Bloomberg : After Irma, America Should Scrap the Jones Act


#1

Here we go again.I expected attacks on the Act following the recent waiver and I expect this is just the first in another flurry…


#2

From Lloyds List:

Removing coastal roadblocks

07 Sep 2017

Opinion

Written by

by Michael Grey

US politicians are likely to shoot down the attempt to abolish the Jones Act, which means American coastal shipping will remain stagnant

Despite all the positive arguments for repeal of the Jones Act, there are no signs that the objections to this might in any way be ameliorated.

ONCE in every US presidency, people raise their heads above the parapet to question the continued rationale of the Jones Act, that fiercely protective and now ancient legislation securing US maritime jobs. It is a talking point at present, with a bill before Congress seeking its abolition on the grounds of its cost to the country. This has coincided with some research from Tufts University, which has been considering the prospects for coastal shipping and which has concluded that the dear old Jones Act might be considered a “roadblock” to any large-scale use of the coastal waters for the movement of freight. A more accurate term might be “sea-block”.

If we just considered the logic of logistics in the US, there would be no arguments against the development of a large and healthy coastal shipping industry. The coast is long, the ports are available and the sea is empty. The interstate coastal highways are bunged up with freight traffic and getting ever more congested. Only a few years ago, the government put some thought into the US coastal shipping prospects and even developed a range of useful ship designs which, if anyone wanted them, could be dusted off and constructed in a trice.

But despite all the positive arguments for repeal of the Jones Act, and the manifest advantages it might bring, there are no signs whatsoever that the objections to this might in any way be ameliorated. There is no breakthrough in sight that might see the maritime unions or organised labour in the shipyards, backed up by the powerful road haulage lobbies, agreeing to cut coastal shipping a bit of slack.

If anything, their resistance to any weakening of the Act is hardening, not least because of the examples they see around the world in which local industries have been damaged by cheap labour and imported ships, with the inexorable movement towards those who can run ships cheapest. Where would the US Merchant Marine end up if its remnants, now almost exclusively in Jones Act trades, were to be undercut by cheap foreign seafarers and their open register ships? The same as Australia, the UK or the high-cost countries of Europe — is that what those who challenge the Jones Act really want?

There is no question the potential is there for the modal shift of colossal quantities of cargo from road to the sea. The US Marine Highway Programme offers a blueprint for this transfer, which sees a realistic track to real growth, if only the “roadblocks” could be moved. There are a few signs some brave souls are making an effort. Atlantic Coastal Services, for instance, is to launch a weekly ro-ro service between Miami and Newark, supported by the programme, and it will be interesting to see if this can prosper.

But as has been found in Europe, it is a struggle to build up coastal services, which depend on changing the logistic habits of a lifetime of the potential users. The European Union’s Motorways of the Sea scheme helped to do just that, aided by the willingness of the ports to invest and the bravery of a few operators who have grown trade and changed shippers’ habits.

In an ideal world, rather than building expensive new ships to inaugurate US coastal freight services, it would be made possible to charter suitable tonnage at a fraction of the cost and test the waters. But that will not happen when there is an absolute prohibition on any imports of foreign-built tonnage and very little available in the US.

Compromise

Might it be possible to persuade the supporters of the Jones Act to think rather more long-term and compromise on their fierce stance against any weakening of the legislation?Might such a compromise be to agree a long-term arrangement that would see domestic construction of “replacement” ships once a service using imported, chartered tonnage, albeit with US crews, had been established and was regarded as viable?

But arguments over the operational costs of US ships would not disappear in a hurry. In a country in which operators are forced to use tug-barge units instead of “proper” ships, it would be argued that the high costs of operating US coastal tonnage would remain prohibitive when compared with the costs of cheap road haulage. Sadly, the costs of congestion, road accidents and pollution rarely enter into these comparisons, as is the case in many other countries in which coastal shipping ought to play a far larger role.

And for all his pronouncements about deal making and the importance of business, it seems most unlikely that President Donald Trump would risk the wrath of many of his supporters by freeing up US maritime industry from its Jones Act constrictions.

The US Marine Highway Programme will probably stagger on, assisting a few brave operators, but any real breakthrough seems unlikely. Years ago, it was said that only when the costs of congestion and pollution on the US highway system become insupportable will America look to its coastal seas for salvation. That may take a little while yet.

rjmgrey@dircon.co.uk


#3

You mean like this?

http://www.rstreet.org/op-ed/end-protectionism-in-the-shipping-industry/?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3Bbe01zU7mRmWOlNL3g3guEQ%3D%3D


#4

All the tired, old, one sided arguments are back on the table. Each one always seems to omit one lynch pin counter argument as do so many other conspiracy theories.


#5

So I’m going to play devil’s advocate here a little, regarding the US built requirement for Jones Act trade… do any other countries with strong cabotage laws have a similar requirement? Or is that just us?


#6

The other main player is Indonesia, though their restrictions are flag only most are built in Indonesian yards, mainly on Batam - spin off from Singapore’s technology and skills.

http://blog.ssek.com/index.php/2017/05/indonesia-extends-cabotage-exemption/

http://www.wfw.com/wp-content/uploads/2016/09/WFW-Indonesia-1.pdf

Another is Brazil with their offshore sector, though they chop and change.

The idea was to stimulate shipbuilding by having foreign companies invest.

Swire had eight large PSVs to be built, four in Japan as lead vessels, four in Brazil.

There are bits of them there today.

http://worldmaritimenews.com/archives/157251/swire-pacific-offshore-cancels-four-psvs-at-eisa/

Brazil has iron ore, steel mills, deep-water harbours, but a repeatedly failing shipbuilding capacity.


