Imagine that you wanted to do some grocery shopping. To do so, you drive your car from your house not to the grocery store, but to a parking lot miles and miles away from the grocery store. There, you get on a bus (which you have to pay for) that will then take you to the grocery store. You do your shopping, get back on the bus (paying once again) with your groceries, which then takes you back to your car where you can unload the groceries from the bus and reload them into your car before ultimately driving home. This would be absurd. It’s also remarkably similar to how people in the great states of Hawaii and Alaska must do almost all of their shopping, thanks to the Jones Act.
Passed in 1920 (long before Alaska and Hawaii were states) the Jones Act requires that any cargo shipped between US ports, such as those in Hawaii and California, use American-built and American-owned ships and with a crew of majority US citizens. This over-100-year-old law was meant to boost domestic shipbuilding and crewing by protecting them from foreign competition, who may be able to build ships that are bigger, faster, or cheaper to operate, with crews who work for lower wages than their American counterparts. Unfortunately, it has resulted in little more than increasing costs and complicating the lives of Americans, as a newly filed lawsuit alleges.
For Hawaii and Alaska, which joined the US in 1959, the Jones Act is a daily burden. Moving cargo from these states to the lower 48 requires hiring a vessel that is compliant with the Jones Act’s provisions, since the ports involved are all US ports. In practice, Alaska and Hawaii must have entire shipping routes specific to their states. A large container ship coming from, for example, Australia, could not stop by Hawaii on its way to a port in California, pick up some cargo, and deliver both the Australian goods and Hawaiian goods to the US unless, that ship also happened to comply with the Jones Act. Given the high cost of American-made ships and the more-expensive American crewmembers, most international shipping is not done by vessels that are Jones Act compliant. A 2023 Hudson Institute report finds that “only 3 percent of the 55,000 ships in the global commercial fleet” are American-owned. These 1,650 ships include “only 178 large US flag cargo ships, 85 of which are committed to international trade,” leaving only 93 of these large ships permitted to move cargo between US ports.
As a direct result, shipping to and from Hawaii and Alaska is both less frequent and more expensive than it otherwise would be. A 2011 US Department of Transportation Maritime Administration report finds that operating a Jones-Act-compliant vessel costs $12,600 more per day than a “open registry” ship, with almost 90 percent of this increase attributable to higher labor costs. By comparison, that’s a difference greater than the annual grocery budget for a family of four. Every day.
These inflated costs get passed on to Hawaiians and Alaskans, who must import the vast majority of the goods they purchase. The Jones Act also raises prices for anyone elsewhere who consumes goods and services produced in those states. The Kōloa Rum Company, for example, faces significantly higher shipping costs than other domestic rum producers, in part because of geography, sure, but also due to the Jones Act unnecessarily and, as the lawsuit alleges, unfairly raising these shipping costs.
Repealing the Jones Act would result in cheaper and more frequent shipping to and from the great states of Hawaii and Alaska. This would only help these people better afford basic items such as food, building supplies, and other consumer goods. Further, it would greatly reduce the cost of shipping domestically for all Americans, which would significantly drive down the cost of goods and services. So why has this law not been repealed?
Unfortunately, protectionist measures such as this are easy to pass but incredibly difficult to rescind, at least politically, because of what Mancur Olsen refers to as the logic of “concentrated benefits and dispersed costs.” Take, for example, US biofuel requirements. Reportedly, these cost the typical American about $20 per year, which is hardly enough to cause a general uproar from citizens. Farmers, however, benefit tremendously from this law and would face significant financial losses if it were repealed. They actively lobby Congress for its continuation, because these concentrated benefits are worth fighting to keep. The dispersed costs, though real and greater over all, are hardly worth fighting about for the many more people who bear them.
Tariffs and other trade restrictions being floated about today should be approached with both skepticism and caution. It is entirely possible that a case can be made for them in the short-term. But the institutional stickiness and inflexibility of policy-making means that we will likely be stuck with these laws for much longer than we expect. All costs, both those felt by today’s generation and by those which will be felt by future generations, need to be accounted for. Once they are, the economic case for protectionist measures falls precipitously.
All that would be required to repeal the Jones Act is a simple stroke of a pen. With it, Congress and the President could significantly reduce prices for the two million US citizens living in Alaska and Hawaii, not to mention the millions of tourists visiting these states annually. A full repeal would improve the lives of all US citizens around the world by lowering prices and increasing access to goods and services. Finally, it would boost manufacturing jobs in the US. Repealing the Jones Act, also known as the Merchant Marine Act, would accomplish all of this. Reversing a century-old protectionist mistake is a legacy any political leader could be proud of.
