The debate over the Jones Act and its impacts on National Maritime Strategy reflect two opposing views as the AJOT’s Stas Margaronis explains.
The Jones Act is critical to developing a new national maritime strategy supporting commerce, shipbuilding, manpower and military sealift priorities, according to officials from the Transportation Institute and the Navy League of the United States.
Sara Fuentes, Vice President of Government Affairs, Transportation Institute and Jonathan Kaskin, National Vice President for Legislative Affairs, Navy League of the United States said the U.S. Maritime Administration (MARAD) and the U.S. Coast Guard are authorized to produce a National Maritime Strategy that would provide the basis for the United States to assess maritime shortfalls and address them through greater investment and/or policy changes.
Expand The Jones Act Fleet With Dual Use Vessels
Expanding the Jones Act fleet with coastwise services of DUVs would alleviate congestion, road wear and pollution along the I-5/I-95/I-10 corridors in peacetime by carrying domestic 53-foot tractor trailers/boxes along these American Marine Highways (AMHs). A business case analysis done in 2013 estimated the externality benefits associated with DUVs amounting to $16-25M/ship annually compared to truck or rail equivalents. If these externality benefits could be monetized and if the Title XI Federal Ship Financing Program and the Capital Construction Fund are used to reduce the effective capital costs, the DUVs would likely be competitive without further government support. (see AJOT article, PASHA cites “Teamwork’ in Delivery of Newest Jones Act Container Ship https://www.ajot.com/insights/full/ai-pasha-cites-teamwork-in-delivery-of-newest-jones-act-container-ship)
The Jones Act or the Merchant Marine Act 1920 provides that cargoes carried between U.S. ports must be transported on U.S. built vessels, manned by U.S. crews, and operated by companies owned by U.S. citizens. The aim is to safeguard national security and ensure a U.S. maritime fleet is available in a war time emergency.
Kaskin and Fuentes say that safeguarding U.S. protections of Jones Act carriers, shipbuilders, and mariners, is vital as their livelihoods are coming under attack by conservative free-trade think-tanks such as the Cato Institute and the Heritage Foundation which ignore the economic and national security benefits of cabotage. These organizations represent an anti-federalist movement within the United States that is undermining the maritime security of the United States as China poses a growing threat to Taiwan and U.S. allies in the Pacific.
CATO Institute Proposes Abolishing The Jones Act
At the same time, the Cato Institute proposes 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 (RUT) and Rep. Tom McClintock (RCA) “who have introduced several bills aimed at dismantling national protectionism, including a full repeal of the Jones Act.”
In a May 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 Advocates Eliminating Central Features of the Jones Act
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.”
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.”
Is the Jones Act the cause for US merchant ship decline? Cato thinks so.
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 operate vessels 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.”
Pushback on CATO Premise
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. They say these organizations ignore the economic and national security benefits of the Jones Act and advocate outsourcing maritime work to foreign flag operators. The result is that Cato and Heritage represent an anti-federalist movement that is undermining the maritime security of the US.
Kaskin says the effect of attacks on the Jones Act is to undermine maritime security at a time of growing tensions with China: “Cato and Heritage ignore the economic and national security benefits to the United States when they seek to undermine the Jones Act at a time of the growing maritime threat from China. Focusing only on economic costs without acknowledging the public benefit of the Jones Act is disingenuous when there is such an overwhelming threat to national security and a growing naval and economic security threat to the United States in the Pacific. We can no longer afford to ignore these growing national security threats and the Jones Act is one way we protect our national security.”
Fuentes and Kaskin say that the U.S. maritime industry is supported by the Jones Act as an infrastructural and national security asset that provides the major source of manpower to crew the ships of MARAD’s Ready Reserve Force and the U.S.-flag fleet during a protracted war time emergency when commercial and military supply chains will be contested. It also helps maintain a shipbuilding industrial base needed to support wartime shipping. Jones Act opponents ignore this and argue instead that profit and cost should take precedence over the national interest, Fuentes and Kaskin argue.
Somewhat ironically Grabow says of the Cato Institute: “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.” How the U.S. flag merchant shipping fits into this aspect of CATO’s philosophy is clearly, unclear.
National Maritime Strategy
In 2022, U.S. Senators Maria Cantwell (D-Wash.), Chair of the Committee on Commerce, Science, and Transportation, and Ranking Member Roger Wicker (R-Miss.) introduced the bipartisan U.S. Maritime Administration (MARAD) Reauthorization Act. They argued that the $1.6 billion bill would invest in the maritime workforce, strengthen maritime infrastructure, and expand research and development into new technologies to advance fleet sustainability and innovation.
The legislation established a new National Maritime Strategy to help grow the maritime economy through shipbuilding, maritime trade, training, and infrastructure.
“This bill makes critical investments in America’s maritime workforce, shipyards and port infrastructure that are key to keeping our supply chains moving,” said Sen. Cantwell. “It will create a new innovation center to explore cleaner fuels and new technologies to boost resilience of our maritime fleet and ensure the U.S. maritime industry remains competitive well into the future.”
“A strong Maritime Administration is essential for our national and economic security. I am glad to support this bill, which would improve our marine highway system, help protect against sexual assault and harassment within our merchant fleet and at the Merchant Marine Academy, support maritime education, and reauthorize the port infrastructure development program,” Sen. Wicker said.
MARAD is the principal federal agency responsible for supporting the American maritime industry through financing, shipbuilding, workforce development and port infrastructure grant programs.
