MYTH: The Jones Act provides benefits without adding to consumer prices

The following is an excerpt from “Five myths about the Jones Act,” by institute research associated Josh Mason and Jonathan Helton.

Jones Act supporters want to have it both ways when it comes to the federal government protecting them from competition.

On the one hand, they say that their government-sanctioned market dominance protects national security, contributes to economic growth and provides more than a half-million jobs, directly and indirectly. On the other hand, they say all these alleged benefits come at virtually no cost.

The truth is, none of these claims are true. Earlier chapters of this report have dispensed with the claims about benefits. Here we consider the myth that the Jones Act provides benefits without any costs.

In 2020, for example, the American Maritime Partnership alleged the law has no or only a negligible effect on prices in Hawaii.1 Its source was a report that compared online prices at Walmart, Target, Home Depot and Costco stores in Hawaii and Los Angeles. It was similar to an AMP study concerning Puerto Rico that compared Walmart prices in San Juan versus Jacksonville, Florida. But online prices usually are not the same as store shelf prices.2

For example, during visits to Walmart stores in Honolulu and LA, Grassroot Institute of Hawaii researchers found that 18-ounce boxes of Cheerios listed online as $3.64 each in both locations were $4.26 each in Honolulu and $2.94 in LA.3 One-gallon bottles of Wesson Canola Oil were $6.98 each online and in the LA store but $9.64 in Hawaii. Looking at all the grocery products on the AMP’s list, the Honolulu Walmart prices were on average 14% higher than in LA.

Studies more methodologically rigorous have shown the Jones Act definitely adds to the cost of living in America’s noncontiguous states and territories. They include a 2019 University of Hawaii study that found at least a 3.1% differential,4 a 2019 study showing the Jones Act costs Puerto Rico’s economy $1.5 billion annually and 13,250 jobs,5 and a 2020 study showing it costs Hawaii’s economy about $1.2 billion annually and 9,100 jobs.6

In other words, it is a myth that the Jones Act provides benefits without adding to consumer prices.

  1.  Impact of the U.S. Jones Act on Hawaii,” Reeve & Associates and TZ Economics, prepared for the American Maritime Partnership, July 2020.
  2. Puerto Rico Economy,” American Maritime Partnership.
  3. Shipping industry study claims Jones Act benefits Hawaii economy … yes, really,” Grassroot Institute of Hawaii, July 22, 2020.
  4. William W. Olney, Cabotage Sabotage? The Curious Case of the Jones Act,” The Economic Research Organization at the University of Hawai‘i, Sept. 9, 2019, p. 42.
  5. The Jones Act: A Legacy of Economic Ruin for Puerto Rico,” prepared by John Dunham & Associates, February 2019, p. 3.
  6. Quantifying the cost of the Jones Act to Hawaii,” Grassroot Institute of Hawaii and John Dunham & Associates, July 2020, p. 3.

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