Sorry, Best We Can Do Is More Jones Act

J ones Act proponents have been feeling the heat because governors are concerned that New Englanders won’t be. New England is facing high heating costs this winter, and the protectionist law, which requires all ships transporting goods between U.S. ports to be built and flagged in the U.S. and owned and crewed by Americans, makes it difficult to transport petroleum products from the Gulf Coast to New England. Very few tankers meet the Jones Act’s requirements, so the market is not very competitive and prices are high.

Of course, New England politicians don’t help the situation. Many of them oppose new pipeline construction, which also makes it more difficult to transport petroleum products from the Gulf Coast region, and they have fought to close refineries. But the fact of the matter is that New England is facing high energy costs, and unlike building new pipelines, which takes years, waiving the Jones Act could make an immediate difference.

Colin Grabow of the Cato Institute writes:

While pipelines are the most efficient means of moving large volumes of fuel, their ability to move product from the Gulf Coast to the East Coast is described as “largely maxed out.” Marine transport would seem an obvious alternative, but tankers that comply with the Jones Act are already fully employed with little excess capacity. That doesn’t leave much margin of error if temperatures drop for a sustained period. The American Fuel and Petrochemical Manufacturers warns that while U.S. refineries produce sufficient volumes to keep the region supplied, “it’s possible high seasonal demands and Jones Act constraints [emphasis added] could cause temporary disruptions.”

Naturally, Congress is working to make Jones Act constraints even stricter than they already are.

That effort is partly in response to a different situation in a much warmer part of the U.S. that also demonstrated the law’s ill effects. Puerto Rico was struck by Hurricane Fiona in September. Puerto Rico, being an island, has always been disadvantaged by the high shipping costs the Jones Act encourages, but the law’s harm to Puerto Ricans becomes especially apparent when a disaster such as Fiona strikes. The Biden administration, after days of delay and protestation from the domestic maritime industry, granted a Jones Act waiver to allow a ship flagged in the Marshall Islands to deliver diesel from a Texas port to the island.

Jones Act waivers are extremely rare, and the law is already one of the strictest protectionist policies currently on the books. But that’s not good enough for the domestic maritime industry, which, despite being small by global standards, punches way above its weight when lobbying in Washington. So efforts are afoot to make the law even stricter.

First, an amendment has been added to the recently passed National Defense Authorization Act, the yearly bill that funds the military, that will make it more difficult to waive the Jones Act in response to natural disasters such as the one that struck Puerto Rico in September. The provision “amends the Jones Act waiver process to require the request be made public, establishes a 48 hour holding period after publication, prohibits any ship with goods on waterways from obtaining the waiver and requires a presidential determination that the waiver is needed for national defense,” according to Reuters. These requirements would have made the waiver the administration granted in September impossible, and will make prospective future waivers more time-consuming and legally dubious.

Second, Representative John Garamendi (D., Calif.) has introduced a bill to close what he calls Jones Act “loopholes.” U.S. Customs and Border Protection interprets the Jones Act with letter rulings, which over the years have permitted foreign vessels to perform certain tasks, such as oceanographic research and energy development in U.S. waters, that do not necessarily involve transporting goods between U.S. ports. Garamendi’s bill would repeal every CBP letter going back to 1972. It’s a more all-encompassing version of the American Offshore Worker Fairness Act, which he introduced in the House earlier this year, and which lawmakers tried and failed to shoehorn into the NDAA.

“The U.S. government should do everything in its power to prevent foreign vessels from paying poverty wages to take jobs from Americans working in our maritime industry. Sadly, it has largely enabled it instead,” Garamendi said in introducing his new bill. It’s unclear how the Jones Act’s blanket ban on foreign vessels’ transporting goods between U.S. ports has, in the century it’s been on the books, “largely enabled” foreign companies to kill American jobs by paying foreigners “poverty wages.” But that is beside the fundamental point: The purpose of transportation is to move stuff, not to be a government-supported jobs program.

Protectionism allows politicians to appear patriotic, but it leaves Americans worse off. By making it more difficult to develop and transport energy resources, the Jones Act and the expansions to it that Congress is considering disadvantage American energy consumers — which is to say, all Americans — to benefit domestic industry and organized labor. This state of affairs is not new: The law has been in effect since 1920. And until American voters punish protectionist politicians for supporting it, Congress will continue to say, “Sorry, best we can do is more Jones Act.”