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September 20, 2020 60 mins
Going Broke With The Jones' — Episode 018
Podcast Notes and Outline.
Jones Act Intro Pre-recorded by Jeff as a Monologue

Have You Ever Split a Cab or an Uber with a friend? If the Jones Act applied to Uber drivers, this would be illegal

Reasons we economists suck — the dismal science

  • What the heck is cabotage? 
  • Market Distortions
  • The Devil Lives at the Margins — “Concentrated Benefits” & “Diffuse Costs”


  • Merchant Marine Act of 1920 — The Jones Act

    100 years ago

    Introduced by Wesley Jones — the senior senator from Washington State

    Hmmmm … and they build ships where? (hint: Washinton State!)

    The Jones Act in a Nutshell

    All Ships Used for Cabotage

  • US Built
  • US Owned
  • US Flagged
  • US Commanded
  • US Staffed


  • Other Related Issues

  • Insurance
  • Seaman Rights
  • Port Inspections
  • Etc.


  • Often confused with the Passenger Service Act of 1886 — Discuss the difference

    Even NPR confused the issue in their podcast.


    Jeff Introduces Guest Colin Grabow (GRAY-Bō)

    Colin Grabow of the CATO Institute — Policy Analyst, Herbert A. Stiefel Center for Trade Policy Studies. He has a BA in international affairs from James Madison University and an MA in international trade and investment policy from George Washington University. He specializes in things like subsidizing sugar production and The Jones Act.


    Welcome to the JeffEffect.


    What did the Jones Act Attempt to Do?

  • Foster Shipbuilding in the US (Protectionism)
  • To Maintain Domestic Fleet and Shipbuilding Capacity (National Security)
  • Maintain an experienced Merchant Marine Workforce (Protectionism & National Security)


  • Did it Succeed …. No, It Did Not — Jeff and Colin Discuss

    There are currently less than 100 Jones Act Qualifying ships.

    Commerce between states is negatively impacted.


    How The Jones Act Got on My Radar

    Thinking about opportunity for the local Economy — Why Apple Can’t Build Phones in Puerto Rico


    Why Are US-built Ships So Darned Expensive?

  • The irony of Asia-Pacific Shipbuilding — Being destroyed in war required that it be rebuilt from scratch. Japanese industrial base was devastated during WWII. The Korean conflict occurred immediately after WWII. Both areas were reindustrialized after the conflicts. This appears to have facilitated the construction and recapitalization of shipbuilding in these two regions.
  • Protectionism Breeds Complacency Every Time It’s Tried.
  • There is not a single LNG Tanker, Heavy Project Ship, Heavy Cargo Ship, or Cruise Ship built in the US — Zero Qualify for The Jones Act.
  • If ZERO qualify, what are we protecting?


  • Anecdotes

  • Flying Cows of Hawaii
  • Road Salt in New Jersey
  • LNG Triangle Trade — Russia/Massachusetts/Pakistan
  • Oil in Houston Can’t Get to Maryland
  • Other Ideas and Anecdotes from Colin


  • Complacency Revisited

    Transport companies that were not covered by the Jones Act have become competitive on the world stage.

    US Airplane Manufacturers

  • Boeing
  • Gulfstream/General Dynamics
  • Textron (Textron Aviation/Cessna)


  • US Locomotive Manufacturers

  • GE Transportation/Wabtec
  • Brookville Equipment Corp.
  • Electro-Motive/Caterpillar


  • US Semi-Truck and Trailer Manufacturers

  • Peterbuilt
  • International/Navistar
  • Kenworth/PACCAR


  • Nixing The Jones Act Seems Like Something Everyone Could Support

  • Environmentalist Should Like it — more energy-efficient.
  • Consumers Should Like it — lower prices.
  • Domestic producers of commodities and manufactured goods should like it lower transport costs more competitive domestically.
  • Economic development of Places Like Puerto Rico Should Like It — Activate local workforce.
  • National Security … two sides of the coin.


  • So, who doesn’t support it and why?


    Could We Further the Goals of The Jones Act other Ways?

  • Tax Incentives to Modernize Domestic Shipbuilding?
  • Expansion of the Naval Reserves?
  • Tax Incentives for Domestic Ownership?
  • Liberalization of Flagged Ship Laws?
  • Other Mitigating and Replacement Ideas from Colin


  • Links and Additional Resources

    Spring 2015 Industrial Study Final Report on Shipbuilding by the The Dwight D. Eisenhower School for National Security and Resource Strategy National Defense University: 

    https://es.ndu.edu/Portals/75/Documents/industry-study/reports/2015/es-is-report-shipbuilding-2015.pdf


    A Brief History of Shipbuilding in Recent Times, September 2002, Tim Colton and LaVar Huntzinger: 

    https://www.cna.org/CNA_files/PDF/D0006988.A1.pdf


    NPR Planet Money Podcast: Mr. Jones’ Act

    https://www.npr.org/sections/money/2017/09/27/553990861/episode-524-mr-jones-act


    Jeff’s guest on this podcast is Colin Grabow — Policy Analyst, Herbert A. Stiefel Center for Trade Policy Studies at The CATO Institute. You can read his bio on the CATO Institute website here:

    https://www.cato.org/people/colin-grabow


    Here is the written interpretation by Department of Customs and Border Protection of the Passenger Vessel Services Act of 1886 and the impact of NAFTA on this law. Note that NAFTA has since been withdrawn and replaced by USMCA by President Trump. 

    https://www.cbp.gov/sites/default/files/assets/documents/2019-Sep/PVSA-ICP.pdf


    Here is an online version of the full text of the Jones Act (Merchant Marine Act of 1920):

    http://huelladigital.univisionnoticias.com/cruceros-vacaciones-en-aguas-de-nadie/wp-content/uploads/2016/06/Jones_Act_1920.pdf


    The Organization for Economic Cooperation and Development (OECD) paper: “Local Content Requirements and Their Economic Effect on Shipbuilding:”

    https://www.oecd-ilibrary.org/science-and-technology/local-content-requirements-and-their-economic-effect-on-shipbuilding_90316781-en


    WSJ editorial "America First? Kill the Jones Act" (mentions LNG issue vis-a-vis Puerto Rico: 

    https://www.wsj.com/articles/america-first-kill-the-jones-act-11572822910


    Congressional Research Service report about the JA (fantastic overview paper):

    https://fas.org/sgp/crs/misc/R45725.pdf


    Russian LNG imported into New England: 

    https://www.washingtonpost.com/business/economy/tanker-carrying-liquefied-natural-gas-from-russias-arctic-arrives-in-boston/2018/01/28/08d3894c-0497-11e8-8777-2a059f168dd2_story.html


    Hawaii cows: https://www.youtube.com/watch?v=Oq4YQgxMquQ


    My paper about the JA's impact on national security and shipbuilding: 

    https://www.cato.org/publications/policy-analysis/rust-buckets-how-jones-act-undermines-us-shipbuilding-national


    Cato JA overview paper: 

    https://www.cato.org/publications/policy-analysis/jones-act-burden-america-can-no-longer-bear


    Hawaii importing propane from West Africa: 

    https://www.enverus.com/blog/dislocations-in-the-us-propane-market-and-the-jones-act/


    Here is a link to the dedicated section of the CATO website: 

    www.cato.org/jonesact

    _____________ 

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