A Law That Deserves To Hit an Iceberg

A century ago, Congress passed the protectionist Merchant Marine Act of 1920, commonly known as the Jones Act. This law stipulates that any cargo transported between two U.S. ports must be carried in ships that are built, owned and operated by American citizens or permanent residents. The law is costing our economy more than $100 billion a year in lost growth and is making gasoline unnecessarily expensive. It’s long past time to send this legislation to Davy Jones’ locker.

One huge trouble with the law: Today U.S.-made big ships cost four times more than those made by foreign competitors.

The result of the Jones Act is signi cantly higher costs for consumers and businesses. The law has distorted shipping patterns across North America. It particularly hurts Hawaii, Alaska, Puerto Rico and Guam, which are more dependent on waterborne products than is the continental U.S.

The most pronounced perversions of the law are found regarding energy. For example, it would be logical for Puerto Rico to get its lique ed natural gas (LNG) from Georgia or Louisiana, but since there are no LNG tankers that meet Jones Act requirements, the island must import the gas from Russia and other foreign sources.

The same distortion phenomenon also holds true for the U.S. mainland. It’s cheaper for New England to get natural gas from Trinidad and Tobago or even Siberia than it is from the Gulf Coast.

We have the absurdity of re neries on the East and West Coasts nding it less expensive to import oil from abroad instead of transporting it from other parts of the U.S. California can get gas more easily from Singapore than from the Gulf Coast. Re ned petroleum products from Gulf Coast re neries

are sold to Latin America instead of in the U.S. because of the law’s perversions.

But the Jones Act’s distortions go beyond energy. Have you ever wondered why so many retail products in Alaska and Hawaii cost so much more than they do on the American mainland? The Jones Act is a huge factor.

Deep-sixing the Jones Act would lower the costs of shipping cargo by water in the U.S. by 50%. A study from the OECD concluded that torpedoing this law could add up to $135 billion to America’s economic output.

An old cousin of the Jones Act is the Passenger Vessel Services Act of 1886, which similarly stipulates that only American-made, -owned and -sta ed ships can take passengers from one U.S. port to another. That’s why when you go on a cruise to Alaska from San Francisco, the vessel will rst make a stop at a Canadian port before going on. A direct San Francisco–Alaska route is illegal. The U.S. hasn’t made a large cruise vessel since 1958. Both laws deserve to be sent to the bottom of the sea.