The Jones Act Should Be Waived, but More Substantive Changes Are Needed

[Muda69]

https://www.cato.org/blog/jones-act-should-be-waived-more-substantive-changes-are-needed

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In the wake of the Colonial Pipeline outage that has produced mounting fuel shortages along the East Coast, the Department of Transportation has announced that it is taking initial steps to determine if a Jones Act waiver is warranted. It’s not hard to see why. Transporting a massive 100 million gallons of fuel per day, the Colonial Pipeline accounts for 45 percent of the fuel used on the East Coast. That’s a huge supply gap to fill and, as the Energy Information Administration points out, waterborne transport can play a key role:

Markets along the Atlantic Coast with access to deepwater ports, such as Savannah, Georgia; Charleston, South Carolina; Wilmington, North Carolina; and Norfolk, Virginia, can receive limited imports from the global market and from marine shipments via coastwise compliant shipping originating from the U.S. Gulf Coast.

Unfortunately, only a relatively small number of tanker ships ideally suited to transport refined petroleum products are deemed coastwise compliant, meaning they meet the Jones Act’s requirements of being U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned. Waiving the Jones Act would allow far more numerous—and significantly cheaper—vessels not compliant with the law to quickly move fuel from the Gulf Coast to where it’s needed.

The transportation system requires maximum flexibility in an emergency or crisis, and a Jones Act waiver would help provide it.

There is ample precedence for such a move. In the wake of Hurricanes Harvey and Irma in 2017, along with Hurricane Sandy in 2011, a lack of fuel supplies was deemed to be a threat to national security, thus clearing the way for the issuance of Jones Act waivers. If it was a good enough reason to justify a waiver then it should be a good enough reason now.

But waivers should only be a prelude to more significant changes to the Jones Act.

The law isn’t just a problem in times of pressing need, but also in everyday life. By limiting domestic waterborne transport to ships that are the world’s most expensive to build and operate, the Jones Act interferes with the efficient flow of goods within the United States. That’s particularly true of petroleum products where the law’s distortions are in abundance. For example:

• Refined products produced in the Gulf Coast are sent to Latin America instead of the East Coast.
• Refineries on both the East Coast and West Coast can find it more attractive to import oil from abroad than other parts of the United States.
• California can source gasoline more cheaply from distant Singapore than the Gulf Coast.

At its worst, the Jones Act can even make domestic transportation outright impossible. While the United States is the world’s leading exporter of propane, Hawaii must buy it from as far away as Africa owing to a complete lack of Jones Act‐compliant ships capable of transporting it from the U.S. mainland. A similar absence of appropriate ships, meanwhile, means that Puerto Rico has no choice but to meet its bulk liquefied natural gas needs from foreign sources.

These inefficiencies are not just a hit to the country’s economic pocketbook, but a threat to its security. Reduced transportation options or over‐reliance on a single method of transport can lead to significant problems when things go awry, as we are painfully finding out. Redundancy and flexibility are key to overcoming systemic breakdowns, and the Jones Act means less of both.

So, what should be done?

At a minimum this situation illustrates the need for a waiver system based on commercial considerations. Currently, waivers can only be issued by the Department of Homeland Security if they are deemed in the “interest of national defense” or by the Secretary of Defense in order to address an “immediate adverse effect on military operations.” That’s a high bar to clear, which helps explain why such waivers are rarely issued.

Instead, Congress should create a new type of waiver allowing the use of non‐Jones Act ships if no vessel meeting the law’s requirements is available—no “national defense” justification required. Canada already has such a system. Other measures that should be on the table include a scrapping of the law’s U.S.-built requirement and permanent exemptions for parts of the United States that are uniquely dependent on maritime transportation such as Alaska, Guam, Hawaii, and Puerto Rico.

A Jones Act waiver could help ameliorate some of the Jones Act’s worst effects, but what’s urgently needed is the significant reform—if not outright repeal—of this failed and costly law.

Bingo. Such a simple solution for an indeed failed and costly law.

 

[Muda69]

More evil perpetrated by the Jones Act:  https://reason.com/2022/09/27/in-the-aftermath-of-hurricane-fiona-the-jones-act-is-screwing-over-puerto-rico-again/

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The absurd consequences of America's terrible trade protectionism are on full display just off the coast of Puerto Rico today, as a foreign ship full of barrels of diesel fuel is waiting to see if it will be allowed to deliver them to the hurricane-stricken island.

We are, once again, speaking of the Jones Act, technically called the Merchant Marine Act of 1920. The Jones Act requires that ships delivering goods between U.S. ports be made in America, owned by American companies, and crewed by Americans. The act is openly and plainly a protectionist law designed to shield the domestic maritime industry from foreign competition.

