Hill hails lawsuit against Jones Act, Matson intervenes to try and stop it

from Grassroot Institute of Hawaii, April 24, 2025

A recently filed lawsuit challenging the constitutionality of the Jones Act has not surprisingly caught the eye of Hawaii-based shipping giant Matson, which filed a motion on April 11 to intervene in the case.

Matson is seeking to defend its legal protections and profits against shipping competition granted by the 1920 federal law, which is a significant factor in Hawaii’s high cost of living because it requires all vessels transporting goods between U.S. ports to be U.S. built and flagged and mostly owned and crewed by Americans. 

Word of Matson’s motion came out during an April 15 webinar sponsored by the California-based Pacific Legal Foundation, which filed the lawsuit on behalf of Kauai-based Kōloa Rum Co.

Webinar participant Malia Blom Hill, policy director at the Grassroot Institute of Hawaii, said that for Hawaii residents, the most important aspect about the lawsuit — “going through and changing the Jones Act — is to just make it a little easier for people to get by.”

Joshua Thompson, the PLF attorney leading the case, said that for Kōloa Rum, a legal victory would lower its costs and make it more competitive in U.S. and foreign markets.

Thompson said the basis of the lawsuit is the U.S. Constitution’s port preference clause, which prohibits Congress from discriminating against the ports of any state. He said Alaska and Hawaii were territories when the Jones Act was enacted, but now they are states, so the legal landscape has changed. Further, the intent of the law was clearly to favor the contiguous U.S. states over then-territories such as Alaska and Hawaii, which further makes it vulnerable to legal challenge.

“If there is a discriminatory purpose and it has a discriminatory effect, well, then that is a discriminatory law and it would violate the port preference clause,” he said.

Thompson said PLF also is alleging that the Jones Act violates the Constitution’s Fifth Amendment by depriving Kōloa Rum of its right to earn a living without due process of law — because in 1920, he noted, Hawaii was a territory and had “no ability to enter Congress to talk about” the pending law.

With well-funded Matson entering the legal fray, Thompson acknowledged the uphill battle ahead, but emphasized that PLF will “use all of our ammo — … in court, in our lobbying efforts and in our policy efforts — to take aim at a law that is just disastrous to the American people.”

To watch the entire discussion, which also featured economist Patrick McLaughlin and moderator Caleb Brown, click on the video above.

TRANSCRIPT

4-15-25 Pacific Legal Foundation Jones Act webinar

Caleb Brown: All right, good afternoon, everyone. Thanks for joining us today. I’m Caleb Brown. I’m the host and executive producer at the Cato Daily Podcast. I’m serving as moderator for today’s discussion. 

For those of you not familiar with the Pacific Legal Foundation, they’re a national nonprofit law firm that defends Americans’ liberties when threatened by government overreach and abuse. They sue the government when the government violates Americans’ constitutional rights — and they win.

Each year, PLF represents hundreds of Americans free of charge who seek to improve their lives but are instead stymied by the government. They give them their day in court to vindicate their rights and set a lasting precedent to protect everyone else. 

So, today we’re here to talk about the Jones Act, and I think it’s pretty clear that, as the title indicates, it is time to end the Jones Act. It drives up costs, stifles competition, it hurts American consumers and businesses alike, and I will add that I think even the national security claims that are made on behalf of the Jones Act are highly dubious.

Today, we’re going to take a deep dive into the law’s lasting harm and the ongoing and perhaps new wrinkle in the battle to end it. Our panel of experts will break down the Jones Act, economic and legal impact. We’ll talk about why past repeal efforts have failed and what it will take to finally get that hundred-year-old law, a century-old law, off the books. 

We’ll also be highlighting PLF’s new case, Kōloa Rum v. United States, and why the strategic litigation there could be key to ending this particular outdated protectionist scheme.

A few housekeeping matters before we get started. This will be recorded and circulated, so don’t worry if you join us late. 

And I think you will be, perhaps, I’m not 100% on this, but I’m going to go ahead and promise that ahead of time: You’ll be able to share this with folks if you think that they would find it interesting as well. 

If you have a question during our discussion, go ahead and drop that into the Q&A box at the bottom of your screen, and we’ll answer as many audience questions as we have time for today.

So, I am joined by Joshua Thompson. He directs the litigation for PLF’s Equality and Opportunity Program. You can read about more of his work at this website, Pacific Legal Foundation’s website. 

Malia Blom Hill is from the Grassroot Institute in Hawaii. She has a background in law, politics and communications. And Dr. Patrick McLaughlin is a research fellow at the Hoover Institution and a visiting research fellow at the Pacific Legal Foundation. 

So I guess I want to start here … You know, as I mentioned at the outset, Malia, the Jones Act is a hundred years old. And the rationale for having it at the time when this law was passed, what was that rationale?

