According to an article published in the Wall Street Journal, Russian natural gas is again being shipped to a US port, according to news reports.
What is the Jones Act?
Bloomberg says the Catalunya Spirit tanker, which carried thousands of miles away, would arrive in Puerto Rico last week. Such a transaction makes little sense, as the United States is the world’s largest gas producer.
What explains the mystery is the Merchant Marine Act of 1920, also known as the Jones Act. The law states that ships carrying cargo between American points must be built, 75% owned and 75% crewed by Americans. This, in turn, inflates prices for matching ships and domestic shipping.
There is a particular problem for liquefied natural gas since there are zero LNG tankers that meet the Jones Act regulations. This means that Puerto Rico is effectively barred from importing gas from LNG terminals in Georgia or Louisiana. As a result, it apparently turned to Siberia. The same thing happened two days ago in New England, where gas is short due to a lack of pipeline capacity. A tanker of Russian gasoline was unloaded in Boston. How is this an “America First“ policy?
Waiver for allowing the foreign tankers
Earlier this year, President Trump considered a Jones Act waiver to allow foreign LNG tankers to bring US gas to the Northeast and Puerto Rico. But news reports suggested that Republicans in shipbuilding regions talked him out of it. “In many states,“ Louisiana Senator
John Kennedy said, “that would mean his options were as dead as fried chicken.”
Benefits of pairing the Jones Act will benefit all Americans
Consider an April study from the Organization for Economic Cooperation and Development. “The law obviously creates great cost efficiencies,“ it says, “by protecting the shipbuilding industry – a small US economic sector – at the expense of other US industries with enormous economic potential.”
The cost of waterborne shipping in the United States by 50%. It would stimulate other industries. The OECD says US production could increase $ 135 billion, or 0.4%, in the long run. This would be “three times the size of the original American shipbuilding industry.”
The drawback of Jones Act
Cato Institute’s Colin Grabow and Inu Manak had another comparison: The Trans-Pacific Partnership would raise the economy $ 42.7 billion in 15 years, according to the US International Trade Commission. “In other words, simply by removing the Jones Act,“ Grabow and Ms. Manak, “The United States could realize potential gains in excess of ratifying a major trade agreement with eleven other countries, including the world’s third-largest economy.“ in reality, the law suffocates them. After completing a container ship in March,
Philly Shipyard had zero orders. “There are no shipbuilding activities at the yard, and all production facilities are inactive,“ the company said in May. The problem, as the magazine reported at the time, is that Jones Act ships “cost four times more than ships built by foreign competitors,“ and yet they serve a limited market.
Foreign competition would force American shipbuilders to “reduce ship prices by at least 50%,” the OECD says. Several ships were to be built, with recesses and economies of scale. The OECD study estimates that industrial production could increase by 71% through an “increased number of new ship orders.”
Conclusion
The Jones Act is protectionism at its most short-sighted. As the economy slows down, it is an easy gain for growth to facilitate trade between the ports at the state. As a small start, Trump should let Puerto Rico and Boston send their natural gas dollars to Americans instead of Russians.
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Source: WallStreetJournal
