Honolulu Advertiser Second Opinion column by Cliff Slater
November 12, 1996
(1) Economist. 03/23/91. pp. 81.
(2) "While the Jones Act generates $635.6 million in profits annually for the cabotage sector, this is at a welfare cost to consumers of between $4.2 and $10.4 billion annually, in 1988 dollars." -- U.S. International Trade Commission report, 1991. cds: The average of these numbers is $7.3 billion and with a 32.9% allowance for inflation that comes to $9.7 billion which rounds nicely to $10 billion.
(3) Letter to Sen. Whitney Anderson from Guam Governor Carl T. C. Guttierez, 1/18/96.
(4) Using a population of 153,000 from the 1995 Statistical Abstract of the U.S.
(5) GAO Report: The Jones Act's Impact on Alaska, 1988.
(6) "... the increased cost for shipping on a Jones Act carrier are borne primarily by the consumers ..." p. 4. and, "Hawaii's consumers are paying a premium for the ... Jones Act." p. 7. in State of Hawaii's Comments in Response to U.S. Department of Transportation's request for public comment on competition in the noncontiguous domestic offshore trades. Docket No. OST-96-1066. April 17, 1996.
(7) Murray, Robert J. and Philip M. Grill, Matson officials. Honolulu Advertiser, 6/2/96.
(8) USA Today, 04-18-1994, pp. 11.
(9) USA Today 1/1/95. pp. 22.
Jones Act reform needed now
Much of our high cost of living in the islands is due to unnecessarily high shipping costs caused by the federal 1920 Jones Act. Senator Helms (R-NC) recently introduced a bill to reform it that could have a major impact on Hawaii consumers.
Over the past thirty years, Congress deregulated most forms of transportation—railroads, trucking, and airlines—with great cost benefits for the consumer—but left ocean shipping alone. The Jones Act still requires that all cargo moved between U.S. ports be carried in expensive U.S. cargo ships with all the attendant costs of union featherbedding and overregulation. The London Economist calls it "an idiotic rule." (1)
The federal government enacted the Jones Act in 1920 to protect the U.S. merchant fleet. However, it was obviously not successful since U.S. cargo ships have declined by 90% since 1948, and maritime jobs even more.
The U.S. International Trade Commission calculates that the excess costs have required consumers nationally to pay about $10 billion annually (2) more than they would otherwise. Guam's Governor estimates that if Guam were only able to reduce shipping costs a "modest" 30% Guam's families would save $40 million annually (3) or $1,045 for a family of four. (4) The U.S. General Accounting Office calculated in 1988 that the Jones Act was costing Alaska's families between $1,921 and $4,821 annually. (5)
Our state Administration agrees that the effect on Hawaii consumers is to drive up consumer prices. (6) Senator Whitney Anderson estimates that these excess prices cost the average Hawaii family $1,900 annually. The Jones Act Reform Coalition says it is more like $4,000 per family.
The State does not know the exact costs to Hawaii consumers because shipping interests have successfully blocked the funding of a study. Even so, Hawaii's consumers will obviously pay a lot less at the checkout counter with Jones Act reform—it is only the amount that is debatable.
Hawaii's shipping companies, on the other hand, estimate (7) that total ocean transportation rates add less than 5% to Hawaii prices. Even so, that is a considerable sum.
Hawaii's opponents of reform—principally the maritime unions and the ship owners—protest that they provide an orderly and reasonably priced service. However, the arguments they use to project the chaos that reform will bring are the same as those used by the airlines and the trucking and phone companies before the U.S. deregulated them.
Hopefully there will be reform, but the Jones Act is "ferociously defended by dedicated lobbies" as USA Today puts it. (8) Ship owners and maritime unions make $4,000,000 in political contributions annually. (9) Their industry lobbying group, the Maritime Cabotage Task Force (MCTF), funds our Hawaii's Congressional delegation particularly well with Congressman Abercrombie alone getting over $60,000 from them just during the last election.
Congress cannot expect Hawaii consumers to continue to bear the brunt of the Jones Act costs. At the very least, they should be shared with the country as a whole. With the national spotlight now on the Jones Act it is time for Hawaii's Congressional representatives to help reform this element of our high cost of living.
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