Shadow Boxing with Jones Act Strawmen

by Mike Hansen, Hawaii Shippers Council, April 14, 2016

The Workboat Magazine published on April 14, 2016, an opinion-editorial (Op-Ed) piece, “In Jones Act battle, it's national security vs. free trade,” which notes in the growing national debate over Jones Act cabotage, proponents are shifting to a national defense rationale.

The Op-Ed was written by Kirk Moore and published under his regular column title “The Nor’easter,” presumably signifying his U.S. North East geographic point-of-view.

Moore characterizes those advocating for Jones Act reform as free traders, mentions the efforts of U.S. Senator John S McCain (R-AZ) and U.S. Representative Mike Pompeo (R-KS-CD4), and implies they are seeking to fully repeal Jones Act cabotage.

In fact, Sen McCain has introduced Jones Act reform legislation to eliminate the domestic ship build requirement, and Rep Pompeo indicated he would seek to repeal certain elements of the Jones Act (which is likely to be the build requirement). Both stressed domestic economic reasons for their proposed reforms, not international free trade.

The key bogeyman for Moore is a report calling for repeal of the Jones Act by the Alliance for Innovation and Infrastructure, which was full of factual inaccuracies and severely criticized not only by Jones Act industry interests but also by those seeking reform. With so little relevance, Moore has effectively created a straw man out of the Alliance and its Jones Act report.

Against the alliance report, rejected by parties on both sides of the Jones Act debate, Moore gleefully invokes the criticism of the American Maritime Partnership (AMP), which is the leading Jones Act industry trade association (Sec. 501 (c) 6 trade association), and the Lexington Institute, a non-profit unable to lobby (Sec 501 (c) 3) with a primary focus on national defense and funded by defense contractors. This is nothing more than shadowboxing.

In his populist defense of American shipboard labor, Moore states, “but more striking is their [i.e.. Jones Act reformers] insistence that the U.S. maritime industry is overpaid – which is after all at the heart of Jones Act arguments.” In stark contrast, the most broadly supported reform is to eliminate either all or in part the U.S. ship build requirement of Jones Act cabotage, and retaining the citizen manning requirements that will project American jobs and likely increase employment by significantly lowering ship acquisition cost.

Moore quoted a key person at the Lexington Institute regarding the security threat arising from foreign ships calling at inland waterway ports if the Jones Act were repealed. This is of course a red herring. Today, foreign ships call at all major U.S. seaports and many inland ports virtually every day of the week and transit from one U.S. port to another on a foreign voyage status. The U.S. Coast Guard, Customs and Boarder Protection and other agencies are and have been for many years organized to supervise and regulate this traffic.

Furthermore, it would be all but impossible for foreign shipping to displace purely domestic inland waterways traffic even with a full nationwide repeal of Jones Act cabotage. This is primarily due to the extra-cabotage legal and regulatory web enveloping the inland waterways – from immigration, taxation, business registration to wage and hour – which would impinge on a foreign flag vessel continuously employed in domestic service.

This has been effectively described in the Journal of Maritime Law and Commerce article, “Myth and Conjecture? The “Cost” of the Jones Act,” published in January 2015. The lead author, Mark Ruge, is the senior counsel to the American Maritime Partnership.

Key excerpts:

Sooner or later, it had to come to this: the Jones Act debate as a wrestling match between two dominating political forces in Washington.

In one corner, national security, the 800-lb. gorilla that has loomed over national discourse for 15 years now. The challenger: free trade, the bipartisan faith that lowering U.S. regulations and trade barriers will, on balance, benefit all Americans.

Both are invoked amid renewed demands for changes to the 1920 Merchant Marine Act that mandates U.S. crews and U.S.-owned vessels carry cargo between U.S. ports.

The law increases costs to U.S. businesses and consumers, the free trade camp complains. Its allies in Congress, including Sen. John McCain, R-Ariz., and Rep. Michael Pompeo, R-Kan., call the Jones Act a throwback to early 20th century isolationism and protectionism.

Refiners and petrochemical manufacturers want reforms to the Jones Act, and Washington think tanks are into the game.

“The citizen crewing requirement alone increases the daily cost to man a Jones Act vessel by at least six times the cost of a foreign-crewed ship due to inflated wage rates,” declared the Alliance for Innovation and Infrastructure in a January report “The Jones Act: Protectionism vs. Global Trade.”

That paper was trashed by a pro-Jones Act industry group, the American Maritime Partnership, who called it “littered with fabrications” and confused over the role of coastwise and inland U.S. maritime workers.

Another think tank, the Lexington Institute, chimed in on that theme.

“It is particularly important that those vessels and crews which routinely travel between U.S. ports and especially the inland waterways through America’s heartland pose no threat to the homeland,” Lexington analyst Paul Gouré wrote. “It is for this reason that the higher standards with respect to ownership and manning requirements for Jones Act ships are so significant.”

With huge costs in money and personnel already spent to secure U.S. ports, “it makes no sense to add to the burden facing domestic security agencies by allowing foreign-owned ships operated by foreign crews to move freely throughout America’s inland lakes, rivers and waterways,” the report asserts.

But more striking is their insistence that the U.S. maritime industry is overpaid – which is after all at the heart of Jones Act arguments. It is not a good time to pick that fight, in a presidential election year when voter discontent over the effect of free trade on U.S. jobs is already bringing the elites of both political parties to grief, in the persons of Donald Trump and Bernie Sanders.