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Colin Grabow



Articles by Colin Grabow

Needed: Straight Talk on the Jones Act and LNG

25 days ago

Last week Aaron Smith, president and CEO of the Offshore Marine Service Association, testified before the House Subcommittee on the Coast Guard and Maritime Transportation. As the head of a group which ardently backs the Jones Act it was no surprise that Smith used his opening statement to press for an even more restrictive interpretation of the law’s provisions. Shortly after that statement he then had this exchange with Rep. Bob Gibbs (R-OH), the subcommittee’s Ranking Member:

Gibbs: "We’re exporting LNG now—largest producer in the world of natural gas and oil. And my understanding is…we pick up LNG shipments in the Gulf area and then they export to other countries but to get LNG in needed areas of the country, like in New England area for example, they have to get it from foreign.

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Assessing the Jones Act’s National Security Rationale

November 12, 2019

The Jones Act has been a blight upon the United States for nearly 100 years. That the law survives despite its well-documented costs can in large part be ascribed to frequently-made claims it is vital to U.S. national security.
Such claims should be greeted with a skeptical eye.
As I explain in a new paper, decades of evidence suggest any contributions made by the law to national security are vastly overstated. In fact, there is considerable reason to think the Jones Act is a net national security liability.
The facts are these: under the Jones Act’s watch the U.S. maritime sector has suffered grievous setbacks. Numerous shipyards have closed, the domestic fleet’s numbers have dwindled, and the pool of mariners that the military draws upon to crew its sealift fleet has become perilously

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Want Americans to Buy U.S. Products? Dump the Jones Act.

November 4, 2019

Jones Act supporters often argue that the law, which mandates the use of U.S.-flagged, U.S.-built vessels that are at least 75 percent U.S. owned and crewed for purposes of domestic transport, epitomizes President Trump’s philosophy of “America First.” But as a new Wall Street Journal editorial points out, the truth is perhaps closer to the opposite:
[The Jones Act is] a particular problem for liquid natural gas, since there are zero LNG tankers that meet Jones Act rules. That means Puerto Rico effectively is barred from importing gas from LNG terminals in Georgia or Louisiana. As a result, it apparently turned to Siberia. The same happened two winters ago in New England, where gas is short due to a lack of pipeline capacity. A tanker of Russian gas was unloaded in Boston. How is this an

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Why Is an Energy Powerhouse Importing Russian LNG?

October 23, 2019

In the coming days a Spanish-flagged ship, the Catalunya Spirit, will deliver a shipment of Russia-originated liquefied natural gas (LNG) to Puerto Rico. Bizarrely, the United States—a leading exporter of LNG—is nonetheless importing it from a geopolitical rival. And this isn’t a first. Last year a supply of Russian LNG arrived in Boston amidst a spike in demand to fight off the winter cold.
So what gives?
Basically, the Jones Act. This 1920 law mandates that vessels transporting cargo within the United States must be U.S.-registered, at least 75 percent U.S.-owned, at least 75 percent U.S.-crewed, and U.S.-built. But no ships capable of transporting LNG in bulk quantities that meet these requirements exist. Of the world’s more than 525 LNG carriers, not a single one is Jones

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Old Ships Still Abundant in the Jones Act Fleet

October 1, 2019

Four years ago today the United States suffered a horrible maritime tragedy with the sinking of the Jones Act-qualified containership El Faro. Caught in the midst of Hurricane Joaquin during its voyage from Jacksonville, Florida to San Juan, Puerto Rico, the ship was lost with all hands. Although investigations performed by the Coast Guard and National Transportation Safety Board largely assigned blame for the disaster to the ship’s captain for his failure to divert away from the storm, the El Faro’s advanced age also garnered considerable attention. Built in 1975, the ship was 40 years old when it slipped beneath the heaving waves.
For an oceangoing ship that is ancient. A ship’s useful life is commonly estimated to be anywhere from 20 to 30 years, and some observers place that figure

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An Opportunity for Trump to Lead on Jones Act Reform

August 26, 2019

President Donald Trump and U.K. Prime Minister Boris Johnson met on the sidelines of the G7 summit this weekend, and among the issues discussed was a possible U.S.-U.K. free trade agreement. In public remarks Johnson made clear his desire that such a deal include cabotage privileges for U.K.-flagged ships:
PRESIDENT TRUMP:  We’re having very good trade talks between the UK and ourselves.  We’re going to do a very big trade deal — bigger than we’ve ever had with the UK.
And now, they won’t have it.  At some point, they won’t have the obstacle of — they won’t have the anchor around their ankle, because that’s what they had.  So, we’re going to have some very good trade talks and big numbers.
PRIME MINISTER JOHNSON:  Talking of the anchor — talking of the anchor, Donald, what we want is

