Designed to protect U.S. shipyards and its workers while also serving as a key element of national security, the Jones Act is arguably the most significant piece of legislation in the maritime industry. These considerations are not unique to America, as the majority of the world’s shipping ports have some type of Jones Act equivalent to protect against foreign intrusion in a country’s domestic industries. Nonetheless, efforts to dismantle it have continued, led by certain lawmakers who would allow foreign mariners into domestic markets.
Michael G. Roberts, "Staying Afloat: Why America Needs the Jones Act to Compete with China and What to Do Next" report takes on the job of addressing and dismantling arguments around why such efforts are misguided. In this free resource, Roberts lays out the serious and negative impacts on American security that a Jones Act repeal would produce while also outlining the essential role it should further play in America’s national security.
A full exploration of these issues will take place at the International WorkBoat Show during the "State of the Jones Act in 2024" keynote address, which will provide a comprehensive understanding of the current Jones Act landscape and its implications for the maritime industry. To provide a baseline for this conversation, we connected with Roberts to further explore some of the insights from his recent report as well as from articles like "Rewriting the Future of America’s Maritime Industry to Compete with China". We talked about the challenges with the policies governing America’s commercial maritime industries, what critics of the Jones Act get wrong, what can be done to sort out the issues and much more.
Jeremiah Karpowicz: You started working in the maritime industry in 1984 but soon became part of the team at Crowley, where you provided senior leadership with the information they needed to make decisions related to key industry developments like the Maritime Security Program (MSP) and the Coast Guard Authorization Act of 1998. What can you say about how these pieces of legislation made an impact on where things are in the industry today?
Michael G. Roberts: Key laws affecting the economic aspects of the US maritime industry were last written in the post-Cold War 1990’s. The Maritime Security Act of 1996 retained a small US flag presence in international markets, The Jones Act itself was challenged but kept intact (although certain financing rules were relaxed in the Coast Guard Authorization Act of 1996). The Ocean Shipping Reform Act of 1998 deregulated the container shipping industry. Proposals to support commercial shipbuilding in the US could not find a consensus and were abandoned. Aside from important legislation governing vessel operations (security, environmental and similar functions) those would end up being the most significant pieces of legislation passed for years and in many ways the industry over the past thirty years was built on that framework.
It’s important to remember that those key decisions about maritime policy came together during the Pax Americana of the 1990s. Americans weren’t really concerned about superpower conflict, and there was considerable doubt about the value of an American maritime industry. You have to remember that when President Clinton took office, they wanted to radically cut back on maritime industries.
Fortunately, we had a very strong leader at the Maritime Administration by the name of Admiral Al Herberger, and he was able to push through a reformed maritime security program. While it was smaller than previous programs, it kept an American presence in international trade. It's kept us in the game.
A good portion of the next twenty years of my personal career (aside from practicing law) have been spent defending the Jones Act, which has meant dealing with the traditional misguided arguments around whether we should allow foreign mariners to take jobs away from American mariners in our home markets. The geopolitical threats of recent years, particularly the emergence of an aggressive People’s Republic of China (PRC) and its overwhelming shipping and shipbuilding industries, have really changed the conversation around the entire maritime industry.
I want to explore both of those things, although your "Rewriting the Future of America’s Maritime Industry" article fully details the latter. Briefly though, what are the most significant challenges with current maritime policies that are specific to China’s geopolitical position?
China has upended two key assumptions. One is that America would always be the sole global superpower and not be really seriously challenged. We now know there's a serious challenge out there. We can meet the challenge but we have to change what we're doing to succeed in many areas, and that includes the maritime industry.
The other is how the maritime industry is related to national power and economic security. The shipping and shipbuilding industries are way more important to both than we assumed. The “we” here being the general population. I'll speak for the general population and say that we assumed these industries would never again be as important as they were during and after World War II, but that view has turned out to be highly questionable, if not clearly wrong.
One of my questions for you was going to be whether or not America's domestic maritime industry is inherently linked to American security, but I don’t really need to ask that since it’s pretty clear your answer to that is “yes.”
It is, for several reasons.
One is that this industry serves as a base market for our shipbuilders. It's not a massive market and it's not big enough to produce economies of scale for most types of vessels. But it’s big and diverse enough to keep a shipbuilding industrial base alive. Commercial shipbuilders in the US get almost no government support other than a market that they can build into, whereas the Chinese are spending many billions each year on their shipping and shipbuilding industries. That’s government money directly supporting their commercial shipping and shipbuilding industry. So it's radically different.
