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The Jones Act: The Protectionist Relic Strangling the US Economy

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After Hurricane Ian devastated large swaths of the island, Puerto Rico faces a colossal task: rebuilding its critical infrastructure and restoring power to the hundreds of thousands that lost it in the storm. Its efforts to address the damage will face a host of new challenges this year, including higher prices and global supply chain troubles. But one difficulty among many will be bitterly familiar to island leaders: the Jones Act.

The Jones Act, formally known as the Merchant Marine Act of 1920, is an 100+ year old federal law that requires all goods shipped between two ports in the United States to be transported on vessels that are built and registered in America and owned and operated by a crew of mostly Americans. Enacted in the wake of US naval losses in World War I, the law aimed to foster a domestic shipbuilding industry which, shielded from global competition, could serve as a US “merchant marine” in times of need. Contrary to the Jones Act’s aims, however, such a robust US industry never materialized, and the number of commercial ships built in the United States has fallen steadily as production has moved to countries like China, South Korea, and Japan. The result is a shrinking fleet of aging, inefficient, and expensive ships on which all domestic maritime trade in the United States relies. The states that are able to have moved to cheaper alternatives, mainly relying on the US’s comprehensive rail and highway infrastructure to supplement maritime shipping. The states and territories that can’t be reached by trains or trucks, however, like Puerto Rico, Hawaii, and Guam, have no choice but to either pay the higher price for American shipping or import their goods from foreign countries, which often come with their own tariffs and duties.

The consequences of the Jones Act are especially pronounced during disasters, which is why the US government has granted Puerto Rico a temporary waiver from the Jones Act to help the island rebuild, as it did after Hurricanes Maria and Irma in 2017. Similar waivers were granted for other states following natural disasters in  2005, 2012, and 2017. But this stopgap solution does not go far enough. In Puerto Rico, cars are 40 percent more expensive year-round than on the mainland as a result of higher shipping costs incurred by the Jones Act. In Hawaii, a 2020 study found that residents pay $248 more for food annually than they would without the Jones Act. These are by no means insignificant costs to bear.

So what’s behind these high prices? When US firms don’t have to compete with shipbuilders overseas to secure American business, they’re free to inflate prices well beyond the global market rate. A 2019 study found that ships built in the United States can sell for anywhere from two to five times the price of comparable foreign-built ships. As a result of this complacency, the fleet of US owned and operated ships is shrinking rapidly, putting further pressure on already-high prices. As ships are retired and new shipbuilding slows, the number of seafaring Jones Act-compliant ships has fallen from more than 2,300 in 1946 to just 99 today. For context, Japan produces twice that many new ships every year

Of these 99 ships, not a single one is equipped to carry liquefied natural gas (LNG) without the use of expensive and impractical cryogenic containers. This means that Puerto Rico, along with continental regions like Alaska and New England that lack adequate pipeline infrastructure, are driven to import LNG and other fuels from overseas, when in many cases these commodities are available in abundance just a few states away. As a result, the gas used to heat homes in New England is imported at a price three times that charged by sellers on the US Gulf Coast, resulting in some of the highest heating and energy bills in the nation. This is not only an economic concern, but a security issue, as states like Hawaii are increasingly looking to Russia to meet their energy needs.

Given all of this, why is this law still around? Mainly, it’s thanks to the efforts of a well-funded network of shipping labor unions and powerful lobbyists, who argue that exposing the US shipping industry to competition would cost American jobs. Left mostly unacknowledged by US lawmakers is the fact that the economic relief experienced across the country from repealing the Jones act would far outweigh the costs of any job losses.

By any measure, the Jones Act has been a complete failure. None of its goals for shipping, competition, or security have been achieved, and the law continues to burden the entire US economy, especially outlying states and territories that have long suffered as a part of the nation’s colonial legacy. The Jones Act is protectionism for an industry that simply doesn’t exist. A handful of jobs are shielded from global competition, at a significant cost to the rest of the country. This regressive, mercantilist relic of the American colonial age has got to go. The US government must repeal the Jones Act.