Forbes - One Way To Fight High Prices Would Be To Torpedo The Destructive Jones Act
The Jones Act, officially known as The Merchant Marine Act of 1920, mandates that cargo transported by water between U.S. ports must be carried on ships that are U.S.-built, U.S.-owned, and manned by U.S. crews. This legislation was intended to protect the U.S. shipping industry but has instead led to high construction costs and a decline in the number of American-made merchant vessels. For example, an American-built container ship costs significantly more than those built in Japan or South Korea. The act also raises energy costs for American consumers by making it illegal for regions like New England to receive cheaper natural gas from Texas, forcing them to rely on foreign sources. Additionally, it impacts the environment negatively by necessitating longer transportation routes by truck or rail instead of by ship. Repealing or amending the Jones Act could reduce living costs in regions like Hawaii, Alaska, and Puerto Rico, revive the U.S. shipbuilding industry, and lower transportation costs.
Key Points:
- The Jones Act increases shipping costs by requiring U.S.-built and manned ships for domestic routes.
- Repealing the act could lower energy costs, especially in New England, Hawaii, Alaska, and Puerto Rico.
- The act has led to a decline in U.S. shipbuilding, with American ships costing significantly more than foreign ones.
- It negatively impacts the environment by forcing longer transportation routes by land instead of sea.
- Amending the act could revive the U.S. shipping industry and reduce consumer costs.
Details:
1. 🚢 Critique of the Jones Act
1.1. Economic Impact of the Jones Act
1.2. Operational Constraints and Competitive Disadvantage
2. 💡 Proposal for Repeal or Reform
- Connecticut Governor Ned Lamont has called for Congress to rethink the Jones Act, suggesting that repealing or substantially changing it would help reduce rising prices by lowering energy costs, particularly in Connecticut and the rest of New England.
- The repeal or reform of the Jones Act is proposed to meaningfully reduce the cost of living in Hawaii, Alaska, and Puerto Rico by reviving the uncompetitive commercial shipbuilding industry and cutting transportation costs.
- Passed in 1920, officially called The Merchant Marine Act, the Jones Act mandates that cargo transported by water between two American ports must be on ships that are U.S. built, U.S. owned, manned by U.S. crews, and registered in the U.S.
- The act has unintentionally harmed the U.S. shipping industry by sheltering American shipbuilders from foreign competition, contrary to its original intention to protect and revive the industry.
3. 📉 Economic Consequences
- American-built container ships cost between $200 and $250 million, compared to $40 to $50 million in Japan and South Korea, highlighting a significant disparity in construction costs.
- A large cargo ship in the U.S. costs between $225 and $250 million, whereas similar ships cost $45 to $50 million overseas, indicating inefficiencies in the American shipbuilding industry.
- The higher costs of American shipbuilding can be attributed to labor costs, regulatory compliance, and materials, which are significantly lower in Asian countries.
- This cost disparity affects the competitiveness of the U.S. shipping industry, leading to a reliance on imports for more affordable ships and potentially impacting domestic employment and economic growth.
- Addressing these economic consequences requires strategic policy interventions to reduce costs, such as investing in automation and negotiating trade agreements to level the playing field.
4. 🌍 Impact on Global Trade
- The US is a leading producer of natural gas, with Europe as a major consumer, seeking alternatives to Russian supply.
- Despite high production, the US relies on foreign-made liquefied natural gas carriers, as domestic production of these vessels is absent.
- The Jones Act significantly raises energy costs for US consumers by prohibiting direct domestic shipments of resources like natural gas from Texas to New England, forcing reliance on foreign imports.
- East Coast refiners must import oil due to legal restrictions, despite proximity to domestic sources like Texas.
- The Jones Act also affects oil shipments from Alaska to the West Coast, increasing costs and leading to sales in Asia instead.
- The constraints of the Jones Act illustrate a critical bottleneck in US domestic and international trade logistics, impacting global supply chains.