Jones Act turns 100 amid renewed controversy
By Larry Luxner
Special to News is my Business
Sen. Mike Lee, a Utah Republican viewed as one of the most conservative members of Congress, said lighting “a Dumpster full of manure on fire” would be an appropriate way to mark today’s 100th anniversary of the Jones Act.
The controversial legislation, approved by Congress on June 5, 1920, requires that all goods transported by water between US ports — including those of Puerto Rico, Alaska, Hawaii and Guam — be carried on US-flag ships that were built in the United States, and are owned by US citizens and crewed by either US citizens or permanent residents.
Lee, a self-described libertarian, called the Jones Act a prime example of “crony capitalism” during a June 4 webinar hosted by the Washington-based American Enterprise Institute.
“The Jones Act has lived far too long,” said Lee, who is seeking to repeal the law. “People in Puerto Rico and Hawaii are paying 10%, 20% or 30% and more on common grocery items. This is a classic example of a small handful of big wealthy corporations with concentrated benefits becoming further enriched on the backs of poor and middle-class Americans who are powerless, and unaware why everything is so expensive.”
According to a 2019 study by PriceWaterhouseCoopers, the Jones Act supports 650,000 US jobs, with Louisiana, Florida and Texas as the top three beneficiaries. Both the shipbuilding industry and the Pentagon generally support the law, arguing that it provides sealift capacity for the military in times of national emergencies.
Yet the law has long faced fierce opposition in Puerto Rico because it drives up local prices for consumers and manufacturers.
The senator said building a ship that complies with the Jones Act costs six to eight times as much as building one that doesn’t — ultimately driving up costs for everyone.
“Costs are inflicted on those who have little bargaining power or ability to access the information they need against those who benefit from this evil system,” said Lee, adding that the Jones Act forces Puerto Rico to import liquefied natural gas (LNG) from Venezuela.
“It’s not because of a shortage of LNG in the United States, but rather because there are only so many Jones Act-compliant vessels capable of handling LNG shipments along coastlines — and not one of them happens to be US-flagged, US-crewed or US-built,” he said. “So, we don’t just empower bad regimes, but also impoverish American citizens.”
Economist Aaron Klein of the Brookings Institution said Lee’s thinking is misguided, and that his insistence on building 355 Navy ships “will $865 billion in taxpayer-funded debt over the next 30 years” while outsourcing American jobs to China. And even if the Jones Act drives up consumer costs in Alaska and Hawaii, residents of those two states can well afford it, he claimed.
“Alaska’s median household income is $74,000 a year, and Hawaii’s is $80,000. These states are large net recipients, getting way more in tax dollars than they pay into the system,” he said — without mentioning that Puerto Rico’s median household income barely reaches $20,000 a year. “Go visit Mississippi, where unemployment in the shipbuilding industry has devastated communities. Go to Newport News, Virginia, or coastal Maine, and ask yourselves who’s better off?”
On the contrary, Anne Krueger of the Johns Hopkins School of Advanced International Studies said Lee isn’t harsh enough in his criticism of the Jones Act.
“We have only two or three oceangoing vessels built in the United States per year, and more than two-thirds of the fleet is more than 30 years old,” she said. “Shipping crude oil from the Gulf of Mexico to New England costs $5-$6 a barrel, while to Canada it’s only $2. Cattle are sometimes air-freighted to the US mainland rather than going by sea because it’s more expensive to ship them.”
Particularly stinging was criticism from Rob Quartel, executive chairman at NTELX and a former member of the U.S. Federal Maritime Commission.
“I think it’s ironic that a 21st-century economy and military are held hostage to a law that was written before containerization, nuclear weapons, jet planes, aircraft carriers and the Internet,” Quartel said.
“It failed to prepare us for World War II, and in the first Gulf War, it utterly failed. It’s a law that has failed in everything its supporters claim it was set out to do. And it has destroyed shipbuilding, undercut domestic forestry and mineral production, and in the long-term, national security,” Quartel said.
As a merchant mariner and marine business owner who derives certain benefits and protections from The Jones Act, I can tell you that it is of course way more complicated than any one article can relate, as we all know. There are pluses and minuses, but the main intent was to safeguard and ensure a viable US merchant marine fleet, US shipbuilding industry and a merchant marine labor force. The value of that in WW2 cannot be overlooked, as I think it was critical to the Allied victory. Yes, the Act has hurt and helped and is flawed, but is probably best served by a reordering than simply scrapping it. The USA has always been a maritime nation but far-ranging economic and political challenges have made it difficult to maintain a fleet of ships in the face of foreign competition, lower standards and lower-paid and lesser-trained personnel. Assuming that a major concern is what it means for Puerto Rico or Hawaii for example, let’s look at the fact that after the hurricanes, it mattered not what ships could enter or not since the federal gov’t could not get its own act together on any level. And I am not sure that the island’s government ever does a good job either. Puerto Rico’s problems with the cost of food and energy did not come about because of the Jones Act, but because of centuries of exploitation, corruption, mismanagement and lack of energy and agricultural infrastructure. This is endemic throughout tropical island nations in the Caribbean and elsewhere. Between tidal wave energy, solar energy, wind energy and biomass, Puerto Rico should be energy self-sufficient yet little electricity is produced there other than via conventional fossil fuels–which are imported. Between a reasonable amount of arable land, plentiful rainfall and a 365 day growing season, Puerto Rico should be almost self sufficient in food and quite possibly a net exporter, if not major net exporter of food. In PR renewable supply about 3% of energy now, but a new law has made it a requirement to up that considerably. I have been on tropical islands such as Hawaii and Jamaica that grow pineapples and coconuts, and went into stores where I saw cans of pineapple and coconut and other products from other countries for sale on the grocery shelves that could and should be produced locally. That’s what’s crazy–Jones Act or not. Repealing the Jones Act might actually hinder energy and agricultural development in such places by discouraging investment in food and energy if shipping costs are lowered.