The Jones Act Delivers High Costs but Little Maritime Security
In a recent MarineLink op-ed, maritime consultant Rik van Hemmen argued that the Jones Act is a cost-effective means of meeting the country’s national security needs and that further debate on the law is a waste of time. Neither is true. The Jones Act is both a costly and ineffective means of addressing defense requirements, and debate over the law’s future—to be followed by profound policy changes—is long overdue.
The national security case for the Jones Act, which restricts domestic waterborne cargo shipments to vessels that are US-flagged, US-built, and US-owned, is fairly straightforward. Theoretically, such measures provide the United States with ships in wartime to transport equipment and supplies for the military, the trained mariners to crew them, and shipyards that can both build new vessels and repair existing ones. The problem is that the law delivers only a fraction of its advertised benefits, at a wildly disproportionate cost.
Start with the fleet. Under decades of Jones Act protection, the number of US-built and US-flagged oceangoing cargo ships has declined from 257 in 1980 to 119 in 2000 to just 92 today. Of those, only 74 are deemed militarily useful, and it’s uncertain how many might actually be available in times of conflict. In 2020, for example, a DoD-directed study warned that accessing a significant portion of the Jones Act tanker fleet could unacceptably disrupt the US economy. A year later, the head of the US Transportation Command testified before Congress that wargaming suggested economic considerations might preclude the military from relying on Jones Act vessels.
The Jones Act provides an auxiliary fleet in theory, but perhaps not in reality.
Unsurprisingly, this diminished fleet is not providing mariners in sufficient numbers to meet defense requirements. A 2017 government report concluded the country was short at least 1,800 mariners to meet sealift needs in a wartime scenario, while a government-commissioned study released earlier this year found that 6,400 additional mariners were needed to “fully meet defense needs in a major conflict of significant duration.”
Shipbuilding, meanwhile, is arguably in an even worse state. Although Jones Act proponents argue that the law keeps the industry “robust,” domestic production is anything but. Last year, the United States accounted for 0.03 percent of global output, and US shipyards haven’t exceeded 0.2 percent since 2018. The world’s second-largest manufacturing country ranks nineteenth in shipbuilding.
The scarcity of orders for US-built vessels is hardly surprising. Three relatively small containerships currently being built by Philly Shipyard cost over $335 million each. In contrast, the maximum price to construct an equivalent vessel in Asia is placed at $75 million. Tankers that cost $52 million abroad are estimated to cost at least $240 million domestically (the exact price is unknown because no such vessels have been delivered in the United States since 2017).
Those extraordinary capital costs burden the broader maritime industry, pushing up freight rates and depressing demand for coastal shipping. Instead of renewing the fleet with modern vessels, ships are regularly used until age 40 or beyond. High construction outlays, along with operating costs at least four times those of foreign-flagged vessels, have led to a growing reliance on barges that, whatever their virtues, are ill-suited for a strategic sealift role.
To top it off, some of the Jones Act fleet’s aging ships—whose existence is justified on national security grounds and to thwart China—are dispatched to state-owned Chinese shipyards for repair and maintenance.
These ironic outcomes come with a steep price tag in the form of some of the world’s costliest shipping. That’s no small thing for a country as geographically expansive as the United States. Despite thousands of miles of coastline, the Great Lakes, extensive inland waterways, and shipping-dependent island states and territories, water accounts for less than nine percent of domestic freight transport. So costly is domestic water transport that it can make more sense to purchase goods from other countries where the Jones Act does not apply than from other states.
The current Jones Act waiver for energy and fertilizer products offers fresh evidence of the law’s damage. Finally given access to efficient shipping, domestic energy commerce has surged. Puerto Rico, for example, has imported more propane from the US mainland under the waiver than in the last 22 years combined. In approximately six months, waiver vessels have moved more crude oil and fuel from US ports to the West Coast than in any year since 1981. They have also transported over eleven million barrels of crude oil from the Gulf Coast to the East Coast.
And that’s just energy. What benefits might be realized by other American industries if they could use the same efficient shipping enjoyed by their international competitors? Similarly, what if our ports and waterways could be dredged by internationally competitive firms? What if US ferry systems could modernize their fleets at dramatically lower cost? The missed opportunities are head-spinning.
There are better ways to meet the country’s national security requirements. The Maritime Security Program and Tanker Security Program both pay annual stipends in exchange for the ability to call on ships in times of war or national emergency. Instead of maintaining an aging, declining fleet through a protectionist law with opaque costs, why not employ transparent, direct subsidies tied to discrete defense needs?
There are other important questions that also deserve to be asked. If US maritime policy were formulated from scratch today, would anyone arrive at the Jones Act as the optimal path forward? Furthermore, why should we think that a law whose roots date back to at least the late 1700s is ideally positioned to serve the United States in the 21st century? That no other country employs such a restrictive cabotage law should help inform the answers.
The task for US maritime policy is how to provide cost-effective water transport while meeting the country’s defense needs. The Jones Act is clearly not the answer, delivering only a fraction of its promised benefits at great expense. The debate must now shift from whether to maintain this failing law to the exact scope and nature of the changes that should be made.