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For More U.S.-Flag Ships, Lift the Domestic-Build Requirement

August 23, 2019

Maritime Administrator Mark Buzby has a problem. As head of the Maritime Administration he is charged with crewing and operating the Ready Reserve Force (RRF), a government-owned fleet used for the rapid deployment of U.S. military forces. Speaking at a Navy League-sponsored breakfast earlier this week, however, Buzby expressed worry there aren’t enough mariners to operate these ships. The RRF, while used in a military role, relies upon civilian mariners to operate them in wartime scenarios. And those mariners are in short supply.
In fact, a 2017 government report found that for a sustained sealift campaign the United States faces a deficit of approximately 1,800 mariners for those needed to crew the RRF and maintain commercial fleet operations—and that’s in a best-case scenario. The

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For More Short Sea Shipping, Get the Federal Government Out of the Way

July 1, 2019

Freight transport on the country’s coasts and inland waterways, more commonly known as short sea shipping, is in a pitiable state. Despite being the most energy-efficient method of freight transport it accounts for a mere 6 percent of domestic tonnage moved. The corresponding figure in Europe is 40 percent. Instead of using waterborne transport, Americans place about 75 percent of their freight on trucks. That means more highway congestion, more highway maintenance, and more pollution.
This is unlikely to change if a recent House Coast Guard and Maritime Transportation Subcommittee hearing on short sea shipping is any indication. 
At the hearing, Ranking Member Rep. Bob Gibbs (R-OH) noted various explanations for the dearth of short sea shipping such as ports configured to handle

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New Report Exposes Jones Act’s Flaws

May 23, 2019

Evidence of the Jones Act’s failures continues to mount. Just weeks after the release of an OECD study predicting substantial gains from the law’s repeal, the Congressional Research Service (CRS) has a new report out which places the law’s shortcomings in sharp relief.
The report’s description of U.S. shipbuilding is particularly eyebrow-raising. Rather than bolstering this sector through the Jones Act’s domestic build mandate, the CRS notes the sector has experienced a steady deterioration in competitiveness since the law’s passage:
A 1922 government report on shipbuilding indicated that U.S.-built ships cost 20% more than those built in foreign yards. The cost differential increased to 50% in the 1930s. In the 1950s, U.S. shipyard prices were double those of foreign yards, and by

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Chinese Ships on the Mississippi River: Just Another Jones Act Tall Tale

May 21, 2019

Did you know that the Jones Act prevents Chinese ships from sailing on the Mississippi River? That, at least, is what Rep. Brian Babin (R-TX) claimed in a recent speech on the House floor. For dramatic effect the congressman used a picture of a ship flying an oversized Chinese flag with St. Louis’s Gateway Arch prominently displayed in the background:

“This is a hypothetical picture, thank goodness,” said the Texas congressman. “A Chinese-built vessel, subsidized by their communist regime, operated by the Chinese and delivering Chinese goods all in the very heartland of the United States of America. But this could easily become a reality if the Jones Act is waived.” 
Other Jones Act supporters have made similar warnings. Clay Maitland, the chairman of the Merchant Marine Policy

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Jones Act Waiver Gets Swamped

May 2, 2019

Well, no one said reforming the Jones Act was going to be easy. 
A week after reports emerged that President Trump was leaning toward granting a ten year Jones Act waiver for the transport of liquefied natural gas (LNG) by non-U.S.-flag ships, he seems to have reversed course following a meeting with congressional Jones Act advocates. Confronted with the very swamp creatures that he loudly campaigned against, the president apparently folded—bigly. The members of Congress who spoke with President Trump emerged from the White House projecting supreme confidence that a Jones Act waiver is now effectively off the table. 
While it is impossible to know what swayed President Trump, it beggars belief he was convinced by arguments made on economic grounds. Quite simply, there aren’t any.
If

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Rep. John Garamendi’s Questionable Defense of the Jones Act

April 29, 2019

To paraphrase Ronald Reagan, the problem with Rep. John Garamendi (D-CA) isn’t so much that he is uninformed, it’s just that he knows so many things that aren’t so. That, at least, is the impression one is left with after reading the California congressman’s latest op-ed in defense of the Jones Act which is replete with errors, half-truths, and contradictions. 
Disturbingly, the Chairman of the House Armed Services Committee’s Readiness Subcommittee fudges even basic facts. In the op-ed’s fourth paragraph, for example, Rep. Garamendi claims there are only 81 U.S.-flag oceangoing vessels. The latest data from the U.S. Maritime Administration, however, shows 180 such ships.
Rep. Garamendi later warns about the dangers of employing foreign-flag ships to transport supplies and equipment

