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What in the World?

The Jones Act needlessly hobbles the US economy

Oct 21, 2022

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The Jones Act is a century-old federal law that regulates maritime commerce in the United States, requiring goods shipped between U.S. ports to be transported on ships that are built, owned and flagged in America. It’s one reason Hawaii has one of the highest costs of living in the country. Straight Arrow News contributor Peter Zeihan argues the U.S. economy would do a whole lot better if the law was repealed, decreasing its carbon footprint while strengthening its secondary cities.

Excerpted from Peter’s Oct. 21 “Zeihan on Geopolitics” newsletter:

A large part of geopolitics is geography – some might even say the most important part. And when it comes to geography, few places are as blessed as the United States. 

One of the key pillars supporting the United States and its historical development is the sheer abundance of navigable waterways. Not only is the Mississippi River basin one of the largest and most productive agricultural regions on the planet, but its crisscrossed with one of the world’s best riverine transport systems. And when it comes to international trade, the United States has the most world-class, deep-water natural ports and largest intracoastal waterway network of any country on the planet.

Which is why it’s so weird that the United States has remained determined to hobble economic development from the Puget Sound to the Chesapeake Bay to Puerto Rico and even Iowa by adhering to the limitations of the Jones Act.

Hey, everyone, Peter Zion here coming to you from Richmond, Virginia at the Jefferson Hotel, which is like ridiculously glorious. Anyway, I wanted to talk about economic development in the United States today, something that’s getting a little bit of play because we finally have an industrial policy question. So we finally we have an industrial policy for the first time since World War Two that’s guided things like semiconductors. And not that that’s not important. And not that I don’t support that. But there are a lot of really baseline things the United States could do if the goal is more stable and reliable economic growth at all levels. So specifically, waterways. Now, moving things by water is less than 1/10, the cost of moving to Milan, you can move things at bulk, you can move things at speed over large distances, it really is the way to go. However, the United States adopted a law about a century ago called The Jones Act or the Interstate Commerce Act if you want to use the technical term. And what it does is it makes it illegal to ship any cargo between two American ports on any vessel that is not American crude, captained, built and owned. And what this has done is reduced the amount of traffic that we use our waterways for, by in excess of 90% over the course of the ensuing century. And so now we pretty much have about half of our products, almost two thirds of our products by truck, and then the remainder is a mix of everything else. Trucks being the most expensive way to move things over distance by far. Now for a state like Virginia that is on the Chesapeake. I don’t want to say that this has been the kiss of death, but wow, it is it grounded down their economic opportunities. The Chesapeake Bay is the best world class best bay in the world has the most frontage in terms of areas report citing my home state of Iowa is bracketed, bracketed by two navigable rivers, the Mississippi and the Missouri putting Iowa in a position where it has passed up massive economic opportunities. And then for 19 years I lived in Texas, which has one of the best coastlines in the world, and more deep water potential than the entire west coast combined. Basically, if your state is on a navigable river or an external coast, especially if it’s got a good Bay, like the Chesapeake or New York sound, or San Francisco, you have been missing out on massive amounts of economic activity. For decades. The single best thing that the United States could do if the goal was to salvage the status of its second tier cities and build out manufacturing would be to severely reformed the Jones Act. Now there’s an obstacle there. As you know, from some of my previous presentations, the United States is going through a period of political reshuffling and the factions that make up the parties are moving around. The faction that is most in motion is organized labor. And the two issues that organized labor is most concerned about our union membership, and immigration. And on the union membership issue, all of the jobs that maintain those Jones Act vessels, those old slow, inefficient ones that are the only ones allowed to operate. They’re all union jobs. And so the unions see this as a job Preservation Act, despite the fact that has cost the rest of the United States 10s of trillions of dollars over the course of the last century. So if you want to get mad about something, get mad about Jones, you want to call your congress people about something calm about Jones. That is the best way that the United States could reindustrialize protect its secondary cities, expand the port infrastructure, reduce its carbon footprint for transport, and ultimately make the United States a much stronger place moving forward. Easy fix. Okay, that’s it for me. Until next time,

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