Because we have a domestic build requirement, we have shipyards that are still in business and that have survived. They’re preserving a critical mass of capabilities, expertise and facilities that we can scale up if we need to. That's been the philosophy, but I think it needs to evolve.
I think the approach needs to adjust significantly toward a more robust American capability with shipping and shipbuilding. Now that we see where China has gone, and where the military and economic risks are, we need to adjust so that these core American industries can more effectively support our homeland security, our economic security and our military security.
I imagine those adjustments would directly or indirectly mean strengthening the Jones Act, and we continue to see headlines about how we should do the opposite. Can we break down the core fallacy that leads some to think that American shipping and shipbuilding industries are uncompetitive? What is defining these arguments and how have you been able to combat them?
Those who are hostile to the Jones Act make several claims that simply aren't true. They tend to rely on four core talking points to support a blatantly false story.
The first is a historical argument. They’ll say that the Merchant Marine Act of 1920, which we call the Jones Act, was special interest legislation primarily about domestic shipping, but that is absolutely false. Section 27 is the only provision that relates to domestic shipping. It concerned a minor exception to the core domestic shipping laws that went all the way back to the 1780s, when we were a new nation that didn’t want to have British or Spanish or any other ships moving commerce from port to port in the United States. The first American government wanted American ships to do it so that Americans had control over our internal markets. That’s been the law ever since. We should stop referring to “Jones Act ships”, and just call them “American ships”, which is more accurate and better public relations!
The second falsehood concerns the nature of the requirement itself. If you're moving cargo between two US points by truck or rail or pipeline, you're going to have to use American workers to do it. They’ll have to use an American-licensed truck or railroad or pipeline, and that’s just understood. But if it’s moving by ship, all of a sudden, it’s seen as outrageous protectionism. And that’s just conceptually wrong. It is normal business regulation to prohibit foreign trucks, railroads, pipelines or ships from carrying cargo in our domestic markets.
The third is around the competitiveness of the American maritime industry. The reality is that the domestic markets are quite competitive, even though there are segments that are more competitive than others. That’s true of any large, diverse market, but generally speaking, the domestic shipping and shipbuilding industries are highly competitive. Most business people and bankers and investors understand that. It’s the people caught up in a false anti-Jones Act narrative that don’t.
Finally, there’s a narrative around what would happen if the Jones Act went away, how there would supposedly be all sorts of competition that would drive prices down and force the US industry to tighten its belt. But what would really happen is that the rules for competing would be changed to the disadvantage of American workers and companies. There would be no more American crews on American ships if they were forced to compete in domestic markets with ships having a starting salary of $8,000 per year. And customers and consumers would see no economic benefits from getting rid of American ships.
We need to directly address these sorts of false statements, as an industry, and tell them what they’re saying about American companies and American workers is flat wrong. All of that needs to be called out in a bigger way, and in fact, we need to be outraged about what they're saying about this industry. They've gotten away with it for a long time.
As your reporting points out, domestic shipping markets are generally more competitive than domestic rail and pipeline markets, so what’s really driving these sorts of narratives in the face of the bottom-line reality?
The two sides too often talk past each other, with the pro-Jones Act side saying, “We’re very important to American security,” and the anti-Jones Act side saying something like, “you're not as cheap as the foreign carriers, therefore you're not competitive.” And underlying that are even more egregious implications, that this American industry is somehow complacent or even corrupted by these laws. That’s the sort of message that they've conveyed in this whole debate for the last 30 years. And while I agree completely with the national and homeland and economic security value of this industry, we need to call them out for their utterly false attacks on the industry because they’re wrong about all of it.
The fact is, this is a tough industry. And it’s especially tough when you consider it's not just head-to-head, ship-to-ship competition, but it's ship-to-rail, ship-to-pipeline, ship-to-truck. So there's modal competition. And sourcing competition, the fact that any importer or supplier has the freedom to find other sources for materials if the total costs of delivery are too high. All of that constrains what American shipping companies can charge. It’s just a very tough, competitive market.
What’s also driving it is a refusal to accept the fact that costs are higher for American ships, just as they are for American taxi drivers or American anything. There are costs associated with everybody who works on American soil, and we have to live with that. It’s part of our sovereignty and part of controlling our domestic economy.
Then you look at the ship-building side of things, where the demand signal is relatively small compared to the international market. There are still maybe half a dozen shipyards competing against each other. It’s a tough business on every side.
All of that is why I’m hoping the second report I issued in May is helpful when it comes to fully resolving issues that, frankly, we sorted out almost 30 years ago. I want to get beyond these false narratives and focus on where we can grow this industry to meet global challenges.
