Thomas Grennes’ document titled “An Economic Analysis of the Jones Act,” published by the Mercatus Center,1 presents itself as a serious review of the Jones Act. Instead, it is a one-sided, unbalanced advocacy document that only highlights facts that support Grennes’ own perspective and ignores those that don’t, presenting only one side of the story that is riddled with omissions and outright factual errors. As a result, it should not be viewed as serious scholarship and read with skepticism.
The following analysis was prepared by the American Maritime Partnership to inform readers of these inaccuracies and provide factual evidence of the value provided by the Jones Act.
False Statements Made About the Jones Act:
- Grennes cites Adam Smith’s “Wealth of Nations” for his anti-Jones Act position but fails to mention that Smith specifically supports navigation laws like the Jones Act as an exception to his free market principles. In fact, Smith called the British version of the Jones Act “perhaps the wisest of all commercial regulations” because of its contribution to national defense. 2
- The paper concludes that the Jones Act’s impact on American national security is “small or negative.”3 But he fails to mention that military leaders are among the strongest supporters of the Jones Act and have consistently recognized its importance to military sealift. For example, the paper fails to acknowledge that the U.S. Coast Guard Commandant, multiple 4-star generals leading USTRANSCOM, the Vice Chairman of the Joint Chiefs, the Secretary of Transportation, national security experts in Congress, and many others have all stressed how critical the Jones Act is to national security.
- The U.S. merchant marine’s significant contribution to national security is disregarded in this paper and questions “How much can American crews contribute to national security?”4 In fact, Defense Department leaders have repeatedly identified the availability of American mariners as a major contributor to military sealift capacity.5 That’s because American commercial mariners help crew vessels providing sealift to the Defense Department during a contingency. General Paul Selva, Vice Chairman of the Joint Chiefs of Staff, recently stated, “my operational requirements demand access to the labor pool that is supported by the jobs that are provided by the Jones Act.”
- Numerous references are made to a purported Jones Act “cost” estimate from a series of studies conducted by the International Trade Commission (ITC). But this paper does not mention that the ITC’s methodology in attacking the Jones Act has been described by the General Accountability Office (GAO) as “unclear,” “uncertain,” “unverifiable,” “undeterminable,” “incomplete,” and “unpredictable.”6 In fact, today even the ITC has completely disavowed its estimate.7 Other studies that the author cites suffer from the same methodological failure but criticisms of those studies are also never mentioned.
- Grennes writes extensively about the impact of the Jones Act on Puerto Rico but never mentions the recent GAO study on the Jones Act in Puerto Rico,8 which has been called perhaps the most significant study of the Jones Act ever. The GAO study is ignored because the agency’s findings undercut many of the paper’s arguments, including particularly his arguments about a purposed “cost” of the Jones Act. The GAO study was so detailed, comprehensive, and recent that there is no possible reason the author would have ignored it except that its results were contrary to his desired thesis.
- The document asserts the Jones Act has “stifled innovation,”9 yet fails to acknowledge that the Jones Act industry has invested and will continue to invest in state-of-the art vessels. The domestic maritime industry has led significant technological developments as evidenced by the industry’s recent launch of the world’s first LNG-powered containership and one of the world’s first LNG-powered container/Roll on-Roll off vessels.
- More than 50 of the author’s footnotes (approximately one-third of the entire document) come from three specific individuals who are known, avowed opponents of the Jones Act,10 while most pro-Jones Act commentators are ignored.
- Moreover, the document is filled with basic factual errors that should be corrected:
- The author understates the number of vessels in the American domestic fleet by 10,000. 11
- The paper describes a proposal to eliminate the U.S.-build requirement of the Jones Act as “gaining support” when it is not.12 Military and government leaders continue to be staunch supporters and defenders of the Jones Act, while political advocacy groups exhaust resources and funds to discredit this.
- The document repeatedly portrays Guam as subject to the Jones Act when it is not.13
- The author states the federal government has described the Jones Act as impeding emergency responses during the BP Gulf spill when the federal government said exactly the opposite.14 He erroneously depicts the Coast Guard as establishing the Jones Act Enforcement Division, which is part of the U.S. Customs and Border Protection given its importance to homeland security.15
- The author incorrectly describes a trade route that can be used to circumvent the Jones Act. 16
- The paper repeatedly blames changes to the U.S.-flag international fleet on the Jones Act even though the Jones Act has no applicability whatsoever to international vessels. 17
This is just a glimpse into the many factual errors and distorted narrative depicted by Thomas Grennes. Consequently, this paper should be viewed in the context of its original purpose — to blatantly attack the Jones Act for the advancement of special interests. It is not a serious scholarship study and should be discredited given its ignorance to the substantial national, homeland, and economic security benefits the Jones Act provides, including the economic, homeland, and national security contributions outlined below:
- Economic Contribution of the Jones Act
- Nearly half a million jobs enrich the American economy as a direct result of the Jones Act. Further, each year the Jones Act generates nearly $100 billion in total economic output, $10 billion in taxes, $29 billion in annual wages, and adds $46 billion to the value of U.S. economic output, and moves nearly 1 billion tons of cargo annually.
