End the Jones Act? Ask Alexander Hamilton

This article is better than what is usually seen.

To start, the administration should release a comprehensive national maritime strategy to grow the U.S. maritime industry and increase its competitiveness and support to security. Congress mandated one in 2014, and it still has not been published. To implement the strategy, the government could pursue measures to revitalize America’s maritime industry, including aligning outdated tax structures with international norms, reforming punitive repair duties, funding enhancements to ports and intermodal links, and better coordinating U.S. commercial and government ship construction and maintenance to gain efficiencies.

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I recall the Savings and Loan crises from the 1980s, The thinking at the time was reform and deregulation would lead to increase efficiencies. Turned out the system was more complicated than people assumed and a taxpayer bailout was needed.

The so-called reform was a violation of Chesterton’s fence, don’t mess with things you don’t understand.

The underlying assumptions made in anti-Jones Act arguments is that the solution is simple and obvious, but in fact in real life that almost certainly cannot be true.

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Who can blame an editorial writer attempting to ride on Hamilton’s name at the present moment?

The editorial is a typical bit of pro Jones Act work but as for accurately describing Hamilton and history, well, not so much. The Article makes one statement about an action of Hamilton,” During the first Congress in 1789, Alexander Hamilton led the passage of legislation that required trade between U.S. ports to be conducted by U.S.-flagged vessels, which mirrored the laws of most major countries at the time.”

Except he didn’t, by that I mean, that was not the law passed. Such a law wouldn’t be passed until 1817. What was passed in the first Congress was summarized in Congressional Hearing Records in 1958, a lengthy set of discussion over domestic shipping:

After listening to @john on the Blue Economy Podcast I started listening to some of their other guests. I’d recommend listening to the one with CargoMetrics CEO Scott Borgerson. The whole discussion is interesting, but for the Jones Act specifically jump to 17:45 - 26:15.

I know this has been carried on in multiple threads, but I don’t disagree with his endorsement of the idea of exchanging the blue-water build requirement with a repair requirement. As I see it we don’t really build blue-water ships anyway, so what would be lost. Two of the larger US yards that build commercial tankers and container/con/ro, Philly and NASSCO put out maybe a ship or two per year, sometimes. These one or two-off ship contracts every 5-10 years can not be what is sustaining these yards nor their shipbuilding knowledge. By far their largest customer is the government and that will never change. Let them continue to compete in that realm, and fill their dry-docks with repair/overhaul work.

I think the “amend” argument has merit. Build the fleet with foreign steel. Repair in US yards, keep the US ownership (the money exists), keep the US crew (academies keep pumping them out), keep the US flag and cargo cabotage requirements.

For passenger cabotage I tend to agree with Mr. Borgerson as well. We are already exclusively foreign flag cruise ships in the US, so what are we protecting with this requirement.

He doesn’t speak like he has a solid history of the subject more like he is informed by reading Cato Institute reports. JA is one hundred years old, but build requirement is 200 (and change) at least for cargo.

They can build with foreign steel already, just has to be in standard mill shapes and size. Can’t work it too much or it exceeds the 1.5 percent limit— the problem with America’s Finest.

Anyone who says, ‘oh yeah, competition no one can compete with us’! Yeah, that’s unrealistic—no one can compete unless labor is even, wages, etc… and they won’t be. Build provisions aren’t bottlenecking I-95. Trucks are cheap.

And I recall the ‘we’ll mandate repair/shipyard in the US!’ Done before—This led to complaint and repeal. Screwing the competition up by forcing ships to call in US versus more advantageous and cheaper foreign yards on routes. Scrapped, they just make the cost that much more prohibitive in foreign yards by the ad valorem tax (50%) on such foreign work—except where it has been waived by free trade agreements (which is most places—not China).

The data driven argument about releasing the impact of the build is in place and shows it’s a canard. The MSP ships need ever increasing subsidies to stay afloat despite the foreign build. And they won’t compete in cabotage trade against barges.

The argument as I understood it was always to maintain the build requirement for national security as that is the only way we’ll keep our shipyards open and keep the continuity of shipbuilding workers employed there, such that in time of war we are not reliant on foreign yards for building our naval fleet. But I would argue that the number large tonnage JA vessels actually being built is so small as to be inconsequential. If you were to substitute a repair requirement and allow new foreign tonnage this would be more of a benefit to keeping the yards open, busy, and strategically viable.

