A new Competitive Enterprise Institute report details extensive damage inflicted by a 100 year old law called the “Jones Act,” which requires any ship traveling between two U.S. points to be U.S.-manufactured, -owned, -flagged, and –crewed.
The law was aimed at ensuring a strong merchant marine to support both American commerce and preparedness for war and national emergencies, but it has only undermined those vital goals.
“The Jones Act is not an ‘America First’ policy; it puts America Last,” said CEI Senior Fellow Mario Loyola, author of the report. “The Jones Act creates a preference for imports and exports over domestic commerce by penalizing the latter. It has destroyed America’s once-mighty oceangoing shipbuilding industry. And far from helping prepare for times of national emergency, the Jones Act needs to be waived almost every time there is an emergency. The Jones Act makes it prohibitively expensive to ship oil from Texas to East Coast refineries, which are forced to import oil from other countries at a time when U.S. oil producers are desperate for markets.
“And the impact of the Jones Act on places like Puerto Rico and Hawaii is unconscionable,” Loyola added, “almost to the level of a human rights violation. The Jones Act should be an easy case for reform: It is one of the most poorly-designed laws in effect today, inflicting enormous damage to the public interest, while ruining even the very special interest groups that defend it tooth and nail.”
Key drawbacks of the Jones Act:
- It makes crucial shipping routes several times more expensive than rates in the competitive international market, giving an advantage to imports and exports. The law is protectionism for America’s foreign competitors.
- It imposes unfair costs on the people of Alaska, Hawaii, and especially Puerto Rico. The Jones Act is equivalent to a 64.6 percent tariff on domestic seaborne trade, according to one study. Puerto Rico is forced to get virtually all of its oil and natural gas from foreign countries.
- It has failed to protect the American merchant marine from foreign competitors. Less than 100 oceangoing vessels remain in the Jones Act fleet, and, as of 2019, the few shipyards that can build commercial oceangoing vessels are being kept afloat only by defense contracts.
- It has failed to aid national security. The trend in modern naval design is towards transport ships that are small, fast, and flexible, in contrast to the global maritime industry with transport ships that are increasingly slower, bigger, and less maneuverable.
- The Jones Act makes it prohibitively expensive for American oil producers to ship oil to American refineries. This is particularly counter-productive at a time of historically low oil prices, with American companies facing bankruptcy and desperate for markets. Repealing the Jones Act for energy shipments would let America significantly reduce oil imports.
- As a result of the Jones Act, America no longer has an oceangoing commercial shipbuilding industry. American-owned ships should be permitted on America’s coastwise trade regardless of where those ships are made.
View the report, America Last: The Grim Reality of the Jones Act by Mario Loyola