CATO & congressional allies propose dismantling the Jones Act

At a time when the U.S. Maritime Administration (MARAD) is tasked with producing a National Maritime Strategy to upgrade U.S. shipbuilding and shipping, the libertarian Cato Institute’s proposal is to repeal the Jones Act.

Cato’s Jones Act Reform project is led by research fellow Colin Grabow who “is making waves in revealing the consequences of the Jones Act, which has further exacerbated the supply chain crisis by requiring sea transport of cargo between American ports be performed by ships that are U.S. built, owned, flagged, and crewed,” according to Cato’s annual report.

The Cato Institute report also praised Senator Mike Lee (R‑UT) and Rep. Tom McClintock (R‑CA) “who have introduced several bills aimed at dismantling national protectionism, including a full repeal of the Jones Act.”

National Maritime Strategy

The U.S. Maritime Administration’s (MARAD) National Maritime Strategy would provide the basis for the United States to assess maritime shortfalls and address them through greater investment and/or policy changes, according to Sara Fuentes, vice president of Government Affairs, Transportation Institute and Jonathan Kaskin, national vice president for Legislative Affairs, Navy League of the United States. [see May 4, 2023, Insight: “Proposed National Maritime Strategy Will Support Maritime Growth”]

Recently, both Fuentes and Kaskin told AJOT that they are worried that the decline in U.S. shipping and shipbuilding has gone on for so long that the issue lacks a national urgency: “What we need is for the White House to make a National Maritime Strategy a top priority that will mobilize national resources to get the job done,” Kaskin said.

Fuentes and Kaskin emphasized safeguarding U.S. maritime jobs for coastal and inland vessel transport as provided by the Jones Act. This is vital, they say, because the Jones Act protects the jobs of U.S. vessel carriers, shipbuilders, and mariners from outsourcing.

Cato Advocates Ending Jones Protections for U.S. Shipbuilders

In an interview with AJOT, Colin Grabow discussed Cato’s efforts to repeal the Jones Act: “It would be a sea change … I think we need dramatic change because things are in a bad state.”

Grabow wrote that the Jones Act U.S. build requirement should be eliminated as “No aspect of the Jones Act is more damaging than its prohibition on the use of vastly less expensive foreign‐​built vessels. When the U.S.-build requirement—which predates the Jones Act—was first put in place during the country’s early days, U.S. shipbuilders were some of the world’s most competitive. Today the few remaining U.S. shipyards are the world’s least efficient with prices four to five times that of ships constructed abroad.”

Jones Act protections for U.S. shipbuilders do not enhance national security, so Grabow sees “very little value in U.S. shipbuilding.”

“There’s a very limited overlap between commercial and naval ship construction. If you look at the biggest US naval shipyards: Bath Ironworks, Huntington Ingalls (Newport News) they don't produce anything for the commercial market …, I’m mindful of … the nineties when Newport News had their Double Eagle tanker program … I recall they lost … $200 million to $300 million on that program, and they haven't been back to the commercial market since then.”

Cato Says More Jones Act Waivers Needed

Grabow wants Congress to increase waivers of the Jones Act when no U.S. built vessel is available to do the job. For example, offshore wind developers have sought exemptions from the Jones Act for wind farm support vessels: “Jones Act waivers are extremely difficult to obtain, subject to bureaucratically and politically fraught gauntlets, available for very limited durations, and restricted to those situations deemed in the interest of national defense. A process for obtaining waivers based purely on economic need is non‐​existent. This means there is no mechanism for utilizing a foreign vessel when no Jones Act‐​compliant vessel is available to perform a needed task (e.g., transporting liquefied natural gas to Puerto Rico or New England, something that is currently impossible given the complete lack of LNG tankers in the Jones Act fleet).”

Cato Criticized

Fuentes and Kaskin worry that the Jones Act is under attack in Congress, backed by influential conservative think-tanks such as the Cato Institute and the Heritage Foundation. These organizations ignore the economic and national security benefits of the Jones Act and advocate outsourcing maritime work to foreign flag operators, they say. The result is that Cato and Heritage represent an anti-federalist movement that is undermining the maritime security of the United States.

Cato Advocates Eliminating Jones Act Requirements for U.S. Shipping to Hawaii, Alaska, Guam, and Puerto Rico

Grabow argues: “The high cost of Jones Act shipping falls most heavily on residents of the non‐​contiguous states and territories for whom alternative methods of transport such as trucking, rail, and pipelines are unavailable. This is not only economically harmful but unfair. Although Jones Act supporters insist the law is primarily meant to provide a fleet of merchant ships and mariners to meet national security needs, the burden of paying for something ostensibly meant to benefit the entire country is far from evenly spread. Instead, over half the Jones Act oceangoing fleet is employed serving the approximately 1.5 percent of Americans that reside in Alaska, Guam, Hawaii, and Puerto Rico and pay the tab for keeping these ships in service.”

Cato Supports Foreign Flag Vessels Transporting Goods On Inland Waterways & Between U.S. Ports

Grabow says foreign flag vessels already sail up the Mississippi River as far as Baton Rouge, Louisiana and so he does not see why foreign flag vessels transporting cargoes between U.S. ports is harmful: “Let's be clear right now, we already have foreign flag vessels on our inland rivers … on the Mississippi, as far north as Baton Rouge … on the Columbia River to Portland on the Delaware up to past Philadelphia. A few weeks ago, I saw a foreign flag vessel dock in Albany, New York. … If the objection is … about one nation and national security then we can limit (transport) to flags or countries that we're allied with … I'm all for addressing legitimate security concerns. I just don't like national security concerns being dressed up … being a fig leaf for just plain old protectionism.”

Grabow has also written that with foreign flag vessels sailing in and out of all major U.S. ports allowing these international carriers to move imports and exports by water between U.S. ports could reduce transportation costs and relieve highway congestion: “One way of spurring such transshipment, and thus relieving congestion on the country’s highways and rails, would be permitting the transport of containers on efficient internationally‐​flagged ships.”

U.S. Merchant Fleet Decline

Grabow does not believe the Jones Act is helping the United States build up its merchant fleet: “Back in 1980, we had 257 Jones Act ships by 2000, I believe it was down to 120 … and according to MARAD’s latest statistic, we're down to 93.”

The Jones Act is also not doing much about crew shortages on vessels, so Cato believes the answer is to man vessel with crews from foreign countries: “The Jones Act is supposed to provide us with a pool of trained mariners to crew (military) sealift ships. And it's hard to make the case that that's a success either. Obviously, the fleet's gotten smaller. In 2017, there was a government report … that concluded that in a best-case scenario, we're looking at a shortage of 1800 mariners. So, for me, it's hard to make the case that the Jones Act is working.”

And so, Grabow recommends: “Expanding access to skilled and properly credentialed foreign mariners—particularly from friendly countries—would expand the labor pool, reduce costs, and improve the operating efficiency of U.S. vessels.”

Cato Supports U.S. National Security

Grabow says the Cato Institute is dedicated to less regulation, less industrial policy and limited government: “Cato is … philosophically committed to free markets and limited government … but I do believe … national security is a legitimate purpose of our federal government. It's, it's one of the things we have the federal government for. I have no problem with voting the appropriate resources to meet legitimate national security needs.”