As hulking American-built vessels loaded with colorful cargo containers destined for the mainland exit Honolulu Harbor, they roil the deep blue sea and lift a gray mist into clouded turquoise skies.
The display of colors contrasts with the stark debate over the Jones Act, which often takes place in black and white.
The Jones Act, its defenders argue, is a vigilant protector of American shipping. Eliminating the domestic maritime regulations could, they say, send U.S. commercial shipyards into ruin, end hundreds of thousands of middle-class jobs and spark instability for cargo transport that sustains far-off American outposts like Hawaii. Changing the law would, many assert, undermine national security.
Opponents in Hawaii, by contrast, often paint the Jones Act as a primary driver of high prices. It is largely to blame, some argue, for the long-term decline of non-military U.S. shipbuilding. The act, they insist, leaves disconnected parts of the country vulnerable to special interests that profits from the status quo. But critics’ main argument is about the cost of living.
Both sides are prone to cherry-picking unreliable data — as Civil Beat’s reporting on the issue has shown — and there is little common ground between advocates and opponents.
Darrell Conner, of the American Maritime Partnership, a pro-Jones Act lobbying group in Washington, D.C., insists there is nothing to improve in 95-year-old legislation originally called The Merchant Marine Act of 1920. “I operate from a premise of, ‘If it ain’t broke, don’t fix it,’” he told Civil Beat recently. “The law has demonstrated over and over again that it works.”
Hawaii Shippers’ Council President Mike Hansen says the Jones Act is plenty broke, especially for America’s only archipelago state. Hawaii should, he said, push the U.S. Congress to grant a partial exemption in order to bring down costs in the islands.
But Hansen makes clear how challenging he expects unshackling Hawaii from the Jones Act to be when he talks about the nexus of lobbyists, freight transport companies and related unions that enjoy such enormous benefits from the law that, “They will defend it to the death.”
“If someone walked up and said, ‘Here’s $200,000 to study the Jones Act, yeah, we’d think about it.” — Carl Bonham, UHERO executive director
The chasm between the two groups is fed partly by the big-dollar interests at stake, but it is also a natural result of a debate lacking in up-to-date, authoritative and objective data on the costs and benefits of the Jones Act for Hawaii.
Basically, Hawaii needs answers to some key questions. How much does Hawaii spend on shipping, how much can be attributed to each of the main Jones Act regulations, and how many jobs here are directly attributable to each of them?
How much less expensive would shipping cargo be if domestic ocean transporters were permitted to use far less expensive and more fuel-efficient new foreign ships?
And what would the likely impact of cheaper cargo transport be on businesses and individuals in the islands?
Answer those questions — at least some of them — and Hawaii would be better able to assess whether the different components of the Jones Act help the islands, or whether they are a millstone pulling us down.
The Jones Act requires that domestic freight transport on U.S. waterways be conducted by crews that are at least three-fourths American, and on vessels built in U.S. shipyards, and that are American owned.
The law almost certainly raises costs in a state like Hawaii where nearly all goods are shipped in. American crews and ships simply cost much more than those of most other countries. Large new vessels built in Japan, South Korea and China can cost one-fifth as much as some newly produced vessels in the few U.S. shipyards that are producing them. Those costs get passed on to transport companies and shippers, and then on to the people who purchase goods in the islands. Those people — you and me — are struggling with high costs.
Prominent politicians — including Gov. David Ige, U.S. Sen. Brian Schatz and U.S. Reps. Tulsi Gabbard and Mark Takai — recently told Civil Beat they would all like to see reliable, objective and up-to-date data to measure the cost of the Jones Act for Hawaii. They even suggested that decisive new evidence could change their stance, despite the substantial campaign donations they receive from Jones Act-friendly elements.
So why isn’t a definitive study being done?
People who think such sponsorships would affect decision-making at UHERO “don’t know how little money our sponsors are giving us.” — Carl Bonham
Hawaii isn’t Massachusetts, a little state flush with top-notch economists, well-resourced research institutions and plenty of private companies capable of examining such complex questions. There are just a few widely recognized research bodies that might be capable of taking on the Jones Act in, or for, the islands. The most likely prospects would be federal researchers, the University of Hawaii Economic Research Organization, known as UHERO, or the state’s Department of Business, Economic Development and Tourism.
Rep. Takai, like several other people Civil Beat spoke with, believes that UH is the natural place for a Jones Act study.
UHERO — which is funded by a mix of private contributions, grants and contracts — seeks private funding sponsorships that allow “UHERO to actively engage the Hawaii community and inform stakeholders about the important tradeoffs facing Hawaii’s Economy, Environment and its People,” according to its website.
The Jones Act would seem to raise just such trade-off questions.
But UHERO’s Executive Director Carl Bonham, who is also a member of the Hawaii Council on Revenues, said his organization has “never done any studies for anybody on Jones Act stuff.”
Why? Bonham notes that he and his colleagues have discussed the idea of a study on the Jones Act, but they face capacity limitations. “There are two and a half of us who are actual UHERO faculty,” he said, explaining that the rest of the team is made up of research fellows “who basically work on what they want to.” There are also graduate students that the organization leans on heavily, he said.
The UHERO website lists 14 research fellows, five “affiliated researchers” and 10 graduate research assistants.
So far, Bonham said, none of the staff or fellows have shown enough interest in studying the Jones Act, and no one has come forward offering enough money to pay for it.
