Colin Grabow and Scott Lincicome
In last week’s Wall Street Journal, we called for reforming protectionist laws to improve the flailing US maritime industry. In particular, we proposed that the federal government allow American firms to purchase oceangoing ships from allied shipyards for use in domestic commerce—something currently prohibited by the 1920 Jones Act—and scrap a 50 percent duty on commercial vessel repairs performed overseas. These reforms, we argued, would help to “generate an influx of new ships, boost US mariner employment, motivate US shipbuilders to innovate, and increase US supply‐chain efficiency.”
Given the Journal’s national exposure, we weren’t surprised to see it elicit a response from allies of the special interests profiting from the protectionist status quo. Slightly more surprising, however, is the utter vacuity of their arguments.
On Tuesday, the Wall Street Journal published two letters to the editor that took issue with our op‐ed, including one from the Senate Armed Services Committee’s ranking member, Sen. Roger Wicker (R‑MI). Senator Wicker—the recipient of a 2012 award from maritime lobbyists—insisted that American maritime protectionism has persisted for “hundreds of years” for “a simple reason: it works.” He adds that the Jones Act specifically “helps stabilize the nation’s maritime industry” and “facilitates some 650,000 jobs across our vast system of shipyards, ports and waterways and adds $150 billion annually to our economy.”
Leaving aside for the moment that the senator repeatedly mischaracterized our proposal as Jones Act “repeal” instead of reform, his evidence of the law’s benefits is sorely lacking. Let’s take each assertion one by one.
A “Stabilized” US Maritime Industry?
By any reasonable metric—such as the number of ships being built, mariners employed, or the size of the oceangoing fleet—the nation’s maritime industry cannot possibly be considered “stabilized.” Annual deliveries of oceangoing merchant ships are in the low single digits (including zero this year and next).
The fleet is both aging and has more than halved in number since 1980. And there aren’t enough mariners to meet the needs of a sustained sealift operation—no surprise given the decline in ships. Senator Wicker himself admits in his letter that the United States currently ranks 70th in commercial shipping inventory.
As we noted in our op‐ed, these and other depressing statistics have pushed a bipartisan chorus of senators and representatives to openly worry about the threat the decrepit US maritime sector poses to US national security. If the Jones Act has truly “stabilized” the maritime industry, it’s only because US shipping and shipbuilding have hit rock bottom.
650,000 Jobs?
The senator’s jobs claims are similarly dubious. As previously detailed, the topline figure of 650,000 American jobs is an outdated, lobbyist‐generated fiction. (The word “facilitates” gives away the game here—our two families’ grocery shopping, for example, arguably “facilitates” millions of supermarket jobs, but we’d never be so brazen as to take full credit for them.) Instead, industry and government figures put the actual total of American shipping and shipbuilding jobs directly supported by the Jones Act at around 100,000—certainly not nothing but statistically insignificant in a 158‐million‐person US labor market that creates and destroys millions of jobs each month.
More importantly, US maritime law is not a make‐work jobs program. It’s supposed to ensure vibrant American shipping and shipbuilding industries, and as already noted, it’s utterly failing in this regard. Moreover, as we explain in our op‐ed, allowing American shipping companies to purchase better, less expensive vessels and reducing their repair and maintenance costs would result in an expanded and modernized US commercial fleet, more commercial shipping (thanks to lower prices), and therefore more, not fewer, US seafarer jobs. An enlarged fleet would also generate more repair and maintenance opportunities for US shipyards (when they aren’t building ships for the US government, by far their leading source of revenue). Any talk of lost jobs, meanwhile, must grapple with the fact that shipyard closures and job losses—the result of ship deliveries barely above zero—is exactly what has transpired with the Jones Act in place. You can’t lose what doesn’t exist.
$150 Billion Added to the Economy?
Like the mythical 650,000 jobs “facilitated” by the Jones Act, notions that the law adds $150 billion annually to the US economy are unmoored from reality. The industry‐funded report behind this number shows that it refers not to net economic output directly attributable to the Jones Act and US maritime protectionism but rather to gross economic output resulting from alleged indirect and induced effects (whatever those may be). As the underlying report itself admits, the domestic maritime industry’s direct value-added—its contribution to US GDP—is a far smaller $17.5 billion. That’s more in line with government data showing a $15.4 billion contribution to GDP from marine freight transport and another $512 million from the construction of commercial ships, barges, and tugboats/towboats.
More importantly, by raising the cost of domestic transport, the Jones Act—as numerous studies have found—inflicts a range of harms and generates a net loss for the US economy overall. It is a de facto tax on domestic commerce and a barrier to Americans’ ability to trade with one another. The law weakens domestic supply chains, boosts local rail and road congestion, degrades the environment, and strains relations with US trading partners. Small wonder the Organisation for Economic Co‐operation and Development found that repealing the Jones Act would increase the US GDP by between $19 billion and $64 billion.
The economic damage inflicted by the Jones Act is supposed to be the implicit price we all pay for a strong American maritime industry that can meet US national security needs. That costly reward has clearly not materialized.
Both the ship repair tariff—first imposed in 1922 but with antecedents dating back to 1866—as well as the Jones Act, whose origins can be traced to at least the early 1800s, are profoundly out of step with modern maritime realities. Until this is acknowledged and addressed, the US maritime industry will remain in its current enfeebled state, with accompanying costs to both the economy and national security.
And no amount of congressional handwaving can change that fact.