Hawaii among victims of law that hinders U.S. port dredging

from Grassroot Institute of Hawaii, June 29, 2023

The 1920 Jones Act is a familiar topic in Hawaii, but its precursor — the Foreign Dredge Act of 1906 — has largely escaped scrutiny. 

However, Montana resident Brad Tomasovic researched the maritime law for a year to become the national high school debate champion and shared what he learned with Keli‘i Akina, president of the Grassroot Institute of Hawaii, on the June 20 episode of “Hawaii Together.” 

Now a student at Carroll College in Montana, Tomasovic said that like the Jones Act, the 117-year-old Foreign Dredge Act requires that dredging ships in the U.S. must be American owned, operated and built. 

As a result, he said, “We don’t have enough companies or enough ships for the amount of dredging we need to get done.” The jobs that eventually do get done, he said, cost more, and it is taxpayers who foot the bills. 

Moreover, without enough dredging to clear out sediment buildup in U.S. ports, goods must be transported on a greater number of smaller vessels rather than a few larger ones. 

“What that means,” Tomasovic said, “is that it’s more expensive for companies to ship goods to the United States because it requires more boats, it requires more trips and more fuel. So every time a company has to spend more money because we aren’t dredging our ports, that is reflected in almost every product that gets imported.” 

Tomasovik said that the impact of the law is magnified in Hawaii. 

“Hawaii is actually completely reliant on the [Hawaii] dredging companies, and there aren’t that many of them and they don’t do a lot of dredging,” he said. 

Tomasovic said that much like the Jones Act, the Foreign Dredge Act is in dire need of an update — the first step of which is informing the public about it. 

“If the public cares about this issue — which they should because it’s increasing the cost of almost every good in their home — then we can actually lead to real change,” he said. 

If you would like to view the entire conversation between Akina and Tomasovic, click on the image below. A complete transcript follows.

TRANSCRIPT:

Keli‘i Akina: Aloha, everyone, and welcome to “Hawaii Together” on ThinkTech Hawaii. I’m Keli‘i Akina, your host and president of the Grassroot Institute of Hawaii. And we’ve got a delightful program today. I’ll be interviewing a young man from Montana who has researched a topic that very few people in Montana or even in our country know much about. 

You’ve heard the words “supply chain.” Not very many people paid attention to that phrase until the past couple of years. 

Bottlenecks at U.S. ports were common in 2020 and 2021, and that caused many people in the media and Congress to ask why those logjams happened in the first place. 

The logjams also caused many Americans to ask why there wasn’t enough toilet paper to go around, or at least that’s iconic for those of us here in Hawaii.

Upgrading U.S. ports to avoid such bottlenecks in the future is going to take a lot of work from a great number of government agencies and private companies. But there’s one law that needs more scrutiny, and that law is the topic of today’s show. 

Can you guess what law it is? Well, not quite the Jones Act, although it’s very much related to it and very much similar to it. 

I’m talking about the law called the Foreign Dredge Act of 1906. The Foreign Dredge Act of 1906. And it is very similar to the Jones Act, which we have discussed quite a bit on this program. 

Joining me today to talk about this law, indeed, an expert already in it ,is Brad Tomasovic. Brad’s the national high school champion debater and that’s one of the ways he got involved in studying this topic. He spent a good part of last year researching this law and explaining why it needs to be updated for the 21st century. 

So, please join me in welcoming to the program Mr. Brad Tomasovic. Brad, so glad you’re joining us. Welcome to “Hawaii Together” on ThinkTech Hawaii. Aloha.

Brad Tomasovic: Yeah. Well, thank you for having me.

Akina: Well, I’m glad you’re here. Now, it’s not usual that we interview someone so young as you. You have certainly distinguished yourself by winning the National High School Debate Championship, but you’ve also studied a topic that in many ways is near and dear to us in Hawaii. 

But before we dive into it, let me ask you this question: Tell us a bit about you. Who is Brad Tomasovic? In addition to having completed high school and now going off to college with hopes of completing law school, who is Brad?

Tomasovic: Well, thanks for the introduction. Right now I live in Great Falls, Montana, and I really enjoy policy and especially team policy debate, so.

Akina: But, Brad, how did you get involved in maritime policy? That’s a very specific kind of public policy, and I don’t know what the connection would be in Montana, but why don’t you tell us your story? What drew you into this topic?

Tomasovic: So, every year the debate resolution would come out and we would have to study that resolution. And so the resolution that I was studying this year was about European policy or American’ policy towards one or more countries in Europe. And I quickly discovered this area of law and of policy, which was maritime policy. And I was looking into a bunch of different facets of that, and that’s how I discovered the Foreign Dredge Act of 1906.

