It’s time for Hawaii to receive an exemption from the Jones Act. There’s no doubt it’s unnecessarily driving up costs for islanders and it no longer makes sense. The arguments in support of it don’t hold water.
As Sen. Sam Slom said, 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 who depend on shipping pay more than the rest of the country for basic items.
We all know it costs a lot to live here. Naturally, you can expect expenses to be higher on an island. 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 that cost. More people are recognizing this and trying to do something about it. Several members of the Hawaii Senate and House of Representatives have filed concurrent resolutions seeking an exemption for Hawaii from a provision in the Merchant Marine Act of 1920 (the Jones Act) requiring that all vessels be built in the United States. The resolutions also ask that Alaska, Guam and Puerto Rico be exempt.
So, what, exactly, does the Jones Act require? 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.
Proponents of exempting the noncontiguous trades from the second hurdle (the “domestic build requirement”) say it would create a larger market and foster greater competition in ocean shipping for the noncontiguous trades (in addition to having no negative effect on jobs). Because the cost of building a ship would go down, so would shipping.
Hawaii Shippers Council President Mike Hansen said 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.”
Dr. Kim Kepner-Sybounmy, chief of staff for Slom, is another proponent of Jones Act reform. She has produced a short documentary film to educate the public about the Act, which will be shown Friday in the Capitol Auditorium.
Kepner-Sybounmy was introduced to the Jones Act about a year ago when she attended the Jones Act Video Conference while working for Slom. During the video conference, she listened to the legislative spokespeople from Alaska and Puerto Rico discuss Jones Act reform, and she began to see the economic struggles Hawaii has in common with these locations.
She said the movie is the result of her desire to make this complex issue understandable.
“On a personal level, like many people in Hawaii, my family is constantly looking long term to decide whether we can afford to retire here. My concern is that Hawaii, along with the other noncontiguous locations, makes up only 2 percent of the population of the U.S. yet we shoulder most of the cost burden of the expensive Jones Act ships,” Kepner-Sybounmy wrote. “This unnecessary cost is frustrating, and it makes you wonder how many new businesses are never started and how many existing businesses are prevented from expanding due to the high costs for shipping as a result of the Jones Act.”
Hawaii is long used to paying far more than most places in the U.S., but it doesn’t have to be that way.