Grassroot Institute Testifies on Jones Act in Washington, DC
President Keli'i Akina Discusses Act’s Economic Impact, Reform at SBA Hearing
News Release from Grassroot Institute
WASHINGTON, DC – Aug. 28, 2018 – Today, the Grassroot Institute of Hawaii defended Hawaii’s small businesses against the economic unfairness of the Jones Act. In a special hearing before the Small Business Administration, Grassroot President Keli’i Akina, Ph.D. spoke about the economic harm caused by the cabotage provisions of federal law and advocated for reform.
More than 20 federal regulatory agencies were represented at the hearing, which was held by the SBA Regulatory Fairness Board. Dr. Akina told the Board how the Jones Act (which requires that goods shipped between U.S. ports be carried on ships built and flagged in the U.S., with predominantly American crews) affects Hawaii’s economy.
“What that means for business owners and consumers is that they often must pay more to ship or buy goods, because the Jones Act requires shippers between U.S. ports to use higher-cost ships and higher-cost crews,” said Dr. Akina. “In a state like Hawaii, which is highly dependent on shipping, the costs imposed by the Jones Act can be a huge barrier to small businesses.”
Dr. Akina continued: “Efforts to quantify the economic effect of the Jones Act put its cost to Puerto Rico, Alaska, and Hawaii at about $5 billion to $15 billion annually. But these aren’t the only places where business is held hostage by the Jones Act. It affects all states and territories that rely upon shipping to send or receive goods on ships traveling between U.S. ports, including Guam.”
Dr. Akina urged the Board to support Jones Act reform that would eliminate the U.S.-build and U.S.-ownership requirements in federal law. He stressed that this would eliminate a law that protects the shipping industry at the expense of American consumers and businesses.
Dr. Akina concluded: “It is time we brought this almost century-old body of legislation up to date with tailored changes that would lessen the damage it for too long has imposed on our economy.”
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Taking Jones Act Message to Washington
by Dr Kelii Akina PhD, Grassroot Institute September 1, 2017
This week, I had the honor of speaking on behalf of Hawaii's small businesses at a hearing in Washington, DC.
It was an interesting scene. I was there with representatives from more than 20 regulatory agencies (and many different small business interests) to talk about the regulatory burden on small business and what government can (and must) do to ease it.
I had been invited specifically to address an issue on which the Grassroot Institute of Hawaii is rapidly becoming recognized as a national expert: the economic impact of the Jones Act.
In front of the Regulatory Fairness Board of the Small Business Administration, I testified about how the Jones Act forces entrepreneurs and small businesses in Hawaii to compete on an unfair playing field.
We've spoken at length about how the Jones Act affects consumers, both in Hawaii and around the nation, but we should not ignore how difficult the cabotage provisions can be for Hawaii businesses -- especially the ones that hope to expand.
One example I provided was of The French Gourmet, a 1997 SBA “Exporter of the Year” that was forced to close its doors in 2012. The owner pointed to the fact that its shipping costs had nearly tripled in three years, forcing the company out of business. Because the Jones Act limited the company’s shipping options, there was no way for it to continue.
By hamstringing Hawaii's small businesses, the Jones Act does continual damage to our economy. It's ironic that every year the Hawaii Legislature considers different credits and incentives to grow new industries in our state. Yet, one of the most promising avenues to foster growth would be nothing more than for it request that Congress consider modernizing the Jones Act.
That's why the Grassroot Institute of Hawaii is carrying this message to Washington. If our state Congressional delegation won't represent the interests of small in business in our state, then we will.
E hana kakou (Let’s work together!),
Keli'i Akina, Ph.D.
President/CEO
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August 28, 2017
Testimony of Keli’i Akina, Ph.D.
President, Grassroot Institute of Hawaii
WHEN IT COMES to federal barriers facing small businesses in Hawaii, there is one body of legislation that guarantees they are competing on an uneven playing field: the so-called Jones Act.
When we refer to the Jones Act, we really are talking about the Merchant Marine Act of 1920, which includes cabotage provisions affecting commerce in U.S. waters and between U.S. ports.
Most egregiously, these provisions require that goods shipped between U.S. ports be carried on vessels built and flagged in the U.S., with predominantly American crews.
What that means for business owners and consumers is that they often must pay more to ship or buy goods, because the Jones Act requires shippers between U.S. ports to use higher-cost ships and higher-cost crews.
In a state like Hawaii, which is highly dependent on shipping, the costs imposed by the Jones Act can be a huge barrier to small businesses. Larger businesses usually can absorb such costs; smaller companies cannot.
Stories of Jones Act difficulties for Hawaii businesses abound — like The French Gourmet, a 1997 SBA “Exporter of the Year” that was forced to close its doors in 2012. The owner pointed to the fact that shipping costs had nearly tripled in three years, forcing the company out of business. Because the Jones Act limited the company’s shipping options, there was no way for it to continue.
Efforts to quantify the economic effect of the Jones Act put its cost to Puerto Rico, Alaska, and Hawaii at about $5 billion to $15 billion annually. But these aren’t the only places where business is held hostage by the Jones Act. It affects all states and territories that rely upon shipping to send or receive goods on ships traveling between U.S. ports, including Guam.
Because of the Jones Act, it is cheaper for American livestock farmers to buy grain overseas than from U.S. suppliers. Companies on the East Coast cannot afford to get lumber from the Pacific Northwest. And transporting oil from Texas to New England is approximately three times more expensive than shipping it to Europe.
What we seek is to bring the Jones Act in line with the 21st century, and thereby eliminate a burden on small business and the economy.
Toward that end, we propose repealing the U.S.-build requirement of the almost century-old Merchant Marine Act of 1920 under Section 46 USC 12112, and the U.S.-owned requirement under Section 46 USC 12103.
Doing this would eliminate the need for the existing exemptions to the build requirement for vessels captured in war, forfeited for a breach of U.S. law, and wrecked on a U.S. coast, under section 46 USC 12107.
This change would require a few minor conforming amendments, which we would be happy to provide for you, if needed.
Though an act of Congress is required to take decisive action on the Jones Act, there are several federal agencies that should be involved, including the U.S. Department of Homeland Security and U.S. Coast Guard, which handle documentation and authorization of the vessels in question; and U.S. Customs and Border Protection, which has a special office to deal with Jones Act issues: the Jones Act Division of Enforcement.
Many studies have conclusively shown that the Jones Act has outlived its usefulness in promoting national defense, and now operates primarily as a protectionist scheme for a few in the shipping industry at the expense of the many American consumers and businesses who rely on shipping to prosper and survive.
It is time we brought this almost century-old body of legislation up to date with tailored changes that would lessen the damage it for too long has imposed on our economy.
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About the Grassroot Institute of Hawaii:
The Grassroot Institute of Hawaii is a nonprofit, nonpartisan research institute dedicated to the principles of individual liberty, the free market, and limited, accountable government throughout Hawaii and the Asia-Pacific region.To learn more, visit http://www.grassrootinstitute.org/
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Donate: https://secure.grassrootinstitute.org/
Twitter:http://twitter.com/grassroothawaii
About Grassroot President:
Keli’i Akina, Ph.D., is a recognized scholar, educator, public policy spokesperson, and community leader in Hawaii. Currently, he is President/CEO of Grassroot Institute of Hawaii, a public policy think tank dedicated to the principles of individual liberty, free markets and limited, accountable government. An expert in East-West Philosophy and ethics, Dr. Akina has taught at universities in China and the United States and continues as an adjunct instructor at Hawaii Pacific University. In 2016, Dr. Akina was elected to a four-year term as Trustee-at-Large of the Office of Hawaiian Affairs.