People have argued over the impact of the Jones Act — a 95-year-old piece of protectionist maritime legislation — for many years.
Is it good or bad for the economy? National security? Or jobs? The answers often seem to depend on who you talk to and which data they cherry pick to make their points.
Remarkably, there has been no definitive, objective study on the Jones Act’s impact on prices in America’s most expensive state, as three of Hawaii’s representatives in Washington, D.C. — Sen. Brian Schatz and Reps. Tulsi Gabbard and Mark Takai — noted in recent interviews with Civil Beat.
So there is no way to know whether people in Hawaii pay a reasonable price for the Jones Act, or whether the state should ask Congress for permission to grant these remote islands an exemption from the law’s cost-boosting requirements for cargo transportation.
In at least one way, though, the Jones Act is a moneymaker. Supporting it is good business — for politicians.
Nationwide, maritime interests spent $22,787,502 million on many sorts of lobbying in 2014, according to the Center for Responsive Politics’ political campaign transparency website OpenSecrets.org.
Some of those maritime interests doled out millions of dollars to supportive candidates, including those who defend the Jones Act, with hundreds of thousands going to politicians who represent Hawaii. This has been the case for many election cycles.
Not that maritime lobbyists are defensive about such efforts. “I think if you look at every industry in this country, there is a significant engagement with the political process,” said Darrell Conner of the American Maritime Partnership, an influential group made up of representatives of some of sea transport’s biggest companies.
The AMP spent $830,000 on lobbying in 2014 and has already dished out $360,000 in the first quarter of 2015. “I don’t think we are different from any other industry that wants to see people who support our industry in Congress,” Conner told Civil Beat.
The AMP has a tight relationship with the Transportation Institute, a sort of Jones Act think tank that spent $700,000 on lobbying in 2014. The institute doesn’t just think, it passes along reports used by supportive politicians, like Sen. Mazie Hirono, to promote the Jones Act, when necessary.
The sea transport industry, which has a wide range of interests, is focused on far more than the Jones Act, but protecting that piece of legislation is a key focus of the Transportation Institute, the AMP and the many companies associated with them.
There’s a reason: The Jones Act largely prevents foreign transporters, vessels and crews from competing in America’s domestic cargo transport and cruise-line markets. The absence of international competition in most of the domestic U.S. market makes it easier for Jones Act-accepted companies to profit while shipping crude oil from the Gulf of Mexico to the East Coast, or from Alaska to the West Coast. The same goes for Mississippi barges loaded with grain, ore transporters on the Great Lakes and the vast majority of vessels transporting goods to Hawaii.
Insulating the Jones Act is a basic duty for many maritime lobbyists.
The sea transport industry is one of the chief donors to politicians who represent Hawaii — a state where the vast majority of goods arrive by sea — in the nation’s capital.
A review of the last 13 election cycles shows that at least one politician from Hawaii has been among Congress’ top 20 recipients of maritime industry campaign donations in every election but one in the last quarter century, according to data organized by the Center for Responsive Politics. (The center’s data goes back to 1989.)
In recent years, maritime industry campaign support has grown for politicians from Hawaii. In the 2014 election cycle, Sen. Schatz, then-Rep. Colleen Hanabusa (who was challenging Schatz) and Rep. Takai raked in a great deal of direct and indirect support. Even Rep. Gabbard, who didn’t face a competitive election, and Sen. Hirono, who had no race at all, each brought in tens of thousands of dollars from sea transport.
“I don’t think we are different from any other industry that wants to see people who support our industry in Congress.” — Darrell Conner, American Maritime Partnership
All are pursuing a well-worn fundraising path. From the 1990 election cycle until his death in 2012, Sen. Daniel K. Inouye took in a total of $302,650 from sea transport, making him 13th highest among all members of Congress. The 14th slot went to Rep.-turned-Gov. Neil Abercrombie, who brought in $295,970. (Abercrombie brought in hundreds of thousands more from Jones Act-friendly unions and their allies.)
