The Problematic National Security Rationale for the Jones Act

by Malia Blom, Grassroot Institute, January 28, 2014

Recently, an article from Reuters by Jack Kemp looked at the Jones Act and the national security arguments used to defend it.  Those who support amending the Jones Act (including the Grassroot Institute) often note that the Act serves to hamper trade and the free market without ever succeeding in the aims of improving national security or protecting the American shipbuilding industry. Kemp explores the failure of the Jones Act in that endeavor, adding that cabotage laws in America actually predate the Bill of Rights (which suggests that they’re an increasingly archaic relic of another time):

Mercantilism is no longer fashionable. Not many economists would employ Smith’s argument to defend the modern Jones Act.

Its restrictions have been criticized by shippers and politicians in outlying islands like Puerto Rico and Hawaii for pushing up the cost of freight to and from the mainland United States, contributing to the high cost of living on the islands and holding back their economic development.

The Jones Act has also prompted quiet complaints from oil companies and traders struggling to find enough eligible ships and barges to transport crude oil and products between refineries on the Gulf Coast and the North East United States.

But the defense argument remains enormously popular with politicians, vessel owners, shipbuilders and the military.

…

In a rational world, the Jones Act would long ago have been consigned to the history books. The principal criticism is that the restrictions raise costs without actually being very effective.

The number of Jones Act-eligible vessels has fallen from 193 in 2000 to just 92 in 2013, according to the U.S. Maritime Administration (MARAD).

Within this total, Jones Act tankers are down from 110 to 43, with deadweight tonnage down by more than half from 6.3 million tonnes to 3.1 million tonnes, according to MARAD.

There has been an even more sharp decline in the wider U.S. flag fleet, which includes ocean-going vessels engaged in international trade. The ocean-going U.S. flag fleet had shrunk from 857 ships (17.7 million deadweight tonnes) in 1975 to around 200 by December 2007 (8.6 million deadweight tonnes).

…

Nonetheless, it is questionable whether the Jones Act really contributes significantly to maritime security in the modern world. If Congress is worried about maintaining an adequate merchant marine and auxiliary sealift capacity, there are far cheaper and less distorting ways to do it out of general taxation and subsidies.

The article, which is well worth reading in its entirety, can be found here.