Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Jill Wisenthal.
Speaker 2: Joe, this is the big one. We are about to
Speaker 2: ruin our most long running joke all for this.
Speaker 3: What is our next most running joke? Anyway? Yes, we
Speaker 3: are ruining a lot.
Speaker 4: So we've joked for years and years and years about
Speaker 4: how we should do an episode on the Jones Act
Speaker 4: because it's come up obviously in dozens of episodes. We
Speaker 4: did actually talk about it quite a bit in different contexts,
Speaker 4: but we've never done an episode actually talking about the
Speaker 4: infamous law.
Speaker 2: That's right, and since we waited so long, I guess
Speaker 2: we had to do it a little bit differently.
Speaker 5: Style.
Speaker 2: We had a style, yep. So for those of us
Speaker 2: who came to our life event in Washington, DC recently,
Speaker 2: you will have seen exactly what format we did this in.
Speaker 2: But it's a debate. So we had someone who is
Speaker 2: pro Jones Act debating with someone who is anti Jones
Speaker 2: Act live on stage. Things got heated, things got emotional,
Speaker 2: but always entertaining and informative.
Speaker 4: It was heated, you know, I've joked, you know, like
Speaker 4: people have very strong feelings about the Jones Act, And
Speaker 4: when we did it live on stage, we separated our
Speaker 4: two guests at the end of the stage, you know,
Speaker 4: sort of tongue in cheek you out because but actually,
Speaker 4: you know, it's like really intensive. People feel very strongly
Speaker 4: about this law, which restricts if you're going to ship
Speaker 4: something from one point in the US to another point
Speaker 4: in the US by water, it has to be on
Speaker 4: a US built, a US crewed, in US flagged ship.
Speaker 3: People feel very strongly.
Speaker 4: About this law.
Speaker 2: That's right, and it's kind of interesting also to look
Speaker 2: at it as a little peatree dish of industrial policy.
Speaker 2: I think is one of the reasons we first started
Speaker 2: getting interested in this, along with a lot of the
Speaker 2: supply chain disruptions that we were experiencing around the pandemic time.
Speaker 2: But our two debaters were Zadafuntest, the vice president for
Speaker 2: Government Affairs at the Transportation Institute, and Colin Grabow, and
Speaker 2: associate director at the Cato Institute's Herbert A. Deful Center
Speaker 2: for Trade Policy Studies. Zada took the pro side and
Speaker 2: Colin took the anti side, And as I said, we
Speaker 2: had some pretty good arguments on both sides. So take
Speaker 2: a listen see if it changes your mind. I'm sure
Speaker 2: if you're listening to this you probably already have an opinion.
Speaker 2: But here we go. Before we start, I got to
Speaker 2: ask how many people have heard of the Jones Act.
Speaker 6: Here?
Speaker 4: Wait, actually, let's just hear, like get a temperature of
Speaker 4: both sides. So shout if you think the Jones Act
Speaker 4: should be repealed, and shout if you think we should
Speaker 4: keep the Jones Act.
Speaker 2: Wow, shout if you just feel strongly about the Jones
Speaker 2: Act either way. Yeah, all right, everyone has an opinion. Okay,
Speaker 2: we are giving up on our longest running joke and
Speaker 2: finally doing the Jones Act episode. We thought we'd do
Speaker 2: something a little bit special. Instead of just having one guest,
Speaker 2: we actually have two. It's going to be an all
Speaker 2: thoughts debate, someone arguing the pro side and someone on
Speaker 2: the con side.
Speaker 3: That's right, We're not going to formally declear a winner.
Speaker 3: Everyone's a winner. They're not formal.
Speaker 4: Rules in terms of you know, there's no mike mute
Speaker 4: or anything. But we are hoping we are going to
Speaker 4: have a spirited discussion about this very controversial law. People
Speaker 4: feel really strongly about this law one way or another,
Speaker 4: and so we are going.
