Hurricanes Irma, Harvey prove the need to reform the Jones Act

Following the destruction wrought by Hurricanes Harvey and Irma, there was one thing that brought hope to a worried nation: the indomitable American spirit.

Photos of rescuers and stories of heroism reminded us that when the chips are down, Americans rise to the occasion. Past arguments are set aside, and we make it our first priority to help those affected by the tragedy.

That’s unquestionably why the Trump administration was quick to approve a temporary Jones Act waiver in response to the disaster. On Friday, Elaine Duke, acting secretary of the Department of Homeland Security, announced the decision, stating, “This waiver will ensure that over the next week, all options are available to distribute fuel to states and territories impacted by Hurricanes Harvey and Irma, both historic storms.”

{mosads}The Jones Act refers to the Merchant Marine Act of 1920 and the associated laws and regulations that govern cabotage in the United States. The Act makes shipping within the U.S. more expensive because it requires goods carried between U.S. ports to do so on ships that are U.S.-built, U.S.-flagged, and have a primarily American crew.

Estimates of how much it costs American consumers have ranged as high as $15 billion per year. Fuel shipments in particular are deeply affected by the Jones Act, and it’s estimated it costs three times as much to ship fuel from Texas to New England than from Texas to Europe.

By acting quickly to grant a Jones Act exemption in the wake of Hurricanes Harvey and Irma, the Trump administration did what it could to keep fuel moving to the southeastern states and pre-empt a possible crisis. That fuel is needed for rescue efforts, to rebuild and restore the infrastructure, and to keep critical supplies moving into the region. The waiver gives companies the ability to use foreign-flagged ships to move fuel, which gives them more shipping options, including cheaper ones.

There’s another benefit to the waiver. Because the storms affected oil refineries along the Gulf coast, gas prices are expected to increase nationwide. The waiver should help refineries recover more quickly, which in turn could help curb the increases in gas prices.

Issuing a Jones Act waiver during a time of national emergency has become somewhat standard — though not automatic. Following Hurricanes Katrina and Rita in 2005, DHS issued a Jones Act waiver for the transport of petroleum products, as it did also in a slightly more limited way following Hurricane Sandy in 2012.

In 1989, following the Exxon Valdez spill, a Jones Act waiver allowed non-Jones Act ships to help with cleanup efforts (but not fuel transport). And in 2011, President Barack Obama’s decision to release 30 million barrels of oil from the federal Strategic Petroleum Reserve in response to concerns about availability of Libyan oil also prompted a waiver.

However, American shipping interests have been known to oppose Jones Act waivers.

The domestic shipping industry complained about the waiver issued after Hurricane Rita, claiming that there were sufficient Jones Act ships to help.

When New Jersey nearly ran out of road salt during the blizzards of 2014, the state’s request for a Jones Act waiver was denied because it wasn’t considered a matter of national security.

And following the Deep Horizon oil spill in the Gulf of Mexico, there was debate over whether the administration was blocking a waiver in response to Jones Act interests. Some claimed the cleanup effort was subtly undermining the act and the waiver process.

Few would argue against a waiver in the case of Hurricanes Harvey and Rita. The Trump administration should be applauded for moving quickly to put the waiver in place and keep supplies moving to people in need. But the fact that a waiver is needed at all points to a serious problem in our cabotage laws.

If an emergency highlights how burdensome the Jones Act is to shipping and consumers, it should also reveal the truth about the price we pay on a daily basis for outmoded cabotage laws. The costs of the Jones Act may be most severe during a natural disaster, but they never disappear.

That’s why the recent waiver makes it so obvious that the time has come to modernize the Jones Act: A waiver is a tacit admission that the Act is a constant barrier to the efficient, economic transport of goods in the U.S.

Why does it take a catastrophe to remove those barriers?

Congress should take note of this fact and update the Jones Act for the 21st century.

Keli’i Akina, Ph.D. is the president and CEO of the Grassroot Institute of Hawaii (@GrassrootHawaii), a public policy think tank dedicated to the principles of individual liberty, free markets and limited, accountable government.

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