Malia Blom Hill: When it was passed, the rationale is very much focused on security, national security, and a strong merchant marine, and that’s remained the rationale ever since.

Brown: And so these things have inertia. It got on the books and it stayed on the books, and then it stayed on the books for decades more.

Hill: Exactly. So, you know, the Jones Act is not our first protectionist cabotage maritime law. First one comes in around in 1817 and like the Jones Act, it restricts domestic trade to U.S. flag vessels. 

And what happens is over time, people start to work around it, you know, especially over the Pacific Northwest, sending stuff up to Alaska. Once Alaska’s a territory, they tried to find these ways to, you know, send stuff to Canada, and then ship it to Anchorage from there. 

That’s important because after World War I, Congress starts looking at, “Well, how can we address maritime law?” the older law, which ironically about a hundred years old. [chuckles] “It’s not working for us anymore.”

Well, enter [U.S.] Sen. Wesley Jones, a senator from Washington State, and he is the one who enters in, what we consider the really restrictive part of the Jones Act. Really, he is the author of the act. He introduces it, and it includes these rules that cargo carried by land and water between U.S. ports must do so on U.S. craft. 

And that land and water thing is called the third proviso. And it was specifically done to kind of cut out Alaska, because Alaska’s just a territory at the time. And, you know, they even made some little special movements in the law, special changes so that the Great Lakes isn’t affected, just Alaska.

Now that changes, they had to change it once Alaska became a state, but it kind of gives you an idea Sen. Jones was looking out for Seattle shipping companies. 

So in 1920, they passed the Jones Act. The rationale, as you mentioned, is national security, and it just stays. 

Over time, it’s been updated a few times. It’s updated in 1935 to deal with the fact that you can’t bring a ship back into Jones Act after it’s left that designation. In 1936, they strengthened the Merchant Marine part. In 1940 — They only ever expanded — in 1940 they extended to towing vessels.

Most recently, in 2021, U.S. Customs and Border Protection actually extends it to offshore wind development and installation. So it’s only ever been extended. 

The only thing that you could sort of argue that it goes the other way is that during World War II, FDR creates, by executive order, a waiver system, and Congress makes that official in 1950, but it’s still notoriously difficult to get a waiver.

Brown: All right. So, Patrick, as an economist, as a fellow economist, I should say, you know, the economics of this seem pretty straightforward to me. It seems like we are protecting a very small group of very animated people seeking to not have to deal with certain kinds of competition. And the rest of us, excluding places like Puerto Rico and Hawaii, the rest of us pay for it, but we pay a small amount. So maybe we don’t put a lot of energy into defending or trying to overturn the Jones Act.

Patrick McLaughlin: Yeah, it’s a really classic case to people familiar with the public choice [theory] in economics of large, dispersed costs being borne in exchange for highly concentrated benefits. 

But the way to think of the Jones Act in terms of coming, you know, coming up with some numbers for what the effect of it is, is it works like an internal transportation tax and raising the price of domestic waterborne transport by strictly forbidding cheaper foreign competition. So this drives up shipping costs between U.S. ports, it distorts trade flows, and then ultimately, that leads to, as you say, these dispersed effects of higher consumer prices. 

But if you want to get into some more details, second-order effects, you see reduced economic output as a result. And just this all stems from the inefficiencies created by it.

So let me just highlight a few numbers. You know, when I first started digging into the economic effects of the Jones Act, I was hoping to find some studies that gave you just a clear cut “The Jones Act reduces GDP growth by X%,” or “The total effect is Y,” but it’s messier than that. But what we can do is piece together some bits of evidence here and there to get sort of a picture of the economic effect of the Jones Act. 

So first, let’s talk about the higher shipping costs and the effect of that on consumer prices. So, Jones Act-compliant vessels — they must be made in America, crewed by an American crew, U.S. flagged, and U.S. owned. Those ships are much costlier to build, much [crosstalk]

Brown: Well, let’s go into that detail a little bit more. You said U.S. flagged, U.S. built, and U.S. owned.

McLaughlin: And crewed, and U.S. crewed.

Brown: And crewed by U.S. crew.

McLaughlin: Right.

Brown: That’s a lot of caveats, and it seems like removing even one or two of those caveats would go some distance toward freeing up a great deal of exchange across borders — or across waters, I should say.

McLaughlin: That’s a good point. You know, the conversation doesn’t have to be Jones Act or no Jones Act, right? We could have some version in between where we relax some of these conditions. And, you know, other countries have their own cabotage laws like this, but they aren’t necessarily as stringent in all these categories. So that should be part of the conversation, hopefully, in policymaker debate if we ever get to that point.

But, you know, the effect of having these conditions, all four of these conditions that we do have, is it’s 2.7 to three times as costly to operate one of these versus a foreign-flagged vessel. And then building one of these U.S.-built ships, is four to five times as costly as building one, say, in South Korea or Japan or China. So that’s one source of all these distortions.

