It’s time to repeal the Jones Act

https://www.discoursemagazine.com/economics/2022/10/18/its-time-to-repeal-the-jones-act/

by danboarder • 4 years ago

203 328 4 years ago

discoursemagazine.com

paulsutter• 4 years ago

Fees for non-US ships might be a compromise that helps the opposing side get more comfortable with a repeal

eru15• 4 years ago

Taxation (or fees) are in general less bad than outright bans.

netfl0• 4 years ago

Some things are more important than price efficiency.

flyingfences• 4 years ago

Such as?

bob1029• 4 years ago

User experience is the biggest one that keeps popping up in my head.

adventured• 4 years ago

We'd want to know - to as detailed of an extent as possible - the scale of the trade in question.

How much economic efficiency are we giving up, and for what exactly?

pilgrimfff2• 4 years ago

I'm 100% with you. We have to keep the money flowing away from taxpayers and towards corporate interests.

wcarron2• 4 years ago

That's inevitable. What is preventable, however, is having taxpayer money flow out of the country to foreign corporate interests. As an American, I'd rather get screwed by an American company than one from, well, a whole host of other countries.

JAlexoid31• 4 years ago

Pointlessly protectionist law. What's worse - it hurts primarily other americans... like most protectionist laws.

shagie3• 4 years ago

It's protectionist - yes. Pointless... there's good reason for it when it was written.

The domain is cabotage ( https://en.wikipedia.org/wiki/Cabotage ). Note that many countries have cabotage laws of one sort or another.

JAlexoid31• 4 years ago

It's pointless, because it failed miserably to do anything.

It failed to account for the fact that most of internal US freight transport is ground or air.

It lived in some ideal world where Florida to New York is cheaper to deliver via freight ship, than a rail line.

At the time of drafting it was already based in an imaginary world.

scarier• 4 years ago

Also the Foreign Dredge Act [1]…

[1]https://en.m.wikipedia.org/wiki/Foreign_Dredge_Act_of_1906

eej71• 4 years ago

A recent post from the Cato Institute shows that their push to repeal the Jones Act seems to have touched a nerve inside the U.S. Maritime Administration (MARAD).

"Almost at the end of the 41‐ page document is what appears to be a set of recommendations related to a March 2020 meeting of the Marine Transportation System National Advisory Committee (MTSNAC)’s International Shipping Subcommittee. Among them: “Charge all past and present members of the Cato and Mercatus Institutes with treason.”

https://www.cato.org/blog/charge-all-past-present-members-ca...

kevinventullo• 4 years ago

Slight nitpick, but I think it’s worth pointing out that MARAD, a federal agency, is a distinct entity from MTSNAC, a collection of industry folks who made the treason comment.

Spooky23• 4 years ago

Typical Cato drama. Since when do they care about consumers?

The amortized cost of a $100M US cargo ship vs a $30M ship from India or whatever is peanuts.

The United States is the worlds pre-eminent maritime power. You need ships and the industry to support ships to maintain that. We also don’t want ships operated with the oversight of nations like Liberia in our coastal waters. The treason statement is dramatic, but there’s a legitimate point there… we enjoy the benefits of owning the water, and weakening that dominance to satisfy some phoney baloney principles will hurt the interests of the United States.

xxpor• 4 years ago

We also don’t want ships operated with the oversight of nations like Liberia in our coastal waters.

What are you talking about? There's tons of those already, they just can't go between 2 US ports directly.

andjd2• 4 years ago

Note also that that the act requires that the ships be flagged in the US and staffed by 75% US workers. This means they're subject to US minimum wage laws, and there's a smaller labor pool to draw from, so there are additional costs that raise the price of each voyage, not just a higher upfront capital cost.

Additionally, since there are far fewer firms that can compete for these routes, I would expect that the margins on Jones act compliant shippers is much higher than the industry norm.

shagie3• 4 years ago

As an aside - the complete list of all Jones act ships can be found at https://www.maritime.dot.gov/sites/marad.dot.gov/files/2021-...

Using that information, it would be possible to find out where all of them are right now.

There's only 96 ships... 57 of them are tankers... and note that this also has implications for natural gas in New England this winter ( https://www.wsj.com/articles/new-england-risks-winter-blacko... ) because they typically get some LNG from international sources and that is going to be tighter this winter... so you need to get it from Texas instead, but the pipelines ( https://costcontrolassociates.com/blog/natural-gas-problems-... ) are at or near capacity and so you need to ship instead... but that gets into Jones act again.

JAlexoid31• 4 years ago

Since when do they care about consumers?

Since forever. Since when Donny slapped a 35% tariff on S.Korean major home appliances all prices in US jumped 35%, without change in quality - CATO institute called it and it definitely hit consumers.

We also don’t want ships operated with the oversight of nations like Liberia in our coastal waters.

Jone's Act doesn't prevent that...

kotlin27• 4 years ago

It's basically been disproven at this point that simply lowering cost does not necessarily lead to better outcomes for the country. This was basically neo-liberal orthodoxy until the mid 2010s, by which point it was clear that lowering costs by offshoring labor had hollowed out the middle class in America. Money has a multiplyer effect. Each dollar spent is received by someone who then goes on to spend a part of that dollar and so on. So if you take dollars and send them elsewhere, that multiplyer effect is dampened. Things may be cheaper, but the economy is worse overall.

Also, as the article itself states:

[The Jones act] aims to promote and maintain the American merchant marine fleet for commercial and defense purposes.

The act has nothing to do with making things cheaper. Any earnest proposal to repeal the Jones act should address how the goals of the act can be met in other ways.

jcranmer2• 4 years ago

Except, as far as I'm aware, the Jones Act hasn't prevented the collapse of the merchant marine fleet--in other words, it's failed to do its primary goal, and it has some pretty heft costs for everyone who doesn't live in mainland US.

yamtaddle8• 4 years ago

Seems like this is a case where the "soft touch" approach—set rules and let the market create the outcome you wanted—isn't working, so maybe a more direct approach would be a better idea for the purpose of ensuring a healthy merchant marine fleet, if that's still something we want to do.

toast04• 4 years ago

There's still shipbuilders up and down both US coasts. They don't build that many ships, but they'd almost certainly disappear if foreign vessels were an option.

If having any local shipbuilding capability is better than none, the act works enough.

IMHO, I'd drop Puerto Rico and other island territories from the act. Maybe Hawaii and Alaska too. The inducement to build and operate US based cargo ships for those markets clearly isn't sufficient, and it hurts the economy of the territories for little benefit. But keep it for the mainland --- I think effectively reserving US ports for foreign trade reduces import/export costs which helps the US interface with the global market.

tablespoon5• 4 years ago

Except, as far as I'm aware, the Jones Act hasn't prevented the collapse of the merchant marine fleet--in other words, it's failed to do its primary goal, and it has some pretty heft costs for everyone who doesn't live in mainland US.

Then instead of repeal it, fix it. I wonder if the flaw is that it didn't account for the changes in American sea traffic as foreign imports have undoubtedly increased by orders of magnitude since it was passed 100 years ago.

mcguire• 4 years ago

The US merchant marine fleet has declined (in terms of ship numbers) from 16.7% of the global fleet in 1960 (3000 ships) to 0.4% in 2019 (180 ships).

ch4s34• 4 years ago

it's basically been disproven at this point that simply lowering cost does not necessarily lead to better outcomes for the country

This is a pretty squishy claim, but there's a mountain of work in economics showing that the Jones Act punishes Puerto Rico, Hawaii, and Guam.

lowering costs by offshoring labor had hollowed out the middle class in America

Again this isn't a settled claim. Automation probably had more to do with the shift in workforce. Moreover all advanced economies have shifted to more service work, without necessarily experiencing some of the same difficulties as the US.

