The Jones Act Serves No Purpose

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(Bloomberg View) -- The costs of the Jones Act -- the law requiring all maritime commerce between U.S. ports to be carried on ships built, crewed and owned by Americans -- get too little attention. The toll is heavy, and the burden is unfairly distributed. But what if the law serves a vital purpose? Are these costs somehow justified?

Defenders of the law say it's needed to sustain maritime industry -- a sector that's essential during national emergencies or wartime. Yet if this is the law's purpose, it sure isn't working.  

In 1960, there were nearly 3,000 U.S.-flag oceangoing vessels -- 17 percent of the world fleet. By 2016, there were 169 such ships -- less than one percent of the global total. And of those, just 92 were Jones Act vessels carrying cargo between U.S. ports.

The oceangoing Jones Act fleet has shrunk by more than half since 2000. The ships tend to be older and less efficient and can be less safe. In October 2015, for instance, the 40-year-old El Faro, a cargo ship servicing Puerto Rico, sank in what the Coast Guard called "one of the worst maritime disasters in U.S. history."

Other articles in this series:
The Jones Act Costs All Americans Too Much

Still Playing Politics With U.S. Ports

Maritime Commerce Can Thrive Without the Jones Act

The U.S. shipbuilding industry has lost its competitive edge, and the number of shipyards that build large oceangoing vessels has steadily fallen. A coastal container ship can cost six to eight times more to build in the U.S. than in a foreign shipyard. Carriers for liquefied natural gas would cost two to three times as much as South Korean ships, and take much longer to build.

U.S. mariners are also much more expensive: Crew costs for U.S.-flag ships can be more than five times those of comparable foreign-flag ships. U.S. exporters rarely use them to ship goods overseas. Nearly nine out of 10 U.S.-owned oceangoing vessels over 1,000 gross tons fly a foreign flag.

To be sure, many factors contributed to the decline of the U.S. maritime sector. But one thing is clear: If Senator Wesley Jones were alive, he'd have to score his namesake law an economic failure. U.S. output has more than quadrupled since 1960, but the amount of freight carried by U.S. coastal shipping -- an entirely protected market -- has fallen by almost half.

Even the national security argument for the Jones Act fleet rings increasingly hollow. Foreign-flag ships safely make thousands of calls at U.S. ports each year. Although the U.S. military taps Jones Act vessels for sealift, it also regularly uses foreign-built and foreign-flagged ships for that purpose. In the huge military build-up preceding the first Gulf War, oceangoing Jones Act cargo ships played next to no role; in fact, foreign-flag ships carried more than one-quarter of the cargo. The Government Accountability Office has indicated that the U.S. may already have more than enough qualified mariners to meet the military's sealift needs. And there is less overlap between the work of commercial and military shipyards.

More broadly, a buy-and-build-American approach doesn't necessarily make America safer. Should the U.S. Coast Guard have to wait eight years and pay nearly $1 billion for a U.S.-built icebreaker when a Finnish shipyard could build one for about one-quarter of the time and cost?

Undaunted, Jones Act champions propose to make the law even more onerous. They'd like to tighten enforcement, expand the U.S.-flag merchant fleet by 45 U.S.-built ships, and mandate that U.S.-flag ships carry U.S. energy exports. This would make a bad policy worse -- attacking the cost advantages of cheap U.S. oil and natural gas while failing to address the broader issues.

But give the Jones Act this much: Rarely has a law that costs so much and achieves so little survived so long.

--Editors: James Gibney, Clive Crook.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.

©2017 Bloomberg L.P.

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