Yes, let’s talk about those kinds of specifics from your reporting because while you mentioned that there is no magic wand when it comes to solving these challenges, you advocated for a 250-ship program that would triple the size of the US flag fleet. Is that sort of growth based on what you think is realistically possible, or purely driven by the needed security benefits that would come from that kind of increase?
There’s a lot to this, but the first point really is that we need a goal. We can't just say we need “better” or “more.” That doesn't get us anywhere. We need a true objective.
The 250-ship number actually came out of a podcast discussion I had with Admiral Buzby a couple years ago. Admiral Buzby was the former Commander of the Military Sealift Command and later the head of the Maritime Administration. He is absolutely without peer in terms of being an authority over America's military sealift needs. And it was his view that we ought to have at least 250 ships that could account for what he saw as a change in the risk profile we have with China and the possibility of a war in the western Pacific. This includes a small cushion for attrition and uncertainty.
Since then, things have further changed with our risk profile increasing in Europe (with Russia’s invasion of Ukraine). The minimum military sealift need has only gone up since Admiral Buzby suggested the 250-ship fleet.
And remember, that’s just to meet military sealift requirements. That doesn't take into account civilian population needs that the US flag has historically covered going all the way back to World War II and could become just as relevant in a conflict or crisis involving China. So that's the minimum number, in my view, but it could be a much higher number.
Clearly, our economic and military security would be enhanced if we had more US flag ships, but these ships are going to cost a certain amount of money, and that funding is not unlimited. That’s partly why I’ve advocated for 250, because it’s an achievable number. It's also a reasonable number when you think about the radically changed geopolitical risk profile we have today versus the profile we had when we got to essentially 85 ships at the beginning of last year.
You specifically call out why this expansion isn’t just a matter of adding that many more US Navy cargo ships. Can you briefly outline what kind of additional benefits the growth of a US-flagged commercial fleet operating in international trade represents?
The proposal that we made is based on the maritime security program model. It's basically saying that, of all the ships operating in commercial trades internationally, we want enough of them – at least 250 of them – to be American-controlled and crewed by American mariners, so that we can have them available to meet US military resupply requirements in the event of a conflict. They're tankers or containerships or ro-ros, moving regular cargo for commercial customers But they’re also vessels that could be utilized in a combat scenario.
For example, tankers need to be able to do underway replenishment, to offload fuel to Navy combatants. Certain defense capabilities might need to be added to some of these vessels. These commercial ships should meet most of their costs through normal freight contracts, not taxpayer funds. But because the costs are higher to operate an American ship versus standard “flag of convenience” ships that dominate international markets, the US government should help pay for the cost of Americanizing them to make sure we have that capability. It’s an incredibly cost-effective way of outsourcing to the private sector the need to maintain active, reliable standby sealift capabilities.
But the need today for a larger US flag fleet goes well beyond just traditional sealift. What really surprised me as I was sorting through this data is the extent to which China is already ahead in this area and the risks it presents to America’s economic security. Roughly 20% of the global fleet — over 10,000 ships — is owned by companies in either China or Hong Kong. Almost 7,000 of those ships are registered in China or Hong Kong. The corresponding numbers for America are about 1,700 ships owned by American companies, only 700 of which are registered in the U.S., and 600 of those operate in domestic trade. China has marine terminals is about 100 ports strategically located outside of China. There’s also been a lot of talk about how much of the information around shipping that China controls, from container cranes to logistics or transaction platforms like LOGINK and GSBN.
You add all of this together and you realize that China has been amassing the power to really disrupt American trade if it chose to do so. While we can impose sanctions on certain entities and other bad actors through the banking system, I think we need to have more control over the trade itself, physical control over the cargo, especially with strategically important commodities. Having a much larger fleet of US flag ships would help accomplish that.
Can you elaborate on that?
Let me give you one example.
There's a lot of conversation around Taiwan, which makes sense since it's the most likely hot spot in the western Pacific. The prospect of a blockade or a quarantine, or some other measures that would fall short of an attempted invasion by China of Taiwan, could make it very difficult for Taiwan. A blockade or quarantine would be intended to force Taiwan to capitulate through economic sanctions. And having more American flag ships would help mitigate that kind of aggression.
We need more tools in terms of resisting those types of gray zone tactics including the capability to run a blockade or resist a naval quarantine. It’s a totally different scenario when we’re talking about that capability with a US flag ship with US Navy protection continuing to operate into Taiwan, versus having to rely on a Liberian-flagged ship that is owned and operated by the China or another ocean shipping company.