Speaker 3: To finally, we don't actually do a lot of debates on.
Speaker 2: The show at It's a rule at my house that
Speaker 2: you can't talk about politics or the Jones Act or
Speaker 2: crypto at Thanksgiving. Okay, So without further ado, we do
Speaker 2: have the perfect guests. We're going to be speaking with
Speaker 2: Zada Funtest. She is the vice president for Government Affairs
Speaker 2: at the Transportation Institute.
Speaker 7: And we have Colin Grabow.
Speaker 2: He is a policy analyst at the Cato Institute. So
Speaker 2: welcome to the stage, Zarda and Colin.
Speaker 4: All right, Colin and Sarah, thank you so much. We're
Speaker 4: finally talking the Jones Act. Colin, why don't we start
Speaker 4: with you? Why should we get rid of the edge?
Speaker 4: Why did you even agree to come out here and
Speaker 4: talk about some random shipping law from the early nineteen hundreds,
Speaker 4: and why do you devote time to it and why
Speaker 4: do you want to kill it?
Speaker 6: Well, Joe Tracy, first off, thanks for having me to
Speaker 6: debate this issue. Thanks for doing ending the long running
Speaker 6: joke and finally talking about it. So, yeah, the Jones Act, Well,
Speaker 6: why am I so against it? I think the US
Speaker 6: maritime policy should try to achieve two goals. It should
Speaker 6: provide us with efficient domestic transportation by water, which is
Speaker 6: really important because we have lots of water in the
Speaker 6: United States. We have thousands of miles of coastline home
Speaker 6: to major metropolitan areas. We have the Great Lakes, we
Speaker 6: have a vast network of inland waterways, have a.
Speaker 3: Contiguas and territories.
Speaker 6: So we have this big resource and we totally underutilize
Speaker 6: it by making the cost of transportation so expensive. The
Speaker 6: other thing we need to do is meet national security goals.
Speaker 6: We need to have shipyards, we need to have ships,
Speaker 6: we need to have mariners to crue those ships. And
Speaker 6: I don't think the Jones Act does a good job
Speaker 6: of meeting either one of those goals. So I talked
Speaker 6: about shipping water transfer being expensive.
Speaker 5: Why is that?
Speaker 6: Well, we should back up and say what is does
Speaker 6: the Jones Act? Do Jones Act?
Speaker 2: Everyone's giving history lessons tonight, so you might as well
Speaker 2: go all the way back.
Speaker 6: Oh, so the Jones Act is section twenty seven. If
Speaker 6: the Merchant mari Enact of nineteen twenty was essentially states
Speaker 6: that if you want to move goods by water, you
Speaker 6: have to use a vessel that meets for conditions, it
Speaker 6: has to be US flagged, it has to be US built,
Speaker 6: it has to be crewed by Americans. It has to
Speaker 6: be at least seventy five percent owned by Americans. Now,
Speaker 6: these provisions make water transportation extremely expensive. Less than one
Speaker 6: percent of the world world ships comply with the US
Speaker 6: flag requirement. That means ninety nine percent of the world
Speaker 6: ships are off the table if you want to move
Speaker 6: something within the United States. If you look at a
Speaker 6: map of all the ships operating than US waters, they're.
Speaker 3: Full of foreign ships.
Speaker 6: We have foreign ships everywhere. We can't use them. So right,
Speaker 6: there's let's supply the US flag ships are about four
Speaker 6: times more expensive to operate than foreign flagships, and when
Speaker 6: it comes to building that ship, they cost about four
Speaker 6: to five times more to build than those built overseas,
Speaker 6: so that has huge capital costs.
Speaker 3: You put that.
Speaker 6: Combination together and you're going to get very expensive shipping.
