How to Destroy the American Shipping Business

Wednesday, 18 October 2017

For all Trump’s bleating about trade agreements hitting American business the USA has some blatantly unfair trade restrictions which not only hit other countries’ businesses, but also damage the very country they’re supposed to protect, ie the USA. Starting with the Jones Act. A recent article in The Economist about this ridiculous law was headlined ‘How protectionism sank America’s entire merchant fleet.’

The Jones Act stipulates that domestic US shipping can only be operated by US-built ships. Imagine if the French government announced that Air France could not use US built aircraft and should dump all those Boeing 777s please? Or Korea decided that Boeing aircraft were equally unacceptable for Korean Airlines or Asiana? My Silk Road MGB – between April and July I drove it from Bangkok to London – has just been returned to Australia on the Korean-built container ship Washington.

▲ Here’s the Washington quayside in Melbourne earlier this week. Well the Washington is fine for cargo between Europe and Australia, but it would be illegal to use it between, say, Miami and Puerto Rico, they’re both US ports so using a Korean-built cargo ship would be against the law. After Hurricane Irma the Jones Act had to be set aside for 10 days because it was impossible to resupply Puerto Rico using only Jones Act ships. No Korean cargo ships for the USA please, but there are lots of Boeing aircraft flying on the world’s busiest air route, between Seoul and Jeju Island in South Korea.

▲ Here I am in 2012 sailing out of New York City on the Cunard Queen Mary 2 on my way to Southampton in England. Cunard may be true blue British, but the QM2 was built in France and there’s no way it could be used between – again – Miami and Puerto Rico. Nor could any of those other cruise ships shuttling out of Miami, they all have to go somewhere else, somewhere outside the USA, before they head to Puerto Rico. That way the trip is an international one and not subject to Jones Act restrictions. Container ships don’t get made in the USA and nor do cruise ships, check the sad story of the Pride of America, when for the first time in 50 years, an attempt was made to build an all-American cruise ship. Despite heavy government subsidies the uncompleted ship had to be towed across the Atlantic to be finished in Germany and then get special dispensation to be registered as an ‘American ship.’ Hawaii and Alaska provide special difficulties for cruises ships to comply with the law, from California a little diversion south to Mexico before heading to Hawaii will satisfy the rules. Seattle to Alaska? Forget it, better to write off the USA and operate to or from Vancouver in Canada.

▲ This is the Incat catamaran building yard on Hobart’s Derwent River in Tasmania, Australia. You pass it if you take the ferry service from the centre of Hobart to the amazing MONA (Museum of Old & New Art). Well Incat won’t be building any of their high-speed catamaran ferries for US operations either, again the Jones Act bans them even though Incat ferries operate all over the world. Yes Qantas and Virgin Australia both operate plenty of American Boeing aircraft.

So the Jones Act is extremely unfair to Korean, French or Australian shipbuilders, but it also has lots of negative effects on America:

• America’ shipping fleet has dwindled away to just 0.4% of the world’s total shipping.
• Britain’s shipping has three times the tonnage of the USA’s.
• The Jones Act so hobbles US shipping that while 40% of Europe’s domestic freight goes by sea, only 2% does in America.
• A Jones Act cargo ship costs five times as much as the same ship built in South Korea.
• Compromised by the Jones Act it costs twice as much to ship freight into Puerto Rico as it does to other nearby Caribbean Islands.
• Alaska, Hawaii and Guam businesses are also damaged by the Jones Act, Hawaiian cattle often have to be flown to the continental USA because shipping is not available or is too expensive.