Theories can be useful. But they’re even more useful if they survive real-world scrutiny.
In 1920, Congress passed the Jones Act. It mandates that only American ships are allowed to transport cargo between domestic ports. Sen. Wesley Jones, the bill’s namesake, was from Washington state. He wanted to ensure that his state’s shipping industry would have a competitive advantage in moving goods from Alaska. Today’s defenders of the Jones Act offer a similar rationale. They claim it is necessary to protect the domestic shipping industry.
After the war with Iran spiked oil prices, President Donald Trump suspended the Jones Act until mid-August. Late last month, dozens of Republican House members, including Speaker Mike Johnson, R-La., sent Mr. Trump a letter urging him to let the waiver expire.
“The Jones Act waiver has become a loophole exploited by adversarial countries to erode America’s maritime dominance,” the letter states. This is a bipartisan desire. “I’m concerned that if this extended waiver is allowed to continue, we will quickly become fully and needlessly reliant on foreign ships — owned and crewed by foreign companies — for our economic security,” Rep. Salud Carbajal, D-Calif., said at a June hearing.
To those who support protectionist policies, these statements may hold appeal. But they don’t hold up to even mild scrutiny. Just 0.13 percent of the world’s large vessels are built in the United States. There are around 7,500 oil tankers worldwide. Fewer than 60 meet the Jones Act’s requirements. A majority of new ships are built in China, whose shipbuilding capacity far exceeds America’s.
So much for the act protecting “America’s maritime dominance.” As it turns out, companies in competitive industries face pressure to innovate. This often leads to improvements. Those protected by government usually stagnate.
Ironically, suspending the Jones Act has had a major domestic benefit — increased trade between states. With the Jones Act in place, it was cheaper for California to import oil from overseas. Now, it’s receiving oil from states such as Texas and Louisiana. Suspending the law has even allowed oil to move from Los Angeles to San Francisco for refining before returning to L.A. East Coast states benefit as well.
Allowing states to buy oil and petrochemical products domestically is a big win for America’s economy. The jobs in those industries matter, too. That’s what’s often overlooked with government interventions. There are winners — and losers. This is why the government should seek to provide a level playing field and enforce the rule of law.
The takeaway should be obvious, even to those who understand the need for a stronger domestic shipbuilding industry. The Jones Act failed to protect America’s shipbuilding capacity while imposing previously significant costs on consumers and other industries. Repeal it.
