Hacker News Reader

Comment by ViewTrick1002 | Hacker News Reader

It all stems from the Jones act. [1]

The American shipbuilding industry has been allowed to atrophy in an idea that protectionism would lead to good commercial the results.

What little gets built in the US is way behind the global peers in terms of economics and quality.

As usual the end results are that the entire shipping industry works around the Jones act, for example cruise ships from Florida docking in the Bahamas, and for the regions that can’t do it they are tough out of luck.

Why can’t the US build offshore wind? Because there are no jones act compliant vessels and the proposed workaround is staging all the materials in Canada and adding an enormous time waste to the projects.

[1]: https://en.m.wikipedia.org/wiki/Merchant_Marine_Act_of_1920

View on HN

Congress has been pushed not to eliminate would completely wipe out tiny remaining American Merchant Marine fleet. Most people who want to get rid of Jones Act are economists and other types who sole concern is "How much more money can we make from cheap shipping" while ignoring any national security concerns.

We could talk about modify it maybe allowing purchase of specialized ships from overseas friendly countries, like icebreakers from Finland.

That is the problem with protectionism.

What starts with good intentions ends with a bandaid that someday will have to be ripped off at the cost of the people who made a subsidized living based on it.

Except if you can't move stuff around without support of 3rd party nations, that's defense crippling.

If you want to be a global power, you require great navy, both civilian and military. That's been true since 1500s and will likely remain true for many years to come.

So question is, do we throw out Jones Act and slowly stop being World Superpower or leave it and pay higher upfront costs in certain places? That's political answer obviously.

The problem is that the US fleet is minuscule.

The entire US Jones act compliant fleet comprises 60 vessels. It is not a great civilian navy.

https://www.maritime.dot.gov/sites/marad.dot.gov/files/2021-...

What you’re missing is that our ability to move stuff around has already deteriorated to almost nil, precisely due to Jones Act and shipbuilding workforce unionization. We already cannot build vessels we need at quantities we need. This is already reality today. Repealing Jones Act cannot make our situation much worse.

It can, however, make us much better off, by for example allowing US companies to buy foreign ships to do tasks that currently are covered by Jones Act, and as a result are not done at all.

For example, we’d be able to ship gas from American oil fields in the South to consumers in the North, where there missing or insufficient pipeline capacity. Right now, Jones Act forces US consumers in the North to buy foreign gas.

Couple years back, before the Russia-Ukraine war, Russian Gazprom was making nice profit on the following run: 1) sail to Northeastern US, sell it Russian LNG 2) sail to Gulf of Mexico to buy American LNG for cheaper than it sold Russian gas to Americans in the North 3) sail elsewhere in the world to sell them American gas, eg to Europe or Africa.

This was only possible because Jones Act makes it impossible to ship LNG from Southern US to North. There are literally no vessels that can do it. It already cripples our ability to move things around.

I think there could be some discussion of modify the Jones Act to allow non US made ships to be use in Merchant Fleet. However, key provision of Jones Act around only US flagged ships may transport two US ports. If you eliminate that, forget it, US Merchant Marine fleet will go poof. Since it's a global industry, workers from other countries are obviously much cheaper than any US salaries.

The US merchant fleet has already gone poof. According to Wikipedia "As of 31 December 2016, the United States merchant fleet had 175 privately owned, oceangoing, self-propelled vessels of 1,000 gross register tons and above that carry cargo from port to port. " The list is likely even shorter today.

Jones Act is what is keeping that tiny fleet alive on life support. It would likely approach ZERO outside the Great Lakes without the act.

Jones Act is not what killed the US Merchant Marine Fleet. Globalization is what killed it.

You see an emaciated man being fed a few grains of rice per day, someone says to stop the policy of feeding the man only a few grains of rice per day, and you argue "we can't stop feeding him these few grains of rice per day, they are the only thing keeping him alive!"

The Jones Act made sense when it was implemented in the 1920s while America was the world's leading ship builder, the shipping industry was heavily subsidized, and there was no alternative to shipping things by water. But after the subsidies stopped, and shipbuilding in america started to lose its competitiveness, and we built a massive interstate highway system that made transport by truck economical, the Jones Act proved far too restrictive. The more expensive domestic water shipping got, the less demand there was for ships, the less demand there was for ships, the more it cost to build ships domestically, the more it cost to build ships domestically, the more expensive domestic water shipping got.

There are alternative and better ways to keep the us merchant fleet alive, and even make it thrive, than keeping the current status quo which is obviously not working.

>Jones Act is not what killed the US Merchant Marine Fleet. Globalization is what killed it.

"Protectionism isn't what killed the US industry. Having any overseas competition whatsoever is what killed the US industry." This is farcical.

If globalisation is when the market lacks protectionism and as a result the manufacturing all moves to cheaper shores, then this was not globalisation by dint of US shipbuilding having abundant protectionism.

