Sometimes the Jones Act Makes Domestic Transportation Flatly Impossible

Unsurprisingly, such developments have drawn a backlash from the law’s supporters, including an op-ed from a former shipping CEO who linked these recent developments to the libertarian Cato Institute. As a Cato Institute scholar and staunch Jones Act critic, I welcome the opportunity to respond and explain why the law is so richly deserving of the scrutiny it is now receiving.

Passed in 1920, the Jones Act increases shipping costs by restricting domestic water transportation to vessels built and registered in the United States. U.S.-built ships are at least four times more expensive than those constructed abroad and over four times costlier to operate. There also aren’t that many of them. Fewer than 100 ships — less than 1% of the global fleet — meet the 1920 law’s requirements and are available to serve the world’s largest economy.

All of this makes for some pricey shipping.

According to the CEO of one company that operates Jones Act-compliant tankers, such vessels are three to four times costlier than their internationally flagged counterparts. A 2012 Federal Reserve Bank of New York report, meanwhile, noted that Jones Act container shipping to Puerto Rico was twice the cost of shipping to nearby islands.

Recalling his days in the dry bulk shipping industry, state Sen. Ryan Fazio testified at a recent hearing that Jones Act-compliant shipping was five to 10 times more expensive than internationally flagged vessels, and also much less available (no surprise given their limited numbers).

Sometimes the Jones Act makes domestic transportation flatly impossible. Though the United States is the world’s leading exporter of liquefied natural gas, New England relies entirely on foreign sources for its LNG needs. The reason? No Jones Act-compliant LNG tankers exist to transport it.

Incredibly, American LNG can be sent to other countries but not to New England. That LNG is exported relatively short distances away from terminals in Georgia and Maryland further compounds the absurdity.

This isn’t just a matter of bizarre optics. New England’s inability to access American LNG has real costs for the region’s households.

According to the commissioner of Connecticut’s Department of Economic and Community Development, experts believe the Jones Act increases the cost of New England’s LNG imports by 10–30%. The CEO of ISO New England, meanwhile, highlighted the Jones Act’s contributions to regional energy struggles in congressional testimony last month.

Other examples of the Jones Act blocking domestic commerce abound. Hawaii, Puerto Rico, and New England all import liquified petroleum gas (basically, propane) from far-flung countries rather than U.S. sources due to a similar lack of appropriate Jones Act-compliant ships. East Coast refineries purchase oil from the Middle East and Africa instead of the Gulf Coast due to costly intra‑U.S. shipping. Similar dynamics are found with lumber and steel.

The law is fundamentally a barrier to Americans trading and doing business with each other. Expensive (and sometimes unavailable) transportation in a country as large as the United States is no small matter.

Water transport is typically an efficient means of moving cargo over long distances, but the Jones Act (along with inefficient ports) makes it so costly that ships account for just 2% of domestic freight movement. That means more pollution and highway congestion in Connecticut and elsewhere due to increased demand for trucking and rail.

So why does the Jones Act remain in place? Supporters of the law argue that it ensures the United States has robust shipping and shipbuilding industries. The facts prove otherwise. As of 2023, U.S. commercial shipbuilding accounted for a mere 0.1%, and a recent government report described the heavily protected sector as in a state of “near total collapse.”

The domestic shipping industry is similarly depressed, with the number of oceangoing ships having more than halved since 1980. Forcing Americans to pay outrageous prices for new ships hasn’t proven conducive to a thriving merchant marine.

Whether viewed from the prism of economics or national security, the Jones Act has proven an utter failure. Protectionism isn’t working. It’s time to move on.

Reforming the law will be no easy task, given the entrenched special interests dedicated to its preservation. But the Jones Act has clearly outlived any usefulness it might have once had, and recognizing and calling out this obvious truth is long overdue. Let’s hope that Connecticut policymakers maintain their courage and continue to speak up.