The Jones Act has actually been shown to have made US ship building and ports less competitive by shielding them from competition. US ships and ports are basically 3rd rate at this point.

juve19964• 4 years ago

Again this isn't a settled claim. Automation probably had more to do with the shift in workforce. Moreover all advanced economies have shifted to more service work, without necessarily experiencing some of the same difficulties as the US.

I don't buy it - US manufacturing simply wasn't competitive with overseas prices. If it was just automation, it would still be here - only automated. It's not.

kilolima4• 4 years ago

Bold claims, bold citations?

The "mountains of work" "proving" that the JA is a negative suffer from a free-market neo-liberal bias.

lame-robot-hoax2• 4 years ago

The Jones Act hasn’t even done that though. So what’s the point?

lotharcable• 4 years ago

What "hollowed out middle class" in America are things like "The Jones Act".

The major problem in America is not foreign competition. The barrier to industry is not opening up relations with China.

The major problem in America, and has been since at least the 1970s is a managerial crisis. It is a crisis imposed on the working class by incompetent monolithic bureaucracies in government and in corporate culture.

The problem is exactly the sort of problems imposed on the public by things like the "Jones Act". It is that incompetent buffoons attempt to impose rules on the country to accomplish one thing, which fails utterly, and then has a whole host of undesirable side effects that are aggressively ignored and/or downplayed by apologists like yourself.

It is this managerial crisis that saw the rise of massive conglomerates in the 60s and 70s that ate up industry all over the midwest, liquidated them, and leveraged the assets to purchase more small and medium business. This was considered marvels of efficiency then... which in actually has turned out to be a series of accountancy scams and pyramid schemes that all hinged on exploiting incompentely design regulation.

It is the protectionism and subsidies and cronyism in this country that has destroyed it's competitiveness.

It has never been, and probably never will be, the willingness of the American worker to compete with foreign labor.

Advocating for more protectionism and cronyism and regulatory capture is going to make the problem worse, not better.

IF you need proof of this look no further to what the Federal government has done to the semiconductor industry in the past year.

hn_throwaway_99• 4 years ago

This is just opinion spewing.

That said, the comment you are replying to didn't provide any sources, but if you google, for example, "china outsourcing effect on middle class", it's easy to find research supporting the conclusion that outsourcing had a real negative effect on large swaths of Americans.

Also, as a counterpoint, lots of other countries that have had a more robust middle class in the past 2 decades have stricter regulations than the US does.

danaris• 4 years ago

You said a lot of words there, but I'm having a real trouble understanding just what you think it is that this "managerial crisis" actually involves.

mediaman• 4 years ago

I don't disagree that private equity has, historically, not been great at adding value. Sometimes they're good at cutting waste such as private jets and fat management perks. They're finance people, not product people, and that shows up in what they do to companies. More leverage than innovation.

But it's wrong to ignore the impact of competition from very low wage countries. China truly has hollowed out a lot of industrial operations, especially those that ship easily and are not super high tech.

(One might object and say that we don't care about industries that are not bleeding edge. It's true, degreed engineers don't have to care. Tell that to someone without a college degree.)

I'm here to tell you that it is extremely difficult to compete against low-cost country labor if you're doing basic to mid-level industrial manufacturing, because I'm a partner in a company that does that. I spend a lot of time thinking about how to avoid making things they make, because I pay people a reasonable wage, I have to pay their health benefits, I have to pay skilled machinists and engineers, and all of it is 6-20x the hourly costs of their equivalents overseas.

Some just say, well, automate all of it! And anyone who has experience in manufacturing knows that's not a great answer. "Lights-out manufacturing" is a bullshit myth propagated by people who know nothing about manufacturing except watching a couple YouTube videos. Because the labor that can be automated is already fairly limited. It's already mostly automated! It's the mechanics, machinists, tool and die makers, electricians, mechatronics specialists, production managers, procurement, quality managers, mechanical engineers who are most of your cost. Team leads whose jobs are mostly to monitor the machines and tweak the dials. They're good jobs and they pay quite well. A lot more than their equivalents in China. It's not the automatable direct labor that gets you - it's the skilled overhead labor costs inherent to manufacturing.

So, this business does quite well against its domestic competition. But what can I do when the Chinese competition reliably comes over and offers a product for half the cost? Mostly the answer is to avoid making that stuff, and specialize in smaller, higher margin niches. Which works, and is an answer for the business. But it means much less production happening domestically, because the niche stuff is usually a fraction of the volume. And that has lots of knock-on effects throughout the economy.

Go to Germany and talk to people in their industrial sector, like I have. You hear the same story. Factories shutting down because of low cost labor country competition. Magazines catering to Americans talk about how Germany has beaten this, but you'll find the reality when you talk with people in depressed German towns that have had yet another factory move away. This isn't only an American story.

But sure. Let's just blame the accountants and their "pyramid schemes." There's our villain. Investigation complete!

frozenport• 4 years ago

In this case the "managerial class" would repeal the Jones Act and marvel at the resulting efficiency?

BurningFrog• 4 years ago

...incompetent buffoons attempt to impose rules on the country to accomplish one thing, which fails utterly"

This is NOT what the Jones Act is.

The Jones Act is a very successful attempt by certain special interests to make money by instituting a law sending tons of money their way.

If we believe this model, one way to repeal the Jones Act is to somehow pay off those interests.

edouard-harris• 4 years ago

It's basically been disproven at this point that simply lowering cost does not necessarily lead to better outcomes for the country.

After untangling the double-negative, this is equivalent to saying: "It's basically been proven at this point that simply lowering cost necessarily leads to better outcomes for the country."

Is this in fact what you meant? The rest of your comment suggests you may believe the opposite.

ddoolin3• 4 years ago

There is no double negative; "does not" is the only negative in the statement. "Disproven" is not a grammatical negative.

eru15• 4 years ago

It's basically been disproven at this point that simply lowering cost does not necessarily lead to better outcomes for the country.

Huh? When did this happen?

Neoliberal orthodoxy still reigns supreme.

So if you take dollars and send them elsewhere, [...]

The US can print as many dollars as they need. In fact, when dollars go overseas, a inflation targeting central bank will automatically print more.

kelseyfrog3• 4 years ago

A disproven orthodoxy can still reign supreme. Take the Catholic Church post-enlightenment to the mid 20th-century for example. Just because an orthodoxy fails and falters doesn't mean that it will fade away. There isn't an equivalent of atheism for economics - there are no "aneoliberals" or "aeconomicists".

Anyone who declared themselves "aeconomicist" would be ridiculed. That reaction should give anyone pause though. Ridicule is a powerful reality-maintenance mechanism. Economics is an extremely powerful reality-creating assemblage. Attempts beyond descriptive are met with intense skepticism and cynicism. Even here, in purported a bastion of competing ideas, normative economics are routinely lambasted.

The most common reality-maintenance mechanism is the reflexive "come up with a better idea then" response. It serves as a means of shutting down all discourse which ends up being antithetical and ultimately hypocritical to the mingling of ideas and curious questioning we claim to adhere to. The end result is implicit support for the status quo. Even if that isn't what is typically intended, it is functionally equivalent.

DaveExeter• 4 years ago

Obviously there are winners and losers, but overall, the benefits to society favor repealing the Jones Act.

ROTMetro6• 4 years ago

No, they don't actually.

legitster4• 4 years ago

Each dollar spent is received by someone who then goes on to spend a part of that dollar and so on. So if you take dollars and send them elsewhere, that multiplyer effect is dampened. Things may be cheaper, but the economy is worse overall.

What? You're basically arguing for trickle-down economics here. No - subsidizing small special interest groups is not in our collective best interest.

