Bloomberg editorial finds Jones Act too expensive

by Michael Hansen, Hawaii Shippers Council, December 12, 2017

Bloomberg published from their editorial board, “The Jones Act costs all Americans too much,” on December 12, 2017, noting in their subtitle, “Hurricanes or no hurricanes, this ridiculous policy needs a rethink.”

In their piece, the Bloomberg editorial board notes the recent and widely publicized issues with delivering hurricane relief within the constraints of the Jones Act, and expanded that concern to the effects of the Jones Act on the national economy. They conclude stating Congress, “should . . . . . consider a permanent exemption [from the Jones Act] for the whole country.”

Key excerpts from Bloomberg:

The act hits all U.S. consumers with higher shipping bills.

The law's advocates counter that since no foreign-flag ships have been allowed to carry coastal U.S. cargo, you can't compare costs on an apples-to-apples basis. This is true, but it ignores straightforward evidence and examples compiled by the U.S. International Trade Commission, the U.S. Government Accountability Office, the Congressional Research Service, the Federal Reserve Bank of New York, and disgruntled communities from San Juan to Honolulu.

Consider the impact on U.S. energy markets. Shipping oil from Texas to East Coast refineries on a U.S.-flag ship, for instance, costs several times more than sending it further (to Canada) on a foreign one – so those refineries get their oil from Europe. The U.S. has cheap and plentiful natural gas, but no Jones Act-qualified carriers – so Massachusetts imports LNG from Trinidad and Tobago, while U.S. gas is sent overseas on cheaper foreign-flag ships. When pipeline breaches disrupt the national gasoline supply, the small fleet of Jones Act tankers means a bigger spike at the pumps.

Maybe you care more about cutting greenhouse-gas emissions than about cheaper heating oil and gasoline. If so, here’s some bad news. Coastal shipping is more carbon-efficient than trucks and trains -- but the tonnage it carries has steadily declined, leading to dirtier air and more congested roads.

And this is to say nothing of all the other economic distortions the act creates in tourism, agricultural trade and construction. The U.S. International Trade Commission once labeled the act the country's second costliest form of protectionism. Recent research estimates nearly $2 billion worth of savings in shipping costs if the law were repealed.