Put some more specific numbers on it: There was a study from the Congressional Research Service that found that shipping crude oil from Texas to the East Coast costs a lot more because of these laws, because of these restrictions. The number was about $5 to $6 per barrel, which at the time was 6% to 8% increase in the cost of oil. 

And you can imagine the secondary effects of that, right? Oil, obviously, an input into gasoline in just about everything. So there’s going to be all sorts of price distortion, price increases that are secondary and third-order effects related to that.

And then let me just highlight one other study before we pass it on. So I think this is particularly interesting. 

You can look at the islands that are directly affected, Hawaii, Puerto Rico, or Alaska, if you want to think of that as an island in a way, and compare shipping to those islands to shipping to an island next door. And so the Federal Reserve Bank of New York did this. They looked at shipping from the U.S. mainland to Puerto Rico, which is covered by the Jones Act, because it’s U.S. territory, compared that to shipping to the Dominican Republic. And they found that a standard 20-foot container of goods going to Puerto Rico costs about $3,063 versus $1,503 per container for going to the Dominican Republic. In other words, it’s twice as costly to ship to Puerto Rico because of the Jones Act. 

So I’ll pause there.

Brown: Yeah, so there are other related issues here that I want to get into. But first, Malia, I’ve seen footage, and you can tell me how realistic this is of cows being loaded onto airplanes. [laughter]

Hill: Yeah, that’s the most famous thing to say about Hawaii and the Jones Act, is that, it’s true, Hawaii ranchers have had to fly their cattle planes because of how costly it is to ship it by ship.

Brown: Now, of course, that seems bonkers to me. And, you know, Hawaii is — and Puerto Rico is the same — that, you know, the land is fairly limited in those places, so there is a lot of productivity that is simply not available to Hawaii or Puerto Rico. A lot has to be imported.

Hill: Yeah, it’s true. Actually, about 40% of everything that comes into Hawaii does so in Jones Act ships, all imports. And if we could get our fuel and petroleum products from the U.S., it would be more than double that. We can’t, because there aren’t enough Jones Act tankers to do it. 

And Hawaii’s basically just a duopoly. There are only two major ship cargo carriers that can give us cargo service from the mainland, and they only come from four different ports. 

So, Hawaii is in a really difficult position when it comes to the effects of the Jones Act.

Brown: So in terms of the specific effects to Hawaii, I am imagining, as a father of three, that I might someday like to take my children to Hawaii on vacation, and I’m wondering if this is a research question that the Grassroots Institute has dug into, because I would like to know how much the Jones Act raises the price of my vacation with my family to Hawaii.

Hill: Well, I can tell you that we did research how much the Jones Act costs Hawaii residents. We put out a study in 2020 about that. We found that the median annual cost of the Hawaii economy is $1.2 billion. It annually costs every resident about $645. And its effect on prices annually is to make prices about $916 million higher. It costs us 9,100 jobs, about $404 million in wages. And just basically everything costs more because that’s how it works, everything comes in, everything costs more. You know, it affects electricity, it affects your gas, it affects your car. 

We calculated that it adds about a dollar to the household costs a day, 40 cents to the food bill a day, 14 cents to the electricity bills every day. So, an average Hawaii family will spend about $5 a day to support the Jones Act.

Brown: Incredible. 

Patrick, back to the economics of this, when foreign crude flagged other kinds of vessels come to U.S. ports to drop things off, help me understand, you know, what the cost that it imposes on them, because I can imagine, minus, absent a Jones Act, that a foreign vessel, however defined, would like to pick something up in Seattle while dropping things off in Seattle. And then maybe go down the coast and drop things off in San Francisco and pick things up in San Francisco. And then maybe go down the coast further and drop some things off in Los Angeles and pick some things up in Los Angeles, and then head on back.

That seems like an economically efficient way, perhaps, to go about doing certain shipping. How available is that kind of option to those ships?

McLaughlin: It’s like we have this giant conveyor belt running up and down the East Coast and the West Coast that we’re not putting stuff on. That’s what it amounts to. These ships are there.

Brown: Yeah, so it’s a good way of thinking about it.

McLaughlin: Right. So the ship comes in across the North Atlantic and goes down the coast, dropping stuff off, but we can’t put stuff on there if it’s going to be going down from, say, New York down to Jacksonville, or something like the example you gave is exactly right. So it’s just a lost opportunity here. 

This is what, you know, we economists have to produce a model to say what the actual cost is. We don’t get to observe how much cheaper goods would be or how many goods would be moved up and down the East Coast if we were to allow the shippers to put their goods onto the foreign-flag vessels going up and down. But it’s a huge lost opportunity, missed opportunity. The opportunity cost is staggering.

