Rep. Duncan Hunter, R — San Diego, once spent $600 of campaign money on a plane ticket for his cat.
So you wouldn’t expect Hunter to see the problem with a law that forces ranchers in Hawaii to charter a weekly 747 to get their cattle to market.
Yet Hunter’s views on interstate cargo transportation prevail, for reasons that probably have more to do with the tens of thousands of dollars in campaign funds he has spent on personal items, such as oral surgery, a family trip to Italy, Disneyland gift shop purchases, and dozens of video games on Steam.
You see, there is a simple, pain-free solution to congested freeways in most of our biggest cities, a way to make a lot of those semi trucks clogging the lanes just disappear. It’s simply to put the ships back in shipping.
The reason we don’t is petty bribery: a few companies and unions have a nice racket going, and pay Congress to protect them from competition.
We take the world as it is for granted, but there’s nothing organic about the way we move goods. In Europe, 40 percent of domestic shipping is over water; in the lower 48 states, it’s 2 percent.
There’s no reason we couldn’t exploit the natural efficiency of waterways to get more vehicles off the road. What sort of efficiency? On the Mississippi River, from St. Louis toward any point south, you can move a thousand tons of goods a mile closer to market on a single gallon of fuel.
The benefits: less traffic, less pollution, lower costs, more jobs. But hypothetical alternatives can’t bribe Congress, while a few unions and shipbuilders can.
In 1920, Congress used its authority over interstate commerce to crush a huge chunk of it, passing a law now known as the Jones Act, which prohibited all transportation of goods between U.S. ports, except for U.S.-flag ships that were constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens or permanent residents.
Sounds patriotic, “but it makes it necessary for Jacksonville, Florida, to bring in coal from Colombia rather than from American mines; it requires Maryland and Virginia to bring in road salt from Chile rather than Ohio; and it makes it cheaper for livestock farmers to buy feed from grain farmers in Argentina and Canada than from Americans,” according to a report from the Capital Research Center.
The idea was to protect America’s shipbuilding industry for military purposes, which made some sense in the time of dreadnoughts. But in 2017, the U.S. Navy has no plans to refight the Battle of Jutland any time soon. Its defense contractors, of course, are not dependent on barge construction profits to remain in the business of constructing easy-to-kill Litttoral Combat Ships.
The act has produced two effects: one obvious to anyone with a remedial knowledge of economics, one less so.
The obvious effect of “protecting” the domestic shipbuilding industry has been higher costs. The U.S. International Trade Commission puts these as high as $15 billion annually, but I would venture that the true cost is unknowable, and probably far higher. The European alternative suggests that our roadways could be far clearer. If you look at the 100 worst traffic bottlenecks, or the ten most congested cities, it’s hard to miss how many of them are near the coast.
The unmistakable effect is felt in Alaska, Hawaii, Puerto Rico, and the island territories. Puerto Rico is in its bankrupt state for three reasons, primarily: its own lawless profligacy, the federal minimum wage, and the Jones Act. To ship a container from the East Coast to Puerto Rico costs double what it does to send one to Jamaica or the Dominican Republic. The most extreme example I’ve seen was highlighted in these pages recently: a 40-foot container could be shipped from Los Angeles to Honolulu for $8,700 on a Jones Act-eligible ship, but that the same container could be shipped from Los Angeles to Shanghai for $790 on a ship that did not qualify for the Jones Act.
Why are these costs so extreme? Is it that hard for the U.S. to build ships competitively? The answer is yes. The reason is the Jones Act.
Consider boxing. Imagine trying to become a world champion sparring with palookas, while forbidding them from hitting you in the head. You get this.
Markets work the same way, imposing discipline on fancy. Where there’s a carve-out, a guaranteed source of income, companies will adapt to those political demands, filling up that space even as they become completely unsuited for the larger market.
According to a Reuters report citing the U.S. Department of Transportation, “U.S. flag vessels cost about $21,000 per day to operate, or three times as much as a comparable foreign-flag ship…. On a tanker, crewing costs for U.S. mariners contribute around $11,500 per day, nearly six times the $2,000 of crewing costs on a foreign-flag ship.”
As the barrier between the U.S. puddle and the ocean of world commerce solidified, the puddle filled with algae.
The U.S. shipbuilding industry represents only about one percent of the world market, as its only customers are Jones Act shippers, who prefer to ride their existing rusty hulks to collapse before spreading any of their legally guaranteed wealth.
“In 1946, there were more than 2,300 American cargo ships carrying nearly half of all imports and exports involving the U.S, according to the same report. “Forty-five years later, there were only 360 such vessels in service. By 2000, there were only 250, hauling only three percent of American imports and exports. And in 2007, the U.S. ocean-going fleet was down to less than 200.”
As of 2011, there were 93 such vessels in service. That is the story of decline.
To see the picture clearly, you can look at the views of politicians like Duncan Hunter, and the defense and shipping committees they sit on, and add up their donations — or you can just consider a well-known anomaly.
How is it that longshoremen command compensation of $100,000, or $200,000, or even $300,000, for jobs that often don’t require any actual work? It’s the Jones Act, or rather, it’s a double choke action.
The domestic shippers control a legal choke point, and the unions that unload the cargo control the physical choke points. The shippers squeeze the customers, and the unions squeeze the shippers.
Of course, there’s no money in actually choking anyone to death. If you’re in the business of highway robbery, you can’t scare the travelers away. Just take your cut somewhere up the supply chain, share it with a politician, and trust that consumers will never wise up.