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Colin Grabow on the Jones Act

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After reading my and Alice Calder’s recent op-ed on the Jones Act [2], Colin Grabow of the Cato Institute sent to me the following e-mail, which I share (in italics) with his kind permission:

Hi Don,

I was very pleased to see you highlight the odious Jones Act in a column earlier this week. There are, however, a few points I wanted to bring to your attention:

    • “Not surprisingly, the cost of operating an American flagged and crewed vessel is double that of foreign ones.” I think this actually understates matters, with a 2011 MarAd report [3] finding average U.S. vessel operating costs to be roughly *2.7 times* higher than their foreign-flag counterparts. Furthermore, an August 2018 GAO report [4] says that “According to MARAD officials, the relative cost of operating a U.S.-flag vessel compared to a foreign-flag vessel has increased in recent years, making it increasingly challenging for vessel operators to remain economically viable under the U.S. flag.” This makes me think the cost difference is probably at least 3x at this point.
    • “A 1999 report by the U.S. International Trade Commission finds that this welfare gain would be $1.32 billion, which is $2.0 billion in today’s dollars.” I just want to note that the most recent assessment put out by the USITC that examined the cost of the Jones Act is actually from its 2002 report [5] which came up with a figure of $656 million. For the record, I think this grossly understates the cost, but I wanted to alert you to the fact that more recent data than the 1999 report exists.
    • “This tragedy likely occurred because of the Jones Act.” I’d advise being careful here, with the both the NTSB and Coast Guard largely laying blame on the ship’s captain for bad decision-making and the ship’s owner, TOTE Maritime, for items such as having older lifeboats that are not fully enclosed. The age of the ship certainly didn’t help, and I think that overall the Jones Act certainly does serve to degrade maritime safety, but my understanding is that it’s not clear a newer ship would have survived. As much as I’d like to make this argument about the El Faro being sunk by the Jones Act, I’m still reluctant to do so.

In any case, again, great to see you taking on the Jones Act and helping to raise awareness, which is certainly needed. I only pass all of this along as FYI, and hope to see further pieces by you devoted to this shipwreck of a law.

Best regards,
Colin

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