Akina: Well, when we talk about the Foreign Dredge Act of 1906, we’re going back over 100 years, and we’re talking about dredging. Would you explain to our viewers what exactly dredging is?

Tomasovic: Yeah. So, dredging is when we remove soil or any type of biomass at the bottom of a port or a channel. So over time, a bunch of soil and debris piles up inside of our ports and inside of our rivers and we need to remove that in order to have ships or boats come into our ports.

Akina: Well, what are some commonly known ports or rivers where dredging needs to take place on a regular basis?

Tomasovic: So, a lot of the big ones would be the Mississippi River, LA and Long Beach in California. And there’s even a harbor in Honolulu that needs to be dredged.

Akina: That’s right. And we have a very famous canal in Waikiki called the Ala Wai Canal that was just dredged, and from time to time has to be dredged. So our viewers understand a bit about that. 

Now, when it comes to paying for the costs of dredging, who usually foots the bill for these projects? Is it the state government or the port users or the federal government?

Tomasovic: Yes. So, the primary organizer of all of this dredging is the U.S. Army Corps of Engineers. And they provide most of the funding, but then the port authorities themselves will fund these projects as well.

Akina: Well, as with all things, there are a number of laws that dredging companies have to deal with in order to comply with dredging law in United States ports. And one of those laws you’ve mentioned already is the Foreign Dredge Act of 1906. 

In very simple terms — and you’re an excellent communicator — could you please let our viewers know what the Foreign Dredge Act is all about?

Tomasovic: So, the Foreign Dredge Act of 1906 was essentially one of the main precursors to the Jones Act in that it stops any company from building ships outside of America and dredging from outside America. So every single dredger inside of this country has to be American-owned, operated, and built.

Akina: Well, that’s very similar to the Jones Act, which was first known as the Merchant Marine Act of 1920 in that it has four components to it, and you’ve mentioned them already. 

In order to transport cargo from one port to another port in the United States, ships have to meet these criteria: First, they’ve got to be built in the United States; they’ve got to be crewed by a United States crew, for the most part; they’ve got to be flagged as a United States ship; and they have to be owned by a United States entity.

Now, let’s just review once again — and you said the Foreign Dredge Act of 1906 came before this; once again, what are the basic elements of the Foreign Dredge Act which is talking about dredging in the United States?

Tomasovic: Yeah, so it’s basically those four elements. If you are in a dredging ship in the United States, it has to be built using American labor, using American materials, and it has to be operated by an American company with 75% of the crew being American.

Akina: OK. Now we’re going to come back and see what the impact has been of that law.

But first, let’s talk a little bit about the dredging industry today. Has it flourished in the absence of foreign competition? Well, I’ll ask you about Hawaii in a moment, but let’s just talk in general. What has happened since these regulations have been imposed upon dredging?

Tomasovic: Yeah, so America as a whole doesn’t have a good dredging industry. And what we can see is that there’s a lot of regional monopolies, which is essentially [where] one company will control one area of the United States. You look at all the contracts that the U.S. Army Corps of Engineers is putting out and usually, there’s only one or two bidders on these contracts. So we don’t have enough companies or enough ships for the amount of dredging we need to get done. 

And in fact, just a couple of years ago, the average build of these dredging ships was [the] 1980s. So we have a very old and outdated fleet and not enough companies to fulfill the demand.

Akina: Well, with the lack of enough ships and enough companies to be able to carry out the work, it sounds like a few companies will be making a lot of money and that the cost should be fairly high. Is that the case?

Tomasovic: Yes. A great example of that is in Savannah, Georgia. We wanted to deepen the port. And what happened was because we didn’t have any other companies, we spent $200 million more on that project than we had the budget for because these companies didn’t have to compete. They were basically the sole contractor.

Akina: So one of the things that has happened since the passing of this foreign dredge law is the creation of monopolies or virtual monopolies so that there’s very little competition. Fewer companies can enter the market. 

And so what does that mean in terms of the consumer, in terms of the quality of the product and the cost of the product and availability?

Tomasovic: Well, it harms us in two main ways. The first way is that our taxes are going to these projects. We fund the U.S. Army Corps of Engineers, and so if they’re spending way too much money than needed on these projects, we’re wasting our money. 

But I think the most important way is that if we do not dredge, maintain, or expand our ports, then the consumer loses money. 

And a great example of this is what’s called “light load.” Now, the reason why we need to dredge our ports is because over time, sediment will build up inside of that channel. What that means is that we have to have smaller ships come into these channels — so more ships instead of just one big ship — and we have to put less goods on those ships. 

So what that means is that it’s more expensive for companies to ship goods to the United States because it requires more boats, it requires more trips, more fuel. And when companies have to pay more money to make a product, that means that the price of their product goes up. 