Making shipping cheaper absolutely leads to better outcomes. And if you are worried about offshoring labor, the Jones Act makes it specifically more expensive to ship domestically than internationally.

kotlin27• 4 years ago

I'm not arguing trickle-down economics. The concept I'm talking about is called the "money multiplier" [0].

Think about it like this: You go to the store and buy some bread for $1. GDP has increased by $1. Now the store owner saves 20% of the store's income and spends the other 80%. So after your purchase, the store owner goes to the bakery supply store and buys $0.80 of flour. Now GDP has increased by $1.80 from your initial $1 purchase. Trickle-down economics is more about how income is distributed in a society.

[0] https://en.wikipedia.org/wiki/Money_multiplier

JAlexoid31• 4 years ago

Neo-liberalism that literally pulled half of the planet out of permanent poverty?

goals of the act can be met in other ways

American merchant fleet is all but gone by now. Yet you're suggesting that we keep this act, pretending that doing the same thing would yield a radically opposite result?

PS: PATRIOT Act has a few goals, that have nothing to do with a lot of the content.

tsimionescu• 4 years ago

China pulled half of the planet out of permanent poverty, no neo-liberalism there (no freedom either, so no love lost on them from my side).

ddoolin3• 4 years ago

Right out of poverty and into a new kind of servitude, maybe. OP really should've used "capitalism" entirely but I suppose that would go down even worse.

kotlin27• 4 years ago

Neo-liberalism that literally pulled half of the planet out of permanent poverty?

My original quote said "better outcomes for the country." Yes, a lot of people were pulled out of poverty, but their gains came and the expense of middle-class Americans.

Maybe you're a globalist and you think this is a good outcome. I just hope you never have a nation state-level problem, e.g. unfair competition in the market place. The help you receive from the Chinese government, despite all of their gains, is likely to be quite minimal if you're not a Chinese citizen.

frankus• 4 years ago

Historically the US has favored protectionism over subsidies, but my understanding is that subsidies are almost always a more economically optimal way of ensuring that strategically-important domestic industries are able to survive.

actually_a_dog2• 4 years ago

Then the "free market" zealots would just be crying about subsidies instead of tariffs and regulatory barriers. There's really no winning this battle.

missedthecue10• 4 years ago

Eternally subsidizing massive shipbuilding infrastructure as an insurance policy against WW3 seems beyond silly in my view. And remember, it has to be massive shipbuilding infrastructure or you're not doing any good. Having one or two shipyards that aren't very good at shipbuilding does zero if you need to suddenly build a lot of ships locally for "national security" which seems to be the argument of the pro-jones act commenters.

hedora2• 4 years ago

I suggest re-reading the article.

It has almost nothing to do with "lowering costs"; the fact that it costs 8x more to build a ship in the US is one of many pieces of evidence supporting the argument that the Jones Act has failed to protect the US shipbuilding industry.

kyrra• 4 years ago

The major issue with the Jones act is that it prevents domestic transport of goods on water unless it is a built/flagged US ship. This accounts for a tiny fraction of transport within the US (3%):

https://data.bts.gov/stories/s/Moving-Goods-in-the-United-St...

Getting rid of this single part of the Jones Act would help a lot, and I don't see it hurting, as it accounts for such a tiny fraction of our transport today.

eftychis• 4 years ago

At what point was it alluded that the Jones Act was to make things cheaper? This is the first I hear of this. (I am actually asking, not rhetorical.)

scythe2• 4 years ago

It's not about simply "making things cheaper". It's that the costs imposed by the Jones Act are so imbalanced that they lead to effects like this:

Significant opportunity costs also can be observed in the loss of revenues experienced when, for example, a hog farmer in North Carolina purchases corn feed from Canada instead of from a farmer in Iowa because exorbitant delivery costs make the latter’s price uncompetitive.

Clearly, this is not effectively protecting American business from foreign competition. Even if that is considered a reasonable goal, it should actually, you know, be met.

Any earnest proposal to repeal the Jones act should address how the [military] goals of the act can be met in other ways. [brackets mine]

The Jones Act was passed in 1920. At that time, US military spending was a tiny fraction of what it is today, and the idea that the Navy would borrow commercial ships instead of simply using its own was a lot more sensible. Today, the US Navy is by far the largest in the world, focuses primarily on blue-water power projection rather than defense of the homeland, and naval battles are primarily fought by aircraft, which was unimaginable in 1920.

If the Jones Act continues to bring military benefits, the onus, in my opinion, rests on its supporters to show what they are, because modern naval warfare looks almost nothing like it did in 1920.

kilolima4• 4 years ago

Just to respond to a few of your more landlubberly comments:

Naval battles are fought by aircraft carried on ships.

Modern naval warfare is still about global power projected by ships. That hasn't changed since 1920. Global power projection has always been the focus of the US Navy since its inception.

North Carolina and Iowa are far from each other separated by mountains. Until the advent of giant cargo airships, it will always be cheaper to move bulk goods by sea.

P5fRxh5kUvp2th4• 4 years ago

This is also why the free market trumpeteers are wrong.

Companies charge the most they can, any lowering of internal costs will only change the external costs under 1 circumstance. When lowering the external cost will increase volume enough to make up for the lower cost.

Tech has changed the game so it's much easier for a winner to take most. The free market idea has always assumed local competition, that's no longer the case. When Apple and Google can collaborate on how much to charge for a phone it becomes more difficult to associate lower costs of production with lower cost to consumers.

missedthecue10• 4 years ago

There is another reason why companies lower cost, and it's because of competition. We have seen company after company in all sorts of sectors lose revenues because of competition, so your theory that they only lower costs to increase volume doesn't hold water.

thomastjeffery• 4 years ago

Your entire premise is that "free market trumpeters" are wrong because we don't have a free market.

And as absurd as that sounds, you are right. I've heard more times than I can count from Libertarian ideologues that we could totally avoid these problems by just leaving the market alone.

So many people in the US stubbornly believe that a totally unregulated market would be a totally competitive one.

Back over here in reality, we see corporations taking every opportunity they have to be anti-competitive, and no amount of deregulation would change their motives.

The liberation we need is not for the market itself (as a whole), but for any new marketers who wish to compete against the giant incumbents that regulate them out of business. And the only option I'm aware of with enough leverage to intervene is government.

lame-robot-hoax2• 4 years ago

It's basically been disproven at this point that simply lowering cost does not necessarily lead to better outcomes for the country. This was basically neo-liberal orthodoxy until the mid 2010s, by which point it was clear that lowering costs by offshoring labor had hollowed out the middle class in America. Money has a multiplyer effect. Each dollar spent is received by someone who then goes on to spend a part of that dollar and so on. So if you take dollars and send them elsewhere, that multiplyer effect is dampened. Things may be cheaper, but the economy is worse overall.

Literal gibberish.

What you are describing is a fiscal multiplier which is the change in national income via government spending, or a money multiplier from a central bank.

What actually happens in the scenario described is deadweight loss. Consumers spend more to obtain less goods. See figure 1.

https://corporatefinanceinstitute.com/resources/knowledge/ec...

bobkazamakis• 4 years ago

What actually happens is deadweight loss. People buy less goods, suppliers make less money.

Literal gibberish.

Let's not imply things in a vacuum that don't have second-order effects. Where does this magical margin come from? Oh look, it's wages for that same worker who would be buying these goods!

dragonwriter• 4 years ago

Any earnest proposal to repeal the Jones act should address how the goals of the act can be met in other ways.

