HONOLULU – When Hawaii residents purchase groceries and other goods in the islands, they typically encounter prices 30 percent above what U.S. mainland shoppers will pay in their stores. Small business owners endure similar challenges when purchasing supplies.
Hawaii Attorney John Carroll, a former state Senator and Hawaii GOP party chair, filed three lawsuits in federal court since 2009 including one this year targeting The Jones Act – a federal law many believe secured Hawaii’s designation as the state with the highest costs of living and doing business.
The Jones Act, also known as the Merchant Marine Act of 1920, mandates goods shipped between American ports must be carried on American manned, American made and American owned vessels.
Carroll along with a number of Hawaii economists, professors and business owners believe the law violates the commerce protection clause of the U.S. Constitution and they want the law repealed.
Carroll filed “a motion for reconsideration” in Hawaii’s U.S. District Court on Friday after a third lawsuit he filed was dismissed without a hearing on April 22, 2013, by U.S. District Judge Leslie Kobayashi.
Should his lawsuit fail to gain traction in U.S. District Court, Carroll said he plans to appeal to the Ninth Circuit Court of Appeals.
“The most important issue for me is the violation of the Commerce Clause,” Carroll said. “The founding fathers fought the British and over threw them based on imposition, without representation, of a tax on tea. This law’s enforcement taxes everyone who purchases anything in this state because of the excessive shipping costs, which seem to be out of control.”
Hawaii Pacific University Economic Professor Ken Schoolland, who has won international awards for his book, The Adventures of Jonathan Gullible: A Free Market Odyssey – a book now being used around the world to teach people of all ages about the free market, is a plaintiff in Carroll’s lawsuit. He said The Jones Act similarly impacts Alaska and U.S. island territories.
“I first learned about the damage the Jones Act caused local business while living in Alaska. The chief accountant to Alaska Lumber & Pulp explained that because of the Act it was cheaper to send pulp to Seattle across the ocean and back via Japan rather than directly down the Coast to Seattle. ALP is now out of business, in part due to the high shipping costs,” Schoolland said.
In Hawaii, Schoolland found that a shipment he wanted to make to China first had to travel to Long Beach–triple the distance and twice the necessary cost.
“Some say they strengthen US shipping by outlawing the competition. Really? That’s like saying they want to build a world-class soccer team by banning games with any non-US teams. Fear of competition is neither courageous nor smart,” Schoolland said.
In Hawaii, there are two major container shipping companies – Matson and Horizon – that are Jones Act companies and they’ve established a duopoly that is difficult to challenge.
Schoolland maintains eliminating competitors weakens an industry by removing incentives for better service, lower costs, and innovation while temporarily shielding privileged insiders and harming everyone else who depends on shipping.
“Advances in shipping bring the world closer together while such laws take us further apart. May as well treat us as if we were on different planets instead of as equal to those living in California who can use foreign shipping while we are blocked,” Schoolland said.
The lawsuit – and any challenge to The Jones Act – is extremely controversial in political, business and union circles.
All presidents elected since The Jones Act was established have supported the federal law, claiming it supports a U.S. ready fleet in times of war. The U.S. Navy and its military leaders also back the law.
Union leaders and their members insist the Jones Act must remain in place because it ensures job security for American ship builders and crew, while business leaders who benefit from higher prices and monopolies or duopolies claim the law helps strengthen the American economy.