By Peter Roff.
Smart policies balance short-term considerations against long-term needs, even when they conflict. This is the case in Puerto Rico, where Hurricane Fiona made its presence known, dumping 30 inches of water in just a few hours, accompanied by high winds that knocked the power out all over the island.
For some, this all-too-predictable natural disaster presents an opportunity to advance arguments in favor of repealing the U.S. Merchant Marine Act of 1920, commonly known as the Jones Act, which requires goods shipped between American ports to be carried on American-owned ships with American crews flying a U.S. flag. Detractors of the law argue that the Jones Act prevents foreign ships from delivering much-needed supplies in times of crisis, but reality has proven otherwise.
In the wake of Hurricane Fiona and almost on cue, a foreign-flagged ship that had just left Texas with plans to call on a foreign port — per the requirements of the Jones Act — arrived near Puerto Rico unannounced instead of heading for its intended destination. The ship found itself blocked from docking with what critics assert was fuel needed by island residents because doing so would have violated the law. But that is not where the story ends.
An emergency waiver was ultimately granted but was issued just one day before a Jones Act-compliant vessel arrived with 185,000 barrels of fuel, calling its need into question. This left some wondering if the diversion to Puerto Rico was intended from the start and if the request was nothing more than an attempt to take advantage in a time of crisis.
Any good economist will acknowledge this law smacks of protectionism. They’d be right. Many of America’s shipping needs could be handled by foreign-flagged ships crewed by a mishmash of foreign mariners. It might also be cheaper since countries like South Korea and China have robust shipbuilding industries because they are heavily subsidized and wages are far lower. In this instance, however, the cost is not the only consideration.
America needs a commercial marine fleet. With many American manufacturing needs now outsourced across the Pacific, it’s vital to have U.S.-flagged ships bring those goods home and distribute them across the country. Not because that’s how it should be done when times are good but because it may be the only way it can be done when they aren’t. Without the Jones Act, U.S. cargo fleets and non-military shipbuilding capabilities would disappear.
For practical purposes, should we ever need more ships in a hurry — as America did during World War II when Liberty Ships were sliding down the gangway at the rate of two or three per day at 18 different U.S. shipyards — we couldn’t build them. Nor could we fix the ones we had should they be damaged in battle or sabotaged. We’d have to contract the work or rebuild what we had from the ground up.
According to one estimate, it could cost $65 billion to have a substitute supply of ships, making it precisely the situation governments properly prepare for by imposing regulations on the marketplace. Even Adam Smith, the father of free-market economics, agreed it would be appropriate, writing in the “Wealth of Nations” that:
“The act of navigation therefore, very properly endeavors to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others, by heavy burdens upon the shipping of foreign countries.”
In an essay published by the Center for International Maritime Security, Michael D. Purzycki offered Smith, who transformed our understanding of how markets function, as an exemplar of those who believe in laissez-faire principles but think it is sometimes necessary to balance them against national security considerations.
“All sectors are not created equal,” Purzycki observed. “Those that help support national security are different in importance, and different in the need for government intervention, from those that solely support private consumption.”
The arguments are compelling. Natural disasters like hurricanes are, unlike commerce raids and war, occasional, predictable events. The landfall of a single storm or a series of them does not constitute sufficient reason to toss the Jones Act baby out with the rainwater. It, and the idea of freedom of the seas, are interlinked in a way that can only be untangled at great risk to America’s general well-being, security and global competitiveness.