By Giovanna DaSilva
The Merchant Marine Act of 1920, commonly referred to as the Jones Act, is a law enacted to protect the United States’ maritime industry, regulate commerce, and bolster national defense. While well-intentioned, the act fails to reflect the current needs of the United States. Repealing the Jones Act would prove beneficial to economic growth.
The Jones Act is a modern iteration of regulations imposed on maritime trade, going as far back as 1790. The act’s sponsor, Wesley Jones, wrote of the importance of facilitating the growth and development of a merchant marine in order to strengthen national defense and the shipping industry.
Today, proponents still argue the Jones Act is essential for maintaining jobs, fostering economic growth, and preserving the United States’ maritime industry. They posit that the act allows the American maritime industry to remain competitive in an era of globalization.
One of the main provisions of the act requires vessels that carry goods between American ports are: “owned by U.S. companies that are controlled by U.S. citizens with at least 75 percent U.S. percent ownership; at least 75 percent crewed by U.S. citizens; built (or rebuilt) in the United States; and registered in the United States.”
This requirement restricts market competition within the shipping industry, thus increasing the cost of shipping. The act negatively impacts Puerto Rico in particular. Instead of receiving shipments from neighboring islands at a substantially cheaper price, the island must pay for overpriced US shipments.
Increased domestic shipping costs incentivize states to import commercial goods from abroad instead of shipping goods from other states, to the detriment of domestic industries. Shipping Texas oil to Boston, Massachusetts costs three times more than importing similar oil from Europe.
Researchers Russ Kashian, Ike Brannon, and Jeff Pagel argue the Jones Act impedes the growth of several American industries. They cite estimates from transportation economists Joseph Francois and his colleagues, in the article, “Commercial Policy and the Domestic Carrying Trade,” who found that repealing the act would increase revenues in the water transportation sector by $1.5 billion.The chemical, plastics and lumber sectors would also prosper. Alaska, Hawaii and Puerto Rico would realize around $5-15 billion more in annual revenue.
Florida, on the other hand, ranks second among the states in maritime jobs, and might see a decline in related employment and revenue. However, repeal of the Jones Act could increase economic growth by bolstering other sectors of the economy responsible for a large portion of the state’s GDP. Francois and his coauthors speculate that any jobs lost in the maritime industry could be replaced by growth in industries such as the domestic water sector, agriculture, trade, and manufacturing.
Jones Act protectionism shields the shipping industry from market competition at the expense of increased costs to the American consumer and US industries. While politicians and interest groups champion the act as an “America first” policy, it is ultimately in America’s economic best interest to repeal the act entirely even if states such as Florida find themselves at a temporary disadvantage until they adjust to a more competitive global economy.