Dragon – New Lord of the Seas 5. American Eagle Returns to Protectionism: Reincarnation of the Jones Act

The discussion centers on one of the most controversial and politically resilient regulatory acts - the Merchant Marine Act of 1920, better known as the Jones Act. Timeless classic - the Jones Act was passed by the US Congress on June 5, 1920. The adoption of this act was a direct consequence of the lessons from World War I, which vividly demonstrated the critical dependence of national security and military logistics on a powerful merchant fleet. The main goal of the law, as stated in its introductory articles, was to create and maintain an American merchant fleet sufficient to meet the needs of national defense and promote the foreign trade of the United States.

The Jones Act is a federal law that defines measures to support the development and maintenance of a merchant fleet to ensure commercial activities and perform functions of a naval auxiliary unit during war or national emergency. Among other things, the law requires that transportation between US ports be carried out by vessels under the US flag.

This law also extends the application of the Federal Employers' Liability Act (FELA) to seafarers. The law allows seafarers injured at sea while performing their duties to file lawsuits for damages against their employers. Under the Jones Act, the plaintiff may file a claim in federal district court or state court. The defendant has no right to transfer the case from state court to federal court. Although maritime law generally does not provide plaintiffs with the right to a jury trial, the Jones Act grants plaintiffs this right in personal injury claims.

But the core content of the Jones Act lies in the fact that all goods transported between US ports (cabotage transportation) must be carried by vessels that: a) are built in the US, b) are owned by US citizens, c) are manned by crews consisting of US citizens or permanent residents, and d) sail under the US flag.

The Jones Act, as a model of protectionism in the shipping and shipbuilding industries, has been the cornerstone of American shipbuilding since its adoption in 1920. In particular, by requiring that vessels carrying cargo between US ports be built, owned, and crewed in the US, the Jones Act has ensured a guaranteed market for domestically produced ships. This important law can be strengthened by limiting the use of exceptions that too often allow ships built abroad or with foreign crews to participate in US domestic trade, undermining demand for American shipyards' products. Supporters of this law believe that without it — and without Navy contracts — the US shipbuilding industry would likely not exist today.

The Jones Act became a reincarnation of England's famous Navigation Act, which existed for two hundred years from 1651 to 1849. The Navigation Act of 1651 was a key English law passed at the initiative of Cromwell, which restricted maritime trade by prohibiting foreign ships (especially Dutch) from carrying goods from Asia, Africa, America to England and its colonies, as well as between English ports, thereby monopolizing this trade for English ships and stimulating the development of the British fleet, but at the same time provoking the Anglo-Dutch wars.

The Navigation Act stipulated that goods from Asia, Africa, and America could be imported into Great Britain only on ships owned by British subjects, and their crew must consist of at least 3/4 British subjects; goods from Europe could be imported on British ships or on ships of the country where the goods were produced or in whose ports they were first loaded. The import of salted fish into England and the colonies was permitted only if it was caught on British ships. Finally, cabotage sailing was granted exclusively to English ships.

The Act was issued, on one hand, to encourage the English merchant fleet, and on the other hand, to destroy Holland's primacy at sea. This law so undermined Dutch intermediary maritime trade that it led to the First Anglo-Dutch War (1652–1654). Shortly after the issuance of the Navigation Act, its operation was suspended due to the war with Spain, but in 1660 (under Charles II), it was renewed with significant additions, mainly concerning trade with the colonies. It was established that all goods from the colonies must first go to English ports; goods to the colonies could be transported only on British ships; goods from Russia and specifically listed goods from Europe (enumerated articles), such as timber, salt, tobacco, potash, olive oil, flax, grain, sugar, wine, vinegar, and others, could be imported only to England and only on English ships.

Restoring and enforcing the Jones Act in the US is critically important and ensures that loopholes or misinterpretations do not lead to a reduction in demand for US-flagged vessels in areas such as liquefied natural gas (LNG) transportation and the development of offshore wind energy. Advocates of this law call for strict enforcement of cabotage requirements so that domestic trade consistently supports American shipyards and workers. This will sustain demand signals for investors and shipyards while protecting American seafarers from unfair foreign competition.

It's even amusing now to read lightweight liberal essays in their ideological purism about the harm of the Jones Act and protectionism to American shipbuilding (“The Role of the Jones Act in the Stagnation of US Shipbuilding, and Why Protectionism is Dangerous”, 08.30.2018, sudostroenie.info/novosti/24155.html).

Critics of the Act persistently argue that it has been a colossal failure in all respects. Critics see the catastrophic legacy of the Jones Act in the fact that it has increased the cost of domestic transportation, suppressed competition, created monopolism in shipping, glaring inefficiency, and ultimately weakened the very industries it was meant to protect. Even the national security goals that this Act was primarily supposed to achieve have, in the opinion of critics, been failed as a result of its long existence. At the same time, the obvious degradation of American shipbuilding is paradoxically blamed on this Act on the abstract grounds that “in the absence of competitive pressure, innovations are implemented slowly”. (pacificlegal.org/the-jones-act-a-disastrous-legacy-for-the-u-s-economy-and-security/). Naturally, liberal purists stubbornly ignore the decisive role of Reaganomics in the collapse of shipbuilding, preferring, as always, to blame the “invisible hand” of the market with its mythical “competition”.

Alas, the global internet space is flooded with such “analytical” reviews compiled from materials of numerous Western liberal and libertarian institutes (for example, the Cato Institute), where distortion of reality and falsification of facts serve to propagate extremely detached from reality religious dogmas about markets and market efficiency.