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President Trump Considering a Jones Act Waiver

April 24, 2019

New reports suggest that President Trump is considering granting a Jones Act waiver to allow non-U.S.-flagged ships to transport natural gas from energy-rich parts of the United States to the Northeast and Puerto Rico. He should do so without delay. Granting this waiver would mark not just a triumph of common sense, but also help fulfill President Trump’s campaign promise to take on the Washington special interests who profit from laws such as the Jones Act at the expense of American consumers and businesses.

To learn more about this issue both the public and media alike are invited to attend an April 30 event at the Cato Institute that will examine the Jones Act’s impact on Puerto Rico. Featuring Puerto Rico’s Secretary of State, the president of the Puerto Rico Economic Development

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Doubling Down on Failed Maritime Protectionism

April 1, 2019

What to do when confronted with the failures of U.S. maritime protectionism? Call for more protectionism, of course. That, at least, is the apparent attitude of some members of Congress.
A notable aspect of the Jones Act debate is that the law’s supporters often admit, albeit tacitly, that it isn’t working very well. Rep. John Garamendi (D-CA) is a case in point. Participating in a recent panel discussion at the Brookings Institution, Rep. Garamendi readily conceded the enervated state of U.S. shipbuilding. “What remain of the American shipyards”—approximately 300 shipyards have closed since 1983—consist of “mostly small shipyards,” according to the California Congressman, as well as a few large ones which are “producing ships for the Jones Act but not for the international trade.”

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New Jones Act Ship No Cause for Celebration

March 18, 2019

Earlier this month a new Jones Act-eligible ship, Kaimana Hila, was officially christened when Rep. Tulsi Gabbard broke a ceremonial champagne bottle against the ship’s super-structure. On the surface, the new vessel is a triumph. At 850 feet in length and featuring a cargo capacity of 3,600 TEUs Kaimana Hila is—along with sister ship Daniel K. Inouye—the largest containership in the Jones Act fleet. But this is no shining example of U.S. seagoing prowess. In fact, the ship is in many ways symptomatic of the damage and dysfunction wrought by the Jones Act upon the U.S. maritime industry.
Such dysfunction begins with the vessel’s $209 million price tag (Kaimana Hila and Daniel K. Inouye were purchased for a combined price of $418 million). In comparison, one of the largest

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The Jones Act Fleet: High Costs and Limited Capabilities

March 11, 2019

Jones Act shipping is expensive. So much so that, as a new Cato Institute video points out, it actually competes with aircraft on the island of Hawaii for transporting cattle to the mainland. 

[embedded content]
But the costly nature of Jones Act shipping is only one of the video’s key lessons. Another is the lack of appropriate ships to support such trade and the inefficiencies this creates. In a more economically rational world, Hawaiian cows would be sent to the West Coast aboard specially designed livestock carriers. 
But none exist in the Jones Act fleet, so ranchers in Hawaii make do with makeshift solutions such as using 747s or specialized containers placed aboard ships known as “cowtainers”—economic kludges not found anywhere else in the world. 

As Sarah Moore of the Kealia

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Jones Act Repeal Bill Introduced

March 7, 2019

Earlier today Senator Mike Lee introduced a bill to repeal the Jones Act. Such a move is long overdue. In place since 1920, the Jones Act mandates that goods transported by water between two points in the United States be done by vessels that are U.S.-flagged, U.S.-crewed, U.S.-owned, and U.S.-built. Ostensibly meant to bolster the U.S. maritime sector, the Jones Act has instead presided over its decline whether measured in the number of oceangoing ships, mariners to crew them, or shipyards to build them. 
While its benefits may be mythical, the law imposes very real burdens such as higher transportation costs, more highway congestion, more pollution, and even reduced access to U.S.-made products. In addition, the Jones Act’s rejection of competition and consumer choice should be

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New Reports Detail the Jones Act’s Cost to Puerto Rico

February 25, 2019

Last year the American Maritime Partnership released a report claiming that the Jones Act, a protectionist law which requires domestic water transport to be performed by vessels that are U.S.-made, crewed, owned, and flagged, imposes no cost on consumers in Puerto Rico. Riddled with apples-to-oranges comparisons and an opaque methodology—the no cost assertion was in large part based on a cost comparison of a mere 13 items sold by Walmart at its stores in Jacksonville, Florida and San Juan, Puerto Rico—the report was deeply flawed.
Just how flawed became more apparent last week when several Puerto Rico-based business groups released two analyses examining the Jones Act’s economic impact on the territory.
The first analysis, prepared by Puerto Rico-based Advantage Business Consulting,

