It has become popular in recent years to criticize the Jones Act. Some argue that it's 100 years old and therefore outdated. Others argue that it increases the prices of consumer goods. Another argument is it increases costs to islands like Hawaii and Puerto Rico. But all of these arguments lack factual foundation. They are merely empty words or rhetoric, and cold hard facts refute them.
The Jones Act does not prevent any nation from shipping goods to or from America. But within the borders of America or between its ports, shipping must be handled by American ships and American crews. These American ships and crews work in our heartland and when the U.S. military needs their sealift capability to move troops or military assets and supplies, they stand ready. These American crews are also well-trained to watch for security risks so that our homeland security resources can be concentrated where they are needed most and not diluted by focusing on every mile of every internal waterway.
Why is this law considered antiquated? Do we really want ships and crews from the communist Chinese regime or other enemies to have full and free access to America's heartland?
As to costs, a recent study by Reeve & Associates and TZ Economics proves that the Jones Act has little impact on the price of goods shipped to Hawaii from the mainland. And of course, the cost of goods shipped from other nations isn't impacted in any way by the Jones Act because it doesn't prohibit such activity.
The study examined a basket of 200 consumer goods purchased from major retailers such as Walmart, Home Depot, Target and Costco and found no significant difference in the prices on the mainland and Hawaii. In fact, the vast majority of the items were the exact same price as on the mainland. The overall cost difference was about 1/2 of one percent. Interestingly, some of the goods were actually cheaper in Hawaii.
Of course, Hawaii is known for its high cost of living, but that cost is primarily driven by housing costs and other factors. The study found that those high cost of living numbers were not driven by the type of consumer goods shipped to Hawaii from the mainland on Jones Act ships. For the record, Frontiers of Freedom conducted a similar study a few years ago pricing consumer goods in Puerto Rico and found substantially the same results. The facts demonstrate over and over that the Jones Act does not increase prices to American consumers.
The vast majority of expenses of shipping between U.S. ports are entirely unaffected by the Jones Act. The U.S. Maritime Administration says that if a foreign flagged and crewed ship were allowed to operate within the U.S., it would be required to comply with "all the work rules and manning requirements in the U.S. that affect labor productivity and crewing flexibility that result in overall crewing costs that contribute approximately $12,000 to $15,000 per day to total U.S.-flag operating costs."
The study also concludes that the Jones Act makes a number of positive economic contributions — job creation, infrastructure investment, and a reliable supply chain important to consumer and industrial goods moving to and from Hawaii.
In Hawaii alone, the Jones Act supports more than 13,000 high paying jobs and provides $787 million in annual income to the workforce and more than $3.3 billion in economic activity to the state. The study also reveals that shipping rates between the mainland and Hawaii have actually declined in real terms, while inflation and intercity trucking prices have increased by a whopping 28%. And the Jones Act carriers have reduced their shipping rates even while they have endured a 50% increase in wharfage charges for port improvements.
There are other benefits the Jones Act provides. For example, the study reveals that there is ample shipping capacity to meet the needs of Hawaiian consumers and businesses. Jones Act shipping carriers have increased their capacity by 22% in the last five years alone. Jones Act shippers have provided more than $2 billion in transportation technology that is highly customized for Hawaii and its needs. Moreover, those new ships are highly fuel-efficient and environmentally friendly.
The bottom line is that Jones Act detractors are wrong on national security grounds, wrong about shipping costs, wrong about the act's impact on the cost of consumer goods, wrong about the jobs it creates, and wrong about the overall benefits to consumers, business and the nation.
George Landrith is the President and CEO of Frontiers of Freedom, a public policy think tank devoted to promoting a strong national defense, free markets, individual liberty and constitutionally limited government. To learn more about Frontiers of Freedom, visit www.ff.org. Read George Landrith's Reports — More Here.
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