Trade Law Hindering Our Economy
With various trade negotiations and the accusations of unfair trade practices flying among countries it is important to understand that no country is without blame. Clearly, the Chinese tactic of manipulating its currency so to make their goods look cheaper in the eyes of foreign consumers and their tactic of requiring businesses to reveal intellectual property at a price for operating in China seems blatantly unfair. Similarly, the French subsidy of certain agricultural products and Canada’s Dairy Management System, designed to protect Ottawa dairy farmers from those in the U.S., are just some of the many adverse trade practices. But the U.S. is not without blame for the imposition of tariff and non-tariff barriers that harm free trade and result in higher prices for American consumers. In 1920, during the initial phases of the protectionist era that many economists maintain eventually caused the Great Depression of the 1930s, Congress passed the Merchant Marine Act, commonly called the Jones Act. Still in force today, it was enacted to ensure adequate domestic shipbuilding capacity and a ready supply of merchant marines. It restricted the use of shipping service between all U.S. ports to vessels that were U.S.-built and manned by U.S. crews. Like all such legislation the act has created many unintended consequences. For almost 100 years the act has significantly inflated shipping costs among U.S. costal ports and inland waterways. Goods shipped between U.S. ports face little competition resulting in higher prices for Americans. The Maritime Administration report shows that U.S.-flagged vessels were 2.7 times more expensive to operate than foreign-flagged ships. Ironically, instead of encouraging U.S. shipbuilding, the Jones Act has led to its precipitous decline. U.S. production of ships is the lowest of the 10 industrialized countries that build them, according to the United Nations Conference on Trade and Development. The U.S. built 910 tons of ships between 2014 and 2016 while China built 70,000 tons and South Korea built 71,000 tons. This is a trade imbalance of our own making and its impact is far reaching. For instance, the largest modern American made fishing trawler built in nearly three decades sits 86 percent complete in the Anacortes Shipyard in Washington state. The shipyard made a mistake by using too much steel that had been modified in Holland. The Jones Act forbids “a foreign worker drilling a single hole or making a single bend” on any of the ship’s two-ton hull plates. The $75 million fishing trawler, ironically named America’s Finest, may cost the fishing company and the shipyard their business, eliminating 500 highly paid and skilled trades jobs according to an article in The Seattle Times. The Jones Act also forces America to use non-environmentally friendly transportation. According to the World Shipping Council, a ship produces 10 to 40 grams of carbon dioxide when carrying one ton of steel. Trains produce 20 to 150 grams while trucks produce 60 to 150 grams of carbon dioxide per ton. It does not take an environmental engineer to figure out why the 40 percent of the U.S. population located in coastal areas or navigable inland waterways would be financially better served by ships rather than trucks. Further, while trucks account for only 10 percent of the total miles traveled in the United States, they are responsible for 75 percent of the $73 billion used in road maintenance and repair. Americans are right to lament the cost of tariffs and non-tariff barriers to trade imposed on the U.S. by other countries. They are indeed expensive to consumers and often harm the environment. However, we need to put our own house in order when it comes to noncompetitive trade and transportation rules. The Jones Act is a blatant example of how restrictions to trade, initially well-intentioned, can be harmful to our country. Perhaps we should change policy and convey to our trading partners do as I do, not as I say. MICHAEL A. MACDOWELL is president emeritus of Misericordia University and managing director of the Calvin K. Kazanjian Economics Foundation.