Jonesing for Relief from Port Protectionism

Wikimedia Commons

by Robert Long, The American Conservative, July 24, 2013

Jacksonville, Florida, brings in coal from Colombia rather than West Virginia. Livestock farmers in Texas buy grain from Argentina instead of from America. Puerto Rico’s port at San Juan is losing shipping volume, even as the Port of Kingston in Jamaica is gaining it.

Why? Because an antiquated maritime law, the Jones Act, requires that all transport of cargo between two United States ports be carried by ships that are U.S.-owned, U.S.-built, U.S.-manned, and flagged in the United States.

That is, a ship from South Korea cannot go to Hawaii and then to San Francisco. Foreign ships could not help with the BP oil spill cleanup without waivers.

William Keli’i Akina, the president of the Hawaii think tank the Grassroot Institute, likens the law to a hostile blockade against Hawaii and Puerto Rico. But the vested interests that defend it—U.S. vessel owners, shipyards, unions, overland transporters—are so powerful that the last five presidents have all vocally supported it. Don’t expect repeal any time soon.

But some vivid illustrations of the law’s deep illogic in recent years have gained national attention. The act’s original purpose—in 1920, under the specter of German U-boats—was to ensure a “dependable” merchant fleet for the next “national emergency.” Nowadays, the Jones Act is the first thing to go in an emergency.

After Hurricane Katrina, President Bush waived the act for nineteen days.

During the BP oil spill, the Department of Energy offered a blanket waiver to buyers from the Strategic Petroleum Reserve—they could haul away the crude in any foreign-flagged tankers. When the White House got word of this, Obama’s advisors were “reportedly furious” (the administration switched to a case-by-case waiver program).

Everything about that episode supports the Washington Post’s summary of the law: “The Jones Act may or may not have achieved its original purpose, but shipping businesses and labor unions love the way it shields them from foreign competition.”

And that’s why repeal of the act is all but politically impossible. It’s a textbook example of rent-seeking: the benefits accrue to entrenched vested interests, while the harms are dispersed broadly and imperceptibly.

But Akina is optimistic that incremental reform of the Jones Act can gain momentum as a political cause. Puerto Rican politicians are increasingly vocal about the harms of the act to their island; Hawaiians question its role in sustaining a shipping duopoly on the island; Alaska has successfully carved out useful exclusions for certain industries.

In addition, the death of Senator Inouye of Hawaii, a consistent and powerful Jones Act supporter, “loosened the grip” of the law in Congress, says Akina. “I think it’s a great opportunity to seek reform.”

And last, and probably least, there’s a steady media drumbeat of Jones Act-bashing.

Consider this the most recent beat. Akina stresses that Jones Act reform could be a broad-based non-partisan cause, due to the act’s sheer clumsiness.

---30---