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Jones Act Lobby Hits the Panic Button

February 20, 2019

Puerto Rico’s request for a limited Jones Act waiver to permit the importation of liquefied natural gas (LNG) from the U.S. mainland has touched off what can only be described as a near panic among the law’s supporters. Members of the House Transportation and Infrastructure Committee recently dashed off a letter to the administration expressing opposition to the move. The American Maritime Partnership and other pro-Jones Act special interests are currently urging supporters of the law to send “pre-formatted” emails to Congress. And this past weekend Matthew Paxton, the president of the Shipbuilders Council of America, published an op-ed blasting Puerto Rico’s waiver application.
Alarm bells are plainly ringing, and the Jones Act lobby is willing to do—and say—whatever it takes to

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Puerto Rico, LNG, and the Jones Act

February 8, 2019

In 2017 the United States reached a milestone: for the first time since 1957 the country was a net exporter of natural gas. Today ships laden with U.S.-produced liquified natural gas (LNG) travel the globe delivering their cargo everywhere from Japan to Jordan and Spain to South Korea. One place U.S. LNG is not exported to, however, is Puerto Rico.
Incredibly, that’s not despite the fact that Puerto Rico is part of the United States, but because of it. As a U.S. territory, Puerto Rico is subject to the Jones Act, a 1920 law which restricts the transport of cargo between two points in the United States to vessels that are U.S.-built, U.S.-crewed, U.S.-owned, and U.S. flagged. Out of the world’s 478 ships dedicated to transporting LNG, however, none meet these requirements. In other

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Another Failed Defense of the Jones Act

December 17, 2018

As the Cato Institute continues to press the case for Jones Act reform, defenders of this flawed and failed law have repeatedly made clear that they’ve taken notice. Fresh evidence of this was seen earlier this month with the publication of an op-ed on the leading maritime website gCaptain.com. Entitled “CATO’s Continued Attempt to Skin the Jones Act,” the piece was an obvious preemptive salvo launched a day prior to Cato’s recent conference on the law’s shortcomings. A close reading, however, reveals it to be another instance of Jones Act defenders missing the mark.
Examining the law’s history, author Sal Mercogliano—a professor at Campbell University—claims that prior to the outbreak of World War II that “the Jones Act, reinforced by the Merchant Marine Act of 1936 ensured that not

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Jones Act Reform Gaining Momentum

December 13, 2018

Last week was a busy one for advocates of reforming the Jones Act. On Thursday the Cato Institute held a well-attended conference on the subject that featured a veritable Who’s Who of Jones Act experts and reform advocates. Video of the conference has now been posted, and those who were unable to participate or watch live should make sure to check out the many outstanding presentations that were made.
But ours was not the only gathering where the law was placed under scrutiny. Last week also saw a panel discussion held on the Jones Act as part of the National Hispanic Caucus of State Legislators’ (NHCSL) annual summit in San Diego. Unfortunately, the panel consisted only of myself and a moderator as invitations to groups supportive of the 1920 law apparently went unanswered.

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The Jones Act Isn’t Working. Just Ask Its Supporters.

October 23, 2018

Although the Jones Act’s stated purpose is to ensure that the United States “shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency,” this plainly isn’t the case. But don’t take my word for it, just listen to ardent backers of the law such as Rep. John Garamendi (D-CA):
Our military relies on privately-owned sealift capacity and highly trained and credentialed merchant mariners to transport and sustain our armed forces when deployed overseas during times of conflict. But the number of ocean-going U.S.-flag vessels has dropped from 249 in the 1980s, to 106 in 2012, to at most 81 today.
The consequences of this steep

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Another Jones Act Absurdity

September 21, 2018

As North Carolina grapples with the aftermath of Hurricane Florence, transportation officials in the state are attempting to secure the use of a U.S. government-owned vessel, the Cape Ray, to transport supplies to the port of Wilmington. With the city temporarily transformed into an island by recent flooding, the roll-on, roll-off ship—or “ro-ro” in maritime parlance—will enable trucks filled with needed goods to drive aboard.
It’s a good thing the ship is government-owned—under private ownership the Cape Ray’s provision of relief supplies would be illegal. This absurd situation is due to a nearly 100-year-old law called the Jones Act. Passed in 1920, the law mandates that ships transporting goods between two points in the United States be U.S.-owned, crewed, flagged and built. The

