Regardless of what your opinion may be of President Donald Trump, he made the right call when he waived the Jones Act that was slowing response time to help Puerto Rico recovery from Hurricane Maria.
However, that was a temporary waiver. We would love to see it made permanent. The Jones Act doesn’t just cause problems during disaster relief efforts. Let’s look at why.
The Jones Act was originally meant to protect the shipping industry and maritime trade, but almost a century has gone by and it’s easy to see that the law does not serve its original purpose. Its effect today is that people in isolated areas, such as Hawaii, who depend on shipping pay more than the rest of the country for basic items.
So why is that?
The Jones Act requires that for a ship to engage in trade between ports of the United States, it must fly the U.S. flag; be built in a U.S. shipyard; be 75 percent owned by U.S. citizens; and be crewed by U.S. citizens or permanent residents.
In other words, it eliminates competition in the shipping industry. Foreign-built ships, which are less expensive, can’t engage in trade between ports of the US.
As we’ve said before, expenses are high when you live in the middle of the ocean. We all know that and accept it as part of life here. But part of that cost is due to the fact that the antiquated Jones Act is still the law of the sea. An exemption to the act for Hawaii could make a big difference in lowering the cost of living here.
But, perhaps surprisingly, there is little local outcry for that exemption. You don’t really hear from our congressional members stating opposition to the Jones Act. They should. But perhaps they already know it’s a waste of breath because it’s not ever going to happen.
Keli’i Akina, president of the Grassroot Institute of Hawaii, had this to say in a Sept. 8 story about the US temporarily waiving the Jones Act: “We praise the federal government’s decision to provide a waiver of the Jones Act in preparation for Hurricane Irma. The waiver from the burdens of this outdated shipping law will help save many victims in Florida.”
He continued: “This waiver is a recognition by the federal government that the Jones Act is a hindrance to providing goods for the American people. More important, this pro-active effort to temporarily lift this unnecessary, self-imposed burden on shipping will help Florida deal with the destructive effects of Hurricane Irma.
“The granting of a waiver in this time of crisis demonstrates that the Jones Act needs to be modernized. We hope that Congress will take note of the fact that the Act is a hindrance to not only American consumers and businesses during emergencies, but at all times.”
A U.S.-build exemption would allow U.S. ship owners to acquire foreign built ships, register them under the U.S.-flag and operate them in the domestic noncontiguous trades.
The advantage of this reform is new ships built in South Korea and Japan are a fifth of the cost of comparable ships built in the U.S., and that dramatically lower capital cost will lead to greater competition and moderate freight costs.
According to the Capital Research Center, “Particularly hard-hit by the Jones Act are noncontiguous U.S. territories and states, such as Hawaii, Puerto Rico, and Guam. With few alternate means of transporting goods, the impact in those areas on the cost of living and the cost of doing business is significant.”
A series of studies from the General Accounting Office during the great Jones Act debates of the 1980s and ‘90s found that the Act costs residents of Hawaii, Puerto Rico, and Alaska between $2.8 billion and $9.8 billion a year over what the freight rates would be without the Jones Act.
A 2013 report on global trade and its barriers from the World Economic Forum, in collaboration with Bain & Co. and the World Bank, described the Jones Act as “the most restrictive of global cabotage laws and an anomaly in an otherwise open market like the United States.”
In a place like Hawaii, which imports almost all of its food and pretty much everything else, the Jones Act has an impact on the price of goods. That impact is, they cost more.