Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security

Policymakers must consider either major reform of the law or outright repeal.

by Colin Grabow, Cato Institute, November 12, 2019

Since its inception, supporters of the Jones Act have claimed that the law is essential to U.S. national security. Although indefensible on economic grounds, Jones Act advocates argue that its restrictions promote the development of both a U.S. merchant marine and shipbuilding and repair capability that can be utilized by the country's military in times of war. This rationale appears to be more of an article of faith than the product of rigorous analysis.

This paper examines the national security justification. Contrasting the Jones Act's stated objectives with observable results, the law is revealed to be a national security failure. With dwindling numbers of ships, mariners, and shipyards, the U.S. military's ability to leverage these civilian assets during times of war has been deeply compromised. This paper finds this maritime decline to be the predictable result of the Jones Act's misguided protectionism, whose theoretical underpinnings are deeply at odds with both sound economics and modern maritime realities.

Rather than continue this flawed policy, the Jones Act should be either repealed or significantly reformed. This paper proposes alternative methods for ensuring military access to civilian mariners that offer greater cost transparency and increased certainty of the mariners' availability.

Introduction

If the Jones Act's fortunes hinged on economics alone the law would have been repealed long ago. Economists who have studied the Jones Act are in near unanimity that it diminishes U.S. prosperity.1 A recent analysis published by the Organisation for Economic Co-operation and Development (OECD) estimates that the law's repeal would increase U.S. economic output by up to $135 billion.2

But Jones Act supporters inevitably respond that the law's economic costs are justified by its contributions to U.S. national security. Indeed, the conventional wisdom on Capitol Hill is that the Jones Act plays a vital role in undergirding the U.S. military and protecting the U.S. homeland.

The Jones Act—formally known as Section 27 of the Merchant Marine Act of 1920—requires that vessels engaged in the domestic transport of goods be built in the United States, crewed by U.S. citizens, owned by U.S. citizens, and registered under the U.S. flag.3 The law's advocates claim that these requirements bolster U.S. national security by ensuring the Department of Defense has wartime access to a merchant marine that can be used to transport military supplies and equipment. Indeed, the law itself lists in its stated purpose the necessity of a "merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency [emphasis added]."4

Claims that the Jones Act is a national security asset have generally gone unchallenged and, as a result, this justification is more an article of faith than the result of rigorous analysis. Much has changed in the nearly 100 years since the Jones Act became law, and the economic, maritime, and geopolitical realities that shaped policy in 1920 differ considerably from those of today. Taking account of these modern realities, this paper scrutinizes the Jones Act's impact and concludes that the law has failed to bolster U.S. national security. In fact, it has likely subverted it.

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