There is an economic argument for scale and competition in repair as well. If a shipowner could increase their fleet by adding three or four new foreign built vessels for the cost equivalent of one US build vessel, I suspect there would be a business case for doing so. Bigger fleet, more ships to be maintained. We are not necessarily talking about foreign route vessels passing up foreign yards for repair, but as example the speaker was talking about oil and gas distribution along our own coast, or a more viable container service to the non-contiguous states and territories. As for MSP, if US shipowners in the free market sector could purchase cheaper vessels, this should necessarily reduce the need for government subsidies and financial drain of the older government MSP fleet.

I don’t necessarily know the answer, but I agree amending the law has merit. With involvement of all stakeholders. However, I don’t recall ever actually seeing any draft legislation that wasn’t simply a repeal effort.

You might be confusing MSP and RRF fleets. MSP vessels are ‘Younger’ and have an age limit—for now—there has been talk to repeal The age limit which would defeat one purpose of the law to provide ‘modern’ vessels to sail on.

Isn’t both already mostly consisting of foreign built vessel and exempt from the JA?

The ships enrolled in the MSP are not exempt from Jones Act requirements. RRF ships being government owned technically are (exempt) but they do not engage in commercial trade so that is a nonissue.

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Oh!! This list from MARAD must be total BS then??:

Most of the ships are foreign built and companies that own and operate them appears to be subsidiaries of foreign shipping companies.

There isn’t a U.S.-build requirement for MSP (afaik). They need to be U.S. flagged and they still need to comply with the Jones Act restrictions on carriage between US ports, but since they are for international commerce, this isn’t much of a problem.

I wasn’t the one who brought up MSP in the first place. I specifically, twice, mentioned trade between US ports. The point I was making was that if the US build requirement was not there for what are currently JA, US built, coastwise and domestic commerce vessels coming out of US shipyards, (Tote/Matson/Seacor/APT/OSG/Crowley), there would likely be more vessels in service for these or similar companies.

The stated purpose of MSP is to have ships available during times of war and national security to be available as directed by the Secretary of Defense. A strong and larger commercial, non-subsizieded, US commercial fleet might not negate the need for some dedicated MSP vessels, but it sure seems like it would reduce the number of subsidized vessels required.

No it wouldn’t. Look the MSP ships are the pretended dream of removing the build requirement but keeping the US company and mariners. Equal playing field with international shipping. But of course it isn’t, since labor, and liability of Jones Act seamen, and so on. So where’s that competition? You have to pay them to do it. Not just the overt susbidy, but cargo pref as well—an indirect subsidy. Lucrative in times of war (some operators put vessels in the program without the subsidies for a while even, since its lucrative to have a lot of one way mil cargo and open back haul) not so much in peace (fleets shrink, average vessel size decreases).

That picture of ‘capitalism’ doesn’t improve in coastwise. There wouldn’t be more ships, the freight routes are divvied up, and largely calcified as to mode (water/rail/hwy). That was covered in another thread—bulk of US freight moves a ridiculously short distance, so trucks will own that forever. The barriers aren’t the cost of financing a new barge—and lets be clear, it would only be new barges and tugs that result in removing the build requirement.

New routes make new ships. Offshore is best example. Because of JA, that puts lots of money back into communities. If one wished to find a way to improve it, it’s about expanding protected routes—a NAFTA cabotage zone, or Western Hemisphere Agreement that makes incentives for ships built here, content, etc…

It absolutely has to, at least for the shipping companies and their customers. If any of the above named companies could purchase ships for a third or quarter of the cost they currently are, it would necessarily improve the economics.

Pure speculation, but I doubt Tote would have been running a 40yr old steam ship if the replacement cost wasn’t what it is today. A larger, newer, more efficient vessel would have improved the per-unit cost of customers on that existing route. If a foreign built, US LNG tanker could exist, delivering to the US LNG import facilities, originating from a US export facility, I still firmly believe there would be a US ownership group interested in that business.