- The Jones Act boosts the national economy by maintaining the efficient and economical flow of domestic waterborne commerce and provides good, family- wage jobs for Americans.
- Homeland Security Benefits of the Jones Act
- American mariners are the “eyes and ears” of American homeland security. If the Jones Act was not in existence, the Department of Homeland Security would be significantly challenged to monitor, regulate, and oversee foreign-controlled, foreign-crewed vessels in our 12,000 miles of inland waterways.
- The Jones Act fleet is subject to strict inspections and maintenance schedules, which ensure that these vessels and owners/operators are adhering to all U.S. laws, including tax, immigration, and labor laws.
- National Security Benefits of the Jones Act
- The Jones Act fleet contributes militarily useful ships and experienced crews to national defense sealift needs. Skilled U.S. merchant mariners are available to crew vessels that move goods for the military, supplying U.S. military forces around the world with the goods and munitions needed to sustain their missions. This was recently demonstrated during Operations “Enduring Freedom” and “Iraqi Freedom” where U.S.-flag commercial vessels, including ships drawn from the domestic trades, transported 63% of all military cargoes moved to Afghanistan and Iraq.
- The Jones Act helps to sustain the defense industrial through the domestic oceangoing shipbuilding industry. Domestic shipyards build and repair commercial vessels as well as vessels capable of meeting U.S. Navy needs.
1 Thomas Grennes, An Economic Analysis of the Jones Act, Mercatus Research, Mercatus Center at George Mason University, Arlington, VA, 2017.
2 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 2005 edition, at 371.
3 Grennes, supra note 1, at Abstract.
4 Id. at 34.
5 The following are just a selection of recent statements by military leaders in support of the Jones Act: General Paul Selva, then Commander of U.S. Transportation Command, and currently Vice Chairman of the Joint Chiefs of Staff, has said, “If asked about the Jones Act – I am an ardent supporter of the Jones Act. [The Act] supports a viable ship building industry, cuts cost and produces 2500 qualified mariners. Why would we tamper with that?” General Selva has also stated “There are 2,400 merchant sailors who operate on ships that participate in Jones Act trade that have crewed and will crew ready reserve ships and surge sealift ships — that’s 2,400 of the nearly 11,000 that are required. It’s easy for me to say the economics favor the Jones Act, national security favors the Jones Act.” General Darren W. McDew, current Commander of U.S. Transportation Command, has declared, “The Jones Act … also provides additional mariners, so the Jones Act, for me, is part of the overall readiness of our maritime industry and our ability to go to war.” U.S. Coast Guard Commandant Admiral Paul Zukunft has also stated, “I do not advocate for repeal of the Jones Act. We will lose our mariners.”
6 Letter to Sen. John McCain, chairman, Senate Commerce Committee, from Gerald L. Dillingham, associate director, transportation issues, United States General Accounting Office, providing an “assessment of the International Trade Commission’s analysis of the economic impact of the Jones Act.
7 Under withering criticism for its methodology, ITC reduced its estimated Jones Act “cost” in six consecutive
studies and finally, after GAO criticism, conceded error. ITC said, “It is not clear to what extent these laws would affect the cost and operation of foreign vessels in the U.S. market, so the Commission is unable to provide an estimate of the welfare gains that would result from removing [the Jones Act]. International Trade Commission, The Economic Effects of Significant U.S. Import Restraints, Fifth Edition, 2007, at 99.
8 Government Accountability Office, Puerto Rico: Characteristics of the Island’s Maritime Trade and Potential Effects of Modifying the Jones Act, GAO-13-260, March 14, 2013.
9 Grennes, supra note 1, at 10.
10 The three anti-Jones Act advocates are Brian Slattery of the Heritage Foundation, John Frittelli of the Congressional Research Service, and Michael Hansen of the Hawaii Shippers Council.
11 He says there are 30,000 vessels but there are actually approximately 40,000, according to U.S. Coast Guard.
12 Grennes, supra note 1, at 3.
13 Id. at 7. Guam is not subject to the Jones Act.
14 Id. at 9. Retired U.S. Coast Guard Admiral Thad Allen, the national incident commander responsible for leading the BP cleanup effort, testified before the House Transportation and Infrastructure Committee that the Jones Act did not hinder cleanup efforts, saying “There was a misperception that the Jones Act impeded the use of foreign vessels for Deepwater Horizon response operations. In reality, the Jones Act had no impact on response operations.”
15 The organization is part of U.S. Customs and Border Protection, not Coast Guard.
16 His statement that the Jones Act can be avoided if a vessel begins in Seattle, stops in Vancouver, and continues to Anchorage is simply wrong.
17 Grennes, supra note 1, at 11, 12, 13, 15, 16, and 17.