Voices on Capitol Hill call for Jones Act repeal, but Louisiana industries would stand to lose

Sunday, 08 October 2017, 04:33:44 AM. WASHINGTON — The widespread devastation that Hurricane Irma wreaked on Puerto Rico has renewed a long-running debate on Capitol Hill over a 97-year-old piece of legislation requiring ships shuttling between

WASHINGTON — The widespread devastation that Hurricane Irma wreaked on Puerto Rico  has renewed a long-running debate on Capitol Hill over a 97-year-old piece of legislation requiring ships shuttling between U.S. ports or offshore businesses be built in the U.S. and largely staffed by Americans.

But any proposals to modify the Merchant Marine Act of 1920, commonly known as the Jones Act, will meet stiff resistance from Louisianans in Congress, with the state's U.S. senators and congressmen vowing this week to fight any efforts to weaken the law or lift it outright.

That's largely because few states, if any, benefit as much as Louisiana from the protections the Jones Act creates for American ships and shipbuilders from cheaper foreign competition.

Amid criticism of the slow pace of relief for Puerto Rico, the White House granted a temporary 10-day waiver to the Jones Act, allowing foreign ships to carry goods from Florida and other nearby American ports to the hurricane-ravaged U.S. territory in the Caribbean Sea.

The waiver was set to expire Saturday and the White House has given no indication that it plans to issue an extension.

Several Louisiana lawmakers hit back at the decision to allow the temporary waiver, arguing damage to the island's ports — not the availability of seafaring American freighters — was holding up the delivery of goods.

The temporary Jones Act waiver for Puerto Rico was a "solution in search of a problem," said U.S. Rep. Garret Graves, R-Baton Rouge, who added that the waiver "did more harm than good."

"We have a huge shipping industry on the Gulf Coast that needs the jobs and economic activity now to help economies recover from their disasters," Graves said. "You just took American jobs and sent them overseas."

Graves and other Louisiana lawmakers lined up to fight back as Sen. John McCain, R-Arizona, a longtime and outspoken critic of the Jones Act, joined with conservative firebrand Sen. Mike Lee, R-Utah, on a bill that would permanently exempt Puerto Rico from the law.

"I’m not open to anything that’s going to undermine the sanctity of the Jones Act," said U.S. Sen. John Kennedy, R-Madisonville, when asked about McCain's bill. "There’s no stronger advocate in the United States Congress on the Jones Act than I am."

Louisiana's bustling Mississippi River ports, which handle extensive barge traffic from the country's interior, and the state's bustling offshore oil industry create extensive demand for Jones Act-compliant ships, which must be built and flagged in the U.S. and crewed by American citizens or legal residents.

The state also has a number of shipyards that build those boats, especially for the oil industry.

Foreign shipyards, especially in Asia, generally build ships at significantly lower cost than American Gulf Coast facilities. Foreign crews are paid less, and registering ships under a foreign "flag of convenience" — such as in Panama — carries far looser regulations than flying an American flag.

Taken together, that means shipping goods between ports on a Jones Act-compliant ship generally costs about three times more than with foreign competitors, said Mark Perry, a fellow at the free-market American Enterprise Institute think tank and a professor of economics at the University of Michigan-Flint who's written about the Jones Act.

But repealing the Jones Act "would be fairly devastating for the Gulf Coast states because virtually anyone can build a boat and crew a boat cheaper than we can," said Eric Smith, associate director of the Tulane Energy Institute in New Orleans.

Offshore oil platforms and drilling operations are also considered American "ports" for purposes of the Jones Act, said Smith, who spent decades in the energy industry before joining the faculty at Tulane. Smith said that means supply boats delivering anything to the platforms must meet its requirements.

Thousands of Louisiana jobs would potentially be impacted by major changes to the Jones Act, Smith said.

"Keeping it in place protects American jobs and incentivizes the use of American ships and crews," said U.S. Rep. Clay Higgins, R-Port Barre.

Yet protecting American jobs in the shipping, shipbuilding and offshore supply industries — sectors that would face intense pressure from foreign competitors without the Jones Act — comes at a cost, according to economists who have studied its effects.

Several large firms in the oil and gas industry have complained about the Jones Act because its provisions drive up costs. Oil tankers moving between American ports — including from the oil fields of Alaska to refineries in the rest of the United States — must meet the provisions.

Higher shipping rates impact the cost of a wide range of goods, said Perry, the American Enterprise Institute scholar.

"We all pay more for everything, including energy, because of the protection that’s bestowed on this favored domestic industry," said Perry. "It’s pure protectionism, crony-capitalism — just a classic case of where special interests trump what makes sense from an economic perspective."

Its impacts, however, aren't evenly distributed.

While some states in the U.S. interior conduct relatively little maritime trade, others, like Alaska and Hawaii, depend heavily on ships to move goods to and from the rest of the United States.

Puerto Rico, a Caribbean island, is particularly hard-hit by the Jones Act, according to a number of studies. The Federal Reserve Bank of New York concluded in a 2012 report that the law had a negative effect on the competitiveness of Puerto Rico's economy, mirroring earlier findings by the United States International Trade Commission.

Backers of the Jones Act — including members of Louisiana's congressional delegation — counter concerns about the law's economic effects with what they argue are its national security implications.

By shielding the domestic maritime shipping market from foreign competitors, defenders argue, the Jones Act ensures that the United States has a fleet of merchant ships, a reserve of capable civilian sailors and functioning shipyards to call on in wartime.

"I have long been a staunch supporter of the Jones Act, which is, at its core, a law that protects America from national security threats," said House Majority Whip Steve Scalise, R-Jefferson.

"Is there a protectionist tint to the Jones Act?" said Graves. "Damn right: it protects us. It protects our military service members, our homeland and our capabilities."

The Trump administration has mulled requests to extend the Jones Act waiver for Puerto Rico for a year, opening up the island's ports as it tries to recover from the hurricane. But the White House let the 10-day waiver lapse on Saturday with no indication that another might be on the way.

For the White House, a decision on the Jones Act exemplifies several of the competing currents: a longstanding Republican interest in cutting regulations and opening up markets to competition versus President Trump's "America First" pledge to protect jobs from foreign competition.

The congressional delegation from the state with perhaps the most jobs on the line left little doubt where they stand.

"The Jones Act is about putting America first — both in terms of jobs and national security," said Louisiana Congressman Ralph Abraham, R-Alto. "I don’t want to see Louisiana mariners losing their jobs so that barges flying the Chinese flag can sail up and down the Mississippi River, nor do I want to rely on foreign nations to ship cargo to our troops risking their lives overseas. If this Congress truly wants to keep Americans working, it will resist these calls to end the Jones Act."

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