Brown: So, Malia, if you don’t mind, before we started the program, you said that this portion of our discussion would be pretty short. How have lawmakers responded in trying to perhaps get this law, just get rid of it?

Hill: Well, there have been no shortage of bills introduced in Congress to reform or repeal the Jones Act. There were four in the House and Senate between ’95 and 2000. 

In 2000, Sen. John McCain was a huge proponent of reforming the Jones Act. After the BP oil spill in 2010, he introduced a repeal bill, and that was a big sort of to-do, and then it went nowhere. And he just kept introducing them, repeal or reform bills. 

Rep. Justin Amash introduced a repeal bill. Sen. Mike Lee has introduced full repeal bills. Hawaii Congressman Ed Case introduces reform bills very, very regularly. 

It’s a sort of bipartisan effort to pass Jones Act reform, either full repeal or some reform. 

And it is also a bipartisan effort to oppose Jones Act reform, largely because the maritime unions and their lobby are extremely strong, and the national security argument in favor of keeping the Jones Act has been very influential. 

And sort of a side thing is that part of the Jones Act deals with the abilities of seamen to sue, the rights of seamen in tort. And so you sometimes get a little trial lawyer opposition, too, just because no one wants anyone to mess with any part of the Jones Act.

Brown: Oh, so trial lawyers viewing themselves as having a special rent that they can extract from keeping this law on the books.

Blom Hill: Yeah. There’s a lot of people that benefit from it, and they created a very powerful lobby to keep the law in place.

Brown: So, Joshua, thank you for your patience as we dispensed with the economic arguments in favor of the Jones Act. As a legal matter, have there been lawsuits before that have attempted to attack — you know, I tend to view the ability to trade freely as a fundamental freedom, you know, as fundamental as property rights or my right to self-medicate. So when it comes to the Jones Act, what’s been tried so far litigation-wise?

Joshua Thompson: Yeah, there have been some legal challenges to the Jones Act, Caleb. And most recently, just a decade ago, out of Hawaii, once again, there was a number of consumers who were lamenting the costs of goods that they wished to purchase in Hawaii, brought suit challenging the constitutionality of the Jones Act under the commerce clause. Now, the commerce clause is, you know, a famous or infamous clause of the Constitution that grants the federal government power to regulate commerce.

Now, we may, as good libertarians, object to FDR’s expansion of the commerce clause, but it wouldn’t surprise you to think that one thing that probably was contemplated by the commerce clause was regulation of economics between different states. So the challenge under the commerce clause to the Jones Act didn’t go very far because, as bad a policy as we’ve talked about today, it’s probably not a violation of the commerce clause.

Brown: Right. So the commerce clause, of course, in its barest conception, has some legitimacy. We don’t want the governor of Kentucky to tell Hoosiers that they can’t bring their products into Kentucky. We delegate that to the federal government to make it regular, to regulate in the sense that we want it to be regular and the Jones Act does anything but that when it comes to freewheeling trade. So, the case that you are handling, describe to me why this is a substantially different approach than what we’ve seen in the past?

Thompson: Yeah, so as any good public interest lawyer, we look around at those laws that are hamstringing Americans and that are affecting a large swath of individuals. And protectionist laws are something that is within our ambit and within our crosshairs regularly. So the Jones Act has sort of been a bugaboo of public interest lawyers for a while, but we lacked, frankly, a cogent legal theory that could go after it. 

I’m going to give credit to a Yale law student who in 2021, I want to say, published an article saying that the Jones Act is unconstitutional under the port preference clause.

And if you don’t know what the port preference clause is — I didn’t either — and it’s one of the few … It’s been very little litigated in the 200 years since the adoption of the Constitution. But much like the commerce clause that we were talking about, it is in Article 1, Section 9 of the Constitution, it states that no state shall be discriminated against … the Congress cannot pass any law that discriminates against the ports of any state. 

So what Mr. [Sam] Heavenrich, this Yale law student wrote, is he argues, I think quite persuasively, to my mind at least, the Jones Act when it was adopted … Now, Malia talked about sort of the avowed purpose of the Jones Act was this safety concern in national security in the wake of World War I, but what she also mentioned is Wesley Jones, the senior [U.S.] senator from Washington at the time, was uniquely interested and had spent a career up until that point, 20 years through the House and Senate, to try to prop up the Washington state shipping industry.

Now, he did that expressly at the time, at the expense of Hawaii. And Hawaii businessmen and Alaska businessmen came to testify in Congress, “No, don’t pass this law.” And he’s like, “No, this is a reason to pass the law so that we don’t have to outsource our shipping industry to these states.” 

So the argument is that there was a discriminatory purpose behind the law, even if it facially doesn’t discriminate against any state’s ports. It was certainly the intent of the drafter of the law to prop up the contiguous states’ ports over those of Alaska and Hawaii.