So every time a company has to spend more money because we aren’t dredging our ports, that is reflected on almost every product that gets imported into the United States.

Akina: Well, how does the U.S. dredging industry compare on the international playing field — especially the countries that don’t have a comparable law? Are there other countries that have significant dredging fleets?

Tomasovic: Yes. So I would split up the dredging market into three main areas:

The first main area would be the American market. The American market is completely locked off from any foreign competition. The exact same thing is true with the Chinese market. They don’t allow any dredgers into their waters. 

But now the rest of the market is a free market. They don’t have restrictions on who can’t and can dredge in their ports. And what we can see is that the Europeans — four main companies, specifically — actually do 80% of the world’s free market dredging. And their ships are about four to seven times less costly to build, [and] their job or to do the job is about three times cheaper than the Americans. And one Dutch company — Van Ord — actually has three times the capacity of the entire American market.

So what we can see is that when the market is free and people are allowed to compete, we have a lot of very effective and profitable companies.

Akina: Well, how does all of this affect American consumers? 

In fact, it would probably affect a lot more consumers than at first glance one might realize because goods shipped to our country … by ships affect the actual commerce inland as well that aren’t on the coastline. 

Products ultimately have to get to them through rail or through trucking and so forth. So everybody in some sense is affected by what goes on in our shipping industry. 

But how is the consumer affected by our lack of free market in the dredging industry?

Tomasovic: Well, they’re ultimately harmed because the less dredging we have, the more expensive it is to ship goods into the United States. 

A good example of this is that in the Mississippi River last November, there were 2,000 barges stopped because of the lack of dredging. And because those barges were stopped, the U.S. Army Corps of Engineers reports that there is a 24% increase in the price of soybeans. And that’s just one example of all of the products that come into the United States.

So the businesses trying to sell goods are affected, which means that the people who work at those businesses can’t earn as much money. It means that when businesses aren’t making enough money, they have to raise the price of their goods, which basically affects every single American.

Akina: Now, Brad, let’s talk a little bit about Hawaii. We at the Grassroot Institute study the impact of the Jones Act across the nation, and in particular on Hawaii and Puerto Rico and Alaska, which happen to be other non-contiguous regions with the continental U.S. We’ve seen a significant impact of the Jones Act. 

How about the Foreign Dredge Act of 1906? What’s its impact on Hawaii from what you’ve seen?

Tomasovic: Yeah, its impact on Hawaii is actually really unique compared to the rest of the country. Because the problem is, is that the Foreign Dredge Act restricts building dredging ships. It’s more expensive to build dredging ships in America than it is in Europe, for example, where it’s four to seven times cheaper than building those ships in America. 

And because of that, we don’t have that many what’s called “globalization ships,” which allow these companies to move all of their dredging equipment across the seas.

So, a lot of these mainland companies aren’t able to dredge in Hawaii because it’s just too expensive to ship all their equipment here. So Hawaii is actually completely reliant on the Hawaiian dredging companies, and there aren’t that many of them and they don’t do a lot of dredging.

Akina: Well, that kind of leaves us in a stark position. 

Now, let’s go to the other side, which is something that you have studied because you’re a debater. And naturally, that means you could train to debate both sides of an issue. 

Who supports this law today? Who benefits from it and why is that the case?

Tomasovic: I think the main supporters of this law are essentially the Jones Act supporters because the Foreign Dredge Act is a mini-version of the Jones Act. So you see a lot of unions and a lot of, obviously, American dredging companies will support this act because they want to isolate the market — which is called protectionism.

Akina: Now, what are the major arguments that they put forward to defend the Foreign Dredge Act of 1906?

Tomasovic: I think the major argument is that if we allow foreign companies to come into the United States, then they’re going to just completely take over our market. They’re going to use cheaper labor so the Americans can’t compete, and then we would be reliant on the foreign companies to do all of our dredging. 

So if they, for some reason, decide they don’t want to dredge here anymore, then now we’re completely out of dredgers.

Akina: Now, how would you respond to that argument?

Tomasovic: I think there are a couple of responses. I think the first response is that there can be a gray area. You don’t have to isolate your entire market from everybody else in the world, and then if you lift up on those regulations, then they’re going to completely take over our market. 

There’s a big spectrum of how we can allow foreign companies into the United States. 

You can limit how many bids they have. You can make it cheaper for the Americans by allowing them to buy foreign equipment, like the Europeans, which would make it a lot cheaper for them to operate. 

You could require U.S. labor. You could phase this in. 

But I think the best argument is that when people are forced to compete, they become better. That’s the whole point of debate, is that we’re competing against each other, [and] we’re debating against each other so that the best debater will win. 

