How the Jones Act hurts the economy

Leave a CommentHow the Jones Act hurts the economyEfficiency

What’s America’s most counterproductive law?

An obscure piece of legislation from the 1920s is a strong candidate.

The Jones Act requires that any goods transported by ship between two American ports — can only be moved by vessels registered in America — and built, owned, and crewed by Americans.i

The law was intended to support the domestic shipping industry — but has had the opposite effect.

In fact, coastal shipping has declined by 44% since the 1960s.ii

One of the main reasons: the lack of competition makes shipping too expensive.

Building a container ship in the United States can be as much as five times costlier as building one abroad.iii

That results in dramatically higher prices in places that have to be supplied by ship.

For instance, it’s estimated that the Jones Act costs the economy of Hawaii about $1.2 billion a year.iv

It also makes it nearly impossible to help out coastal regions in emergency situations.

Puerto Rico experienced devastating hurricanes in 2017 and 2022 — but because of Jones Act restrictions, more than 99% of the world’s cargo ships were prohibited from taking part in relief efforts.v

But the Jones Act’s effects are felt on the mainland too.

Under the Jones Act, there are no vessels able to ship liquid natural gas within the U.S. — because the costs would be too high.

As a result, places like New England have had to import LNG from Africa or Russia to avoid the risk of blackouts.vi

One other weird consequence of the law: your terrible commute.

Because moving goods by sea is so expensive, much of the transportation is redirected to railroads and highways — which are less efficient, but cheaper.vii

So, the next time you’re stuck behind an 18-wheeler, the Jones Act may be to blame.

WHAT YOU NEED TO KNOW:

  1. The Jones Act is estimated to cost Hawaii’s economy about $1.2 billion a year.
  2. Because of Jones Act restrictions, more than 99% of the world’s cargo ships weren’t allowed to provide hurricane relief in Puerto Rico.
  3. New England has imported LNG from Africa and Russia because the Jones Act makes it too expensive to ship within the United States.