But those candidates’ sea transport support came over a lengthy period of time. If recent elections are any indication, the flow of maritime money is increasing in Hawaii. Over the course of her much shorter political career, Hanabusa received $209,800 from sea transport, including enough to make her ninth among all recipients running for Congress in the 2014 election cycle.
The new fundraising star, though, is Schatz. In the 2014 election cycle, he led all of Congress in donations from the industry, taking in $149,000. Schatz, who was appointed senator to fill out Inouye’s term, defeated Hanabusa in a costly Democratic primary last August, before securing an easy victory in the general election in November.
Asked by phone last week why the maritime industry appreciates him so much, the 42-year-old senator chuckled, but quickly specified that the financial support doesn’t affect his political convictions. “My views of this issue come from my analysis and my thought process,” said Schatz, adding he advocates for “what I think is best for Hawaii.”
Schatz — like Gabbard and Takai — brought up common pro-Jones Act arguments about it being a matter of national security, jobs and, for remote Hawaii, food reliability.
Those three members of the Hawaii delegation each brought up Civil Beat’s recent report indicating that the overall cost of shipping goods to Hawaii ends up increasing prices by somewhere between zero and 7.5 percent. Several local economists agree that shipping is likely on the low end of that scale, so the direct impact of the Jones Act must be less. Schatz, Gabbard and Takai all said that the Jones Act seems to be worth the cost.
Schatz said that there is no need to change the Jones Act.
“I just don’t think it is necessary. I think it has been assigned blame for problems that are really driven by our geographic isolation,” he said. “It is just an easy scapegoat. I’m not buying that an exemption to the Jones Act or repealing it will help Hawaii.”
Sen. Mazie Hirono, who has received $169,335 over the course of her career from sea transport interests, declined Civil Beat’s request for an interview.
Takai brought in $74,850 from sea transport in the run-up to his 2014 race, making maritime money the third-largest source of direct and indirect campaign support for him. That has nothing to do with his political stance on the issue, he made clear, noting that he went on the record in support of the Jones Act long before he ran for Congress.
Takai said that the maximum direct cost of the Jones Act that Civil Beat found is “minimal compared to what others have said.”
Some opponents of the Jones Act in Hawaii have often cited a much higher range. Hawaii Shippers Council President Michael Hansen told Civil Beat the protectionist law is likely responsible for between 6 percent and 12 percent of the portion of the price of goods in Hawaii that is above the mainland average.
But State Sen. Sam Slom said the Jones Act price increase causes about 40 percent of the overage.
State Rep. Gene Ward said in a recent teleconference on the Jones Act that the maritime regulations are to blame for between 50 percent and 70 percent of the portion of the cost of goods over the mainland average.
Takai, Gabbard and Schatz all said they would be open to a definitive, objective study to nail down the impact of the Jones Act on Hawaii.
“There have been studies that are all over the place,” said Takai. “I would recommend that the University of Hawaii do another one to try to figure things out.”
But the congressman added, “From where I sit, I see no reason to change my position on the Jones Act.”
“You aren’t going to devastate American ship-building by exempting about one and a half percent of overall ocean transportation.” — Charles Djou
He, more than any other member of the delegation, may have earned a Jones Act mandate from voters because his Republican opponent last year, Charles Djou, made obtaining an exemption for Hawaii from the Jones Act’s requirement that ships be built in the U.S. a key part of his campaign. Djou has supported other exemptions as well.
In an editorial board meeting with Civil Beat last year, Djou noted that many of the financial and national security arguments used to protect the Jones Act echo criticisms of deregulation of the airline industry in the years before it began in 1978.
“Flying from the West Coast to Hawaii on a foreign-built vessel has not devastated aviation,” Djou said, adding, “You aren’t going to devastate American ship-building by exempting about one and a half percent of overall ocean transportation.”
“I think you will have the collateral effect of more trade and commerce (as) the spillover effect of a better economy, and more vibrant job opportunities,” he said, before adding that this would likely translate into lower prices in the islands.
After a vigorous campaign in which the Jones Act came up repeatedly in debates, Takai defeated Djou, 52 percent to 48 percent. “I believe that people’s support is a result of the positions that candidates have,” said Takai.
