Mayday for American Protectionism
The Merchant Marine Act of 1920 – which stipulates that only American ships can transport goods between US ports – has long been a protectionist drag on the US economy. Rather than celebrating the law's centenary next year, policymakers should throw it overboard.
WASHINGTON, DC – When you try something for 99 years and the situation keeps getting worse, it is time to try something else. The United States Congress passed the Merchant Marine Act of 1920 (also known as the Jones Act) in order to protect America’s shipping industry and strengthen national security. But the law has almost destroyed the industry, and imposed huge costs on America’s businesses, consumers, and the environment. It needs to be sunk.
The Jones Act requires all cargo shipped between American ports to be carried on US-flagged vessels that are assembled entirely in America, and that have some of their major components manufactured in the US. These ships must be at least 75% owned and crewed by Americans. And if an US-flagged ship needs to be repaired overseas, the US charges a 50% tax on the price.
Shipping goods between two ports in the same country is called “cabotage.” The World Economic Forum has called the Jones Act the world’s most restrictive cabotage law, and the OECD ranks the US behind only China and Indonesia in the restrictiveness of its maritime-services regulations.