At the time, of course, Alaska and Hawaii were not states, so it would not have violated the port preference clause. But fast forward to 1959, Alaska and Hawaii become states,the purpose is still there, and then what is the legal framework for analyzing when sort of facially neutral legislation is in fact discriminatory? 

You look at purpose and you look at effect, and there’s a lot of laws across a lot of different constitutional provisions that we don’t take the government’s word for what the purpose is. We actually look behind the curtain, and if there is a discriminatory purpose and it has a discriminatory effect, well, then that is a discriminatory law and it would violate the port preference clause.

We’ve already heard from Malia and Patrick how this law uniquely targets, in effect, Hawaii and Alaska. And if you couple that with the purpose in enacting it, well then you have purpose and effect, and that would violate the port preference clause.

Brown: All right. So, with this litigation, presumably you believe that this will find sympathetic ears in courts. And can you tell me why you expect that?

Thompson: Well, I think we are … Look, we take big swings here at PLF. We’re not naïve to think that all of our cases are going to win at the outset. We have a coalition here of policy individuals, and we’re talking to the public with webinars today to get out the story of the Jones Act. 

Now we think we have a legal theory that ought to win. We think that, you know, we take cases, we take these big swings and we appeal them to the courts of appeals, and, ultimately, the [U.S.] Supreme Court.

You know, the Supreme Court in recent years has an appetite for breathing life into once dormant provisions of the Constitution. Just recently, the non-delegation doctrine, the separation of powers. And I think this clause, which is expressly written into the Constitution, it is a law that burdens millions of Hawaiians and Alaskans to the tunes of billions of dollars. We think that the time is right to see the port preference clause have the teeth that it once did. It was designed by our framers to prevent precisely this type of protectionist legislation, and that’s exactly what the Jones Act is.

As Malia said, there are only two shippers that are Jones Act-compliant in Hawaii, and lo and behold, just yesterday, one of them intervened in our lawsuit. I wonder why. They’re certainly to protect their interests. 

And so I would just say that, yeah, we are going to use all of our ammo both in court, in our lobbying efforts, and in our policy efforts to take aim at a law that is just disastrous to the American people.

Brown: So, tell me about the good people of the Kōloa Rum.

Thompson: Yeah. Kōloa Rum, and let’s use this as an opportunity for you to all go out and buy Kōloa Rum. Despite the Jones Act restrictions, it is in most of your liquor stores, although the Jones Act has certainly raised the cost to Kōloa Rum to do business. They have to import a lot of their goods, including glass that they put their rum into. Then they’re doubly hit when they have to ship it back to the United States. And both of those are raising the cost, but that is a delicious product.

It’s a rum company that was started in 2009 by Bob Gunter and a small group of investors. They are on the island of Kauai. And they have sparked a great and growing business trying to bottle the aloha spirit into their rums. And anybody that believes the Jones Act is problematic, I urge you to go and support this company. 

They’re standing up for not just their constitutional rights, but the constitutional rights of all Hawaiians and frankly, all Americans who believe in a free market and stand against protectionist legislation.

Brown: Thank you for that. I don’t know if I neglected to mention the work of Cato Institute’s Colin Grabow on this issue, but he’s the guy. If you want to get the economic arguments, he is somebody definitely to follow. 

So, you know, this is one of those cases where you have a business just trying to do the business and having the government essentially tell them, “No, it’s gonna cost you a lot. We’re trying to protect a small group of shipbuilders somewhere far away,” and that is really none of this business’s concern. They want to provide products to people and yet the government continues to intervene.

So we have a few questions that we can get to. And to my panelists, I’ll say, if you want to take a stab at any of these, please go right ahead. Thank you all for joining us and listening while we had our conversation. Now it’s your turn to get into it. 

Here’s a question: “Can we let Hawaii do this as an experiment and see if it works for them before impacting the rest of America?” 

And Malia, if you wouldn’t mind starting with that. And Patrick, I’m sure you would love to have this be able to be presented as a natural experiment for the purposes of generating research. Malia, go ahead.

Hill: Well, you know, I mean, we’re happy to volunteer as tribute, and that is actually kind of what a representative case does with these reform bills. But it won’t have the same effect because the whole system is set up in such a way that, you know, you need reform across the country for it to really, really make a big difference in Hawaii specifically.

Brown: And if it were some sort of time-limited experiment, the desire for people who might want to serve Hawaii with ship capacity, it would be relatively muted, I assume.

Hill: Yes, exactly. Because, you know, it has to be worth the while of all the shipping companies involved to add Hawaii to their, you know, places that they would stop at to like add it to their roots to decide what to bring. 

So, you know, we are a small state and we know that, and so we are very much vulnerable to the economic changes that happen in the U.S. as a whole.

