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Coalitions critical if we hope to reform the Jones Act

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Webinar panelists were, from left, Bob Gunter, Bethany Marcum, Rafael Velez and Colin Grabow.

“If an enemy has alliances, the problem is grave and the enemy’s position strong; if he has no alliances, the problem is minor and the enemy’s position weak.”
~ Sun Tzu in “The Art of War.”

In the quote above, general and philosopher Sun Tzu of ancient China was writing about military tactics, but this piece of wisdom is equally valuable when it comes to understanding how contemporary lawmakers often react to campaigns for legislative reform. In essence: Put together a coalition of voices behind one cause and you instantly become “strong,” worthy of attention.

All of which goes to explain the impetus behind the Grassroot Institute of Hawaii’s recent webinar on the Jones Act. For this event, we brought together experts representing Hawaii, Alaska, Puerto Rico and Guam to explain how the Jones Act makes life more difficult for those U.S. states and territories. The idea was to demonstrate the common bond that unites these outlying jurisdictions and foster a lasting relationship between them aimed at updating the Jones Act.

The webinar certainly revealed how the Jones Act creates special challenges, beyond just raising costs, for each area.

In Hawaii, we already know that the Jones Act costs the average family approximately $1,800 a year. However, Bob Gunter of Koloa Rum on Kauai provided insight on how the Jones Act is a burden for local business, too.

Gunter recalled that when his company first expanded its distribution to Australia, he wanted to ship his goods directly to the Land Down Under. But since there were no direct connections, he had to send his products eastward first to the U.S. West Coast. The trip to Los Angeles, he said, cost $6,000, while shipping it from LA to Sydney only cost $1,900.

Gunter said that as Koloa Rum has continued to expand, he has become convinced that the Jones Act is a “major component of the costs that we incur for doing business here,” and that it is an, “impediment to our continued growth and viability.”

In Alaska, the Jones Act is becoming a hot issue again, partly because of the recent successful efforts to secure an exemption for the state’s tourism industry from the Passenger Vessel Services Act, also known as the “Jones Act for cruise ships.” Bethany Marcum of the Alaska Policy Forum said Alaska’s leaders are well aware of the Jones Act and its impact on the state, and there is even a state law, passed in 1984, that requires the governor to lobby for Jones Act repeal.

Representing Puerto Rico, Rafael Velez, president of Atabey Capital, explained that one study found that the Jones Act was equivalent to having a 7.2% tax on all of Puerto Rico’s food and beverages. Meanwhile, almost 30% of the island’s electricity is generated by liquid natural gas, yet Puerto Rico must import LNG from places such as Russia, since there are no Jones Act-compliant LNG carriers.

Then there is Guam, America’s most remote territorial outpost, which is at least exempt from the U.S.-build requirement of the Jones Act. However, as Grassroot Scholar and Cato Institute policy analyst Colin Grabow explained, this significant exemption hasn’t helped Guam as much as you might expect. This is because ships bound for Guam from the West Coast generally like to stop in Hawaii first, rendering Guam’s exemption moot, since all carriers traveling between the West Coast and Hawaii must comply with all of the Jones Act’s mandates.

A few years ago, a company that uses foreign-built ships, APL, entered the mainland-to-Guam market, minus the stop in Hawaii, and, indeed, consumers have been benefiting from lower prices. But the previous sole provider, Matson, has been pursuing legal action to force APL out.

In any case, Monday’s webinar made it clear that Alaska, Puerto Rico, Guam and Hawaii are natural allies in reforming the Jones Act. They all would benefit from increased competition and lower shipping costs. Even something as simple as modifying the U.S.-build requirement could make a difference, as the case of Guam has already shown.

During the webinar, Grabow noted that in Washington, D.C., the Jones Act debate is “asymmetrical.” For the groups that benefit from the Jones Act, defending it is their highest priority. Meanwhile, those who are hurt by the Jones Act tend to treat it as one of several issues they care about. In order to move the needle in Washington, we need to demonstrate that there is a broad coalition of groups that care about reforming the Jones Act.

That’s why events like this week’s webinar are important. Hawaii residents aren’t the only ones who are paying extra to prop up the Jones Act. By allying with our friends in Alaska, Puerto Rico, Guam and elsewhere, we will finally be able to make Washington understand why it is time to update the act for the 21st century.
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This commentary was Keli’i Akina’s weekly “President’s Corner” column for July 17 2021. If you would like to have his columns emailed to you on a regular basis, please call 808-864-1776 or email info@grassrootinstitute.org.

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