The impact is felt most keenly on the outer edges of America's territory, places like Alaska, Hawaii, and Puerto Rico that are most dependent on ocean shipping to receive goods. The law by its very nature drives up the costs. And in the case of an emergency or disaster, it is difficult to respond quickly because there aren't all that many Jones Act-compliant ships. (There are less than 100 of them.) Whenever a crisis comes around that involves shipping, this law that supposedly helps America has to be temporarily suspended or bypassed in order to handle it.

Today, President Joe Biden's administration is trying to figure out what to do about a BP ship loaded with fuel idling off the coast of Puerto Rico. Because of the Jones Act, the ship cannot legally deliver fuel to the island, where thousands remain without any power at all in the wake of Hurricane Fiona, without some sort of exemption.

In 2017, President Donald Trump allowed for a 10-day waiver of the Jones Act to allow for foreign-flagged ships to transport goods between domestic ports after Hurricane Maria. Ten foreign ships used the waiver to transport goods like drinking water, canned food, heating oil, and fuel from other U.S. ports to Puerto Rico.

Granting waivers "for the purposes of national security" was, thankfully, a relatively quick process for the Department of Homeland Security that year. But in 2020, the National Defense Authorization Act was amended to change the waiver process, requiring that the purpose of these waivers is to prevent "an immediate adverse effect on military operations" and, thus, making it much harder for the federal government to provide them.

So, for the nonmilitary citizens of Puerto Rico, the Biden administration has to evaluate whether any U.S. vessels can perform the job before granting waivers to other ships. If there isn't, it must consider what proper legal justification it can provide to allow the BP ship to dock on the island.

The governor of Puerto Rico, Pedro Pierluisi, on Monday asked the administration to let the vessel dock. Several Puerto Rican officials are begging the administration to provide Jones Act waivers. Eight Democratic members of Congress*, including Rep. Alexandria Ocasio-Cortez of New York, sent a letter asking the administration to waive the law for this crisis.

But thanks to the 2020 amendment, it's unfortunately not that simple. And as The Washington Post notes, the American shipping industry is resisting any waivers for Puerto Rico, crisis be damned:

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The American Maritime Partnership—a coalition that represents operators of U.S.-flagged vessels and unions covered by the Jones Act—wrote a letter to [DHS Secretary Alejandro] Mayorkas on Friday explaining why the Jones Act should not be waived in the aftermath of Hurricane Fiona.

The group said that domestic vessels were ready and available to support the recovery effort in Puerto Rico, with more than 2,000 containers positioned in the port of San Juan to provide supplies before the storm. The group's president, Ku'uhaku Park, said that U.S.-flagged ships are providing Puerto Rico with essential goods for its recovery, adding that waiving the Jones Act would benefit foreign shippers rather than Puerto Ricans.

"There is no indication that American shipping capacity is insufficient to meet demand, and, therefore, no justification for a waiver of the Jones Act," he said.

Essentially, Park is telling the administration to just ignore everybody in Puerto Rico screaming at them for help. They, apparently, should wait to see if the domestic ships fail to provide what they need before letting foreign ships respond. Imagine this mindset in any other industry—demanding that failure must happen before competition could be permitted.

Colin Grabow has been documenting the many negative impacts on American consumers and competitive enterprise caused by the Jones Act as a research fellow at the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies. He noted in July that America's protectionist shipping laws have long been a disaster for Puerto Rico. Lawmakers have generally just refused to deal with it in favor of catering to the maritime industry and its unions.

"Puerto Rico has a 43 percent poverty rate," he tells Reason in response to the industry's insistence that the law be maintained. "So why are we subjecting them to some of the world's most expensive shipping? In the discussion about how to help Puerto Rico, how about we begin by ending policies like the Jones Act that actively hurt the island?"

The industry has long-defended the law by insisting that Americans would lose their jobs if we allowed foreign vessels to engage in shipping between domestic ports. Grabow thinks this is a short-sighted position.

"U.S. policy shouldn't be dictated by whether someone, somewhere loses a job," Grabow says. "By that logic we should oppose all technological progress and free trade. While some would lose jobs, many other Americans would gain employment and see their standards of living raised. The Jones Act is properly understood as a tax on domestic commerce that drives up the cost of Americans trading with one another. That's not exactly pro-jobs or pro-prosperity."

Biden is a stalwart supporter of the Jones Act and defended it both before and during his administration. This morning he nevertheless tweeted his alleged appreciation for capitalism and competition:

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Fair competition is what made America the wealthiest, most innovative nation in history.

And I'm committed to bringing competition back to our economy.

— President Biden (@POTUS) September 27, 2022

But as long as he supports the Jones Act, which deliberately shields the American shipping industry from competition at the expense of hundreds of thousands of U.S. citizens, this is just hot air.

Agreed.  Waiting for for a liberal shill like Dante to come in here and tell all why the Jones Act is still important and neeed.