Spend money directly on the thing you are trying to support rather than trying to bank shot private money into it by restrictions.

abigail952• 4 years ago

this is what googling and reading economics on wikipedia gets

PuppyTailWags• 4 years ago

I wanted a bit of education outside this, so Wikipedia tells me the Jones act declares that cargo between US ports must be on US-flag, US-created, largely US-crew, US-owned ships. The Lexington Institute, a center-right thinktank focused on domestic security policy, has claimed(June 2016) it strengthens border security and reduces terrorism.

I guess my question is: how much is a stronger border security and terrorism reduction worth, economically?

robalfonso• 4 years ago

It’s not just those issues. The original Impetus for the jones act was to keep a strong merchant marine for war time, so we subsidise the us merchant fleet so that if we had need during war they would exist.

I find this difficult because my outlook for those kinds of conflicts indicates it’s not necessary to have such a fleet, but if you need it, it’s too late to decide. Those ships are a multi year build.

I would think some flexibility and also some accounting of exactly how many us merchant boats we’d need should inform changes to the Jones act.

WorldMaker5• 4 years ago

That original "impetus" also changed dramatically due to technology shifts in the very next war after the Jones Act was enacted: naval combat shifted in World War II dramatically towards the favor of aircraft carriers and submarines. A merchant marine fleet doesn't need submarines (they don't have much cargo room, do they?) and maybe there's some crazy way that an aircraft carrier deck could double as a modern shipping container deck, but why go to all that expense?

The last war that merchant marines truly mattered to war was World War I and "iconic" moments like the merchant fleet at Dunkirk.

darkarmani• 4 years ago

so that if we had need during war they would exist.

How would we use a US merchant fleet during war? Maybe I just don't understand how that fleet would be useful in a war. Does the US merchant fleet really have military grade vessels and military grade weapons systems?

sokoloff2• 4 years ago

I definitely support the notion of allowing "shipping from foreign ports to multiple American ports in sequence." (Shipping from China to Port A, Port B, and Port C in sequence, while allowing off-boarding only of cargo in ports A and B.)

Allowing foreign-flag carriers to ship general cargo among American ports is not something I have a strong opinion on (but I generally am not inclined to permit it).

matthewowen4• 4 years ago

That is already how it works. Transpacific eastbound ships typically call at LA/Long Beach, Oakland, and Seattle before returning to Asia. They just can't pick up cargo at any of those stops and then drop it off at another US port (they can and do pick it up and take it to Asia)

sokoloff2• 4 years ago

Then why is Puerto Rico complaining that the Jones Act is causing high prices in Puerto Rico for foreign-sourced goods? Are those complaints just invalid / based on a completely wrong premise?

teddyh6• 4 years ago

It seems to me that the Jones Act is a tariff on the activity of shipping itself. Unless one wants to argue the globalist stance that all tariffs should be abolished, the Jones Act should be examined with a careful eye to what it prevents, not only what costs it incurs. I.e. if the Jones Act was repealed, would all shipping suddenly be done by foreign actors, who, by virtue of being cheaper, would have a virtual monopoly on (and insight into, and control over) all shipping within the US? Maybe this might not actually be bad, but such consequences should be considered.

eru15• 4 years ago

That 'globalist' stance is eminently sensible.

Tariffs should be unilaterally abolished: no need to wait for the other guys to stop hitting their head against a wall, you can stop today. Ie no need to wait for free trade agreements. Just declare unilateral free trade.

teddyh6• 4 years ago

If that was done, all workplace safety and employment security laws would stop being useful and become mostly only a financial drain on all domestic businesses, as foreign countries without such laws and restrictions could offer cheaper goods and services by exploiting and endangering their employees. Also all child labor laws. Most domestic businesses would, by force of price competition, be made to buy from, and outsource their jobs to, wherever it was cheapest. Since this outcome might still technically protect domestic workers and children, but would leave them destitute and out of work in a destroyed economy, it is reasonable to argue that this outcome should be avoided.

eh9• 4 years ago

I’m from Puerto Rico and people there have been fighting for this since I can remember.

This disproportionately hurts the poorest people there the most. Groceries are already exorbitantly expensive, doubly so because of this misguided act.

Never mind the fact that Puerto Rico is in the middle of recovering from a Cat1 hurricane that nearly took the island out for a month (power outages still ongoing). While the island should have been prepared for that, it was still in the middle of recovering from Maria (a cat 5 hurricane in 2017).

How much slower has relief been because of the jones act? How much longer can we keep subjecting people to colonialism?

ceejayoz2• 4 years ago

Formally exempting overseas territories like Puerto Rico seems to me a reasonable compromise.

ch4s34• 4 years ago

But why do it at all? There's no evidence that the Jones Act has worked. The US ship building industry lags far behind places like South Korea that churn out bigger, better, and cheaper ships on a faster basis. South Korean ship builders aren't poorly paid either, they just have to compete on a global market.

chimeracoder• 4 years ago

Formally exempting overseas territories like Puerto Rico seems to me a reasonable compromise.

If you're going to exempt Hawaii, Puerto Rico, Guam, etc. then why not just repeal it entirely? At that point it doesn't really do anything.

javert4• 4 years ago

I live in Puerto Rico. I'm curious about the actual mechanics of how the Jones Act affects PR. For context, I'm against the Jones Act regardless of the exact effects it may or may not have---but I'm still curious about the mechanics.

For instance, I used to believe we couldn't get produce from the DR without it first going through a US port (typically Jacksonville).

But in reality, the Jones Act doesn't prevent ships from bringing DR produce directly to PR, even foreign ships.

I'd like to get a specific example of something economically useful that the Jones Act forbids.

For instance, you couldn't have a trade route by a DR ship that goes San Juan -> Ponce -> DR, if you want to be able to pick up goods in San Juan and drop them in Ponce. But is that really useful, anyway?

Perhaps allowing non-US ships to brings goods between Florida and PR would be the biggest gain of dropping the Jones Act? Because shipping would be much cheaper. Like the case in the article where it's cheaper to bring fuel to the Northeast from Africa than from Texas.

hellojesus2• 4 years ago

I think the issue is that a non-Jones ship going from DR to PR could then not continue on to another US port, which means that PR would have to have enough demand to unload the entire ship there or at another foreign port.

The issue really comes into play with the fact that a non-Jones ship couldn't stop at a US port on the way to another US port, and that really hurts smaller outlying ports that are between a foreign nation and mainland US.

alistairSH• 4 years ago

Shipping Florida or Texas to PR would be where you see a benefit to PR. Currently, shipping an American-made good (car made in SC, maybe) to PR requires using the US merchant fleet, which is more expensive.

JAlexoid31• 4 years ago

It's pretty simple. PR isn't a major market, that means that delivering goods from US to PR isn't valuable enough to have economies of scale to kick in.

Add to that that most freight in The Lower 48 is ground(rail and road) - there's little demand for all American merchant fleet.

Low demand for services = low demand for new ships = older inefficient ships = high maintenance costs = lower profit or high prices = small markets get screwed (PR, Guam, Hawaii, etc)

matthewowen4• 4 years ago

The arguments I've seen are:

a) you would get more competition / lower prices on trade routes from the US to PR. b) foreign flagged vessels could stop in PR on their way to the US, drop off PR goods, and load PR manufactured goods.

It's hard to argue that those possibilities wouldn't have _some_ impact on CoL... but they wouldn't change the bigger reality that PR is an island that doesn't have any natural resources, imports 85% of its food, and is a second class entity within the country it belongs to.

gnopgnip2• 4 years ago

The Jones act restricts trips between US ports to US ships. So transport between San Juan and Jacksonville needs to be a US ship. It doesn't technically restrict ships between DR or another other foreign port and PR. But the Jones act prevents a ship going from DR to Jacksonville from stopping in San Juan along the way. San Juan isn't a large enough market, so it doesn't make financial sense to make a trip only there, or to stop in San Juan then another foreign port, then Jacksonville.

cr18954• 4 years ago

I'd like to get a specific example of something economically useful that the Jones Act forbids.

