Aug 24, 2018

Jones Act Could Hamper Hawaii's Recovery from Hurricane Lane

The Law Restricts Certain Types of Shipping and Could Make Relief Supplies Harder to Come By
Chad Reese Managing Editor

More than 1500 Hawaii residents spent Thursday night in shelters waiting for Hurricane Lane to reach the islands. Some areas of the state have already received more than two feet of rain, and flash flooding is widespread.

While Lane may not directly hit Hawaii, and the state is better prepared to deal with natural disasters than Puerto Rico was when Hurricane Maria made landfall there last fall, President Trump declared a state of emergency on Wednesday.

Hawaii will undoubtedly need significant aid in the coming days as it weathers the storm and deals with the aftermath, but at least one federal policy may make it harder for the state to get the help it needs.

As Hawaii’s Grassroot Institute, a nonprofit public policy think tank, has noted, the Jones Act could make relief supplies (like gasoline) more expensive and harder to come by, just as it has following other natural disasters (including Puerto Rico). The Grassroot Institute has called for a temporary waiver from the Jones Act.

The Jones Act (more formally known as Section 27 the Merchant Marine Act of 1920), requires that domestic ships be built, owned, crewed, and flagged in the United States. The argument at the time of the law’s passage was that it was a necessary step to retain a robust domestic shipping fleet for national security purposes.

Since that time, the Jones Act has been regularly scrutinized, perhaps most publicly by Senator John McCain (R-AZ). Sen. McCain has argued that the Act “directly contradicts the lessons we have learned about the benefits of a free and open market.”

Mercatus Scholars on the Jones Act

  • In “An Economic Analysis of the Jones Act,” Emeritus Professor of Economics at North Carolina State University Thomas Grennes analyzes the benefits and the costs of the act. He finds:
    • Nearly all analytical studies have found that protectionist policies, like the Jones Act, impose net losses on the US economy.
    • Repealing the Jones Act in its entirety would provide the greatest economic benefits.
  • Late last year, Professor Grennes released “The Jones Act Revisited,” a policy brief arguing that the Jones Act is costly to consumers and an obstacle to speedy responses to domestic disasters (including hurricanes).
  • In “The Jones Act Is an Unnatural Disaster,” Nita Ghei notes that temporary waivers (usually in the wake of a natural disaster) make the normally unseen costs of the Jones Act explicit.
  • In “Puerto Rico’s American Dream Is Dead,” Tyler Cowen points out that while temporary waivers are “better than nothing,” it’s nevertheless “sad we cannot repeal the Jones Act altogether.”

Read more: You can find more commentary and policy analysis on the Jones Act at Mercatus.org.

Photo credit: BRUCE OMORI/EPA-EFE/Shutterstock

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate