#524: Mr Jones' Act The government suspended the Jones Act last week, to allow non-US ships to move fuel to victims of hurricanes in Houston and Florida. Which once again made us wonder why the act even exists.
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#524: Mr Jones' Act

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#524: Mr Jones' Act

#524: Mr Jones' Act

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ROBERT SMITH, HOST:

Hey. It's Robert Smith here. Like everyone else, we have been watching this growing disaster in Puerto Rico this week, after the hurricane. And we noticed a particular issue coming up in the news that we have covered before here at PLANET MONEY. That issue is the Jones Act. The Jones Act is this old shipping law that says only American ships can carry cargo between American ports without having to pay hefty penalties. And it makes it very difficult and expensive, even in the best of times, to get anything to Puerto Rico. And in the wake of this disaster, Puerto Ricans and many members of Congress wanted this law suspended, just like the law was suspended for Texas and for Florida after their hurricanes.

Puerto Rico needs aid. They need relief from the rest of America. And they frankly don't care at this point whether it's an American ship or a foreign-made ship bringing aid from the rest of America. But so far, as of this recording on Wednesday, the Trump administration has not suspended the Jones Act for Puerto Rico. The Department of Homeland Security says they're looking into it but they're not sure if it would help at this point.

Today we are going to replay our show about the history of the Jones Act. It is a fascinating episode. The podcast originally aired back in 2014. But as you will see, it is totally relevant this week.

(SOUNDBITE OF ARCHIVED BROADCAST)

ZOE CHACE, HOST:

I'm at this dock in midtown Manhattan over on the West Side, the Hudson River. We don't really think of the city as a port anymore, but it is for cruise ships. I'm looking up at these two enormous boats. There as big as apartment buildings. It's windy and cold. And these boats are going to the Bahamas. It was busy before out here, but now it's quiet. Everyone is onboard. The ship is getting ready to leave. All of a sudden, this family comes tearing around the corner. Rolly suitcases are bouncing, their backpacks, all their stuff. They're rushing to the boat. And a port employee is yelling at them, come on.

UNIDENTIFIED MAN: OK, run to the left. Run to the left.

UNIDENTIFIED WOMAN: Run to the left. Run, run. Run to the left.

CHACE: And they just miss it. The gangplank is up.

(SOUNDBITE OF FOGHORN)

CHACE: This poor mom, her teenage son slump down into chairs, sulking. They all sit in this little terminal. We can see the ship through the window getting ready to leave. Mom gets on the phone to Norwegian Cruise Lines. It turns out there may be a way to catch the ship before it hits the Bahamas because it stops in Orlando for, like, a day, and maybe the family can get on a plane to Florida and save the vacation.

UNIDENTIFIED WOMAN: We're trying to contact Norwegian to see if they'll allow us to board in Orlando.

CHACE: On the phone, she's taking notes. The news is good.

UNIDENTIFIED WOMAN: So we can board in Florida.

CHACE: You can?

UNIDENTIFIED WOMAN: However (laughter), as long as you're boarding in the United States, you will have to pay up to $300 per person extra to board.

CHACE: Did they tell you why?

UNIDENTIFIED WOMAN: It's a booking - what did she it was? And she said it falls under the Jones Act, so I don't know. In your research, look up the Jones Act.

CHACE: She's written the words Jones Act on her notepad, underlined it and put a big box around it.

DAVID KESTENBAUM, HOST:

We here at PLANET MONEY did not have to look it up. We've actually been wanting to do a story about the Jones Act for a while. It is one of those really old laws that pops up in all these strange places. The Jones Act was written over 90 years ago, but today it still governs just about anything that travels by ship in America - bananas, hairdryers, gasoline, even people.

CHACE: The core of the Jones Act dictates that every time you want to send something from one U.S. port to another U.S. port, the cargo must travel on a ship built in America staffed by Americans owned by Americans. The cruise ship like all cruise ships was foreign owned.

KESTENBAUM: This is a pretty unusual requirement, if you think about it. If you want to send a bunch of oranges by truck from Florida to Baltimore, it doesn't matter who made the truck. The truck can be made in Germany. You want to fly some computer chips across the country, it's fine if the plane's and airbus made in France. But you want to send cargo by ship, it has to be a ship made in America.

(SOUNDBITE OF PODINGTON BREAR'S "60'S QUIZ SHOW")

KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.

CHACE: And I'm Zoe Chace. Today on the show, we dig into the words that the woman scribbled on her notepad - the Jones Act. We look at all its strange consequences that play out in all these crazy ways in this country - cruise ship passengers, cattle farmers, a guy in New Jersey who really, really needed some salt - a mountain of salt.

(SOUNDBITE OF PODINGTON BREAR'S "60'S QUIZ SHOW")

KESTENBAUM: So the Jones Act - it actually popped up in my life recently. I live in New Jersey. And a couple of weeks ago, in the middle of, like, five snowstorms, we found out that the state had run out of salt. It had run out of rock salt to melt the snow and the ice, which is a really dangerous thing to run out of.

CHACE: And there was a fairly simple solution. New Jersey didn't have salt, but the state of Maine had a giant mountain of it. And as it turns out, right in a port in Maine, there was this really big ship that seemed like it could carry all the salt to New Jersey.

JOE DEE: I mean, it was just, like, serendipity. Here's this ship that's big enough to take 40,000 tons of salt. It's on its way to Newark anyway. This is perfect.

KESTENBAUM: That's Joe Dee, one of the guys in charge of getting salt for New Jersey. He had one problem, though. You can almost picture him writing it on his notepad and drawing a big box around it - the Jones Act. That ship was not made in America, not flying an American flag, and the captain, as it turns out, was Greek. Jones Act says you cannot use that kind of ship to carry anything from one U.S. port to another.

CHACE: The workaround was quite painful. The U.S. doesn't build that many ships anymore, especially compared to other countries. And the only Jones-Act-compliant ship was this little barge.

KESTENBAUM: Zoe, you really wanted to see this little barge.

CHACE: Yes.

KESTENBAUM: So one morning, you headed out.

CHACE: Hey, man. I'm here (laughter). I'm here. I'm looking at it, dude.

KESTENBAUM: And, Zoe, you recorded your best weather reporter on the scene.

CHACE: I'm standing here at Berth 13, looking at this barge that's filled with rock salt - salt to melt the snow - that just came down here from Searsport, Maine, to New Jersey.

KESTENBAUM: We also asked reporter Jay Field in Maine to do his part at the mountain of salt.

JAY FIELD, BYLINE: I'm Jay Field in Searsport, Maine, where the rock salt just came from. And, Zoe, what's funny is that there is still a huge pile of salt in front of me.

KESTENBAUM: The barge was not nearly big enough to carry that mountain of salt, at least not in one trip, hence the workaround.

CHACE: OK, so this is the plan - they're going to drop off the rock salt here, and then this barge is going to turn around and head back up to you.

FIELD: And it's going to pick up another fraction of this large pile and head back down to you.

CHACE: And then it's going to drop off the rock salt here in New Jersey and turn around and head back to you.

FIELD: And pick up...

KESTENBAUM: The Jones Act has been around for over 90 years. And at this point, coming up with workarounds has become a sort of art form in the maritime world. Hawaii is really the master. You know, New Jersey, you can drive there or send stuff by train. Hawaii - there is no train that goes to Hawaii. If you want to bring stuff from Hawaii back to the rest of the United States, it's probably going to have to go by boat.

CHACE: I talked to this one cattle rancher in Hawaii. His name is Pono von Holt. He raises cows in Hawaii, but the market for burgers is across the ocean, on the mainland.

KESTENBAUM: And the Jones Act says he needs to use American ships. And the thing about ships made in America, crewed by Americans, is that they are expensive. They're expensive to manufacture and expensive to run.

CHACE: Pono told me, for a while, he was using foreign ships. And what he would do is he would send the cows to Canada, and then they traveled by land over the border back to the United States. That didn't work out. These days, he's doing something that sounds crazier, which is he sends some of the cows to the mainland by airplane. To save money, he sends the cows when they're little an don't weigh so much.

KESTENBAUM: People, like cows, are also subject to these old laws. That was the problem that the family ran into with the cruise ship. It is illegal for a foreign-owned cruise ship to pick you up in one U.S. port and drop you in another, which is why the family had to pay a fine for getting on in Orlando. The cruise ship, at the end of the trip, was going to drop everyone off in New York.

CHACE: Economists - you may have guessed they are not fans of the Jones Act. When cows fly, it's a sign that there are some real distortions in the maritime shipping business.

KESTENBAUM: We called up Joseph Stiglitz. He used to chair the Council of Economic Advisers under President Clinton. He said the council took a look at the Jones Act and said, OK, look, it does save some jobs in the shipping industry, but it also makes all kinds of other things cost way more than they should. How much are we paying to save those jobs? They did the math.

JOSEPH STIGLITZ: So we did this calculation and asked the question, how much did each job cost?

KESTENBAUM: What was the answer?

STIGLITZ: It was something like a quarter-million dollars a job.

CHACE: What do you make of that number?

STIGLITZ: Well, that it was a very inefficient way of job creation.

KESTENBAUM: Stupid?

STIGLITZ: Yeah.

KESTENBAUM: Is there any economic argument in favor of the Jones Act?

STIGLITZ: Other than an argument of certain special interests, no.

KESTENBAUM: So no?

STIGLITZ: No.

KESTENBAUM: Do you know any economists who like the Jones Act?

STIGLITZ: No, I don't. I've never met one.

KESTENBAUM: According to an official report around this time by the United States International Trade Commission, the Jones Act was costing the country over $1 billion every year.

CHACE: So why does this thing exist? The basic idea of requiring that cargo travel on domestic ships goes back centuries. But this current incarnation, the Jones Act, is from 1920. So 1920 - World War I had just ended. During the war, the government geared up to build ship after ship after ship, but then the war ended, and the ships were still being built. Here's a maritime historian, Jeff Bolster.

JEFF BOLSTER: There's this glut of ships. I mean, they're still being churned out now in these shipyards owned by the Emergency Fleet Corporation, OK? As a result of that, anybody could see that, in the short run, shipbuilding was going to become depressed because the government had stepped in to build all of this tonnage to win the war. It also means that the market would be saturated with tonnage for a while so that ship building yards would simply not have anything to do.

KESTENBAUM: And you know where there were a lot of shipyards? Seattle, Washington state. And Washington state happened to have a very powerful senator - head of the Commerce Committee, Senator Wesley L. Jones. Senator Jones, concerned about his hometown shipbuilding industry, pushes Congress to pass the Merchant Marine Act of 1920, the Jones Act.

CHACE: And it received some news coverage at the time. Here's a snippet from a news story written by one J.J. Underwood.

KESTENBAUM: You want to do it?

CHACE: Here I go. (Reading) Indirectly, it affects the foreign transportation of every product of American industry. Upon it is also dependent the industrial expansion of the nation. Literally thousands of different interests will be affected by it.

KESTENBAUM: That ran in the Seattle Times, Jones' home state, which, over the years, clearly benefited from the hard work of their senator.

CHACE: In fact, the barge with the salt in New Jersey, that was made in Seattle - Jones Act for the win.

KESTENBAUM: The other argument for the Jones Act made at the time was military readiness. Basically, if we get into another war, we're going to need American ships and Americans who know how to sail them.

CHACE: And this is the argument that the shipbuilding industry makes today.

DARRELL CONNER: There are certain things in this country that are core to protecting the country. Shipbuilding industrial base just happens to be one of those.

CHACE: Darrell Conner is a lobbyist with the American Maritime Partnership. He represents U.S. shipbuilders, U.S. shipbuilding companies. In wartime, he says, you need people who know how to make ships - war ships that we use to fight battles. And you also need ordinary cargo ships for supplies and food and medical stuff.

CONNER: Almost 90 percent of the cargos carried in the Iraqi and Afghanistan wars were carried on U.S.-flagged ships. Now, those weren't Jones Act ships, but a lot of the seafarers that served on those vessels served in the Jones Act trade, so the Jones Act plays a vital role in ensuring we have those seafarers.

KESTENBAUM: So what he's saying here is, OK, it is true - even with the Jones Act, we don't have enough ships to supply our troops during wartime. We have to use other countries' ships, but the Jones Act gives us some. And it gives us trained captains and crew.

CHACE: The economist Joseph Stiglitz says he heard those arguments when he was in the Clinton administration. No one on the Council of Economic Advisers found them very convincing. We are dependent on foreign countries for a lot of stuff - oil, food, steel, clothes. We need to use the ports of our allies in Europe. Why do we have to insist on American-made ships with an American crew flying under an American flag?

STIGLITZ: I think the view of the Council of Economic Advisors was, very strongly, we should get rid of it. But we're not - you know, we - we're the - we're advisors. So we can just say, what are the economic costs, and is there a plausible argument that they're any better that's commensurate with the cost? And we could not see any.

KESTENBAUM: And then what happened next?

CONNER: Well, I think, nothing.

CHACE: It's a political nonstarter. It's been that way for 90 years. When the U.S. military teams up with unions and shipbuilders, that is a lot of lobbying power. Put that up against a mom who missed the cruise ship, a guy who needs a bunch of salt, a Hawaiian cattle rancher. They don't stand a chance.

KESTENBAUM: Academics have a fancy term for this. The Jones Act has concentrated benefits and diffuse costs. A small group of people benefit a lot. The cost gets passed on to the rest of us in little, hidden ways.

CHACE: The only way the Jones Act is going to change is if the costs become more obvious and more powerful people start yelling about getting rid of it. That could happen because of the way that our economy is changing at this moment. The U.S., as you probably know, is in the middle of an oil boom thanks to fracking. If you want to send oil from Houston to Philadelphia by sea, you have to use a Jones-Act ship, and there are not that many of those. So the price is going up, and U.S. oil producers are starting to get really mad about this restriction.

KESTENBAUM: But for the moment, you've got to play by the rules laid out in the Jones Act. If you're sending something from one U.S. port to another, it's got to be on a ship built in America, with an American crew, flying an American flag.

(SOUNDBITE OF JOHN DUFILHO AND SKINNY WILLIAMS' "FOR THE OLD SOULS")

SMITH: Just a reminder - this show was from 2014, but this debate about the Jones Act is going on even to this day. We would love to hear what you thought of the show. You can email us, planetmoney@npr.org. You can also hit us up on Facebook or Twitter. Today's show was originally produced by Jess Jiang. And today's rerun was produced by Elizabeth Kulas and our intern Alice Wilder. I'm Robert Smith. Thanks for listening.

(SOUNDBITE OF JOHN DUFILHO AND SKINNY WILLIAMS' "FOR THE OLD SOULS")

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