As noted above, this imposes a significant cost on the economy and specifically the operations and finances of U.S. manufacturers that are involved in complex supply chains (and thus do a lot of shipping).
By raising domestic companies’ shipping costs, the Jones Act and related cabotage laws disadvantage these producers relative to their foreign competitors, meaning potential lost sales to lower‐priced alternatives. Such transactions not only deny U.S. companies business, but also can undermine national security where the foreign producers at issue are in hostile places. For example, Russian and other foreign gas producers often service Northeastern U.S. cities like Boston due to the artificially high cost of shipping liquified natural gas (LNG) from Texas, Louisiana, and even nearby Cove Point, Maryland. (There are a grand total of zero Jones Act LNG tankers.) Puerto Rico, meanwhile, buys rice from China and jet fuel from Venezuela.
If American producers can successfully pass on higher costs to U.S. consumers, on the other hand, then the resulting higher prices consume funds that U.S. households could have saved, spent, or invested elsewhere in the economy (likely on more productive ventures). This, again, hurts those consumers and the economy more broadly.
Heightened use of trucks and freight trains means more wear on aging U.S. infrastructure (roads, rail lines, etc.), as well as increased environmental costs (surface transportation emits more carbon than ships and barges). It also raises safety issues (e.g., transporting toxic materials on U.S. highways) and increases traffic congestion—especially on highways running parallel to U.S. sea lanes—thereby costing American commuters time (possible wages/output or leisure). The Jones Act also will raise costs for offshore wind projects, discouraging their implementation and, by extension, Biden administration climate goals.
The PVSA causes other unintended problems. For example, U.S. cruise lines will detour to foreign ports in order to escape the PVSA and use foreign‐built ships. Thus, cruises from California to Hawaii might stop in Ensenada, Mexico or Vancouver, Canada—both thousands of miles out of the way and thus wasting time and fuel while increasing pollution. And, as we saw at the beginning of the newsletter, cruises that start or end in Alaska will also hit a Canadian port.
Alternatively, U.S. cruise lines simply avoid the United States altogether, choosing instead to depart from Canada or Mexico and thus depriving U.S. ports of revenue and jobs: