Jones Act Waiver Yields Rich Data

Cato's Scott Lincicome considers economic data from Trump's wartime waiver of the century-plus-old protectionist disaster known as the Jones Act.

In just over two months, economists like himself have harvested a trove of information about what happens when the government doesn't dictate who builds, operates, and owns a ship that operates between two American ports:

[T]he waiver reveals some of the domestic shipping demand that the Jones Act has suppressed, thus hinting at the law's substantial economic costs. As industry publication TradeWinds reports, foreign vessels utilizing the waiver have supplemented a fully-booked Jones Act fleet instead of displacing it. This implies the existence of latent demand for coastwise shipping that the law has thwarted -- additional transactions between U.S. companies and U.S. ports that would occur daily but for the Jones Act's costs. In non-waiver times, this activity goes to foreign suppliers, along overland U.S. routes, or via ridiculous workarounds such as sending Gulf Coast fuel to the Bahamas for blending before delivering it to California. For the next few months, it doesn't.

The waiver data also show the potential for both U.S. long- and short-haul shipping markets -- sometimes between a single American company's U.S. facilities. Distant voyages include diesel from Louisiana to Puerto Rico (due to "non-Availability of U.S. flag vessels"); crude oil from Texas to Pennsylvania; gasoline from Houston to Long Beach; and renewable diesel from New Orleans to Portland. Jones Act critics have long claimed that the law forces supply-constrained U.S. areas to use imports instead of preferable American-made goods; under the waiver, Phillips 66 is shipping domestic oil from Texas to an East Coast refiner, instead of the foreign crude it usually sends.

The short-haul voyages are just as noteworthy. They include gasoline and diesel from Washington to California and Oregon; same-state shipments of fertilizer, ethanol, and refined products in Louisiana, Texas, and California. These are natural trade lanes that have been blocked for decades, all but ensuring more traffic on U.S. interstates and rail lines instead of goods traveling more efficiently on the water. [bold added]

That's just data blowing the alleged economic case for the measure to smithereens. The national security case is likewise hollow.

Interestingly, Lincicome notes that, if anything, the impact of repeal would be even more positive since that would give investors and companies the certainty they'd need to plan and build in order to take advantage of the many opportunities currently being denied to them by the Jones Act.

-- CAV