Sorry to ask, are not any gas pipelines in US? In Europa there is a huge network of pipelines moving gas around in any direction.

There is but there isn't enough capacity in particular over the Rockies. So LNG ships are needed to help move what pipelines can't.

I think the argument among the anti-Jones contingent is that our only real hope of having a globally competitive shipbuilding industry is to repeal it and all the other things preventing our shipyards and merchant marine from having incentive to compete globally. As it is, there is a slow trickle of work for domestic shipyards that is based solely on policy (ships that legally HAVE to be US-made, whether for Jones Act reasons or military reasons). Without that protectionism, they would have to build ships at a quality, price, and timetable that is competitive with the rest of the world.

I'm not super sympathetic to arguments that presuppose the absolute requirement that US hegemony continue indefinitely, but certainly if you are trying to make sure your shipbuilders will be roughly as good as foreign ones or better (a reasonable policy goal, even leaving out military reasoning), cutting them off from competition with those foreign shipyards is not going to result in what you want. If there is a ready market for expensive, poor quality ships that take years longer to build than they do abroad, why would I as a shipbuilding executive invest to improve on any of those metrics? It would be wasted money, because my existing capital and workforce are already 100% utilized in high-margin activities, with orders stretching out years into the future.

More realistically without the Jones act, ships wouldn't be built or operated by the US at all. International vendors can do this cheaper.

You'd instead see all domestic shipping be entirely dependant on third-party international operators paying third-world wages to third-world crews, and you'd have next to zero recourse against them if they, say, run one of their ships into a bridge, or spill a few million litres of oil.

They already are not built in the US at all. This is already true today. We already build less than one oceangoing Jones Act compliant ship a year. The US shipbuilding industry can hardly get any worse than it already is today.

My point is that it wouldn't get any better. Anyone blaming the Jones Act for this completely misidentified the root cause.

There are a few good reasons to repeal the Jones Act (reduce shipping and trade costs in Hawaii, Alaska, and Puerto Rico) and a lot of really bad ones (the domestic shipping industry will be completely killed, and you're inviting unbounded liability from unregulated, fly-by-night international actors who don't give two craps about our laws.)

The way ocean shipping currently works is entirely incompatible with any national rule of law. Flags of convenience and corporations with non-existent liability mean that nobody in the international industry is actually following any of the rules.

The domestic industry has to follow them, which is the reason why it's not cost competitive.

I think you have a cursory understanding and are then pulling that to the extreme without actually knowing how the industry operates.

The problem stemming from flags of convenience is well known and the Port State Control system [1] was created to manage it.

In other words: live up to our requirements or we will detain your vessel.

The US is not a signatory to any international port state control scheme but as is usual the US runs its own nearly equivalent scheme through the coast guard. [2]

[1]: https://en.wikipedia.org/wiki/Port_state_control

[2]: https://www.dco.uscg.mil/Our-Organization/Assistant-Commanda...

In practice, these inspections are insufficient, and the liability problem remains (which can vastly exceed the value of the ship).

The problem is that there is too much to check, too many incentives and reasons to break the rules, and too few consequences for people who do.

> you'd have next to zero recourse against them if they, say, run one of their ships into a bridge

You know that the Jones Act only applies to domestic shipping, right? So our ports are still full of ships dependent on third-party international operators paying third-world wages to third -world crews who occasionally run their ships into a bridge.

> "How much more money can we make from cheap shipping" while ignoring any national security concerns.

But isn't it the case that national security concerns are being reached, presently, under the effect of the Jones Act? We just don't have the capacity to build the naval vessels that we need for national security.

>But isn't it the case that national security concerns are being reached

It's not being fully met. Likely with elimination of Jones Act, it would disappear entirely. So it's one of those, it's bad now, do you want to eliminate it completely?

Only way I could see Jones Act disappearing but Merchant Marine Fleet to remain intact is announce that US is done playing world Navy Police. If it's not US Flagged, US is done giving a shit. Economic worldwide collapse to follow.

You are saying that as if sacrificing a tiny industry to benefit the entire rest of the economy is somehow a bad thing. And the merchant marine isn't really big enough to contribute much to a hypothetical war either.

Of course there have to be considerations to maintain the capability to build warships. But other than that the Jones Act seems to do a lot of damage for very little benefit. Though ripping off the bandaid would be painful in that moment

> Most people who want to get rid of Jones Act are economists and other types who sole concern is "How much more money can we make from cheap shipping" while ignoring any national security concerns.

I read "economists and other types" as people who understand basic economics. People oppose the Jones Act because it has devastated the US shipping industry, which is obviously bad for national security. It's not just about cheap shipping.