The Jones Act obliges some pretty absurd contortions and workarounds to construct offshore wind, of which many many gigawatts are planned to be built in the future off the coasts of the US. This directly increases risk, cost, complexity, and uncertainty compared to offshore wind development in other countries.

The highly specialized vessels which are capable to do this work are in very limited supply globally, and exceedingly few are (or will be) US-flagged and JA compliant. These are the heavy crane vessels, jack up vessels, precision rock placement vessels, cable lay vessels, etc of which practically nothing suitable exists in the US-flagged fleet. Some US vessels are being built (Dominion’s turbine installation jack-up or GLDD’s fall pipe vessel), however, these are absolutely insufficient on their own, and vastly more expensive (and uncompetitive elsewhere) compared to the rest of the global fleet.

notch656a3• 4 years ago

How much longer can we keep subjecting people to colonialism?

Puerto Ricans call themselves subjects of colonialism yet continually reject both statehood and complete independence. It seems like Puerto Ricans want the worst of both worlds.

myroon5• 4 years ago

Multiple referendums in the last decade where Puerto Ricans voted for statehood:

https://en.wikipedia.org/wiki/2020_Puerto_Rican_status_refer...

US government's rejecting Puerto Rico's statehood

colinmhayes3• 4 years ago

Turns out different people want different things.

JAlexoid31• 4 years ago

PR voted for statehood THREE TIMES already... THREE!!! (2012, 2017, 2020)

https://en.wikipedia.org/wiki/Puerto_Rico_political_status_p...

lazide4• 4 years ago

Puerto Rico currently benefits from massive federal grants and subsidies, while having a power structure/leadership that doesn’t have to report/be accountable to the US gov’t in certain ways, and doesn’t have the same taxation. For instance, most Puerto Rico residents don’t need to pay federal income taxes.

It leads to some interesting incentives for folks there, especially in gov’t, if they know how to poke certain populist buttons.

The voting demographics also favor one party over the other, if one cares to look, and if admitted as a state may cause swings and imbalances in the current two-party detente. This is similar to Washington D.C.

The current balance has a lot of defacto non-obvious benefits for politicians that their constituents might not appreciate if they fully knew about them.

Gwypaas3• 4 years ago

The Jones Act is a problem and a blessing. It ensures a US maritime industry, albeit tiny. Still, due to lack of competition, it has left the US maritime industry so far behind the world standard that the minute it is removed, the entire sector will go bankrupt from international competition.

The Decline of the U.S. Merchant Marine | What's Going on With Shipping?

https://www.youtube.com/watch?v=kJn0bCWx_9g

bombcar6• 4 years ago

Eh, all international shipping will collapse the moment the US Navy stops being the oceanic police for everyone for free.

Gwypaas3• 4 years ago

How come? What is this disaster mindset? Even Ukraine and Russia agreed on how to open grain corridors from Odesa.

https://en.wikipedia.org/wiki/Black_Sea_Grain_Initiative

unethical_ban3• 4 years ago

This seems entirely unrelated to the conversation at hand, and a strawman because no claim is made that such an event is about to occur.

mperham• 4 years ago

The Cato Institute is a conservative think tank.

Repealing Jones would effectively kill a huge amount of the US maritime industry and related jobs. Literally offshoring those jobs to foreign ships and wage slave crews. Just like we offshored union manufacturing jobs to China in the 80s and 90s.

We can discuss ways to make it more efficient but keeping jobs onshore has very real benefits. It's the core of our middle class.

photochemsyn4• 4 years ago

I think the operational description of the Cato Institute is that of 'neoliberal ideologue', not necessarily 'conservative' or 'liberal' (not that those two latter terms have much meaning anymore, there more like keys to rather mutable dictionary entrys whose meaning fluctuates with the daily political intrigues).

Neoliberal is a bit easier to define, it's basically the notion that international pools of capital should be liberated from the restrictions imposed by the persistence of nation-states.

eru15• 4 years ago

The Jones act has already made sure that the US maritime industry is tiny.

JAlexoid31• 4 years ago

Considering that CATO has been blamed to be liberal, conservative and everything under the sun - they've had a very consistent view on many issues, that opponents come up with labels to try to smear them.

ddoolin3• 4 years ago

Neoliberalism and modern conservative economic policy are basically the same thing though.

yourapostasy• 4 years ago

Pass on this "analysis". I'd rather speak with actual merchant mariners with 4+ decades experience in the industry and reams of data of actual merchant marine businesses and a bunch of other stakeholders like shipbuilders, DoD, municipality water utilities techs who have to deal with the industry on the coal face, ecologists, marine biologists, etc. to find out where the real skeletons lie in a scrap-vs-support discussion of the Jones Act.

This kind of pablum that passes for "analysis" thrives upon readers not bringing externalities into the picture. When you lossy compress these types of decisions into a unidimensional pricing metric, the blowback from overlooked information always comes back to bite you in the ass after the ones who can monetize the externalities have long since absconded with the money and saddled the rest of us in taxes with the clean up bill.

I'm completely open to scrapping the Jones Act and in fact my personal inclination is to scrap it. Once I find where the externality debt the authors were so desperate to hide is buried, and priced that into the full evaluation, like any balanced business decision should be made. After seeing up close first-hand the disaster that is Chinese food biosecurity, I'm not at all impressed with these capitalism über alles boosters who are not putting forth a proposal in good faith, instead just putting in a negotiating ploy.

We see this all the time in our profession where someone blithely ignores technical debt of all kinds to meet a metric, grab their bonuses, and jet out the door before the business realizes they've been conned.

bombcar6• 4 years ago

Just update the Jones Act so that the only vessels allowed to dock at US ports are US vessels or vessels coming from the flagged country. So if a ship from China wants to dock, it better be a US or China vessel.

eru15• 4 years ago

The Jones act mostly puts limits on shipping within the US.

Do you want to add even more restrictions?

bombcar6• 4 years ago

There exists almost no US-other country shipping that is US flagged. The problem is that these foreign flagged vessels can pay slave wages to what are sometimes literal slaves, and we take advantage of it.

So yes, restricting the vessels that can use US ports even more will help US-flagged shipping.

8note• 4 years ago

It would eliminate the specific concern that a ship can't stop by PR on its way to another port.

It would make those restrictions more consistent between mainland and island US ports

andjd2• 4 years ago

I think it's a fair criticism of the jones act that it hasn't delivered on its goals of keeping a vibrant commercial shipbuilding and shipping industry in the US for the purpose of supporting our military in case of war. Is seven active shipyards sufficient if we need to mobilize a war effort? Do ships matter as much to logistics in modern warfare? Is our domestic production capable of building trans-oceanic capable ships when international shipping is not protected?

Similarly, the costs of the act are not evenly distributed, with Puerto Rico and Hawaii particularly burdened by higher shipping costs.

thehappypm• 4 years ago

Repealing the Jones Act would be great for the US economy. It is an artificial constraint on internal trade, and trade is the single most useful tool for prosperity.

It does not achieve its goal. Its goal is to ensure internal trade is not foreign dependent. However, what really happens is domestic trade is replaced by international trade!

A great example is liquid natural gas in Massachusetts. Massachusetts cannot buy LNG from sellers in the US because there are no Jones Act compliant ships that carry LNG.

So we buy from Trinidad instead. Literally billions of dollars flowing out of the country because of this regulation.

IceHegel• 4 years ago

This would be a win for capital over labor. Make your own conclusions.

zeroonetwothree• 4 years ago

Disagree. It would be a win for labor over capital.

eru15• 4 years ago

It would be a win for both labour and capital.

