In late September, President Donald Trump waived the Jones Act – a nearly century-old law that restricts the transport of goods between U.S. ports exclusively to ships built in the United States and owned by U.S. citizens or corporations. The Jones Act is an example of legislation designed to protect cabotage, or trade within a country’s border.
Officially the Merchant Marine Act of 1920, the more popular and colloquial “Jones Act” is used in acknowledgement of Senator Wesley R. Jones, who sponsored the legislation. In the years after World War I, lawmakers were eager to ensure that the United States maintained a robust merchant marine fleet. By requiring a fleet of ships capable of delivering goods throughout the nation’s major ports and waterways, lawmakers sought to shore up national security.
The recent waiver was not a case of POTUS 45’s action contradicting his “America First” campaign promise to restrict international trade to boost the domestic economy. Instead, President Trump temporarily waived the law in an attempt to make it easier to get critical supplies to Puerto Rico in the wake of the devastation caused by Hurricane Maria.
President George W. Bush waived the Jones Act in the aftermath of hurricanes Katrina and Rita in 2005 and Trump similarly waived the law after Harvey and Irma earlier this year. Those actions spurred a renewed debate in media and policy circles about the relevance of the maritime legislation.
According to The Economist, “building a cargo ship in America can cost five times as much” as those built in China or Korea with twice the operating costs of foreign ships. A widely cited 2010 study conducted by the University of Puerto Rico found that the Jones Act costs the U.S. island economy $537 million per year. Like the U.S. territory, Alaska and Hawaii also claim considerable financial burdens for import transport costs due to the Jones Act.
Other reports indicated that temporary waivers of the Jones Act were providing scant relief to Puerto Rico because hurricane-related disasters had badly hobbled transportation networks on the island. The PBS News Hour reported that more than 9,000 containers had accumulated at the Port of San Juan with other ships still waiting to enter the port, a reminder that maritime transport is part of a broader supply chain.
For a brief moment, because of the attention paid to the devastation in Puerto Rico, the debate surrounding the relevance of the Jones Act in today’s economy took place in the public arena on media outlets and not just in trade circles. As hurricane season wanes, so too will the public debate over the Jones Act. But the issue will not go away for goods movement leaders or U.S. states and territories most impacted by cabotage law. A new awareness however may spur a wider set of lawmakers to ask questions about the real benefits and costs of national trade policy.
The same thing could be said for the North American Free Trade Agreement (NAFTA), which took effect in 1994. Over the last 27 years, a little thing called the Internet was invented and global trade patterns and financial systems today are markedly different.
Like the Jones Act, the President also has played a role in shining a more intense spotlight on this and other trade agreements. NAFTA was a hot topic during the 2016 presidential campaign and President Trump now seeks to renegotiate certain of its aspects to create more favorable trade terms for the U.S.
The renewed attention to both NAFTA and the Jones Act has not necessarily resulted in a more nuanced debate. In some cases it has led to even greater divisions based upon overly simplistic arguments that gloss over the fact that trade policy can have different impacts in places as close as Long Beach and Bakersfield. But it is good to question policy and honestly assess its impacts. The good news is that even when the spotlight fades, the trade community will continue the dialogue. NAFTA alone has been renegotiated more than ten times since its inception, something that has been lost in the current debate. The regular back and forth is healthy and necessary if we are to ensure that our response to challenges and crises is more about policy than politics.
(Dr. Thomas O’Brien is the executive director of the Center for International Trade and Transportation (CITT) at CSULB and an associate director for the METRANS Transportation Center, a partnership of USC and CSULB. Dr. Tyler Reeb is director of research at CITT and associate director of the Southwest Transportation Workforce Center.)