Allowing American companies to use foreign-built ships for cabotage would lower shipping costs and encourage trade.
Allowing American companies to use foreign-built ships for cabotage would lower shipping costs and encourage trade.
T he American military sees the civilian merchant fleet and shipbuilding industry as strategic assets in wartime. Given their strategic importance, the government passed the Jones Act in 1920 to protect and support domestic shipbuilders.
However, the Jones Act has failed. Although the United States is at peace, its shipbuilding industry is dominated by military production and repair. Barely any commercial shipping capacity could be converted to military production if needed.
America has produced a small and steadily declining share of the world’s merchant ships over the past century, although World War II was a significant exception to that trend. How can America ensure it will have the ships and industrial capacity needed in a conflict?
Despite itself, the Jones Act requirement that cabotage (shipping goods between ports within the country) be done with domestically built ships has crippled America’s ability to maintain its merchant fleet. The fleet has declined from 199 vessels in 1990 to 82 vessels in 2017. The American military would need the merchant fleet to transport equipment in a war, but with each passing year the fleet is less capable of meeting that need.
One solution to our current abysmal situation would be to relive the glory days of the U.S. Maritime Commission in World War II: Sound the alarm, have the government fund ship production, get competitive contracts from a variety of private entities, and repeal regulations to expedite the production of more ships and shipyards. But there is little reason for such drastic measures.
A simpler solution would be to allow American shipping companies to buy foreign-built ships for cabotage. The Jones Act is entirely imprudent, but the domestic-building requirement is especially harmful to the American merchant fleet by limiting access to cheaper vessels.
If the domestic-production requirement were dropped, America could supplement its merchant fleet with cheaper, foreign-built vessels. Buying foreign ships would not help increase American shipbuilding capacity, but it would enlarge the fleet. Domestically built vessels are eight times more expensive than comparable foreign-built ships.
On the other hand, reliance on foreign-produced ships could potentially diminish America’s ability to produce ships for itself in times of war or crisis. Although America is around its peak industrial production and uses only about 77 percent of its industrial capacity, reorienting industrial production toward shipbuilding would take time. However, America’s dramatic growth in ship production during World War II shows that massive shifts can be rapid.
Essentially, America faces a tradeoff between having a larger mercantile fleet and having more industrial capacity devoted to shipbuilding. The Jones Act has failed to promote domestic shipbuilding, and it continues to cause economic harm. But more-effective government action to increase American shipbuilding would add another large cost to America’s already overburdened peacetime budget.
Allowing American companies to use foreign-built ships for cabotage would lower shipping costs and encourage trade. It would also dramatically increase the size of America’s commercial trading fleet, which could be used to support the military during war. Abolishing the domestic production requirement is critical for supporting national defense.