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The Jones Act at 100: Time to Make This Protectionist Law History

Summary:
The Jones Act turned 100 years old last week. While numerous lawmakers rushed to pay homage to it, we’ve opted, as trade policy analysts, for a different approach: the release of an edited volume, The Case against the Jones Act, which delves into the costs of the law and the founding myths and false narratives its supporters have used to perpetuate it. One of these myths has to do with the Jones Act’s very origins. As commonly told, the law dates back to the aftermath of the First World War and a desire to shore up the U.S. commercial fleet. But that is, at best, an incomplete picture. The Jones Act’s real story is far more sordid. To properly understand the law, one must first go back to the very founding of the republic. Meeting in 1789, one of Congress’s first acts was to encourage the

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The Jones Act turned 100 years old last week. While numerous lawmakers rushed to pay homage to it, we’ve opted, as trade policy analysts, for a different approach: the release of an edited volume, The Case against the Jones Act, which delves into the costs of the law and the founding myths and false narratives its supporters have used to perpetuate it. One of these myths has to do with the Jones Act’s very origins. As commonly told, the law dates back to the aftermath of the First World War and a desire to shore up the U.S. commercial fleet. But that is, at best, an incomplete picture. The Jones Act’s real story is far more sordid. To properly understand the law, one must first go back to the very founding of the republic.

Meeting in 1789, one of Congress’s first acts was to encourage the use of American ships to carry U.S. commerce through the use of discriminatory taxes and tariffs. But this took place in a very different environment. At the time, U.S. shipbuilders and sailors were among the world’s best, both in terms of cost and quality. U.S. ships were so competitive that some scholars have gone so far as to argue that these measures encouraging their use were essentially cost‐​free.

Beyond the measure’s low cost, a national security calculus also no doubt loomed in Congress’s thinking. In the recently‐​concluded Revolutionary War, repurposed merchant ships sailing under the U.S. flag—so-called privateers—captured or destroyed approximately 600 British ships. In times of war, such ships could again be called upon to serve as a naval auxiliary. Ensuring their availability through laws favoring the use of such ships was plainly in the national interest.

But as time passed, U.S. shipping laws became ever more restrictive, and the rot of protectionism began to set in. By the mid‐​1800s the age of sail and wood began to give way to a new era of steam and iron, and eventually steel. Rather than adapting, U.S. shipping firms and shipbuilders—ensconced in a protected domestic market—clung to their old ways. The competitiveness of U.S. ships had so eroded, that by the 1890s one shipper decided to send 250 kegs of nails from New York to Los Angeles via Belgium in order to circumvent the prohibition on using foreign ships to transport goods between two U.S. ports.

Congress closed that loophole, but another soon emerged. Goods were being sent on land from Seattle to Vancouver and then onto Alaska via cheaper foreign ships. While the arrangement was beneficial to Alaska, it raised the ire of Seattle shipping interests. When Sen. Wesley Jones of Washington, chairman of the Senate Commerce Committee, began a series of hearings in 1919 on the U.S. maritime industry, these Seattle shipping firms saw their chance.

In early 1920, a representative of the Pacific Steamship Company, appeared before Sen. Jones’s committee and decried foreign competition from Canada, out of whose ports operated “coastwise steamers … of a class and character calculated to take away from the United States water carriers the business of Alaska.” He proposed new language to govern domestic waterborne transport to eliminate this less expensive means of transporting goods to Alaska. This proposal, and the language that was eventually adopted, bear an uncanny similarity.

That language forms the basis of the Jones Act today. Folded into the Merchant Marine Act of 1920 as Section 27, the Jones Act was passed with practically no debate by the Senate and without a recorded vote. Alaska, not yet a state, but the part of the country most affected by the Jones Act, had no say in the matter.

The world has changed dramatically since 1920—never mind 1789—yet the Jones Act has not. The results speak for themselves. Protected U.S. commercial shipbuilding, once renowned, is now largely notable for its expense and technological inferiority. The Jones Act fleet, numbering as many as 257 ships in 1980, has declined to less than 100 as less expensive means of transport are sought. This withered fleet, inadequate to the needs of the world’s largest economy, also barely fulfills its mission as a naval auxiliary. When the military requires sealift, Jones Act ships are rarely used.

The United States needs laws that keep up with modern times. But the Jones Act has plainly kept us stuck in the past.

Although the law lies in our midst mostly unnoticed, its protectionist origins and the economic burden it has placed on the United States cannot be forgotten. The Jones Act is a textbook case of concentrated benefits and diffuse costs. Most Americans are unaware of either the law or the increased costs that they bear as a result of it. The U.S. maritime industry that profits from the law’s restriction on competition, however, is hyperattentive to the law and lobbies heavily to maintain it. It’s time for Congress to repeal this law and to make the Jones Act history.

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