For the uninitiated, the Jones Act is a 1920’s law that says any freight carried entirely in U.S. waters must be transported by U.S.-owned ships and crewed by U.S. citizens. Sounds good on the surface, but as with most well-intentioned government action it does not trump the law of unintended consequences, and those consequences are becoming painfully obvious.
The Act was written to protect U.S. shipping jobs against those rascally foreigners, before trucking was seen as reliable or trustworthy. If a European shipper were to cruise into a U.S. harbor and offer to carry U.S. freight at, say, a 10% discount to standard rates, the company would have a distinct competitive edge. To a U.S. shipping company, the foreign firm would appear to be “stealing” jobs (though they would see it as earning new business.) But what if you are a company that needs shipping? Then the low-cost shipping company is good news. Without the Jones Act, high-cost shippers would have to lower their rates to compete. So those that buy shipping services are penalized.
The law of unintended consequences arose in Summer 2010 when oil from a broken well head gushed into the fishing and recreation waters of the Gulf of Mexico. A modest and ill equipped armada of U.S. ships attempted to skim oil from the water’s surface but was overwhelmed by the task. At least one huge Taiwanese vessel, A Whale, designed just for such work and capable of filtering enormous volumes of oily water, was ready and waiting nearby to assist. Many other foreign vessels docked in North Sea ports had offered assistance but were rebuffed for reasons unclear although The Jones Act is often cited. President Obama eventually waived the act but only after precious days were lost.
Now we are presented with a great opportunity of building the first offshore wind farms in the Great Lakes and on the Atlantic Coast. One project scheduled for the waters near Cleveland will be a modest start of five turbines, 20 MW. But before construction begins, enormous investments are needed for support equipment, docks, barges, cranes, and special vessels that the Jones Act says must be owned and crewed by U.S. companies – all for five turbines now and the possibility of more later. Canadian companies might like to share the costs and crews for their offshore work, but the Act forbids common-sense cooperation.
Investments for the offshore work on the Atlantic Coast will be much greater, possibly reaching billions, in jack-up barges and cable-laying vessels that already exist in Europe. It would make better sense to hold costs down by leasing that equipment and experienced crews from the UK, while green U.S. crews get their sea legs. But again, the Jones Act mines that harbor.
Some lawmakers cannot acknowledge that we live in a world economy. If the Act is not modified, or better yet scrapped, the U.S. offshore wind industry may never get off the water. Competition is always healthy and that law, a tax in another form, stifles it. It is time to deep-six the Jones Act.
Filed Under: Policy