Jones Act draws critics, defenders

U.S. Sen. Mike Lee, R-Utah, has been one of the most vocal opponents of the law, which mandates that cargoes moving between domestic ports be transported by U.S.-built, U.S.-owned and U.S.-crewed ships.

"Intuitively, we know that the Jones Act creates a lot of costs, not just to our economy but to U.S. families, hardworking moms and dads, poor and middle-class Americans all over the place. It's one of the things that happens when we artificially protect shipping industries from competition," he said. "You're going to cause market distortions that don't create the most efficient, market-based prices."

But James Weakley, president of the Lake Carriers Association, an organization that represents U.S.-flagged fleets operating on the Great Lakes, said the Jones Act supports domestic security and economic security "because our employees make family-sustaining wages, and they have good benefits, and they have upward mobility."

"We have captains and chief engineers that started out as deckhands and wipers. They make good money, and they contribute to our economy," said Weakley, noting that the Great Lakes navigation system supports 235,000 jobs.

Mario Loyola, a senior fellow with the Competitive Enterprise Institute, points to the U.S. energy sector as evidence of how the Jones Act has had unintended consequences. He notes that it is cheaper to ship Texas crude oil to Canada via foreign tankers for refining than it is to ship it to domestic refineries in the Northeast. As a result, refineries there have taken to importing oil instead of using domestic product.

"One thing to note about the reforms that we propose and that Sen. Lee has proposed is that they affect a very small part of the Jones Act fleet, which is the ocean-going portion, the one where ships are going from California to Hawaii, from Florida and New York to Puerto Rico and crucially from the Gulf Coast to our refineries in the Northeastern United States," Loyola said.

He said that only about 100 U.S. vessels would be affected by Lee's proposal to lift Jones Act restrictions.

"Meanwhile, on the inland waterways and Great Lakes, we have more than 30,000 tugs and barges that are the main Jones Act fleet, and that's where the law really gets its lobbying power. So, all the special interests defend their perks tooth and nail, and that's why the large part of the inland waterway Jones Act fleet, their lobbyists, will not abide even a small change that would affect the ocean-going fleet, because they think that if they allow any reform, it will end up with a broad repeal," Loyola said.

Upon further questioning, however, Loyola acknowledged his ultimate goal, saying: "I'm in favor of removing the Jones Act entirely. I don't think it helps anyone."

Weakley suggested that scrapping the Jones Act would be short-sighted.

"What the Jones Act opponents want to do is make money by outsourcing, and it's really more egregious than outsourcing our jobs. It's bringing foreigners into our waters to take our jobs," he said.

Lee suggested that waivers ought to at least be granted for foreign tankers carrying U.S.-produced liquified natural gas to serve U.S. markets, noting that no such vessels are even a part of the Jones Act fleet.

"If there's a market, we'll build for that market," Weakley said. "A lot of LNG in the U.S. moves by pipeline. One of the challenges is in New England; they won't permit the pipelines. So, there's actually an offshore provider that moves LNG from Trinidad offshore to the New England market."

Weakley noted that three LNG carriers previously had been part of the Jones Act Fleet but were sold to foreign buyers when the domestic market for their services dried up.

Weakley suggested the U.S. would put its naval superiority at risk without the Jones Act.

"If you look at the Chinese, the Chinese subsidize their shipbuilding, they're out to dominate not just the seas from a naval perspective but also from a merchant marine perspective. So, they not only subsidize their shipbuilding, they also subsidize their merchant marine. So, there are a lot of Chinese-flagged ships out there," he said.

Lee contends that fears of Chinese competition in domestic waters are often overstated.

"The Chinese competitors, regardless of how well-funded they are, are always going to be outnumbered, and they're always going to be in some ways inferior to those that we can locate here in the United States," Lee said. "In any event, we want to be able to compete. If we insulate ourselves with our giant economic footprint in the world, if we insulate ourselves and American companies from competition from abroad, that's the surest-fire way to lose American jobs in the long run. We don't want to do that."

Lee said he will continue to seek Jones Act waivers where they make sense.

"Every time there's a window of opportunity with a humanitarian situation overseas or with liquid natural gas having to be shipped from Russia to Massachusetts or with jet fuel having to be shipped from Venezuela to Puerto Rico, every time these developments occur, we need to shout them from the rooftops and find the nearest legislative vehicle to attach these reforms to," he said. "We can fight them anywhere, everywhere, but we need to fight them every single day. Sooner or later, we will find that weak link in the fence, and we'll get through, and we'll bring about reform."

Weakley acknowledged ongoing efforts to attack, weaken and eventually repeal the Jones Act are well-funded.

"They've been ramping up a campaign of misinformation, and we take that threat very seriously," he said.