Though the parties involved claim to have reached an eleventh-hour “tentative deal” to avoid a national rail strike, Americans are still right to worry about the impact rail disruptions could have on supply chains. Already, businesses and consumers are bracing for shortages, delays, and further price increases on top of existing inflation. But as businesses scramble for domestic shipping alternatives, one option stands out as significantly less viable than it should be: namely, ships.
Water transport should be a far more significant mode of freight transportation in the United States, particularly given the fact that nearly 40 percent of Americans live in coastal counties. Yet just 6 percent of domestic freight is transported by water in the United States, compared to 36 percent in the European Union. The reason? A century-old law that has long outlived the circumstances that birthed it.
The Jones Act, part of the Merchant Marine Act of 1920, prohibits the transport of cargo from one U.S. port to another by water, or cabotage, unless the cargo is transported on a U.S.-flagged, U.S.-built vessel owned and crewed by American citizens. Cargo originating in foreign countries can be delivered by foreign ships all around the country, but domestic cargo must be transported on Jones Act-compliant vessels.
The issue with this requirement is that there are very, very few Jones Act-compliant vessels. In fact, there are only 93 — out of a global merchant shipping fleet of over 54,000. That’s about 0.17 percent of all vessels able to ship domestic freight from one U.S. port to another. Incidentally, one of the main arguments that proponents of the Jones Act make is that it protects domestic shipbuilding capability — an argument that the meager number of Jones Act-compliant ships disproves.
Unsurprisingly, the result is that domestic cargo transport by water is far less common than it should be in a country with over 95,000 miles of coastline and a population heavily concentrated on the coasts. As such, the country relies heavily on transport via trucks clogging up I-95 and I-5 and, of course, rail.
The recent disruptions to the supply chain from COVID and now the potential for a nationwide rail strike highlight how foolish this sidelining of an entire mode of cargo transport is as a matter of national policy. Even setting aside the well-documented impacts that the Jones Act has on prices in normal times, arbitrarily forcing domestic suppliers to rely on truck and rail transport rather than water transport only makes the catastrophe greater when there are disruptions with the former options.
It’s worth noting, of course, that some parts of America already lack the option of receiving goods produced in other areas of the United States by rail or truck. Islands like Hawaii and Puerto Rico feel the full brunt of the Jones Act at all times, and are reason enough to do away with the archaic law.
But the severe disruptions that will occur should a nationwide rail strike take place serve as a reminder of the self-inflicted wound that the Jones Act represents. By refusing to do away with the Jones Act, the country is not only guaranteeing higher prices and arbitrarily favoring foreign suppliers over domestic ones, it is guaranteeing that any disruptions to truck or rail shipping will be more devastating.
Americans should not accept this blatant protectionism for a moribund domestic shipbuilding industry at the cost of the rest of the country any longer. The time to do away with the Jones Act was a long time ago, but the second best time is as soon as possible.
