Keeping up with the Jones Act
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Matson supports the U.S.-build requirement as a vital component of the Jones Act, citing the importance of ensuring that the U.S. has strong, vital shipyards that are capable of building and maintaining modern, competitive commercial vessels.
Also, the coalition in Washington, D.C., that supports the Jones Act includes politicians from shipbuilding states, so changing that part of the act could endanger the coalition. In 2010, U.S. Senator John McCain helped introduce federal legislation that would have repealed the Jones Act, but the bill did not receive enough support in Congress to pass.
Hull says the biggest cost differences between U.S.-flag and foreign-flag ocean carriers are vessel crew costs (foreign workers earn less than U.S. seafarers) and depreciation (a direct result of the higher construction costs of ships built in the U.S. vs. foreign shipyards). But, he says, these higher costs end up as wages in the pockets of U.S. citizens rather than foreigners. More importantly, he says, these combined costs represent a small percentage of U.S.-flag carriers’ total expenses.
“Every other cost that U.S.-flag carriers incur is the same for a foreign-flag operator: cost of fuel, stores, containers, machinery, vessel loading and discharge, customer service, computer tracking systems, local pickup and delivery, insurance, and overland transportation,” adds Hull. “Thus, the bulk of the costs of shipping are not impacted by the Jones Act and would be the same for all shipping companies, U.S. or foreign.”
U.S. Senate candidate Ed Case says he has believed for some time that, while the Jones Act may have its merits nationally, it “disproportionately harms the noncontiguous parts of our country, like Hawaii.”
“This is because, unlike the mainland, with its trucks and trains and other transportation alternatives, we have no practical options to importing our consumer goods and exporting our local products if Jones Act shippers do not price or service competitively,” explains Case. “As Hawaii’s 2nd District congressman from 2002 to 2007, I represented virtually all Hawaii agriculture, which could not get its products to mainland markets affordably because of an absence of targeted and reasonable transportation services. Even today, Big Island ranches must charter a weekly 747 out of Keahole Airport to get their cattle to the mainland because that’s cheaper than Jones Act shipping. There’s something wrong with that picture.”
But, Matson’s Hull says, “The Jones Act is responsible for thousands of American jobs in Hawaii. According to a recent study undertaken by Price Waterhouse Coopers, the Jones Act contributes 23,225 jobs to the state along with labor compensation of more than $1.1 billion annually.”
That’s of little comfort to the French Gourmet’s Novak, who, at the height of his business, employed 85 local workers.
“We employed good people. We paid a good, fair amount of taxes like everyone else. We exported. Did good for the state. But they’re killing Hawaii. Hawaii could be so much more.”
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