Hawaii residents renew fight for free market in shipping

ALOHA: Jones Act supporters say the law protects U.S. carriers for wartime need. Hawaii residents say they pay the price in higher shipping costs.

by Malia Zimmerman WatchDog.org May 27, 2013

HONOLULU — High-profile Hawaii economists, professors and businessmen last week called on Congress to repeal the Jones Act, the 1920s federal law requiring that cargo shipped within the U.S. be moved only by American-made, American-manned and American-owned vessels.

They said the Jones Act — more formally called the Merchant Marine Act of 1920 — substantially increases the cost of goods imported into Hawaii, other island territories and Alaska by limiting shipping competition.

The Jones Act has supporters, of course, including union leaders, businesses that benefit from shipping restrictions, the U.S. Navy and powerful political figures in both major political parties. They say the law is important to national security, a strong economy and job creation.

Supporters and opponents are not divided neatly along party lines. Democrats traditionally back the law in step with union workers in the shipping industry. But even prominent conservatives — President Ronald Reagan was a fan — see the Jones Act as essential to national security by supporting American shippers in peacetime so that they’re ready in time of war.

“The Jones Act provides a layer of protection to this nation that many do not recognize and also provides capability to assist in times of national emergency,” Joseph Pyne of the American Maritime Partnership told members of the House Subcommittee on Coast Guard and Maritime Transportation last week. “Please help us keep the confidence we need to continue investing in America by telling the world America’s security is not for sale and the Jones Act will remain the foundation of our U.S. fleet.”

Hawaii’s most powerful politicians typically back the Jones Act. Those who don’t can expect industry-financed campaign opponents who do.

In 2010, when then City Council Member Charles Djou, Senate President Colleen Hanabusa and former Congressman Ed Case ran against each other for a vacant congressional seat, both Djou and Case came out against the Jones Act, while Hanabusa was in support.

Matson, the shipping line that dominates the movement of goods to and from Hawaii, backed Hanabusa. While Republican Charles Djou beat two Democrats who ran in the race, Hanabusa and Case, that victory was fleeting. Hanabusa returned during the next election 10 months later to beat Djou in the General Election, in part with the help of Jones Act companies and unions.

“This has nothing to do with national defense as it might have back in the 1930s,” said Honolulu Attorney John Carroll, who filed a 2012 federal class-action suit alleging the act violates the Commerce Clause of the Constitution and forces monopoly prices on Hawaii consumers. “It’s about paying off unions and protecting vested interests of the shipping monopolies that have a stranglehold on Hawaii.”

Carroll’s lawsuit was dismissed on standing, but in a sign of growing anti-Jones Act enthusiasm, he filed an appeal Thursday, May 23.

Ken Schoolland, a Hawaii Pacific University economics professor, said if the Jones Act is really for national security, then the cost should be paid by the nation as a whole. He said the act unfairly burdens Hawaiians and Alaskans with high food and other consumer costs, and cripples every business in the islands that could benefit from lower shipping costs with the world.

“When advocating restrictions on shipping, the protected industry typically showcases their jobs shielded from competition without comparing the greater number of jobs lost in other sectors of the economy that are negatively impacted by such preferential laws,” Schoolland said.

The economist Henry George “had it right,” Schoolland said:  ”protectionism teaches us to do to ourselves in time of peace what enemies try to do to us in time of war.”

Noting that May was the 25th anniversary of the attack on the USS Stark that killed 37 American sailors, Schoolland said the Stark was in the Persian Gulf for the purpose of “guaranteeing freedom of the seas’” to international shipping.

“Too often special-interest groups, in their haste to eliminate competitors, fail to remember that this nation’s interests throughout the Cold War and beyond have been in support of free markets around the world,” Schoolland said. “If only the U.S. Congress would practice in our own backyard what our leaders have been preaching to the world over the past century.”