So if you have more companies, not only does that lower the price for the U.S. Army Corps of Engineers for these contracts, but it also forces all of these companies to have a better service, to buy better equipment and to do it at a lower price. When people are forced to compete, everybody gets better.

Akina: Do some people argue that we need the reliability of American companies — companies that are located here in our country — in order to be assured that our waterways will be functioning up to par?

Tomasovic: The problem with that argument is that they aren’t reliable right now. Like I said earlier, we had 2,000 barges stopped at the Mississippi River in November. This is a very recent issue. We’re losing millions of dollars, we’re increasing the prices of all of our goods. 

So it would be nice to have a reliable American market. But until the Americans have to compete against other companies, they won’t be reliable. So what that means is that we are relying on an unreliable and a poor industry.

Akina: What do you say to those who argue that we need to protect American jobs, that if we gave our dredging industry away to foreign sources, Americans would lose jobs?

Tomasovic: Well, I think it’s very likely that these companies would actually hire American jobs. 

A good example of this is a lot of these dredging companies in Europe are starting to build offshore wind farms, and they’re using unionized American labor to do so because they don’t want to make enemies with the unions. The unions are very powerful, and they’re actually cooperating with American unions to do their offshore wind farm jobs. So I would imagine that they would do the exact same thing with their dredging jobs as well.

Akina: You know, international tensions are at an all-time high now in the 21st century. We’ve got the conflicts taking place between China and the United States becoming manifest in economic battles as well. 

What do you say to those who argue that we need the Foreign Dredge Act in order to protect our country from foreign influences [and] we need it for the purpose of national defense? And that’s a very significant argument for the Jones Act as well. What is your response?

Tomasovic: Well, that was the original purpose of the Foreign Dredge Act because our dredging equipment was not that sophisticated in 1906. And we wanted to have as many American-made ships as possible just in case we had to utilize them in war. 

The thing is, is that in 2023, these dredging ships are just for dredging. That is the only purpose they serve. They serve no purpose for national security — unless you are dredging a military base or naval base. 

So other than just a few small examples, I would say that this is a commercial issue, not necessarily a national security issue.

Akina: Brad, do you think that the United States will seriously consider getting rid of the Foreign Dredge Act? Is that a politically feasible approach for anyone to take in Congress?

Tomasovic: I think it’s politically feasible. I think it is a winnable argument. 

Now, [U.S.] Sen. Mike Lee has proposed about four bills talking about the Foreign Dredge Act. And I think that as long as these lobbyists hold a lot of their influence — monetary and political influence — over these politicians, and the American people don’t know about the Jones Act, or they don’t know about the Foreign Dredge Act, then it’s never going to be addressed. 

The first thing when you’re trying to solve any political issue is to actually let the public know about it. Because if the public cares about this issue — which they should because it’s increasing the cost of almost every good in their home — then we can actually lead to real change.

Akina: Well, as with the Jones Act, real change may be desirable, but in the real world, it may not be quite so achievable, or certainly not quickly. 

Have you considered modification of the law in some way as a first step forward in trying to appeal to Congress? I see by shaking your head, you are, and I look at our clock and realize our time is running out. So, let me ask you to do something quickly. Sorry to surprise you like this.

Give me an elevator speech, if you would. You’re in an elevator with a member of Congress. You’ve got 30 seconds to a minute in which to get to your destination. You’ve got the attention of this powerful member of Congress. Sell him or her on bringing about change to the Foreign Dredge Act of 1906.

Tomasovic: Because of the Foreign Dredge Act, we’re losing billions of dollars and it’s affecting every American. The purpose of the Foreign Dredge Act is to protect national security. So what we can do as a compromise is waiver the Foreign Dredge Act and allow European or NATO allies to dredge in United States commercial ports. 

We can still keep our military ports safe. We can still protect national security. But we can save billions of dollars and employ more Americans by allowing more competition in the market. 

America is built off of the free market. And if we allow the free market to thrive, it can solve our issues.

Akina: Well done, Brad. Thank you for informing me and our audience today about the Foreign Dredge Act of 1906. But more than that — inspiring us. You’ve accomplished a lot already in your high school career. Congratulations on your National Debate Championship, and I want to wish you well as you launch your college career and head off perhaps to law school or whichever direction you plan to go. 

Good job. Thanks for being with us today.

Tomasovic: All right, thank you. I appreciate it.

Akina: Well, that was Brad Tomasovic from Montana. We’re going to keep our eye on him as he moves forward in his career. 

It’s very encouraging to see young people like that: well-informed about issues that affect our nation. And I want to thank you for supporting that and your viewership of the program today, “Hawaii Together” on ThinkTech Hawaii. 

I’m Keli‘i Akina, president of the Grassroot Institute, and I wish you well. Until next time. Aloha.