> economists and other types who sole concern is "How much more money can we make from cheap shipping"

This is most people? National defense and the domestic shipbuilding industry are important, but the value of cheap shipping should not be underestimated. Plus, giving credit to the Jones Act for the current state of US civilian and military shipbuilding is, in my opinion, perhaps the strongest possible argument for repealing the Jones Act. The current state of American shipbuilding is disgraceful.

Isn't part of this that US vessels are not competitive on a global market because of taxation?

if you built and registered a ship in the US, wouldn't taxes be much more than say a ship registered in a small tax-advantageous country? (for a ship that basically wasn't in US 99.9% of the time)

Retirees do this with motorhomes - why register in california and pay all those taxes when you will be out of the state traveling all the time. Register in North Dakota or something and still drive the same route. (note taxes could be state income taxes because of residency, or vehicle registration taxes which are a % of vehicle value)

I’m sure that’s definitely part of it, but there’s lots more stuff to it.

I’d say the “where to register your ship” question is the category of “complicated” - since obviously if we lowered our taxes to be as low as Panama then we’d get more registrations which sounds good - and “low tax” is better than the “zero” taxes we get from them now, but then the other country would just undercut that, and so on, and now nobody can get any tax revenue anymore.

It’s why the global economy doesn’t lend itself to simple sound bite answers like “just build American ships” or “just raise/lower tariffs” etc.

It’s too bad no one on any ballot seems to do anything but useless grandstanding, when it comes to actual problems like this.

People here keep blaming the Jones Act but the US has lost manufacturing capability across so many sectors so I don't really get how shipbuilding would be much better without the Jones Act. (Not that I like the Jones Act, I really don't, I'm just skeptical our shipbuilding would be much better without it. We were screwed either way)

We may have lost the capability to manufacture specific things but our capacity for manufacturing has only increased (https://fred.stlouisfed.org/series/INDPRO). You can run per capita numbers as well and see it’s very similar.

So if we haven’t lost capacity but have lost capability doesn’t that imply something about the industries we’ve lost?

I’m not a ship industry expert but the US can make as much stuff as anyone in the world besides China and on a per person basis we are top tier. If ship building is a problem it’s not because of some generalized failing.

The problem in the US is not just protectionism against other countries, is that it doesn't incentivize internal competition. Instead, the US gov will throw more money at existing big corporations which from that point on have no fear of smaller companies innovating.

I don't find this explanation satisfying. If the Jones Act of 1920 is at fault, how do we explain the timeline? The U.S. was a ship-building powerhouse at least through the 50s, if not through the 70s. Why was there a multi-generation lag between the Jones Act and its effects?

Increasing wages and the service economy.

For other high income nations the ship building industry has specialized on higher tech vessels while leaving the enormous labor intensive container ships to South Korea and now lately China.

The rest of the world was in total shambles until 1960s. Europe was destroyed by two world wars. East Asia was an economic backwaters. Same was true about most of South America, and its advanced regions were underpopulated compared to US. Africa was and is Africa. There was simply no other place that could build stuff at scale.

This article covers a lot of the history. https://www.noahpinion.blog/p/why-cant-the-us-build-ships

Basically the US wasn’t great at shipbuilding post civil war due to high costs. WWII was an existential threat so cost was no object, and we coasted on that capacity for a long time.

Thanks for the link. That article doesn't really support the GP's contention that the Jones Act is the root cause of the U.S.' shipbuilding failures.

Also, the US commercial shipbuilding industry has always been small. WW2 was the exception where built lots of ships mostly in temporary yards. Since WW2, it has struggled. Naval shipbuilding has been the big part.

It is a lot of pain for reset of economy for protecting a small industry. If US wants more naval shipyards, then should incentivize building them. I get the impression that there has been much reason for yards to improve protected from competition.

“Leading to good commercial results” is definitely not the rationale for the Jones Act.

Read the wiki link. [1]

The goal was to have a globally competitive merchant marine based on a home grown ship building industry to call on in case of war. Trying to balance both sides.

The end result is that that home grown ship building industry has all but disappeared together with the educated population required to crew it.

[1]; https://en.m.wikipedia.org/wiki/Merchant_Marine_Act_of_1920

Your argument is post hoc ergo propter hoc. But as with car import tariffs and quotas, nobody doubts that removing all import obstacles would lead to the offshoring of most remaining car manufacturing.

What economists argue that the Jones Act is suppressing is greater use of domestic sea transport, which could be much cheaper than trains and trucks. Without the Jones Act sea transport would grow, but undoubtedly using foreign ships, perhaps relying on a primarily foreign crew. OTOH, a much larger domestic shipping industry would likely spur demand for downstream services, as well as open up opportunities for growth elsewhere in the economy, so overall jobs for Americans might grow. But deregulation grow the ship building industry domestically? Nobody expects that.

Globalization, not the Jones act made it disappear.

If you want to bring it back, you have to deglobalize. (Good luck with that!)

Reply on news.ycombinator.com