With the current waiver in effect, the Jones Act has been in the headlines more than usual. Americans benefit daily from this 106-year-old law, but few know how deeply it actually runs through U.S. national and economic security.
What is the Jones Act?
The Jones Act is Section 27 of the Merchant Marine Act of 1920. Passed largely to expand U.S. maritime capacity after the First World War, section 27 requires that vessels moving cargo between U.S. ports be owned, built, and crewed by Americans. An 1817 law signed by President James Madison already reserved domestic maritime trade for U.S.-owned vessels, and a 1789 law signed by George Washington gave tax preferences to ships built and owned by Americans. Reserving the domestic fleet for American workers and investors is a principle nearly as old as the country itself.
So why does it still matter?
Maritime is inseparable from national security. In times of military conflict or natural disaster, the American fleet is the safest and most reliable option to deliver support. Foreign companies cannot commit to delivering basic goods during global crises, nor guarantee initial trade agreements to hold, or hold at a stable price. Relying solely on foreign trade is a gamble, one which Americans don’t hold the cards. To preserve national security, the U.S. must be able to maintain and crew an equipped maritime fleet before the emergency arrives.
Besides national security, the Jones Act, being the backbone to the American industrial workforce, is deeply tied to the U.S. economy. It preserves jobs well beyond the waterfront, as one American-built vessel draws steel from mills in Indiana, Ohio, and Alabama; engines and propulsion systems from Wisconsin and Michigan; valves, switchgear, and electrical components from shops in states that never touch an ocean; trucks and railcars to haul all of it to the yard.
A shipyard’s paycheck buys groceries, covers a mortgage, pays a dentist, and funds a school district through its local tax base. When a yard closes, the loss is never just in maritime. Its impact is felt throughout the community and the communities of connected industries.
How the waiver hurts every American…
Jones Act waivers are meant for genuine national security emergencies. The recent so-called justification was a rise in oil prices tied to the conflict in Iran. The waiver has been extended with no meaningful consumer benefit as studies have shown the waiver’s effect to be less than a penny per gallon pumped by drivers. Bloomberg notes that fuel prices have climbed even as crude has fallen: regular gasoline averaged $3.88 a gallon as of July 10, the third highest for this point in the year on record, with diesel the second highest, even as Brent retreated toward pre-war levels.
Meanwhile the waiver is being used for cargo that has nothing to do with fuel. A recent example is the Chinese vessel Jin Zhou Wan, which used the national security waiver to move asphalt all along the East Coast. This forces American shipowners to compete on domestic runs while giving away union jobs to foreign workers. The Seafarers International Union called it a routine commercial voyage that U.S.-flag vessels were available to handle, and pointed to the roughly 650,000 jobs the Jones Act supports nationally — more than 70,000 in Louisiana alone, tied to over $18 billion in annual state economic output.
As the waiver continues so does the increase of foreign shippers. MARAD’s July 10 report shows 162 movements under the waiver, more than double the total from two weeks earlier and a 70% jump over the prior week. The increase in foreign voyages alongside the continued fuel crises demonstrate the waiver not a national security necessity, but a means for foreign companies to expand their presence in American commerce.
In a letter written to the Washington Post, FMC Commissioner William Doyle wrote, “The waiver was justified as an emergency measure to lower fuel prices. It should be judged on whether it achieved that objective. And despite more than 130 foreign voyages under the waiver, consumers have seen little measurable relief at the pump.” The time is past due for new cost reduction measures to be explored if Americans actually expect to see relief filling their gas tanks.
Congress, on a bipartisan basis, has called on the Administration to end the waiver. Most recently, a June 30 letter from Speaker Mike Johnson, Majority Leader Steve Scalise, Oversight Committee Chairman James Comer, and 49 other House Republicans called the waiver “a loophole exploited by adversarial countries to erode America’s maritime dominance.” It is unclear at this point if the Jones Act waiver will be extended or left to expire on August 16th. It is certain, however, the Jones Act waiver is not helping consumers. While Americans continue to pay more at the pump, the industrial workforce is increasingly undermined, risking new recruits, investors and a 106 year old law, still deeply engrained in U.S. financial, and national security