Brown: Patrick, any thoughts to add to that?

McLaughlin: That’s a good point about — it’s a scale effect, right? And if Hawaii is the only change for this natural experiment, you’re not gonna get to see the full-scale effect that you’d want to see. However, it’s a good starting point. I mean, maybe I get a paper out of it.

Brown: [laughs] So follow-on question — related question here, rather: “Repealing the Jones Act would likely lead to significant job loss, reduced maritime visibility, potential national security risks and disruption to the current state of shipping. How would you combat these risks?”

Patrick, if you don’t mind.

McLaughlin: I’ll take some of that. I mean, I think some of those risks are probably overblown. I don’t really think that the Jones Act has been very effective in creating a large shipbuilding capacity in the U.S., first off. 

The number of facilities we have that can build these large vessels is a fraction, like less than a percent, I think, of what you have over in China. So it’s not like we’ve been getting some great maritime or shipbuilding capacity because of the Jones Act. I think, at some point, you just have to admit the failure of the Jones Act to do that for us.

And then, how many vessels have been built at these limited facilities we have over recent years? I think there was one built last year and one built the year before. So, again, we’re not getting a whole lot from it. 

So I’m not sure the risk is there when it comes to shipbuilding capacity and whatever that adds to our military capabilities. 

And then as far as jobs go, you know, I mentioned earlier there I wanted to find some concrete number on the overall cost of the Jones Act, but there’s a range of estimates. The low end is something like $10 [billion], maybe $20 billion per year.

All right, and how many jobs are we protecting for that loss? Maybe a couple a thousand, let’s say 2,000. So if it’s $5 billion, let’s pick a number, $5 billion per year as the cost, and we’re protecting 2,000 jobs, I think, that works out to $2.5 million per job, per year. So, OK, maybe we’re protecting some jobs but it’s super, super costly. There’s better ways to have a few jobs protected, if you will.

Brown: And Malia, in terms of the savings to the Hawaiian people if the Jones Act were to go away, presumably, that means more tourism, more employment and a number of positive effects that you could point to fairly quickly.

Hill: Yeah. It’s just at all levels. When we did our study of the effects, it affected things that you wouldn’t believe. The biggest effect was actually on things like just regular business and personnel. Things like the cost of cars. So I think that for Hawaii, it’s a trickle-down. It just affects every part of our economy.

Brown: For you, Joshua: “Does your legal theory apply as strongly to businesses in U.S. territories like Puerto Rico or Guam as it does to states like Hawaii and Alaska?”

Thompson: Yeah. The port preference clause only applies to U.S. states. It prohibits discrimination against U.S. states. So though I certainly recognize and some of the more egregious harms that the Jones Act perpetuates, is against Puerto Rico. Not to leave Hawaii out of the mix, but when Puerto Rico goes through … I think, recently, there was a hurricane that really devastated a lot of the infrastructure in Puerto Rico, and they couldn’t get the necessary supplies to repair the island because of Jones Act restrictions.

That said, the theory that we’re proposing here would only target Jones Act restrictions against U.S. states because that is the provision of the Constitution, the text of it. However, if we were successful, and if we are successful, I would hope that Congress would take that opportunity to also provide meaningful reform to Puerto Rico.

Brown: And another question for you Joshua: “What is the timeframe for the litigation that you’ve discussed with us? Where is this now?”

Thompson: So we filed this complaint about two months ago. We amended our complaint to add an additional claim under the due process clause of the Fifth Amendment. The idea there is, you know, this might get a little into the weeds of public interest law, but one of the things that we have, another sort of bugaboo that we’ve been going after is, you know, this expansion of federal power and the relegation of substantive due process after the, it’s called, Carolene Products, Footnote Four, a case from 1937.

And one of the things that that decision says is that if an entity has little access to the political process, and if there are changed circumstances, that may be a scenario where a substantive due process would come into play.

I think that’s exemplary here, where you have an act that has completely failed in its purpose to prop up the maritime industry of America. And since 1920, the circumstances have certainly changed. And at that time, Hawaii had no ability to enter Congress to talk about it. So we added a substantive due process claim recently.

As I mentioned, Matson Shipping has intervened in the lawsuit. It’s one of the two major shipping companies in Hawaii. That happened just yesterday. Next month, the federal government will provide its response. They will either move to dismiss the case, which, I think, is likely, or they will answer, and then we’re off to the races. The courts can do what they do. It will go to discovery, or it will go to appeal. It will go to the Supreme Court or it will be at the trial court.

I would anticipate this case lasts somewhere from three to five years before we get a final resolution.

Brown: All right. And one last question in this thread here. You know, I know a little bit about public interest litigation, being married to a lady who’s worked at multiple firms such as the Pacific Legal Foundation: “What are the implications constitutionally beyond this case?”
You know, I know that when you guys take a case that you’re doing it to establish a principle. And in this case, is there a principle beyond just winning this case?

