April 22, 2020 10:02AM

China Concerns Are No Reason to Maintain the Jones Act Status Quo

As scrutiny of the Jones Act intensifies, defenders of the 100‐​year‐​old law have come up with ever more imaginative justifications for keeping it in place. One argument currently en vogue is casting the Jones Act as a bulwark against Chinese expansionism. Such framing is not difficult to understand given the poisoned state of U.S.-China relations.

But is it actually true? Would China take over or dominate domestic shipping in the Jones Act’s absence? There is considerable reason for skepticism.

It’s perhaps first worth noting that China, while a major shipping player, hardly dominates the field. Measured by deadweight tonnage (carrying capacity by weight), China and Hong Kong collectively own approximately 15.5 percent of the world’s ships. Ships flying the China and Hong Kong flags, meanwhile, account for less than 9 percent of the world’s total (or 15 percent as measured by deadweight tonnage).

In international shipping, Americans are free to use ships from any country for exporting and importing. Yet the overwhelming majority are from countries other than China. Of the top 40 shipping lines that carry U.S. exports, only a single one is headquartered in China. That line, Cosco/​OOCL, has a 9.4 percent market share of U.S. exports. For the shipping of U.S. imports Cosco/​OOCL weighs in at 12.3 percent.

Similarly, ships built in any country can be registered in the United States for the purpose of transporting goods internationally (but not domestically due to the Jones Act). But of the 86 U.S.-flagged ships engaged in foreign trade, only 12 were built in China. The rest come from the shipyards of U.S. friends and allies including Japan, South Korea, Taiwan, Singapore, Denmark, Germany, and Poland.

This use of Chinese‐​built ships and Chinese shipping has come at no obvious detriment to U.S. national security. Indeed, seven Chinese‐​built ships participate in the Maritime Security Program that provides sealift to the U.S. military. One of these vessels, the Ocean Giant, has been used to supply U.S. military bases and government installations.

If Chinese‐​built ships and Chinese shipping fail to dominate U.S. international trade and the U.S.-flagged foreign trading fleet, what reason is there to think they would occupy such a position in domestic trade should the Jones Act be repealed?

But even if Chinese domination of U.S. domestic trade in the Jones Act’s absence was a realistic possibility, that’s still no reason to leave the law intact. The Jones Act does not specifically prohibit Chinese ships from engaging in domestic trade, but rather all foreign‐​flagged and foreign‐​built ships.

This means that Americans cannot buy competitively‐​priced ships built in Japan or South Korea⁠ and use them to facilitate domestic trade. It means that Americans cannot contract with leading shipping companies such as Denmark‐​headquartered Maersk Line to move goods domestically. It means that Americans cannot use Spanish‐​flagged LNG carriers—a type of ship that does not exist in the Jones Act fleet—to transport U.S. natural gas to New England or Puerto Rico. It means that Americans cannot employ advanced dredging vessels from the Netherlands and Belgium⁠ to maintain the country’s ports and waterways.

These are all countries that have signed defense treaties with the United States. 

If keeping Chinese‐​built ships and shipping out of domestic trade is deemed a national security imperative, the current Jones Act blanket ban could be discarded in favor of a narrower approach that still grants access to U.S. partners and allies. One possibility would be to restrict the use of foreign‐​built ships or the provision of domestic waterborne transport to those countries with whom the United States has defense treaties or free trade agreements. Constraining one country by banning all countries from offering their ships and services is a profoundly inefficient approach.

This assumes, of course, that concerns about China are being made in good faith and aren’t just a convenient excuse for maintaining an archaic piece of protectionism.

The Jones Act is an outdated law that burdens the U.S. economy and despoils our environment while failing mightily to bolster national security. It is self‐​sabotage on a grand scale. If the employment of Chinese‐​controlled or Chinese‐​built ships in domestic commerce is indeed a national security threat then far less damaging ways of mitigating it are available. But this alleged menace is no excuse for maintaining an intolerable status quo.

The Jones Act’s primary victim is not China, but the United States.