“If someone walked up and said, ‘Here’s $200,000 to study the Jones Act, yeah, we’d think about it,” the UH professor said. “I don’t know that we could do it, but we always listen when people want to propose this.”
Two companies directly affected by the Jones Act are sponsors of UHERO. Among the organization’s numerous “middle-tier” sponsors is Matson Navigation, which controls about two-thirds of the freight transportation market between the mainland and Hawaii. Matson — along with companies like the Bank of Hawaii, HECO and Kamehameha Schools — gave UHERO $10,000, according to UHERO’s website sponsorship page.
That level of support, UHERO’s website says, affords sponsors the right to “private consultations” or in-house presentations on the UHERO forecasts and research topics,” as well as discounted custom research services and all UHERO forecast reports.
In the lowest tier of support for UHERO is Young Brothers. The interisland freight company is one of 11 such entities mentioned on the site’s sponsors’ page. To make it into that category, sponsors must give at least $3,000, earning “access to in-house presentations on the UHERO forecast or another research topic and all UHERO forecast reports.
UHERO’s sole high-level sponsor, which involves giving $35,000 or more, is the Hawaii Business Roundtable. Glenn Hong, the president of Young Brothers, and Matthew Cox, the CEO of Matson, are members of the roundtable.
Matson and Young Brothers have never asked UHERO to assess the Jones Act, or to avoid the topic, Bonham said. People who think such sponsorships would affect decision-making at UHERO “don’t know how little money our sponsors are giving us,” he added with a laugh.
“If you have enough sponsors from enough different areas, and individually they are not giving you much money, you can live with making them angry through your work,” said Bonham. “If we make them angry, it isn’t like we’re going to shut down.”
“I think the third rail has often been the labor issue. If a study is seen as a union-busting study, it won’t go over here.” — Sumner La Croix, UH economist
Eugene Tian, a state statistician at DBEDT, said his organization is unable to conduct a study on the Jones Act’s effects on prices in Hawaii because the freight companies won’t share the necessary data. The state can’t legally require those companies to disclose certain information, he said, but federal authorities can. So either the companies would need to voluntarily share some of their financial information or federal involvement would be necessary.
“All of us are happy to do this study if there is pressure on the data part,” he explained. “We feel this would be a really valuable study.”
Ige told Civil Beat in a recent Editorial Board meeting that he would like to see a federal study. From his vantage point, that might have two benefits. One, the feds would have no data issues and, perhaps more importantly for a governor elected in a time of budget limitations, the feds might cover the costs of the study. That has a certain logic, given that the Jones Act is a piece of federal legislation.
One problem is that the U.S. Government Accounting Office attempted to measure the impact of the Jones Act on another set of American islands, Puerto Rico, without substantive success. In a 2013 report, the GAO concluded that the Jones Act almost certainly raised prices but, given the many factors at play — including uncertainty about which immigration, environmental, labor, safety and other laws would apply if the Jones Act were not in place — it was unable to slap a price tag on the the law’s impact there.
Conner, at the AMP, cited that study’s inadequacies to argue that it is simply not possible to measure the cost of the Jones Act, but several local researchers like Tian say it should be possible.
Part of the problem with getting a study green-lighted by a credible organization is that it might be seen as anti-union, according to Sumner La Croix, the chair of the Department of Economics at UH.
La Croix, who has acted as a consultant for Young Brothers, noted that unions can “do a lot of good under the appropriate circumstances. When people say unionized labor is the problem, that is a narrow way of looking at this.”
“The first thing you do when you see a study is ask: ‘Who paid for this?’” — Lee Endress, UH economist
But, La Croix, who is a UHERO research fellow, said that perception can trump reality — and prevent a study from getting the backing necessary to make it happen. “I think the third rail has often been the labor issue. If a study is seen as a union-busting study, it won’t go over here,” he said. But, he added, “Hawaii would benefit from doing a good study of the Jones Act. There is no doubt about that.”
The labor issue is an interesting one. While the Jones Act is widely seen as a union issue, and some key unions are crucial supporters of it, union members and their families pay the same high prices in Hawaii as the rest of us. And if a partial exemption from the Jones Act resulted in cheaper cargo deliveries to Hawaii — and that is a big if — it could also potentially result in more jobs in the islands.
But the impact of change is purely speculative because, as Schatz noted, “We do lack data.” He, like many of his colleagues, said he would like to see it. He emphasized the need for a study to be conducted “in an evenhanded way,” and specified, “I’d be interested in who was paying for it and what their agenda was.”
Agendas are also a concern for researchers. Lee Endress, a UH economist who has written about what he sees as market shortcomings of the Jones Act for the UHERO blog, said, “The first thing you do when you see a study is ask: ‘Who paid for this?’”
As things stand, Schatz said that the Jones Act ends up as a sort of Rorschach test in which politicians try to use it to “project either great economic vitality or all of our anxieties about paying higher prices.”
The truth, said the senator who supports the Jones Act, “is really somewhere in between.”
Or it might be. Until a definitive study is done, all we can say is that’s a fair guess.
Until there is an authoritative study, politicians on all sides will be basing their decisions on incomplete, unverified or unverifiable data.
Put another way, a black-and-white debate will continue on both sides untroubled by the rich, colorful details of reality.
Read compelling personal stories about the human impact of Hawaii’s high cost of living on our Connections story page, and then click on the red pen and share your own.
And join Civil Beat’s Facebook group on the cost of living in Hawaii to continue the conversation and discuss practical and political solutions.