Jones Act Ready for Retirement

by Michael Hansen, Hawaii Shippers Council, May 16, 2015

The California Political Review published on Friday, May 15, 2015, an op-ed from Professor Gary Galles, Economics Department, Pepperdine University, entitled “Jones Act ready for retirement,” in which Prof Galles examines the fallacies underlying the national defense argument in support of the Jones Act.

A prior op-ed by Prof Galles was posted to this FaceBook Group page on March 3, 2015. It was entitled “Little known laws that cripple American trade,” published by the Mises Institute (Austrian Economics, Freedom and Peace), and examined the economics of the Jones Act. Maritime expert, Donald B Frost, commented upon Prof. Galles prior piece on March 7, 2015, with his “The Jones Act does not enhance our defense,” published by Hawai'i Free Press.

Key excerpts:

National defense needs have long been such an all-purpose excuse for protectionism that they may be the best illustration of Samuel Johnson’s aphorism that “Patriotism is the last refuge of a scoundrel.”

Restricting America’s coastal trade to American ships does not appreciably restrict Chinese sea-power, military or otherwise, given the tidal wave of goods their ships carry to America and other destinations around the world. Further, concern about potential naval military threats as a rationale for the Jones Act is inconsistent with the sharp drawdown taking place in the Navy fleet.

Beyond the question of a sufficient military threat, for the Jones Act to make any sense, it must produce benefits, increasing the number of American ships, sailors and construction capabilities. But it does not.

From 43 percent of global shipping in 1950, the Department of Transportation found in 2009 that “U.S.-flag ships carry only about 1.5 percent of the foreign trade of the United States.” The wider U.S. flag fleet lost half its tonnage capacity between 1975 and 2007.

Vessels meeting Jones Act requirements fell to 90 in 2014 from 193 in 2000. 110 tankers have become 43. Almost five times as many American ships now fly other flags to escape Jones Act burdens, even though it makes them ineligible for domestic shipping.

Even if the Jones Act had a positive effect on American shipping, it could do little for military production potential, as only one shipyard that builds the Navy’s primary vessels also builds commercial shipping vessels.

The Jones Act must also provide services that would be hard to acquire during hostilities and emergencies. But it does not.

The Department of Defense has stated that “Unfortunately, very few commercial ships with high military utility have been constructed in U.S. shipyards in the past 20 years. Consequently … nearly all of the [charter] offers are for foreign-built ships.” Similarly, in the aftermath of both Hurricanes Katrina and Sandy, Jones Act restrictions were suspended because they hindered emergency response capabilities.

CPR: Jones Act Ready for Retirement