Honolulu Advertiser

SECOND OPINION  by Cliff Slater

August 11, 2003

Jones Act costs us big bucks

In my July 14 column about giving Hawai'i workers a virtual raise by lowering our high cost of living, I suggested exempting the Islands from the Jones Act.

Let me explain why: The 83-year-old Jones Act requires that all cargo moved between U.S. ports[i] be carried in expensive U.S.-built cargo ships with all the attendant costs of union featherbedding and overregulation. The Economist calls it “an idiotic rule.”[ii]

I had said, "Were Hawai'i to have an exemption from the Jones Act, freight costs would be half of what they are today." Because the Jones Act lobbyists have blocked any funding for studies of the issue, we have no objective evaluation of the financial impact on Hawai'i of the Jones Act. We can only look for indicators and make an educated guess. Here are some of those indicators from which you can make your own estimate:

  • The U.S. International Trade Commission (USITC) has studied the effects of the Jones Act and in its latest publication says that in the tanker trade, Jones Act vessels total costs are 82 percent higher than competitive vessels.[iii] One can reasonably assume that prices follow costs.
  • Guam’s governor said that if Guam could only save 30 percent on its shipping costs it would save Guam’s families $40 million annually — $1,045 per family of four.[iv]
  • The cost to ship a standard-size 40-foot container of apples 2,100 miles from Oakland to Honolulu via Matson (using Jones Act ships) is $4,862, or $2.31 per container/mile.[v]

To ship the same container of apples 5700 miles from Seattle to Hong Kong (using competitive ships) costs $3,800, or 68 cents per container/mile.[vi]

Allowing that the cost of loading and unloading is disproportionately higher for the shorter runs, it is not unreasonable to assume that, everything else being equal, Jones Act shipping costs about twice as much as competitive shipping.

  • USITC says there would be a $2.8 billion gain for the U.S. economy if the Jones Act were repealed. How much of that would benefit Hawai'i? Bear in mind that Guam, Alaska, and Puerto Rico are the places in the U.S. that would gain the most.
  • The state's former consumer advocate, Charles Totto, told the U.S. Department of Transportation, in prepared comments, "… in the Hawai'i trade, the additional costs due to the Jones Act are as high as $600 million annually."[vii]

The total of Jones Act shipping charges for Hawai'i is about $750 million annually.[viii] If this were reduced by only a third, it would save Hawai'i consumers $250 million, or $870 for a family of four.

The Jones Act is, "ferociously defended by dedicated lobbies," as USA Today puts it.[ix] Any attempt to even study the Jones Act’s impact on Hawai'i is fought tooth and nail by its defenders. Failure to study it is a shameful reflection on the Hawai'i Legislature.

We can argue about the amount of savings to be gained by exempting Hawai'i from the Jones Act, but no one can argue that there will not be any.

But there is hope. Hawai'i's Ed Case has introduced legislation in the U.S. House that, if passed, would exempt Hawai'i from the Jones Act.

We have a decent case for exemption: Hawai'i is the only state in the union that has no recourse to trucking and rail alternatives.

Some 80 percent of all the food, building materials, manufactured goods and energy supplies comes by Jones Act ships from the Mainland at shipping costs far higher than competitive shippers would charge.

Hawai'i citizens should not be asked to shoulder most of the burden of the Jones Act for whatever benefit the rest of the nation may see in this legislation.

Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater


[i] There are certain exemptions for Guam, Samoa, the Marianas and the Virgin Islands.

[ii] Economist. 3/23/91. p. 81.

[iv] Guam’s Gov. Guttierez in a letter to Hawaii State Sen. Whitney Anderson, January 5, 1996.

[v] Quote from Matson by phone.

[vii] In the Matter of Requests for Public Comment on Competition in the Noncontiguous Domestic Maritime Trades. Docket No. OST-96-1066, before the U.S. Dept. of Transportation. Prepared by Division of Consumer Advocacy, Department of Commerce and Consumer Affairs, Charles W. Totto, Executive Director. April, 1996. p. 5.

[ix] USA Today. 1/1/95. p. 22.