The first-term representative noted that just as no one knows the cost of the Jones Act for Hawaii, no one can be certain that a Jones Act exemption for the islands would actually bring down prices.
All three members of the delegation also cited the military utility of the Jones Act in recent years. Both Gabbard and Takai said that during their military stints in the Middle East, Merchant Marine vessels were used to move equipment around thanks to the Jones Act.
Gabbard told Civil Beat that the law was originally enacted to support a strong and enduring maritime industry in the U.S. that could also be mobilized rapidly in case of war and national emergencies. “That was relevant at that time, but it has been relevant in our recent conflicts as well,” she said.
Gabbard, who didn’t face a competitive election, received $38,900 from sea transport in 2014, far less than Schatz, Hanabusa or Takai. Overall, Gabbard has received $54,150 during her two congressional elections — not a particularly major source of her campaign funds.
Still, she sounded similar notes when talking about a law originally called the Merchant Marine Act of 1920. “When I look at the Jones Act, I look at costs and benefits. The benefits outweigh the cost of exemptions,” she said.
A core issue on the economic side of the equation, she said, involves balancing however much the Jones Act increases the cost of living in Hawaii versus what we get from it.
“The Sam Sloms and Charles Djous are just peeing in the wind.” — Lee Endress, University of Hawaii economist
So is it worth it? “On the Jones Act, given the estimated small amount, yes it is,” Gabbard said.
But, under the right conditions, if decisive evidence from a neutral source came out indicating that changes would be beneficial to Hawaii and the nation, Gabbard said, politicians should be open to that. Schatz and Takai also said they would be open to new data, as long as it is objective and reliable.
And even Gabbard included plenty of caveats about the need for research to carefully examine the many potential impacts of changing the legislation. She set the bar even higher, given her national security-related conviction that the U.S. needs to retain its commercial and military shipbuilding capacity in an ever-changing world.
There is little likelihood that the Jones Act will disappear anytime soon.
As Schatz noted, there has been enduring bipartisan support for it in Congress, even if the Jones Act can seem like a partisan one in the islands. That is why some recent reform efforts have focused around the non-contiguous states and territories — Hawaii, Alaska and Puerto Rico — seeking an exemption from the requirement that all ships be built in the U.S., where construction costs can be as much as five times more than in the world’s dominant building nations, Japan, South Korea and China.
Ships sold at a fraction of the cost could translate into cheaper rates over the lifetime of large freight-transporting vessels that usually cost in the hundreds of millions of dollars in the U.S. Less expensive ships could also lead transport companies to renew their fleets more often, which could mean adding more fuel efficient vessels, resulting in additional cost savings.
In Hawaii, resolutions have been put forward to seek an exemption in the state Senate and House for the last three years, and each year they garner more bipartisan co-sponsors, but they have ultimately failed.
UH economist Lee Endress, who spent years in the armed forces before studying economics and becoming the chief economist for the Pacific Command for many years, has written that the Jones Act is harmful to consumers and shrinks Hawaii’s economy. It is, he wrote on on the UH economic research organization site, “plain old protectionism under the guise of national security.”
But, he told Civil Beat, he is skeptical about the prospect of consumers in Hawaii bonding together enough to demand change.
On one side, he said, the maritime industry and its union employees enjoy concentrated benefits. The related unions give far less money than sea transport companies, but tend to be very politically engaged. Collectively, they have very concrete reasons to protect the Jones Act, he said.
On the other side, Endress notes, there are many individual consumers spread out around the state who pay a little more for milk, a loaf of bread and other goods shipped into the islands. Those people must consider if the added price is “enough of an annoyance that I’ll fight the Jones Act.”
Members of Hawaii’s congressional delegation sometimes seem to avoid talking about the Jones Act, unless they are called upon to defend it — or unless they bring it up to bolster their pro-labor records, he suggested.
It all adds up to a great challenge for those pushing reform.
“The Sam Sloms and Charles Djous are,” Endress said, “just peeing in the wind.”
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