(Bloomberg View) — Another big hurricane, another temporary waiver of the Jones Act — the 1920 law mandating that goods and passengers shipped between U.S. ports be carried in U.S.-flagged ships, constructed primarily in the U.S., owned by U.S. citizens, and crewed by them or by U.S. legal permanent residents.Circumstances did indeed demand a new stay on this dumb law — but it would be better to get rid of it altogether, as Senator John McCain and others have argued.
The Jones Act was meant to ensure that the U.S. has a reliable merchant marine during times of national emergency. It has devolved into a classic protectionist racket that benefits a handful of shipbuilders and a dwindling number of U.S. mariners. It causes higher shipping costs that percolate throughout the economy, especially penalizing the people of Alaska, Guam, Hawaii and Puerto Rico.
Despite the law, the U.S. merchant fleet has continued to shrink. Today there are only about 100 large ships that meet its requirements — and many of them are past their best. In part because of the high cost of using Jones Act vessels, coastal shipping has steadily declined, even though it would otherwise be more efficient in many cases than trucks and railroads. The act distorts trade flows, giving imports carried by foreign ships an edge over goods shipped from within the U.S. Proposed extensions of the law could threaten the development of offshore energy resources as well as exports of U.S. oil and natural gas.
Defenders of the law say its effects are uncertain because there’s too little data. The Federal Reserve Bank of New York suggests a way to put that right: Give a five-year Jones Act waiver to Puerto Rico. That would provide data for a more rigorous analysis while giving the island’s battered economy a lift. Short of outright repeal, Congress could also revisit the law’s ancient, burdensome rules on crew sizes and much else. If the law remains, its focus should be on restoring the vibrancy of coastal maritime commerce, not on counting ships and sailors.
Economics aside, one might ask, isn’t the Jones Act vital for national security? Hardly. Much of the U.S. Ready Reserve Fleet is foreign-built. Very few Jones Act ships are the roll-on, roll-off kind that the military wants. To be sure, the U.S. has sound strategic reasons for maintaining some shipbuilding capability — but smarter support narrowly directed to that purpose would be cheaper and fairer than a trade law that does so much pointless collateral harm.
The latest waiver is slated to expire this week. Modernizing the law would be a step forward. But the best thing to do with the Jones Act is scrap it.