Thursday, September 19, 2013

US Shipping - Waterborne Domestic Freight - Vital Security Precaution or a Restriction of Trade?

The Jones Act in the Spotlight Yet Again as Opposite Views Published Simultaneously
Shipping News Feature

US – Yesterday a topic which we have touched upon many times in the Handy Shipping Guide surfaced again, demonstrating two opposing views of an element which forms the backbone of the US short sea freight industry. The Jones Act, that controversial piece of legislation which supported a US owned and operated fleet in times of war, is seen by one side as the supporting pillar of the American feeder fleet, whilst its opponents see it as an anachronistic construction to free trade, increasing the price of container and other cargoes to consumers.

Two completely unconnected events yesterday saw Tom Allegretti, American Maritime Partnership (AMP) Chairman and American Waterways Operators (AWO) President & CEO, make a speech to the TradeWinds 2013 Jones Act Shipping Forum in New York City, at the very time in his Heartland Institute blog, Dr. Erik Root, Chair of Economic Philosophy, Assistant Professor of Political Science, and Senior Fellow with the Government Policy Research Center at West Liberty University (WLU), proposes a diametrically opposed argument.

The Jones Act, or to give it its proper title, the Merchant Marine Act, demands that every vessel used for the domestic carriage of cargo within US waters must be built in the US, owned by US citizens, and staffed by American citizens and permanent residents, doubtless a wise precaution in 1920 when Washington senator Wesley Livsey Jones drafted it following the horrors of the Great War. Mr Allegretti obviously has a vested interest in maintaining the status quo and he spoke eloquently about how he feels maintaining the policy plays a significant part in helping to protect US national and homeland security, commenting:

“The domestic maritime industry supports US national and homeland security at zero cost to the federal government. The Department of Defense and the US Navy strongly support the domestic maritime industry, and the Jones Act as its statutory foundation, because strong vessel operating companies, a skilled, available supply of mariners, and a robust shipyard industrial base are critical force multipliers that the US government must have, but could not sustain, without the commercial domestic maritime industry.

“The American maritime industry is a thriving economic engine and a jobs creator. Companies have made, and are making today, multi-billion dollar investments in vessels, in shoreside facilities, and in technology to meet the needs of their customers in every sector of the US economy. Ours is one of the largest, most vibrant domestic maritime industries in the world, and will continue to adapt and grow to meet America’s transportation needs.”

Mr Allegretti of course represents the American tugboat, towboat and barge industry, which operates 5,000 towing vessels and more than 27,000 barges across the country and believes that the restrictions imposed by the act represent ‘remarkable example of a statute that is both a commercial success for the American economy and a public policy success [for America]’, a view which many waterborne carriers in other parts of the world view with suspicion. In Europe both the thriving feeder operations which carry their intermodal cargoes in and around numerous countries and the sea and river barge operators which travel the various river and canal system, have to fight commercial pressures with competition fierce in the various markets.

Mr Allegretti’s view is under attack from numerous domestic quarters as companies realise that the current regulations impose extra costs because of its inherent uncompetitiveness and Dr Root’s blog makes his own position clear when he says:

“As a consequence [of the Jones Act] US shipbuilding yards today construct fewer than 1% of the world’s deep draft tonnage, and the ships produced for the commercial market come at a hefty price. If you’ve ever wondered why some goods cost so much when shipped via ports, then the reason is directly related to the Jones Act. Talk about driving up the costs of shipping! As a result, goods are not as low as they otherwise would be because of this nearly century old piece of legislation.”

Dr Root also quotes Keli’i Akina, president of the Grassroot Institute of Hawaii, a public policy think tank which studies and reports on the effects of government upon individuals, who said recently:

“The most economically debilitating plank of the Jones Act requires that ships carrying cargo between US ports be built in the United States. This has created an artificial scarcity of ships largely due to the inefficiency and extraordinary cost of US ship construction, driving up freight and charter rates and thus limiting domestic commerce.”

To circumvent the act overseas companies can register offices as US companies within the US but the rules concerning construction of vessels and the staff involved still restrict free trade in the view of opponents such as Dr Root, whilst exponents always use the internal security card that plays so well with American audiences.

So the argument rages on as it has done for some decades, a shield of safety against perceived threats of war or a restriction of free trade? This one may well run and run for another 100 years.

To see earlier articles concerning the Merchant Marine Act simply type Jones Act into the News Search Box at the top of any page.