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The Jones Act: A Fish Out of Water?

Alaska… What the American public sardonically labeled “Seward’s icebox” and “Johnson’s polar bear garden” (referring to President Andrew Johnson) turned out to be The United States’ most strategic conduit for challenging the British Empire in the Pacific, its new economic frontier–that would inspire U.S. supremacy in world markets during the late-nineteenth century and beyond.

Alaska today enjoys a vast array of natural resources, yet it suffers, along with its non-contiguous counterparts: Puerto Rico, Hawaii and Guam, from a century-old regulation: The Merchant Marine Act of 1920, otherwise known as the Jones Act.

The Jones Act is intricate in design but it is in essence a protectionist policy. In short, it requires vessels that operate between U.S. ports to be U.S.-flagged, U.S.-built, and at least 75 percent U.S.-owned and -crewed. The idea that this will protect the jobs of those employed in the U.S. shipping industry by eliminating foreign competition, seems to have lost traction. In fact, the number of active tankers and container ships in the Jones Act fleet are on a steady decline due to this strict regulation, endangering the jobs of those building, operating and manning the US commercial fleet. As far as protectionist policies go, the Jones Act seems to be like a fish out of water.

Its survival can be largely attributed to something that has always been at the heart of America’s interests: national security. The philosophy of so-called “peace through strength” has encouraged the U.S. to amass a large fleet of U.S.-controlled ships and other waterborne transport vessels with sealift capability (the use of cargo ships for the deployment of military assets). However, local commercial vessels simply cannot accommodate the standards of modern military vessels to be meaningfully repurposed. “The fact that there is so little overlap…weakens the argument that subsidizing producers of commercial ships strengthens military capability and national security.” Nonetheless, America’s capacity to project military power across the world and maintain global hegemony is inextricably linked to a dependable network of ships.

Economic Setbacks

Back in 2017, Hurricane Maria devastated the northeastern Caribbean, and has continued to bring a whirlwind of concerns. Primarily, what it has brought to light on the stifling influence of the Jones Act on the unincorporated U.S. territory Puerto Rico, stressing in particular the elevated cost of living. Estimates by the Federal Reserve Bank of New York show that “it costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo, Dominican Republic and $1,687 to Kingston, Jamaica–destinations that are not subject to Jones Act restrictions.” This disjunction is also visible in the energy sector. Puerto Rico is by far the largest importer of liquified natural gas (LNG) in the Caribbean region (with 57.56 billion cubic feet in 2016), yet its close neighbor–the Dominican Republic is the recipient of U.S. exports to meet its natural gas needs, while Puerto Rico relies on imports coming from distant Trinidad and Tobago. On the supply side, it also makes Alaskan crude oil exports less attractive to U.S. importers. How can a policy that is designed with national prosperity and security in mind, reflect such a stark contrast in its promises and treatment of its territories?

Detached from the mainland, Puerto Rico has no way of importing liquified natural gas (LNG) from the United States by water because there are no active Jones Act-qualified LNG tankers, largely due to high construction costs. In fact, the United States has not built an LNG tanker since 1980. A 2017 Congressional Research Service Paper highlights the comparative cost of a U.S.-built ship. It reports the total cost of a U.S.-built coastal size container ship to be six to eight times higher than that of a similar size container ship built in a foreign shipyard. Statistics as of January 2022 show that there are only 99 remaining U.S.-flag ships in the privately owned merchant Jones Act fleet. Compare this to the 434 oceangoing ships in 1950, and we see the ripple effects of a protectionist policy that has radically shrunk the capacity of the U.S. maritime industry.

This has left the non-contiguous territories unable to exploit the virtually inexhaustible U.S. energy supplies, and instead have been held captive to imports from unfriendly foreign countries, by restricting the economic freedom of U.S. firms and households. In 2020, Hawaii imported roughly a third of its crude oil from Russia, for which they have had to find alternative sources following a “resolution [in the House of Representatives] condemning Russia’s attacks on Ukraine and supporting the economic sanctions the U.S. imposed on Russia.” This decision has exposed the vulnerabilities of the Jones Act to global conflicts as we are currently witnessing in Ukraine.

Political Setbacks

President Joe Biden demonstrated his devotion to keeping the Jones Act alive in his remarks on ‘strengthening American manufacturing’, seemingly uncompromising when it comes to prospects of abandoning the–some would say ‘out-of-place’–102-year-old maritime policy.

“The executive action I am taking also reiterates my strong support for the Jones Act and American vessels, you know, and our ports, especially those important for America’s clean energy future and the development of offshore renewable energy.”

The Jones Act has seen bipartisan support since its inception. Previous efforts to rescind the act, most notably by Sen. John McCain (R-AZ), have been answered with defiance both from members of Congress and special interest groups representing the U.S. maritime industry. Since the benefits are concentrated among a few producers in this industry while the costs are dispersed nationwide, lobbyists have shown great impetus to keep the Jones Act alive. A Washington Post Article accredits the vitality of the Jones Act to the “perils of political ignorance”. Surveys have shown that nearly half of Americans are unaware that Puerto Ricans are U.S. citizens. Such ‘ignorance’ or as the author later clarifies ‘individual rational behavior’ means that political reform of the Jones Act fails to capture voters and will instead be met with an overpowering concerted effort by knowledgeable interest group lobbyists to shut down any such reform, leaving Puerto Rico and Hawaii to bite the bullet of an antiquated policy to “satisfy the protectionist impulses of a bygone era.”

Whether or not the Jones Act has outlived its potential, one question remains: How long will the Jones Act continue to stay afloat?


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