Thompson: Yeah, I think there’s two answers to that, Caleb. 

On the one hand, the port preference clause, it doesn’t have a lot of reach. So we are using that arrow in our quiver to go after the Jones Act directly. We think this is such bad legislation. It harms Americans so uniquely, and Hawaiians even more than uniquely than that, that we are going into our mysterious bucket of tricks to find this sort of antiquated provision of the Constitution that we want to breathe new life into, and we want the court to recognize its force, and we want the Constitution to be upheld as it was originally written.

Now, I don’t think that our port preference clause challenge, if successful, will sort of have major effects down the road with other legislation. I think the Jones Act is unique in that respect. However, our substantive due process claim that we have also added recently, I think that is more of a larger strategy to have, you know, legislation that has failed in its purpose reexamined under the light of whether it violates individuals’ constitutional rights.

Brown: Related, Patrick: “Do other countries have laws like this on the books, other schemes that sort of nakedly protectionist as this? Is there an international comparative policy that can be applied here?”

McLaughlin: Yeah, other nations do have cabotage laws, protectionist policies like this, although they’re not all as stringent in the four different categories we mentioned earlier. 

But I think an easy one to think of for those, you know, who are located in the U.S., we have the same sorts of similar policies for passenger air travel. There are not foreign carriers flying you from New York to LA. It has to be a domestic company, a U.S. company, doing that. And that’s a similar kind of law. But the airlines can buy airplanes from foreign producers.

Delta has plenty of Airbus planes in its fleet. It’s not all Boeing. And that is one thing you can just think about here in case of the Jones Act. If we at least relax part of it to allow the purchase of vessels that are produced in, say, Japan or South Korea, to be Jones Act-compliant, that would lower the cost tremendously just like you can see that effect in passenger air travel.

Brown: Let me ask this question; I’m not sure if I understand it, but maybe one of you does: “Please discuss indemnification for those that are sailing recent-built U.S.-flagged vessels. Why do they face higher operating and capital costs compared to foreign-flag ships under the Jones Act?”

[silence]

No? No thoughts on that? We can move right on. 

All right. Here’s a question, and pretty much anybody can jump on this: “The Trump administration has pushed for U.S. shipbuilding. It reminds me of a statement from President Trump, ‘If you don’t have steel, if you don’t make steel, you don’t have a country.’ That might easily apply to shipbuilding, at least for this president. How might that push from the administration, specifically, affect the lawsuit, if at all?”

Thompson: Yeah, it’s interesting. I did see that executive order recently on shipbuilding. I think it doesn’t directly speak to the Jones Act. And I’m hopeful that if a Jones Act repeal would reach President Trump’s desk, that he would sign it because he recognizes that it really hurts American businesses. It hurts Hawaiians and Alaskans. It hurts businesses like Kōloa Rum. These are good American businesses. 

Now, I also think it hurts American shipbuilding, and maybe Patrick can speak to that, but by driving up the costs that it takes to … Just raw materials for American ships, I can imagine why eliminating the Jones Act would be a boon for the shipbuilding industry in America.

Brown: Malia, this is a political question, so I’m going to direct it to you here. “Why would a landlocked senator care about keeping this act intact?”

Hill: You know, the political disputes about the Jones Act are funny because there’s also landlocked senators who are really passionate about repealing it. It has a lot to do with — well, it has a little to do with — who contributes to your campaign, [chuckles] which might be why Hawaii and Alaska have both had either currently or in the past Jones Act supporters in Congress.

And, you know, in Hawaii we’re split. We have Jones Act supporters. We have a Jones Act opponent. You know, when it comes down to it, you know, if you have a strong national security issue, you know, sometimes that’s what does it one way or the other. Sometimes it’s just because you’d have no evidence that it affects you. And so, you know, why stick your neck out on the Jones Act if there’s nothing that says it’s costing the people of your state X million or billion dollars?

Brown: Joshua, this is another question here from a viewer: “Your lawsuit says, ‘For an international order from Hawaii to Sydney, Kōloa Rum must first ship its goods to Los Angeles.’ Can you explain that?”

Thompson: Yes. So there are …  Well, take a step back. There is Jones Act-compliant ship … When Kōloa Rum sought to prospect for the cost of shipping from Hawaii to Sydney, the most cost-effective way to do that was to ship it from Hawaii first to Los Angeles. Now, I’ve come to understand, and this I’m getting a little bit in the weeds of Jones Act policy that I don’t fully understand, that there is a method for a ship that is foreign flagged that started in Los Angeles and then stops in Hawaii can, in theory, make it to Sydney, but because there is so little demand from Hawaii to Sydney that doesn’t happen.

