Going Broke With The Jones' — Episode 018

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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