”’Congressman Ed Case (Hawaii, Second District) today introduced three bills in the U.S. House of Representatives to end a century of closed market cargo shipping to, from and within Hawaii. The bills would exempt Hawaii and other non-contiguous U.S. locations from the Merchant Marine Act of 1920, also known as the Jones Act, which mandates that cargo shipping between U.S. ports exclusively utilize U.S., not foreign, vessels. Below is the speech he made with the introduction of what he deemed the United States Noncontiguous Shipping Open Market Act of 2003, Hawaii Shipping Open Market Act of 2003, and the Hawaii Agriculture/Livestock Shipping Open Market Act of 2003.”’
Today, I introduce three bills to end a century of closed market cargo shipping to, from and within my isolated home state of Hawaii, as well as the other noncontiguous locations of our country. In doing so, we will break the stranglehold on the economies and peoples of these exposed communities which results from just a few shipping companies controlling the lifeline of commerce upon which our communities absolutely depend.
These bills all amend the Merchant Marine Act of 1920, also known as the Jones Act. That federal law mandates that all cargo shipping between U.S. ports occur exclusively on U.S., not foreign, flagged vessels. (A similar federal law of the same vintage, the Passenger Vessels Services Act, provides the same mandate for cruise line and other passenger transit; the same arguments as drive these three bills apply there, but that is another effort, already commenced through limited federal exemptions.)
The Jones Act was enacted in a protectionist era under the guise of preserving a strong national merchant marine. But today it is just an anachronism: most of the world’s shipping is by way of an international merchant marine functioning in an open, competitive market. And those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to, from and within our most isolated and exposed locales: our island and offshore states, territories and possessions.
My Hawaii is a classic example. Located almost 2,500 miles off the West Coast, we import well over 90 percent of our life necessities by ocean cargo. There are no doubt plenty of international cargo lines who could and would compete for a share of that market. Yet only two U.S. flag domestic cargo lines – Matson Navigation and CSX Lines (fka Sea-Land) – operate a virtual duopoly over our lifeline.
While they are nominally subject to federal regulation, the fact of the matter is that cargo prices have gone in only one direction – up, and fast – and it is indisputable that there is no downward market pressure which would otherwise result from meaningful competition. These accelerating cargo prices are not absorbed by the shipping lines, but passed through all the way down the chain, to the transporters, wholesalers, retailers, small businesses, mom-n-pops, and ultimately consumers, of all of the elementals of life, from food, to medical supplies, clothes, housing and virtually all other goods. The result is a crippling drag on an already-challenged economy and the very quality of life in Hawaii.
The broadest, deepest effects of the Jones Act on Hawaii result from its impact on westbound imports. But Hawaii is an export location as well, in key products such as agriculture and livestock. Here the Jones Act also effectively stifles meaningful competition in getting those products to their primary markets on the U.S. Mainland. Because the producers of these products and all that rely for their own livelihood on their successful export have to eat inflated shipping costs, these export industries, which any economist knows are the ultimate key to any economy’s prosperity, are also crippled.
Let’s take a concrete example: Hawaii’s once-prosperous ranching/cattle industry, which is so key to the economic health and the very lifestyle of so much of the rural Second District which I proudly represent. That industry depends on getting its product, young cattle, to West Coast pens and transportation hubs in a cost-efficient manner.
There are foreign cargo carriers that specialize, through custom cattle ships and overall sensitivity and adjustment to rancher timetables and needs, in such transport, but the Jones Act outright excludes them from the Hawaii-Mainland market. As a result, Hawaii’s ranchers are reduced to two crippling, cost-magnifying options.
The first is to ship their cargo by foreign carriers to Canada, where they have to go through a myriad of bureaucratic, cost-magnifying gyrations to get their product eventually to their U.S. markets. The second is to beg for the goodwill of the domestic carriers, to whom this is simply a hindrance rather than a major commitment, to ship directly to the West Coast.
And it shows: most of the cattle are first shipped from Hawaii’s Neighbor Islands, where the bulk of the cattle industry is located, to Oahu, in small “cow-tainers,” where they sit for days in Honolulu Harbor awaiting the return to the Mainland of one of the massive cargo ships designed and utilized for quite another purpose. The result (besides associated higher costs): in-harbor cattle waste disposal challenges; higher in-transit cattle mortality; lower-weight cattle delivery to market. That’s what happens when you try to squeeze a square peg into a round hole.
These three bills say: enough is enough. The first, the United States Nonocontiguous Shipping Open Market Act of 2003, exempts all noncontiguous U.S. locations, including Hawaii, from the Jones Act. (Frankly I question whether we shouldn’t outright repeal the Jones Act, but I leave it to my colleagues from the contiguous U.S. to evaluate that option; the consequences are especially acute in the noncontiguous US and that is my focus.) The second, the Hawaii Shipping Open Market Act of 2003, exempts Hawaii. And the third exempts Hawaii agriculture and livestock. Essentially, the bills are intended to lay out the options from broad to narrow; we can get into the issue at any level and work our way up or down.
Let me address directly some arguments sometimes offered up by the domestic shippers in defense of the Jones Act: that it contains important labor and environmental protections that would be lost upon repeal. Of course, the exact terms of repeal are up to this Congress and administration, and all three of these bills propose to retain these important protections. Specifically, these bills provide that all foreign shippers operating under Jones Act exemptions must comply with the same labor, environmental, tax, documentation, U.S. locus and other laws as are applicable to non-U.S. flag ships and shippers transiting U.S. waters today.
Mr. Speaker, these long-overdue bills are of the utmost importance to the localities which have long borne the brunt of the Jones Act. Sometimes it is difficult to pierce the veil of longstanding custom and understanding to see what should instead be, but clearly the time for these measures is overdue. I urge their passage.
Mahalo (thank you.)