Protectionist Shipping Law Hinders Gulf Clean Up

Oil continues to spew into the Gulf of Mexico from the site of the BP oil rig, yet the Obama administration refuses to relax a protectionist U.S. shipping law known as the Jones Act that makes it more difficult for foreign-owned ships to help contain the damage.

According to an article in the Daily Caller this week by our former Cato colleague Chris Moody, foreign-owned ships have offered to assist the American-owned fleet in skimming oil and other tasks. But some of the foreign ships have hesitated to enter U.S. waters because of the 1920 law that reserves inter-coastal shipping to vessels that are built, owned, and crewed by Americans.

Although cloaked in terms of national security, the act is really a protectionist measure designed to insulate U.S.-based shipbuilders, ship operators, and their unionized crews from global competition.

Three GOP senators representing Gulf states have introduced legislation to temporarily suspend the Jones Act in the region of the spill. So far, President Obama has refused to act, despite his assurances that he is doing all he can to contain the damage.

The Jones Act is such an egregious trade barrier, I devote a whole page in my 2009 Cato book Mad about Trade describing the damage it imposes on the U.S. economy. The Jones Act is most costly during times of war or other emergencies. As I write on page 163:

Defenders of the Jones Act claim it promotes national security by maintaining a merchant marine fleet in case of war. But Jones Act ships tend to be old and of limited use in times of real emergencies. In fact, during the 1991 Gulf War, only one Jones Act ship actually went to war; President George H. W. Bush suspended the law because it was interfering in the efficient transfer of goods. President George W. Bush again suspended the law in 2005 so that fuel and other needed supplies could more quickly reach New Orleans after Hurricane Katrina. What is an expensive indulgence for domestic shippers during peacetime becomes an intolerable liability for the nation during time of emergency.

President Obama should suspend the Jones Act now, followed by a vote in Congress to repeal it permanently.