With oil prices spiking due to the Iranian regime’s closing of the Strait of Hormuz, President Donald Trump has waived restrictions on foreign vessels that transport commodities between U.S. ports for the next 60 days.
Why couldn’t he do it before? Because of an antiquated 1920 law called the Jones Act, part of the Merchant Marine Act signed by our worst president, Woodrow Wilson, which mandates that any cargo transported by sea between our ports can only be undertaken by vessels built, owned, and crewed by Americans.
“This action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to U.S. ports for sixty days,” White House press secretary Karoline Leavitt explained in a statement, “and the Administration remains committed to continuing to strengthen our critical supply chains.”
The critical question then becomes: Why do we have a law on the books that inhibits vital resources such as oil, natural gas, fertilizer, and coal from freely flowing between U.S. ports?
The justification, as is often the case with protectionist policy, was national security concerns and American jobs. But the Jones Act has failed to secure, either. Like most forms of protectionism, it came with high unanticipated costs, undermined competition and efficiency, failed to boost production, and ended up protecting a handful of big corporations and unions.
The United States has long shorelines that are barely used for port-to-port shipping because agriculture, construction, and the energy industry avoid the sea. One Congressional Research Service report found that around 2% of our entire freight is carried by ships. The Jones Act adds hundreds of millions in costs for American consumers and tens of billions in lost trade. Crude oil on a Jones Act tanker, for instance, has triple the cost — Hawaii and Alaska, as well as Puerto Rico, obviously bear the highest costs.
Rather than create a boom in the U.S. shipping industry, the Jones Act has helped make the U.S. home to one of the most expensive systems in the world. The point of the Jones Act was to ensure the country was home to a big fleet and vigorous shipping industry, during both wartime and peacetime. But the domestic fleet has gotten smaller and more expensive. In 1970, there were around 860 cargo-carrying vessels in the U.S. flag fleet. Today, there are fewer than 100 Jones Act-compliant ships.
PAUL EHRLICH IS DEAD. REGRETTABLY, HIS LEGACY ISN’T
Estimates find that it’s five times more expensive to build ships here in the U.S. than to purchase them abroad. Lowering operating costs for American companies would make them more profitable, help them expand their businesses, and give them more capital to buy and build new ships and tech. But plug any worthwhile commerce into that sentence, and you can come to the same conclusion.
Logic dictates that if waiving the Jones Act lowers prices and opens trade in the short term, then overturning it, something Congress would have to do, would do the same thing in the long term. So why does it exist?