A win of diffuse interests over concentrated interests.

akavi• 4 years ago

This would be a win for the millions of laborers that don't work in maritime shipping over the capital owners of the (~100 odd) jones act ships.

missedthecue10• 4 years ago

It would be a win for hundreds of millions of Americans who buy products that are shipped between ports. It would be a huge win for Americans in Hawaii, Puerto Rico, and other US islands.

It would be a loss for people employed building these vessels and it would be a loss for the companies that profit on building them. This is not a huge number of people.

As other people have mentioned, the issue is that the Jones Act has very clear advantages for the people who benefit from it, and it generally imposes very diffused costs on the people it hurts, even though the costs are very real. This is the issue with all tariffs.

photochemsyn4• 4 years ago

So when will Cato just go full-on globalist neoliberal and demand that weapons production should not be a national concern? Maybe we can contract out production of F-35 engines to China, and close that plant in Vermont that Congressperson Bernie Sanders lobbied so hard for? Or maybe ULA's production facility in Alabama, a gift to Congressperson Richard Shelby, could be moved to Honduras to take advantage of the cheap labor costs?

Yes, higher domestic labor costs mean less profits to distribute to the entities that finance the Cato Institute. Regardless, regional realities mean that shortening supply line for critical necessities is a wise move in an increasingly unstable world (that instability being due to well-known factors like resource starvation, climate destabilization, population pressure, etc.).

This doesn't mean that well-regulated global trade isn't a benefit to all partners, it just means that trade in things like luxury items (whose loss from local economies doesn't cause critical failures) is quite different from trade in fundamental necessities (whose loss does).

As far as the Jones Act, here's a good counterargument to Cato:

https://www.defensenews.com/opinion/commentary/2020/06/05/wh...

To imagine life without this law, consider the risks we would face if foreign-owned companies were allowed to conduct our domestic trade during this pandemic. Foreign companies would be able to influence the flow of domestic goods and resources that are keeping our economy afloat. Thousands of now-secure American jobs throughout our shipbuilding and maritime workforces would be threatened, and foreign governments could gain even more undue leverage over our economy.

eru15• 4 years ago

Most other economies don't have the equivalent of the Jones Act. Did they have a worse experience in the pandemic?

photochemsyn4• 4 years ago

Repealing the Jones Act in particular is really about outsourcing the construction of ship-building to places like China and India to get the cheapest labor rates and maximize profits. The well-known scarcity of medical supplies during the pandemic is part of the broader trend of neoliberal globalization.

"Among ocean-going commercial ships, worldwide 2,873 are under construction and China is building 1,291 of them while the U.S. is building only 8 (as tracked by the shipbroker BRS Group). The other leaders are Japan with 697 and South Korea with 475, both also heavily-subsidized, although less than China’s mega-billions. Other nations subsidize the building of commercial ships, including India and France. But the U.S. discontinued its shipbuilding subsidies decades ago."

https://townhall.com/columnists/ernestistook/2020/04/23/chin...

Note the above article has a kind of 'fear China' theme, but the reality is that the US oligarchs in the shipping industry would be the immediate primary beneficiary, in terms of profit margins and overall labor/material costs. Of course, if the US economy and state goes belly up, they'll run off to hidey holes in New Zealand, Singapore, Switzerland or similar.

carry_bit• 4 years ago

According to this article, New England is risking winter blackouts due to strong LNG demand in Europe and the Jones Act making delivery of domestic supplies nearly impossible: https://www.wsj.com/articles/new-england-risks-winter-blacko...

nluken• 4 years ago

There's a much easier long-term solution to this problem: electric heating, powered by electricity from Hydro-Québec. Unfortunately, the LNG industry has lobbied hard to block transmission lines, but it would make a huge difference should the lines eventually be built.

elteto• 4 years ago

As one (very wise) commenter here on HN once said, you have to prefix “We would like you to believe that…” to the title of publications like this.

“We would like you to believe that it’s time to repeal the Jones act.”

gadflyinyoureye• 4 years ago

I pointed asked Yolo on a call why won't we repeal this. Gave him my contact information. Never. Never! heard back on this. It's idiotic that we require this process.

matthewowen4• 4 years ago

Although I do think that elements of the Jones Act make sense to repeal (the shipbuilding aspects are an example of something that has really bad outcomes on the whole), I think there are also aspects that ought to be retained and enhanced.

It is true that foreign owned vessels can't move goods between US ports. These vessels sail under flags of convenience and are crewed by poorly treated Filipino sailors earning a pittance. Do we really want to move _more_ shipping to them?

It seems appropriate to me that cargo between US ports should be effectively regulated. I would hate for the outcome of a repeal to be yet more abusive labor practices.

pg_bot• 4 years ago

I'm no fan of the Jones Act, I think it should be repealed in its entirety. However, there is a political reality that several special interests are united in keeping the law on the books.

I think a better solution would be to amend the Jones Act to remove the American built requirement. I'm fine with American flagged and crewed ships if we want to ensure that we have available merchant marines. (which we don't have now) However, there is no such thing as an "American built" ship anymore. The ships we "build" in the USA have had their design and critical components outsourced. The only thing we do is assembly, and that is the easiest part of shipbuilding to ramp up in a war.

You can sell this plan to the defense department by stating that you will actually have ships and crew members if you need them. Right now almost the entire fleet of Jones Act ships is reaching their end of life and there is a point which we will reach soon where they will go extinct.

maherbeg• 4 years ago

A straight forward fix would be a gradual repeal. Start with foreign territories and Hawaii allowing for non-US vessels. Then in the US allow for 10% of all traffic to be serviced by an international company, and keep increasing that until some X% that allows for a US maritime industry and international competition.

manv1• 4 years ago

Repealing this will be difficult, because you have a small focused organization supporting it, and you have a large, diffuse, and distractible public.

And those maritime guys are hardcore union guys, which will make Democratic support a given.

The only reason it has a chance to pass now is because the repeal may reduce costs for millions of consumers. If it's hurting home heating oil customers in New England then the NE delegation may get behind it. That'll put them against every state that's contiguous to water (including inland waterways). I'd put the chance of it passing at 15% unless something exciting happens.

missedthecue10• 4 years ago

There have been significant issues building offshore wind farms because the speciality ships used to construct these behemoths are not built by US shipyards. There have been some discussions of sailing these vessels all the from from Europe and operating them out of ports in Canada to get around the Jones Act, but the inefficiencies are obvious.

Perhaps democrats could be persuaded into abolishing this rule on the basis of furthering green energy efforts.

cr18954• 4 years ago

There have been some discussions of sailing these vessels all the from from Europe and operating them out of ports in Canada to get around the Jones Act

Not mere discussions. This has already happened (Dominion Coastal Virginia demo project) and will continue to happen.

JA support is really bipartisan…some dems are fully on board with continuation and even further strengthening of the Jones Act.

maxwell• 4 years ago

For context, it looks like there are only 32 wind turbine installation vessels in the world as of early 2021, and the first Jones Act-compliant wind turbine installation vessel is currently being built: https://www.theverge.com/22296979/us-offshore-ships-wind-boo...

Instead of taking on national security + environmental pollution risks and further empowering foreign industry by repealing the Jones Act, we should invest in U.S. shipyards and continue to investigate assembling wind turbines at port and bringing out to sea mostly intact: https://crew.udel.edu/industrializing-offshore-wind-power-ge...

tablespoon5• 4 years ago

Before I do, let me say that I am forever grateful for the tremendous work that scholars at the Cato Institute have done—and continue to do—to expose the Jones Act’s many flaws. ... A special mention goes also to Scott Lincicome who, more than anyone, has made fighting the Jones Act hip on Twitter.
Other scholars have worked on this effort, of course. For instance, in 2018 the Mercatus Center published a piece by Thomas Grennes called “An Economic Analysis of the Jones Act” urging the reform of a law that “imposed large losses on American consumers.” My Mercatus colleagues Alden Abbott and Andrew Mercado also recently published a policy brief that delineates the negative economic effects of the Jones Act

This looks like typical free market libertarian dogma, so color me unconvinced. Especially since the reasoning seems all about consumer prices, which libertarians seem to often forget are not the only policy priority.

The Jones Act is a 102-year-old federal measure that aims to promote and maintain the American merchant marine fleet for commercial and defense purposes. To achieve this goal, it restricts the waterborne transportation of cargo within the U.S. to vessels that are U.S.-flagged, U.S.-built, at least 75% U.S.-crewed and at least 75% U.S.-owned. The concrete results are that a foreign ship can enter a U.S. port to drop off its foreign cargo, it can even from there sail to different U.S. ports to drop off other foreign goods, but it is not allowed to pick up any domestic goods in a U.S. port and bring those goods to another U.S. destination if it doesn’t meet the four conditions listed above.

Personally, I think it's probably time to strengthen the Jones Act. It seems written for a time where a larger fraction of American sea trade consisted of domestically-produced goods. Now that we've unwisely outsourced much of our manufacturing ability, so maybe it should be modified to also mandate a certain percentage of all cargo, foreign and domestic be transported by US-flagged, US-built, US-crewed, US-owned ships. That should increase US sea transport capacity, and the greater volume should help drive down the costs of US-build ships.

jmyeet• 4 years ago

Hard pass.

This is no different to any other neoliberal effort to move more profits to the capital-owning class by offshoring more jobs under the mirage of reducing costs to consumers by paying people in the third-world peanuts.

The US (and the EU) are able to use their significant market power to benefit consumers and workers by imposing regulation on those who want access to their markets. Access to the US financial system is one way the US can impose its will (for better or for ill) on foreign financial institutions, as one notable example.

This article makes no mention of "flags of convenience" and that really gives the game away at the agenda of the neoliberal thinktanks that produced it.

Maritive law is complicated. A big factor is what flag a ship flies under. Often commercial shiping will fly under a flag of a country that has next to no worker protections so countries like Liberia and even Mongolia (yes, land-locked Mongolia) ostensibly operate large commercial shipping fleets. To further escape any liability form, say, spilling millions of barrels of oil this will be further complicated by a corporation registerd in a different country operating the ship flying a flag of yet another country.

The US is a huge destination for commercial shipping. The US thus has a ton of power to require certain standards of the ships that want to visit its ports and the conditions the crews operate under. Under no circumstances should we give this up for the false promise of neoliberal cost-cutting.

JAlexoid31• 4 years ago

How about you actually read the damn article and the law, before writing this?

crisdux3• 4 years ago

I am passionate about this issue because I think the US is failing to leverage an extremely valuable asset that could help bring manufacturing back to the states, reduce highway traffic and cut co2 emissions.

I believe the biggest infrastructure change the US could do is invest in a comprehensive inland terminal network. Europe is doing this. They have been working on strengthening hundreds of inland terminals. Check out this example linked below on google of terminal in Basel, Switizerland - literally in the middle of the continent[1]! Below is also a proposed project in Cincinnati, Ohio that never gained traction because of the issues with the Jones Act[2]. Imagine if every city along the Mississippi river network had a terminal like this.

I want to stress that the real use of an inland terminal network like this isn't only for delivering finished goods from outside the US to the interior of the country. The real value is to further integrate manufacturing transportation networks between US states, Canada and Mexico. I think this opportunity will fail to be realized because of our dysfunctional politics in Washington and too many powerful lobbies.

[1] https://www.google.com/maps/place/Swissterminal+AG+COBI/@47....

[2] https://www.soapboxmedia.com/devnews/0605queensgateterminals...

JAlexoid31• 4 years ago

There's a big difference - US actually has a highly efficient rail freight network.

Retric3• 4 years ago

The US’s rail network isn’t that different than the EU’s.

The average freight rail trip in the EU are much shorter which makes rail less competitive relative to trucks. That has nothing to do with the rail network and is instead a function of EU’s economy.

The difference in utilization largely comes down to geography and politics. America’s flyover states and high population coasts just fit rail really well.

crisdux3• 4 years ago

Sure, maybe that explains why Europe has made more progress with their inland transportation network. But what I said is still true. Transporting freight via river systems is cheaper and greener than using road and rail. The gap will widen as energy and transportation costs continue to increase.

The United States has the largest internal waterways system in the world, and we basically only use it for bulk goods.

anigbrowl2• 4 years ago

As does Europe?

bell-cot2• 4 years ago

Ah. Depends on what you mean by "highly efficient". From both memory and a quick Google on "2022 u.s. railroad problems", there are plenty of major problems with the U.S. freight RR system. Especially if you try to assume that it has (or can easily add) a bunch of spare capacity.

(Short version - each of the major U.S. freight RR's is more-or-less a monopoly in the part of the U.S. which it serves. If management relentlessly optimizes for profitability, and doesn't much care about customer service, shipping delays, sustainable staffing levels, etc... Well, I'm sure RR management has enjoyed some fat profit-sharing bonus checks.)

gnopgnip2• 4 years ago

What does this look like in practice? Extending the port of Stockton to Fresno?

larryliu2• 4 years ago

In California? Many badge terminals along Pacific coast. But it means much more for Eastern and Southeastern US where waterways are plentiful.

crisdux3• 4 years ago

I think a better example would be the following. Let's take the perspective of cargo intended for a Honda plant in Ohio. This is a fictional illustration. The below voyage is impossible right now because of the Jones act.

1. River barge within the Mexican interior picks up a shipment intended for the Honda plant in Ohio.

2. Shipment is transferred to a larger vessel in Coatzacoalcos, Mexico for voyage to Houston Texas.

3. Vessel travels along the coast, which makes for a perfect transport waterway because of its shallow and calm waters.

4. Vessel stops in Houston. picks up and drops off containers at various terminals.

5. Vessel enters the Mississippi river system and continues to drop off and pick up goods throughout its voyage.

6. Our original cargo we care about, is offloaded in Cincinnati at the Queen City Ohio River Terminal and transferred to the rail network, ultimately for delivery at the Honda manufacturing plant outside of Columbus Ohio.

Terr_• 4 years ago

Imagine if every city along the Mississippi river network had a terminal like this.

Alas, just this week the news [1] is that the Mississippi river's water-level has fallen low enough that existing docks and routes are having problems.

So while it's an interesting vision, there are some risks with respect to reliable rainfall and water-usage.

[1] https://www.wsj.com/articles/mississippi-river-approaching-r...

mlb893• 4 years ago

The USA has a prime example of what would happen if they removed the patriot act, that is shipbuilding industry in Canada. The industry need doesn't sustain itself at those costs and Canada's cost for labour are much lower than the US's.

We are trying to reboot the industry here and I am not kidding when I say it will take 2-4 decades so I can only imagine what the US will lose if they give up the Jones act.

WorldMaker5• 4 years ago

The US already lost the vast majority of its shipbuilding industry. Jeffboat was one of the few US manufacturers the Jones Act tried to protect and Jeffboat went bankrupt and shut down for good in 2018. (Jeffboat was an historic shipbuilder going back to the golden years of the steamship.)

mmcconnell1618• 4 years ago

The Jones Act in combination with the Passenger Vessel Services Act (1889) also forces foreign-flagged cruise ships (which is basically all of them) to stop at a foreign port even if they loop back to the same starting US port or all passengers will be charged a fee of several hundred dollars.