#7

Just us. Canada has a strong cabotage law but still allows for foreign building. I think Algoma has a fresh new build on the way from china, CSL had their Trillium Class boats built over there, and Mckiels is running an old Arklow ship (to name a few). I’m thinking that they pay a large tax but its is still cheaper than building in Canada. Canada will also grant coasting exemptions to foreign ships (usually tankers) to engage in the home trade.


#8

Nearly all Offshore vessels working in Canada are foreign built and more are joining the fleet.
The large new Factory Trawlers are also foreign built.

Cannot think of any other country that has a blanket ban of foreign built ships, even for inland and domestic trade. Even Australia with their strong Union induced Cabotage Laws does not require local built vessels only.

The idea is so obsolete and costly that only a rich country like USA can afford to keep it on their books.


#9

so if the US were to scrap the domestic build requirement in the Jones Act, there would be little if any reason for a vessel built to private account to be built in the US. Does any nation want its shipbuilding industry to only exist to build for government account?

Think Great Britain here


#10

It’s a wonder that anyone can spew such drivel with a straight face. The longshoremen who add hundreds of dollars and significant delay to every container movement that make coastal shipping non competitive with trucks on both cost and transit time. Without the Jones Act there would be no American ships and no additional coast shipping. Homeland Security costs and delays would soar, and the size of its staff would have to be doubled.

If you want to make US coastal shipping possible, the first thing you’d have to do would be to replace the Longshoremen with automation and foreign dock workers.


#11

Unless US yards modernize and become competitive with other yards, no one will see any reason to build anything there unless they are force to. How much is that going to cost US taxpayers before they say; “enough is enough”?

Subsidizing is some evele European Socialism and have to be kept out of Capitalist heaven. In good American tradition companies that are unable to compete should be allowed to die.

Isn’t that in accordance with the cherished capitalist principle of “free competition and markets are the best regulator”??


#12

except when it is in a nation’s compelling interest to maintain an industry such for its own defense? Shipyards in the USA are as important as ships and mariners to have a maritime industry which no one can deny is critical for supporting its own military.


#13

OK, then modernize the yards to where they can compete on equal terms with others.

Maybe more important; cut the benefits and bonuses for the top heavy Management and dividend for the shareholders, until they can produce a product that can sell with profit in a free market.

Meanwhile, continue as now by buying ships that suites the military transport needs from abroad and let US branches of foreign shipping companies operate them, but with US crews.


#14

Just think, if it was not for the Shipyards here that were building ships at an unbelievable rate during WWII, Europe would be a very different place today.

Now, yes they need to change and modernize but it’s tough to compete against foreign yards that are backed by their government and have a lot of very cheap labor readily available!


#15

The Jones Act isn’t going anywhere. The only influential politician who gives a shit is McCain and we hear his latest attempt is dead as you will read here http://gcaptain.com/senator-mccains-latest-jones-act-repeal-effort-unlikely-to-progress-holland-knight/

All this talk about scrapping jones act is as expected after major storm that has created fuel shortage. I’d say biggest threat currently is if the issue somehow gets into the mind of wildcard Trump but hopefully that ship has sailed until next time a big storm comes shutting down ports and supply. As Trump would say these storms are bad branding for jones act but you will rarely see the Jones Act in MSM so this hoopla will blow over. Not all puns intended.


#16

Yes a lot of cleaver (mostly female) riveters and welders knocked together Liberty ships in a week and some of them lasted for 20+ years. But that was then, this is now.

If you seriously believe that foreign yards are all subsidized by their Government and US yards are not, you have to check your facts again.

Subsidies may be hidden by paying a premium for Naval, Coast Guard and other vessels built for the Government to stay within OECD limits, but they are subsidies nonetheless.

As for labour costs; Do you seriously think that North European and Japanese shipyard workers are cheap? If you compare the actual cost of labour you’ll find another reality.
If you compare productivity they may be “cheaper”, but that is because of investment in new machinery and equipment and efficient management methods.

It also have to do with the number and high pay (in wages, benefits and bonuses) paid to the Management and the large dividend paid to shareholders in America.

This is part of the philosophy difference between America and Europe, Japan and other developed countries. In America companies and Managers exists to maximize profit for shareholders, in Europe they are also tasked with looking out for their workers and the societies in which they operate. (Did I invent this? No, read The Economist for last week)

The fact that the Government is also demanding corporate responsibility and that the workers are represented on the Board help, as does strong Unions that actually represent the interest of the workers.

So, in stead of complaining about “cheap foreign workers”, get together in a STRONG Union with honest leaders that work for the good of the members, not for their own pockets.


#17

What “North European” countries are you thinking about?


#18

I’m thinking about Scandinavia, Germany, The Netherlands etc.
OK, so Poland is kind of in the North of Europe, but is seen as an “East European” country.

And I’m talking about shipyard workers, not CEOs, Managers, or even Engineers, cause they ARE “cheaper” in Northwestern Europe. The wage gap is much smaller in Europe than in USA.


#19

What yards in Scandinavia build ships? Taking ships built elsewhere and fitting engines and winches isn’t “building”.

Norway can’t build their own vessels affordable, can anywhere else in North Europe?


#20

Selective quoting?? Germany build complete ships, hulls incl., as does France and Finland. Just look at the shiny palaces owned by American Cruise companies.

Building a hull from foreign design and with foreign steel, then fitting foreign equipment to complete a ship is assembly, not shipbuilding.

Not entirely up to date, but here is statistics showing average earnings in different countries, incl. major shipbuilders, like Korea, Japan. Also for USA, Scandinavia and European countries (in 2005): http://www.worldsalaries.org/allsectors.shtml

PS> Switzerland and Norway are the only two countries over USD 3.000/mth. average salaries.