We can keep holding on to this build requirement, but it has yet to create a large number of commercial vessels built here and will never do so because it will never be economically viable. There is physically no room for current yards to expand in scale and truly compete. Their cash cow is the Navy and will remain so. If you want to improve the condition of JA shippers and the US mariners working for them, let them buy cheap ships. An extra $100 mil on the balance sheet goes a long way.

You left out decimating tens of thousands of tug and barge builder and supporting industry jobs. It has long been shown that there is no jump starting a US shipbuilding superiority outside the Jones Act trader area. It never jump starts anything, because it never expands the Jones Act trade area. The point in deliberating on the JA and any modification or repeal is to see what good or bad would result. You can accuse me of speculating but I have more reasoning behind my position than believing more ships would result if only… in either case—the build requirement is better for more Americans than removing it. That should count for something. No way the number of mariners expands as hard as yards shutting down for fishing, tugs, barges, passenger boats.

I intentionally left out tugs and barge/fishing/pax builders and that industry because I was, again, specifically talking about large blue-water ships. I don’t see why any modification to the act has to be wholesale rather than logically piecemeal in a way to improve the industry in areas needing improvement.

You are correct in that there are many yards building and repairing quality barges and OSVs at a somewhat reasonable cost. I see no reason to change that, it is a large industry here supporting many thousands of jobs. Those builders and shipowners are by and large operating successfully. But that is simply not true for larger ships. And keeping a requirement so that two or three yards can occasionally put out one commercial ship every few years is subsidizing a few jobs for the sake of subsidizing a few jobs, at a cost exponentially higher than their value. Those yards will continue building government ships as they have always done.

And as was one of the discussion points, replacing a build (for large tonnage vessels) with a repair requirement could actually stimulate growth rather than stifle it. If the repair industry was expanded perhaps it would make it more attractive and competitive for the US vessels currently dry-docking overseas. Yes, it is of course just a discussion point. But if we don’t actually consider potential realistic improvement opportunities we’ll get to watch a further decline for the next 100 years, or worse yet (IMHO) the wholesale repeal pushed by unaffected lawmakers beholden to lobbyists.

The person in the interview didn’t, he was specifically talking about passenger ships at one point.

piecemeal? Expanding blue water foreign build requirement to participate in Jones Act trade but leave the rest? That’s also a bad idea. For one, there will always need to be at least what we have for large oceangoing ships. In case of war. Anemic as it can be, no one wants that to go away—the infrastructure that is, and if it pays off (no matter whose name is over the yards) when Jones Act ships get recapitalized or expanded or modified, then that’s great. Extending a coastwise trade permit to foreign build ocean going means you’d be subsidizing barge and tug competition from the MSP fleet for one and that leads to the same losses, and of course it would be irrationally unfair as a principle.

I understood his initial passenger ship point to be about cruise ships, which we already don’t build here, having to squeeze in foreign ports in what otherwise could be a strictly US voyage. But he did also make the example of European large overnight ferry services. Of course we also don’t build those here currently. I took that to mean that by removing the barrier cost of entry that we might create the opportunity for a European-style coastal ferry service, including more jobs offshore and port-side.

As for the “In case of war” case, I struggle to defend that simply on the data. Most of the yards pumping out commercial ships for the last war in which we needed them to be built at that rate, do not exist today. The yards that do could never scale up to meet that requirement today (physically they can’t expand, and likely the priority would be for warships). And if needed, though currently “anemic”, they aren’t going away since they are still building naval vessels, and MSC vessels that use similar enough naval arch principles as commercial vessels.

You say there will always be a need for at least what we have for large oceangoing ships. And I agree. But I don’t see why those ships can’t be purchased overseas. And that if they were, at significantly reduced cost, the fleet age would be younger, there may or may not be more of them, and they’d be far more reliable in time of war than the current fleet, especially if one includes the current mothball fleet.

This “time of war” comes back in just about every post. Has there been a time when the US was NOT involved in war (declared or covert) somewhere in the world since WWII?
If there should be a WWIII it would be over before any yard could build a ship. (maybe even before any of the mothballed ships could get under way, load and get half way across the ocean)

Time to accept that the world have changed and so has both warfare and shipping. (Not to mention that ships are developing every day)