made in other countries and assembled here. 

One Maui attendee asked about the number of jobs that would be affected if the U.S.-build requirement were eliminated. But again, the answer wasn’t the nightmare scenario so often presented by Jones Act proponents. 

As Colin explained, most U.S. shipbuilding jobs revolve around building ships for the military, so freeing up the civilian shipbuilding market would have little effect. What’s more, studies have suggested that efficiency gains could actually lead to more maritime industry jobs.

There was so much more about the Jones Act that Colin was able to explain in a relaxed and easily comprehensible manner. If you were unable to attend either of the events yourself, I hope you will take the time to view the videos on the Institute website, since greater knowledge about the Jones Act is key to updating this failed law for the 21st century. 

In fact, surveys show that the more people know about the Jones Act, the more likely they are to support its reform. For the future of Hawaii, consider spending some time to learn more about the Jones Act. Again, you can watch Colin's Oahu presentation here. The Maui event will be posted shortly.

E hana kākou! (Let’s work together!)