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A Feeble Defense of the Jones Act

August 23, 2018

Rep. Duncan Hunter is not pleased with the Cato Institute’s efforts to repeal the Jones Act. Taking notice of a recent op-ed I penned criticizing the California congressman’s support of this costly law, Hunter took to the pages of the same newspaper last weekend to defend his stance. It’s worth reviewing the piece in full, as it recycles several arguments typically offered in support of the Jones Act—and exposes some glaring weaknesses.
Hunter begins his defense of the Jones Act by disputing accusations that the law negatively impacts Puerto Rico’s economy:
Like many opponents of the Jones Act, the CATO Institute attempts to conflate this 100-year old law with the struggles of Puerto Rico’s economy. They repeat the same tired argument that the Jones Act is responsible for high prices

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The Jones Act Makes Little Sense in a Globalized World

August 20, 2018

Late last month that rarest of commodities, a new U.S.-built commercial transport ship, completed its maiden voyage by entering the harbor of San Juan, Puerto Rico to deliver its cargo. Called El Coquí, the vessel is among the world’s first hybrid roll-on/roll-off container vessels—a “ConRo” in industry parlance—that is powered by liquefied natural gas. 
Supporters of the Jones Act, a protectionist law which mandates that ships transporting goods between U.S. ports be U.S.-owned, crewed, flagged, and built, have pointed to El Coquí as a symbol of the measure’s success. The President of the Shipbuilder’s Council of America cited “American skill and ingenuity, as well as critical laws like the Jones Act” in his remarks praising the new ship. A senior official with Crowley Maritime,

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No Jones Act Cost to Puerto Rico? I Have My Doubts

August 8, 2018

In a new op-ed I take issue Rep. Duncan Hunter (R-CA) for his unstinting support of maritime special interests and the Jones Act at the expense of average Americans. Particularly egregious is Hunter’s promotion of a recent report funded by a special interest group, the American Maritime Partnership, which makes the incredible claim that the Jones Act imposes no cost to consumers in Puerto Rico. Indeed, Hunter actually presided over a gathering of the House Subcommittee on Maritime Transportation meant to highlight its dubious findings.
While Hunter’s support for the AMP and the unseemly nexus between legislators and maritime special interests is the op-ed’s focus, the shortcomings of the AMP-funded report are worth exploring in greater detail.
From simply a theoretical perspective,

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There’s No Such Thing as a Trade Deficit

July 30, 2018

Concerned with how trade is commonly discussed, Greg Mankiw recently issued a plea to journalists to halt the use of subjective terms to describe trade flows. Rather than words such as “deteriorated” or “improved,” the Harvard economics professor (and noted textbook author) proposes that writers employ more objective language such as “the trade balance moved towards surplus.”
Mankiw’s plea is fine as far as it goes, but it probably doesn’t go far enough. The problem in the way trade is discussed lies not only in the descriptions applied, but the nouns themselves.
To speak of trade surpluses or deficits is utterly nonsensical, or at the very least a corruption of the term “trade” that incorrectly uses it as a synonym for “exports.” Trade, however, comprises both selling and buying,

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Navarro Misses the Boat on the Jones Act

July 12, 2018

In a recent Philadelphia Inquirer opinion piece White House economic advisor Peter Navarro hailed the christening of a new transport ship in the nearby Philly Shipyard as evidence of the “United States commercial shipbuilding industry’s rebirth.” As is typical of Navarro’s pronouncements, the reality is almost the exact opposite. In fact, a closer examination of the ship’s construction reveals it to be symptomatic not of a rebirth, but of the industry’s long downward slide.
Named after the late Senator Daniel K. Inouye of Hawaii, Navarro describes the 850-foot Aloha-class vessel as “massive” and notes that it is “the largest container ship ever built in the United States.” This, however, is somewhat akin to the tallest Liliputian. Although perhaps remarkble in a domestic context, by

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U.S. Maritime Sector Among the Jones Act’s Biggest Victims

June 28, 2018

Monday of this week marked the Day of the Seafarer, an occasion meant to recognize the critical role played by mariners in the global economy. American seafarers, however, increasingly find little to celebrate. A large source of their travails is the Jones Act. Signed into law 98 years ago this month, the law mandates that cargo transported between two domestic ports be carried on ships that are U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-crewed.
The harm caused by this law is well documented. By reducing competition from foreign shipping options and mandating the use of domestically built ships that are vastly more expensive than those constructed elsewhere, the Jones Act has raised transportation costs and served as a de facto tax on the economy.
Too often overlooked is that the

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