The nearly century-old Jones Act, enacted in 1920 to protect American shippers from foreign competitors, is back in the news. To speed delivery of relief supplies to Puerto Ricans devastated by Hurricane Maria, President Trump waived compliance with the Jones Acts requirements for up to ten days, allowing for an extension of the waiver if needed.
The Jones Act (shorthand for the Merchant Marine Act of 1920) requires any cargoes shipped from one U.S. port to another to be carried on vessels built in the United States and flying the American flag. The law plainly was intended to protect the owners of such merchant ships, their officers, and their crews from foreign competition. The law was expected to make Americas shipbuilding industry great again, but the Jones Act-compliant fleet actually has shrunk to only 91 vessels.
Presidents have routinely waived the law after natural disasters along Americas Gulf of Mexico and eastern coastlines. The law even was waived during a particularly harsh winter a few years ago to top up inventories of road salt in New Jersey, which was running short. (Fortunately, the weather moderated before the shortage became a full-blown crisis.) Presidents can grant waivers only temporarily, however.
Gallons of ink were spilled in the days after Hurricane Maria hammered Puerto Rico, claiming that the Jones Act impeded emergency shipments of everything from food, water, and blankets to heavy construction equipment. President Trumps decision to waive the law was taken in direct response to claims that it was strangling relief efforts.
But some commentators think blaming the Jones Act is a serious error: the bottleneck, they say, may not be the availability of too few U.S.-flagged vessels to deliver emergency supplies to Puerto Rican ports, but rather a lack of infrastructure to move supplies inland from the ports. Maria wrecked the islands distribution networks, adding to the long-term failure of the territorys bloated, debt-ridden public sector to build and maintain roads and bridges.
One commentator even suggests that, far from being an impediment to Puerto Ricos recovery, the Jones Act actually encourages a strategically important U.S. merchant shipping industry, going so far as to write that Adam Smith would have supported the law. That opinion comes from the chairman of the American Maritime Partnership, the merchant shippers principal lobbyist, and so should be taken with a grain of salt.
Whether or not the Jones Act was responsible for delaying shipments of aid to Puerto Rico, it has no doubt raised the cost of moving cargoes by sea between U.S. ports ever since 1920. Studies suggest that energy prices for consumers on the east coast are one-third to one-half higher than they would otherwise be. Hawaiians are harmed, too, along with the residents of Guam and other outlying U.S. territories.
And thats just the tip of the iceberg. Because American vessels do not have to compete with vessels flying other nations flags and thus can raise their charges to cargo owners, traffic gets diverted to other, possibly less cost-effective ground transportation modes like highways, railroads, and pipelines. Some of those higher shipping charges are of course passed on down the supply chain and ultimately are paid by the shippers customers and final consumers.
It is somewhat ironic that a president pushing an America First policy agenda saw fit to waive a special-interest law enacted almost 100 years ago to protect U.S. merchant shippers. Trumps action proves the rule that economic nationalism benefits a handful of cronies at the expense of everyone else, including Puerto Ricans.
Rather than depending on benevolent chief executives to waive the Jones Act selectively and temporarily, the law should summarily be repealed, a step that only the U.S. Congress can take.
|William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|
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