Have you ever had the experience of meeting someone, and then suddenly you see them everywhere around town? Or, you learn something new and almost immediately application of this new knowledge pops up repeatedly? This is the case for me with The Jones Act.
Never heard of it? Neither had I until I met the School of Business and Public Management Executive in Residence, Bill Carter. The Executive in Residence program gives our School the unique opportunity to learn from a highly successful individual in our community who holds office hours on our campus and opens him or herself up to mentorship and guest lectures for our students. Bill Carter is our current Executive in Residence and when he came aboard a little over a year ago, I wasn’t immediately sure how his expertise in the telecommunications industry (undersea cables specifically) would be applicable to my Public Management program, but that all became clear quite quickly.
One of the first conversations Mr. Carter and I had was related to the Jones Act and the way this protectionist legislation often hindered business in the U.S., despite the fact that it was designed to protect our national shipping industry. In short, The Jones Act states that ships carrying cargo between two American ports must: 1) be built in the United States, 2) be 75 percent owned by U.S. citizens, 3) be 75 percent manned by a U.S. citizen crew, and 4) fly the U.S. flag. This sounds great for U.S. seafarers and shipbuilders.
Unfortunately, it has a number of unintended consequences. For instance, it drives up the prices of goods for island states like HI, AK, Guam, and Puerto Rico by restricting the number and types of vessels that can legally deliver goods. It’s a supply and demand issue – low supply of eligible ships versus constant or increasing demand for the goods delivered by the ships. Additionally, a cruise ship must put a foreign port between two American ports to ensure compliance with this act. That can make Alaskan cruises very tricky for cruise companies. In the context of the undersea cable industry (and other industries, no doubt), the Jones Act means that companies will simply hire foreign crews, do repairs in foreign countries, and operate work-arounds in their shipping schedule (avoiding U.S. port to U.S. port schedules) to both save money and avoid complications of the Jones Act.
Recently, another instance of the Jones Act acting in an obstructionist rather than protectionist manner popped up in a radio story I was listening to about renewable energy expansion in our country. The story discussed off-shore wind power development and how this industry might expect to expand in the coming years. One of the major challenges that was identified was the Jones Act. Not surprisingly, the parts required to build an off-shore wind turbine are extremely large and require special hydraulic systems to be installed on the ocean floor. According to the Washington Post, there are presently no Jones-Act-compliant ships that fit the installation requirements of these turbines which are being developed in the U.S. So, once a turbine is built in the United States, it can only be transported to the U.S. offshore site on a U.S. ship. Since no such ship exists, a company must then spend a tremendous amount of additional money to either stop off in a foreign port first, or build a compliant vessel. This makes offshore wind energy production much less price competitive and hinders the Biden Administration’s goals for renewable energy development.
While I am still learning about this policy myself, I can safely say it is not an elegant law. It seems to be creating many more economic problems for the U.S. than solutions and directly hurts many U.S.-based companies and even island states; It is ripe for repeal or at least reform.
Dr. Heather Farley is Chair of the Department of Criminal Justice, Public Policy & Management and a professor of Public Management in the School of Business and Public Management at College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies.
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