September 1, 2020 1:03PM

Jones Act Myths and Realities

That the protectionist Jones Act has remained in place for 100 years can be explained by a number of factors. Among these is the insertion into the conventional wisdom of pro‐​Jones Act talking points that are incomplete, misleading, or simply false, but that nonetheless become repeated by elected officials and even government agencies. This post will examine some of these commonly heard arguments and place them in their proper context.

The Jones Act provides 650,000 jobs. Advocates for the Jones Act frequently assert that the law “supports” 650,000 jobs or that the domestic maritime industry covered by the Jones Act is comprised of “nearly 650,000” workers. Even the U.S. Maritime Administration has gotten in on the act.

Such claims should be taken with a large grain of salt. Just six years ago some of these same voices credited the law with providing “nearly 500,000” jobs, while in 2003 supporters of the law claimed it was responsible for 124,000 jobs. Oddly, this employment inflation has taken place despite declines in both the number of Jones Act ships and the amount of domestic waterborne cargo being transported.

The actual number of workers in Jones Act‐​related industries is far lower. In fact, the Jones Act lobby quietly admits to this. A report funded by the pro‐​Jones Act Transportation Institute, but that it does not make available for download, shows actual direct employment at approximately 95,470 (see page 235). This appears to be confirmed by U.S. government figures that show approximately 61,000 people employed in water transportation and 96,000 employed in shipbuilding and repair, only a subset of which is related to commercial Jones Act activity.

There are 40,000 Jones Act vessels. Jones Act supporters often tout the existence of 40,000 vessels compliant with the law to imply that the United States is home to a vast commercial fleet. But the operative word here is “vessels,” which is essentially anything larger than a rowboat. Of the 42,177 U.S.-registered vessels, approximately 78 percent—32,835—are barges. Another 5,800 are tugboats and push boats. Of actual ocean‐​going ships there are a mere 98, only 77 of which are deemed militarily useful.

Cabotage laws are widespread. One oft‐​heard justification for the Jones Act’s restrictions on foreign ships is that many other countries also have similar measures—called cabotage laws—in place. Left unsaid, however, is that the Jones Act’s severity makes it an extreme outlier among such laws. In fact, the World Economic Forum has labeled the Jones Act the world’s most restrictive cabotage law. This is in large part due to the law’s unusual requirement that vessels used in domestic transport be U.S.-built. A 1991 survey found that only four other countries in the world had such restrictions, and some of those countries have since removed them.

It’s unclear why the policies of other countries should dictate or inform U.S. actions. But if the United States is to be guided by policies adopted abroad, then the Jones Act’s domestic build requirement should be immediately repealed.

The Jones Act’s repeal would result in foreign ships in U.S. inland waters. Jones Act supporters, and even government agencies, often warn that repealing the law would lead to U.S. inland waters becoming inundated with foreign vessels such as Chinese ships, Pakistani tugboats, and—hilariously—North Korean barges. But there are numerous problems with this argument, not least of which is that foreign ships already operate in U.S. waters, including inland waterways. Foreign ships can regularly be spotted in such waterways as the Mississippi River (as far north as Baton Rouge), Columbia River (as far east as Portland), and the Delaware River.

That foreign ships do not operate further inland is not because of restrictions imposed by the Jones Act, but rather that rivers are typically not deep enough to allow them to operate. The Jones Act does not restrict where foreign vessels can operate, but rather what they can do.

The Jones Act is vital to U.S. national security. It is often claimed the Jones Act plays a vital role in U.S. national security by providing ships, mariners, and shipyards that can be harnessed during times of war. But these contributions are vastly overstated. In terms of ships, the Jones Act fleet has supplied few in recent conflicts. The massive sealift effort undertaken for Operations Desert Shield and Desert Storm, for example, saw only a single Jones Act ship transport military cargo from the United States to Saudi Arabia. Their seldom usage is no surprise given the Jones Act fleet’s small size and lack of spare capacity.

Under Jones Act protectionism, meanwhile, U.S. commercial shipbuilding is in an abysmal, uncompetitive state. In a typical year a mere 2–3 large oceangoing commercial ships are built by all U.S. shipyards combined. To the extent the Jones Act makes much of a contribution to security it is through the 3,380 mariners found in the domestic fleet. These mariners, however, could be provided at far lower cost through alternative means such as direct subsidies. Furthermore, there would be both more mariners and ships if the Jones Act did not force domestic operators to use U.S.-built vessels that cost 4–5 times as much as those constructed abroad. 

For a more detailed analysis of the Jones Act’s fraught relationship with national security, please see the November 2019 Cato Institute paper “Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security.”

Clarity is urgently needed. As the Jones Act debate rages on, something all sides should be able to agree on is the use of facts and numbers that clarify and elucidate. Too many of the arguments offered by Jones Act supporters, however, obscure the true state of the U.S. maritime industry and lead policymakers astray. Once properly contextualized, these arguments only make the case for Jones Act reform even more urgent.