Protectionist trade policies are going to hinder Maui’s recovery

In the wake of the deadliest U.S. fire in more than a century that has left hundreds of structures destroyed and at least $1 billion in damages, Maui faces a difficult recovery.

In the weeks and months ahead, there is sure to be plenty of talk about how Washington can best support Hawaii’s recovery. Unfortunately, the federal government has not proven particularly nimble in its response to previous disasters, and policymakers would do well to heed the medical profession’s creed of primum non nocere — first do no harm. To best assist Maui, Congress and the administration should first consider the identification and removal of government‐imposed obstacles to the island’s rebuilding process.

Among these obstacles are protectionist U.S. trade policies that will inflate the cost of numerous materials needed for the island’s rebuilding effort.

Exhibit A in protectionism hobbling the island’s recovery is the Jones Act. Passed in 1920, the law restricts domestic waterborne transportation — such as between Hawaii and the U.S. mainland — to vessels that are registered and built in the United States as well as mostly owned and crewed by Americans. Such measures significantly raise the cost of shipping.

Unsurprisingly, a 2020 study found that the Jones Act adds between $54.4 million and $255.9 million annually to the state’s cost of real estate and construction services.

The requirement that vessels be domestically-built, for example, means that the most recent containership built to serve Hawaii from the U.S. mainland cost more than $225 million. In comparison, similarly sized ships can be purchased in South Korea for less than one-fifth as much. Even the barges that transport goods within Hawaii, including between Honolulu and Maui, are pricey.

In addition to being expensive to build, the vessels are also roughly three times more costly to operate than their internationally flagged counterparts. Further aggravating matters is very limited competition: Of the world’s approximately 55,000 commercial ships a mere 93 — 0.2 percent — meet the law’s requirements. This lack of competition extends to shipping between Hawaii and the mainland, with the leading shipping firm in the trade lane admitting that it has only one major competitor.

The inevitable result of these expensive ships and limited competition is inflated shipping prices.

That’s no small matter for islands that overwhelmingly use ocean shipping to transport most of the products they consume — including building materials. Indeed, Hawaii construction companies have highlighted shipping costs and limited competition in ocean freight service from the mainland as a cost driver for items ranging from drywall to screws.

Fortunately, there is a way of avoiding the de facto Jones Act tax: buying products from abroad. Unlike goods arriving from the rest of the United States, imports can take advantage of less costly international shipping. That means lower costs for consumers and businesses.

Or at least it would, if not for yet further trade restrictions that offset at least some of the shipping savings.

U.S. “trade remedy” laws — antidumping and countervailing duties and “safeguard” measures that seek to protect U.S. industries via increased tariffs — can significantly raise the cost of many materials that Hawaii will likely require in its recovery process. The number of such measures currently in place is dizzying. Among them: duties on softwood lumber from Canada, hardwood plywood from China, rebar from Mexico, and steel nails from a host of countries.

Tariffs on steel and aluminum imposed by then-President Trump and continued, albeit in modified form, by President Biden will further increase the cost of rebuilding.

And then on top of all that are the plain old regular tariffs imposed on building supplies. Default tariffs on screws, for example, are more than 5 percent, floor and wall tiles can run up to 9 percent, and ceramic roofing tiles face a 13.5 percent tariff.

No matter whether the people of Hawaii turn to supplies from the mainland or abroad, there’s no escaping the protectionist toll. It all adds up.

Already reeling from devastation, Maui faces many trying days ahead. If federal policymakers want to ease the Hawaiian people’s suffering and help speed their recovery, removing protectionist trade policies would be a great place to start.

Colin Grabow is a research fellow at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.