There are so many different ways to look at it, but they all point in the same direction. We need a larger US flag fleet.
All of this connects to the impact that this kind of initiative would have on the shipping and shipbuilding industries, but how do you see this kind of 250-ship program impacting both?
They’re different aspects of the same story. Shipbuilding and shipping are often thought of as one industry, But they’re very different commercially and their connections to national security are quite different.
America’s shipbuilding and repair industries today need to grow. I mentioned that in the 1990’s America abandoned efforts to develop a new support program for commercial shipbuilding. The result is that the industry consists overwhelmingly of government contractors building for the Navy and Coast Guard. They build the best warships in the world, but especially given the evolving nature and use of naval assets, American security would almost certainly benefit from a larger, more distributed shipbuilding industrial base.
The normal place to look for diversification would be through commercial shipbuilding. We still have commercial shipbuilding in America today thanks to the Jones Act. But it’s a small market compared to international trade. While America has let the free market control international trades, China has used a “whole-of-government” strategy to dominate the maritime sector. Out of about 1,800 commercial ships ordered worldwide last year, more than 1,100 of those orders went to Chinese shipyards, while fewer than 10 went to American shipyards.
We won World War II in large part because of our industrial capacity. We had the ability to churn thousands of ships out of our shipyards, and they were designed around the military needs of the moment. We hope to never be in that position again, but we if need to ramp up our shipbuilding capabilities, we're not well positioned to do that today.
It’s why part of the proposal that was issued last October is to phase in a requirement that this 250-ship fleet be built in United States shipyards. We need to expand the fleet of US flag ships and build these ships in the United States.
This will provide shipbuilders with a consistent demand signal so that they know every year they're going to need to churn out fifteen state-of-the-art commercial ships that are economically viable in international markets. They can be competitively bid, but they'll need to be built in the United States. There will need to be bid teams of American carriers and shipbuilders involved in the bidding process.
One of the more interesting aspects of the proposal is that we're solving two problems with one program. Not having a large and consistent enough demand signal is a problem that we've had in the domestic market that limits shipbuilders from developing economies of scale. Building ships for the international fleet at a rate of 15 per year, while it requires government support to get started, also gives enough of a demand signal that US shipbuilders can make investments to get ahead of the technology that’s going to be required to achieve economies of scale and become internationally competitive.
But then how much of the costs for this type of expansion would come from revenues from private-sector customers? Would it still need to be driven by a demand signal that can only come from the government?
The proposal generally supports ways to incentivize the use of US flag, US US-built ships in international trade. The way that has traditionally been handled is through government preference cargo, which will continue. But the amount of government cargo is limited and will only support a fleet of about 85 ships. That can’t be the factor that constrains the size of the US flag commercial fleet when our military and economic security assessments conservatively suggest that we need a fleet three times larger. Growth in the fleet shouldn't depend on success or failure in finding ways to incentivize US flag services.
It comes back to a security need. We don't ask the Navy to come up with the money to build submarines. It's a national security imperative that we have a strong Navy and Americans understand that part of our tax revenue has to go to support that national security imperative. It’s the same thing here. We need to be good stewards with taxpayers’ money but we also need to tell the story around what that looks like.
Better ways to tell this entire story is where I want to wrap things up, and you already mentioned how the industry as a whole needs to speak up. Outside of talking through these issues as part of panels like the one you’ll be on at the WorkBoat Show, what else can be done? Is it a matter of getting in touch with their representative from Congress? Or speaking up to their networks? Or something else?
The support in Congress, among both those who know something about the maritime industry and those on the periphery of it, is greater today than I've ever seen it. I don't think it's far-fetched to think that in the next year or two – or even this year - there will be major changes in the legislative landscape that will allow this industry to grow.
In terms of what else can be done, it’s very important that leaders in the industry step forward and fight for a scope of change that matches the challenges of today. We’ve spent the past several decades fighting for scraps in comparison to what’s at stake today. We shouldn’t abandon those battles, but we need to be looking at the much bigger picture today. Given the security environment we face, I think leadership in the industry itself is critical to help make that happen.
As far as the Jones Act is concerned, I believe there should be more outrage around the falsehoods that have been stitched together into an anti-Jones Act narrative. It should be seen for what it is - a fabricated attack on an American industry with American workers performing work in America. The benefits this industry provides to American security only reinforces the absurdity of the anti-Jones Act rhetoric. We could do a better job of pushing back on those really outrageous attacks on an American industry. But the real focus of industry leadership should be on playing offense - how we should grow and modernize the US flag, US built industry to meet the national security needs of today.