Now, if, of course, there were no Jones Act, there would be a lot more ships that would be free to stop in Hawaii, and that doesn’t happen. But because there isn’t, although technically possible, what Kōloa has to do is to ship it through Los Angeles in order to get it to Sydney. 

Now, when it did so, it noticed that the cost of that entire shipping was, I don’t know, make up a number, $5,000. Four thousand of those dollars were from Hawaii to Los Angeles, and 1,000 of those dollars were from Los Angeles to Sydney. So the entire bulk of that cost of shipping was from Hawaii to Los Angeles, not the much, much, much, much further leg from Los Angeles to Sydney.

Brown: Patrick, this is not a question from one of our viewers. It’s a question from me: Cato’s Colin Grabow, as I mentioned, has worked extensively on this issue, and one of the points that he makes is the impact of the Jones Act on commercial trucking within the United States, or rail shipping within the United States, and traffic for computers in the United States. Can you speak to any of those secondary effects?

McLaughlin: You know, it’s all so interconnected these days, right? Multimodal is the keyword for transportation. And so you got a container coming in from a ship that gets offloaded from the ship into a rail yard right there at the port. And then it gets shipped farther along, and then that connects to wherever it gets offloaded from the train. And that goes on to a truck, and it goes the final few miles to a house. 

So, to the degree that the Jones Act is diminishing the total volume of goods being shipped, you have secondary and third-order effects there on the other modes of transportation.

Now, to some degree, there might be some substitution as well, and that’s relevant here, right? You’ve got, instead of people, say, in the timber industry shipping their lumber from the Pacific Northwest by boat to wherever else they’re going or by ship, they instead have to use rail. OK, so, if you get rid of the Jones Act, there might be some substitution away from rail in that sense. 

So what’s the net effect there? I don’t know. I think you should ask Colin Grabow that question, but you can definitely see there’s interaction between these different modes of transportation.

Brown: Malia, with respect to manufacturing and agriculture in Hawaii specifically, it seems like, you know, if the famous video is representative at all of cows being loaded onto airplanes, if that is a reasonable or regular occurrence, what have been the effects on those industries that we can point to?

Hill: Well, you know, I’m not an economist, but it is pretty obvious that it doesn’t help. You know, for a number of reasons, agriculture has struggled in Hawaii and, obviously, industry as well, but when you take those other factors and then add the additional cost of export and import, it becomes very difficult. I have a lot of stories about businesses that rely very heavily on export and import in Hawaii, which, you know, things change, shipping costs triple, now they’re out of business. And it happens over and over again.

Brown: All right. Some closing thoughts from any of you? Joshua, on your lawsuit, you said three to five years. What are the questions that you hope the court addresses most directly?

Thompson: Yeah. I want the court to wrestle with the core of our complaints. What does the port preference clause mean? 

Does it mean that Congress can enact legislation that is intended to, at least in part, discriminate against the ports of a state, when, in fact, its legislation then has the effect of doing precisely that? And Hawaiians are suffering under the Jones Act, and our client, Kōloa Rum, is an American business that just wants to compete fairly in the marketplace. It doesn’t want to be undercut by foreign rums. It wants the ability to, you know, if you want to get a rum from the Dominican Republic, it’s going to cost them a lot less to ship it to America than an American business is based in Hawaii. And I think that should give all Americans pause that this business is being treated differently because it is located in Hawaii. 

We want the court to wrestle really with what the port preference clause means. And we’re hopeful that this lawsuit sparks a lot of conversations like we’re having today, and that people really examine this hundred-year-old protectionist legislation, and we get some real reform for all Americans.

Brown: Malia, you are in Hawaii as we are speaking right now, and we scheduled this so that more Hawaiians could follow this discussion. What’s the blue-sky vision? If the Jones Act goes away, what immediately becomes possible? What are some of the possibilities that open up for Hawaiian businesses, for Hawaiian consumers, for people like me who just want to take my family on a slightly less expensive vacation?

Hill: Well, you know, one of our biggest issues in Hawaii is the cost of living. We have the highest cost of living in the country. You know, yes, it’s always going to be a little harder because we’re out in the islands, but the Jones Act just makes everything more expensive. Everything, housing, gas, just every bit of your life. And, you know, we think that the most important thing about, you know, this lawsuit going through and changing the Jones Act is to just make it a little easier for people to get by, or take a vacation [laughs] as it may be.

Brown: All right. I think we’re gonna wrap up there. I want to thank all of you watching for joining us today. If we didn’t get to your question or you have another question after we conclude, you can send that to events@pacificlegal.org, and they’ll pass it on to the relevant people. Please thank our esteemed panelists for their remarks, Joshua Thompson, Malia Blom Hill, and Dr. Patrick McLaughlin. 

I’m Caleb Brown of the Cato Institute, and thank you all for joining us.