Jones Act Explanation THE MOVIE

[Sen. Walter Sobchak]

The Jones Act has come up a lot in the context of Puerto Rico but a lot of the articles that have been posted aren't very good. This is the best non-policy wonkish video or article I have seen.

Basically the Jones Act is an archaic piece of legislation that was intended to stop Canadian Pacific Steamships from sailing between Seattle and Alaska a hundred years ago which they had been allowed to do during World War One. In the modern era it serves no other purpose other than forcing the residents of Hawaii, Alaska and Puerto Rico to subsidize a handful of politically favored US ship builders. And while US operators or Jones Act ships would probably like nothing more than to buy ships from South Korea and Japan, they advocate for the status quo because they don't want to write down their investment in their Jones Act ships and watch as the operators of foreign built US flagged ships elbow in on their market.

If similar rules were applied to aviation, US airlines wouldn't have been allowed to buy their substantial fleets of Airbus airliners.

Some people, such as myself argue eliminating the Jones Act in it's entirety, but the more mainstream and conciliatory position is strictly removing the requirement for US built ships while still retaining the rest of the law.

[CanSocDem]

1. Great video.

Hopefully this will bring the discussion to the table. Are American politicians even capable of serving the public interest we all ask ourselves.


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[AtheistCrusader]

2. Two solutions to the build requirement.

One is to revoke it.

The other option would be to make it iron clad for 20-30 years. Right now, domestic ship production will NOT ramp up because no one is going to risk capital on a shipyard and producing ships even at the much higher price the Jones Act restrictions cause. All it would take is for the requirement to be suspended or revoked in any given legislative year, and the shipyard would be immediately bankrupt, and shippers that acquired ships would be holding ships that cost 3-4x as much as a foreign built ship, and the ships wouldn't be financially competitive.

Suspend the requirement, or take away the risk. If you take away the risk, that would mean some additional US manufacturing jobs. As things are, there aren't any, because it's a bad capital investment.

[Sen. Walter Sobchak]

3. Jones Act ships are an inconsequential portion of US ship building

The only thing that holds back US commercial ship building is that the Pentagon sucks most of the air out of the room. If you're a ship builder would you rather fight for every order with ruthless European and Asian competitors or just coast on military contracts where value and delivery and performance are mostly rendered moot by bureaucratic indifference and political shelter.

Behold the marvels of the Lockheed F-35 and Boeing 767 tanker. Both projects have been disastrously mismanaged, are years behind schedule and are years away from operating to spec. The consequences of that are... well there aren't any. Meanwhile the Airbus A330 tanker, the tanker the USAF actually wanted has been in service for years and American aircraft are refueled by A330 tankers operated by our allies every day.

[AtheistCrusader]

4. But that's the thing.

Because the restrictions of the jones act artificially constrain the ship supply, adding what is essentially a 300% collectors item cost to current ships, that's a HUGE pile of potential revenue. That's a great capital investment for new ship building capacity, not even expanding an existing shipyard, but warranting whole new shipyards/companies from the ground up.

But for the risk. And the risk isn't in the shipping market itself. the demand isn't going anywhere. But if the Jones act goes away...
Then the shipping can be done with foreign built ships at 25% of the cost.

Nobody's going to invest in new ship production capacity that could be obsoleted that quickly and that easily.


I agree, military contracts consume most of the current production capacity, and that's a constraint, but that's a favorable constraint to justify new production capacity.

[Sen. Walter Sobchak]

5. You can't have it both ways

The Jones Act fleet has an average age of thirty three years and rising, which is much higher than the global average. Because the replacement cost is so high their operators will tug those ships all the way to Hawaii if they have to before replacing them. The El Faro sinking put that into sharp focus. The Jones Act premium is a case study in price elasticity.

Investment in ship building capacity will be dictated by the prospectus for defense spending.