A Seattle to Alaska to Seattle cruise will need to stop in Canada, even for an hour, just to avoid the extra fees. Starting at one US port and ending at another requires a stop at a "distant" foreign port which makes it difficult from cruise lines to offer routes like Los Angeles to Hawaii.

https://thepointsguy.com/guide/what-is-the-jones-act-for-cru...

pstrateman• 4 years ago

The obvious and easy solution is to be US flagged.

valarauko2• 4 years ago

Obvious, yes, but not necessarily easy. It would also have to be US manufactured, US crewed, and majority US owned.

exhilaration• 4 years ago

But then they couldn't get away with abusing their workers and paying them peanuts: https://www.businessinsider.com/why-cruise-ship-workers-take...

1-more• 4 years ago

Maybe they should even put the passengers on a rail to nowhere! https://www.maritime-executive.com/article/judge-rules-that-...

throwaway81523• 4 years ago

I had to read in a ways to find out what the Jones Act is. It says that maritime cargo traffic in internal US waterways has to be carried by US-flagged vessels. Repealing it means e.g. that Panama-flagged vessels could carry the cargo instead. The article starts out saying that the importance of repealing it has been propounded by the Cato Institute and by Lawrence H. Summers. So that says what the Act is, and who wants to repeal it. I figured at that point that my curiosity was satisfied.

raldi• 4 years ago

It’s much more restrictive than that, which is why there are basically no carriers that meet its requirements. It’s just not financially feasible. From Wikipedia:

It requires that all goods transported by water between U.S. ports be carried on ships that have been constructed in the United States and that fly the U.S. flag, are owned by U.S. citizens, and are crewed by U.S. citizens and U.S. permanent residents.

Maursault8• 4 years ago

Thanks.

I'd like to know exactly what foreign maritime traffic the Cato Institute and Lawrence H. Summers think can successfully navigate internal US waterways.[1] Freeing stuck ships can cost upwards of $1B, not to mention the ecological threat of discharged ballast, inviting wholesale invasion of snakehead and worse.

[1] https://www.nytimes.com/2022/04/17/business/chesapeake-cargo...

MoreSEMI2• 4 years ago

AFAIK, internal waterways does not literally mean inside the US. Internal means routes between US ports. A foreign vessel could still sail between two deep water ports for example, if the act were repealed.

cr18954• 4 years ago

Its impact is vastly greater than trade along inland waterways. It regulates “coastwise transport” which, under various interpretations, means from one port in the US to another to even a single rock placed on the seabed by a ship.

With respect to ballast water, any vessel discharging cargo or entering US ports has to abide by USCG and other regulations about treatment etc, regardless of whether or not it’s a JA-compliant vessel or not

missedthecue10• 4 years ago

It's not just where the ship is registered. The ship literally has to be constructed in a US shipyard by US shipbuilders and operated by US crews, and everything has to be owned by US citizens.

kilolima4• 4 years ago

"...the real concentration story exists in monopolized markets around the country where the Jones Act has eliminated competition and shielded local firms from international market forces... This conclusion is shared across ideological lines."

Shielding local markets from the race-to-the-bottom of international market forces sounds like a good thing. But does this prove that neoliberalism is the main creed of both political parties?

The Jones Act insures strong regulations for crew, safety, and environment on ships entering at least some US ports, and helps to maintain a strong merchant marine which is critical for our thallasocracy and projecting global sea power.

nmz• 4 years ago

This is simply outsourcing. We know what happens when you outsource. You cannot simply export an industry and then expect to have more money flowing in the nations economy at the end of the day, will the company be richer? sure, but the individuals who actually make that currency flow will be less. This is what happens in a lot of states that are fighting just so there's an amazon or any industry inside of it. To implement this in a national scale is extremely dangerous. Completely decimating the economic import/export balance of any nation.

julienb_sea• 4 years ago

The Jones Act limits intra-state transit of goods. Trade efficiencies create new economically viable business opportunities, which in this context are definitionally domestic. Outsourcing the ships used for intra-state transit would unlock new domestic opportunities which ultimately grow the domestic economy.

There are also acute more significant benefits. Transportation of natural gas by sea would allow better utilization of domestic gas production, as opposed to what currently happens, where states not connected by pipeline have to import gas internationally.

gernb• 4 years ago

If you're sympathic to these types of ideas you might find these entertaining

https://www.youtube.com/watch?v=5hwuRkJMo_4&list=PLBuns9Evn1...

Sometimes I am and sometimes I'm not but I still find them entertaining

miguelazo• 4 years ago

Stopped reading as soon as they quoted Lawrence Summers.

theptip• 4 years ago

Zvi is tackling Jones Act repeal: https://thezvi.substack.com/p/announcing-balsa-research.

One interesting point he makes is that it can be cheaper to simply buy out the special interests; in this case, can we support the shipbuilder unions and manufacturing capacity by committing to increase direct navy contracts in some way?

The general argument being that the special interests capture some value X, and the diffuse costs borne by society are Y, and Y >> X. So if we just pay ~X from some other pot, we still come out ahead as a society. Put differently, is there a more targeted way of achieving the original goals of the Jones Act, without distorting the markets and raising costs as much? It seems likely.

ouid• 4 years ago

Since cato is a PR firm for corporate interests, and nothing more than that, it has no incentive as an organization to support anything that genuinely provides for public wellbeing. Some other think tank will do that work.

It stands to reason, then, that Cato is lying in some essential way. Since they are arguing that the Jones act is agaisnt the public interest. The most obvious such way that this might be true is that requiring an american workforce requires large retailers and logistics companies to pay more to their employees. This obviously serves American interests by preventing, in aggregate, the very wealthy to avoid redistributing their wealth as much by expatriating it. Additionally, repealing the Jones act is an attempt to increase unemployment which drives wages down in aggregate.

Sure, in a well built system of government, protectionism is usually a bad thing, but right now it is serving to stanch the flow of money to the capitalist class, whom Cato universally represents.

EGreg• 4 years ago

I lost about $700 due to the Jones Act.

What happened was that my friend had booked a cruise for us, that sailed out of Orlando. But I couldn't join them in Orlando. "No worries," I thought, "I'll just meet up with the ship at the very next stop" -- which I did, I took an uber there. We had done the same with MSC cruises in the Mediterranean -- missing the ship in Rome and taking a train up to meet it in Civitavecchia.

Well, as I got on the ship, they said I owe $700 or so. I was really wondering why! Turns out that unless the ship drops off the passenger at the exact same US port as they picked them up, it is considered that the ship is "transporting cargo" and therefore has to pay taxes.

I asked whether I could be dropped off at the port I got on: no.

I asked whether I could get off in the Bahamas and fly back: no. (Well, yes but I'd still owe the money).

So, I had to pay. The ship otherwise risked getting fined for not paying its tax.

VLM• 4 years ago

I'm not sure we even have to think about it. Whenever the sophistry is mostly name dropping "deep state" authorities whom all agree its a great idea, its certain to screw over everyone not at the top of the pyramid. Its like that every time, and this is not likely to be an exception.

upsidesinclude• 4 years ago

Haven't we collectively learned the lesson, globalization makes for an extremely vulnerable world.

It's an entire infrastructure and skill base which is being maintained.

When the need arises the government can cause growth. They can't cause knowledge. There are skilled workers and organizers that make shipbuilding happen, likewise a skilled workforce of engineers, navigators and shiphandlers that know how to operate vessels. These things take years or decades to master.

Articles like this are just more globalist rhetoric pitched in with some neocon export-your-slavery.

The Jones Act rant is tired.

It’s time to repeal the Jones Act

Related Stories