Facts and observations about the Jones Act

1. In 2011, 67 percent of the vessels operating in the Port of San Juan were foreign flag vessels, often Panamanian.  Of course they were not carrying cargo from the United States.  That limits the economic costs of the Jones Act, but also implies it doesn’t do much to keep up U.S. shipbuilding for military purposes.  I found this GAO report useful.

2. How can we achieve the military purposes of the Jones Act?  Some observers recommend direct subsidies, but those are much more costly and furthermore require targeting and thus a more specific brand of crony capitalism.  We tried such subsidies in the past and abandoned them due to cost.

3. China, South Korea, and Japan account for over 91 percent of the flow of new ships, circa 2015.  That is sourced from this Mercatus study, by Thomas Grennes, which is the best piece I’ve found on the Jones Act and also the source for the points to follow.

4. What counts as an “American ship” for Jones Act purposes is not always defined or enforced very rigorously.  If deep trouble were to hit East Asia, it might not be possible to expand the production of American ships very much, because of reliance on foreign components.

5. In 1960, there were 2,926 large ships in the U.S. fleet, now there are only 169 such ships.  And of those, only 91 are Jones-Act eligible.

6. Wages on American ships are five times higher than on comparable foreign-flag vessels.  The crews for the latter are often Filipino or Chinese.  Part of the Jones Act motivation is to have surge capacity on the crew side, not just on the shipbuilding side.

7. The cost of producing new ships in American shipyards is four to five times higher than in the relevant foreign shipyards.

8. Given changing share ownership, we don’t even know if “American-owned” ships, for Jones Act purposes, are necessarily American-owned or controlled.

9. John McCain introduced a bill to repeal the Jones Act as long ago as 2010.  He has argued the Act serves no useful military purpose, as it still does not leave America with a useful “surge capacity” for military purposes.  This problem remains outstanding.

10. Trump did just temporarily waive the Jones Act for Puerto Rico.  While this is to be applauded, in the short run this still won’t help very much, as the main problem is transport and infrastructure on the island, not shipping per se.


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