A new Grassroot Institute of Hawaii report examines the costs and effects of the protectionist federal shipping law known as the Jones Act and finds that the law has “raised prices forAmerican consumers, distorted the U.S. economy and stunted the U.S. merchant fleet.”
As stated in the report’s executive summary, the Jones Act — technically Section 27 of the Merchant Marine Act of 1920 — restricts the carriage of goods and passengers between U.S. ports to vessels built and flagged by the U.S. and owned and crewed predominantly by Americans. Its intent is to protect national defense by developing and sustaining a merchant marine force.
The result, however, has been that domestic shipping in the U.S. is more expensive to consumers who lack competitive options, as well as to shipping owners who must pay more for their ships from U.S. shipyards and have higher personnel costs due to higher employee wages and benefits.
Meanwhile, U.S. shipyards have declined since World War II to only five public domestic shipyards and 20 private ones. In addition, between 2006 and 2011, the oceangoing Jones Act-eligible fleet shrank by just over 17%. Of 171 privately owned U.S. flagged ships, only 93 were Jones Act-eligible, and only 73 could be categorized as militarily useful.
As for the effect on consumers, the U.S. International Trade Commission has estimated that reform or repeal of the Jones Act could yield an annual economic gain of between $5 billion and $15 billion.
The economic burden of the Jones Act is felt nationwide, often in unexpected ways, but the highest burden is felt by the noncontiguous territories such as Guam, Puerto Rico, Alaska and Hawaii, which depend on shipping for provision of their goods.
According to the report, partial Jones Act reform could lift overall U.S. incomes by hundreds of millions of dollars, with specific industries making substantial gains that would offset losses by the shipping industry.
Existing studies of the Jones Act show that its national security and job-saving benefits come at a steep price for consumers and U.S. industry. However, more study is needed to further quantify the effect of the act on key industries and states.
The 2017 report was written by researchers Russ Kashian, Jeff Pagel and Ike Brannon, and edited by Keli‘i Akina, Malia Blom-Hill and Joe Kent.
To read or download the report in its entirety, go here.