Speaker 6: You know how expensive. There was a Federal Reserve Bank
Speaker 6: of New York study in twenty twelve. The founder was
Speaker 6: twice as expensive to send a container from the East
Speaker 6: Coast to Puerto Rico, where the Jonzac applies as to
Speaker 6: send to neighboring Jamaica or the Dominican Republic. In twenty seventeen,
Speaker 6: the CEO of a JONESAC shipping company admitted that Jones
Speaker 6: A tankers were three to four times more expensive than
Speaker 6: internationally flag tankers. I mean just yesterday at Center and
Speaker 6: you in Connecticut rather testify for the state legislature, saying
Speaker 6: that his first job out of college, he used to
Speaker 6: work in bulk shipping, and that moving goods within the
Speaker 6: United States was five, sometimes ten times more expensive than
Speaker 6: using internationally flagged vessels. So this is the profound cost.
Speaker 6: I mean, distance is a barrier to a trade between Americans,
Speaker 6: and this makes water transportation incredibly expensive. It's a barrier
Speaker 6: just doing business with each other.
Speaker 2: Okay, so the one thing we can agree on is
Speaker 2: America is hashtag blessed in terms of inland water ways.
Speaker 2: But Sada, I want to bring you in, so feel
Speaker 2: free to give us your own history lesson. But the
Speaker 2: Jones Act doesn't exist just to boost prices of shipping.
Speaker 2: There are other reasons, such as security. So why don't
Speaker 2: we go way back in history and talk a little
Speaker 2: bit more about why this act actually exists?
Speaker 8: Sure, So the reasons for the Jones Act are the
Speaker 8: same today as they were.
Speaker 7: When it passed in nineteen twenty.
Speaker 8: And also some form of you know, Jones AC can
Speaker 8: also be referred to as cabotage laws. Some former cabotage
Speaker 8: law has existed.
Speaker 3: What's cage meanin.
Speaker 8: It basically means if you're moving goods between two points,
Speaker 8: that you want those goods to move on a vessel
Speaker 8: register to your country. Right, And it's really extremely common.
Speaker 8: Eighty percent of the world's coastline is governed by some
Speaker 8: former cabotage.
Speaker 7: You see it in other industries. Right.
Speaker 8: You can't take air China from New York to la Right.
Speaker 8: So it's extremely common.
Speaker 7: Across modes across the world.
Speaker 8: But I love the Jones Act, and I love it
Speaker 8: so much you can really I like to put the
Speaker 8: reasons I like it into three categories. Economic security, national security,
Speaker 8: and homeland security. Economic security is pretty obvious, right, because
Speaker 8: of that US crew US owned requirement, It's created about
Speaker 8: six hundred and fifty thousand jobs, six hundred and fifteen
Speaker 8: thousand and one if you include Collins. And also all
Speaker 8: those and all those jobs are for Americans, right, Those
Speaker 8: Americans are paying taxes. Those companies are paying American taxes.
Speaker 8: That economic security also includes self sufficiency, which especially matters
Speaker 8: in our non contiguous trades, which I hope we get
Speaker 8: into a little bit more. The men and women who
Speaker 8: crew our Jones Act vessels are the exact same people
Speaker 8: who crew our sealed vessels in time of emergency. Not
Speaker 8: only that, but you also get a shipyard industrial base.
Speaker 8: I've heard you all talk on the show. You all
Speaker 8: well know that navy shipbuilding is really feast or famine, right.
Speaker 8: There's a lot of unpredictability in that market, and so
Speaker 8: the Jones Act is kind of a final line of
Speaker 8: defense that ensures you do have some shipyard workers. You
Speaker 8: have a shipyard industrial base that can be spun up
Speaker 8: when needed. Third category is homeland security.
Speaker 7: Right, that's pretty obvious.
Speaker 8: You don't want to just open up our beautiful inland waterways,
Speaker 8: our great lakes.
Speaker 7: To the cheapest option.
Speaker 8: The US flag that Colin mentioned matters quite a bit, right.
Speaker 8: It means that our vessels are inspected by the Coastguard.
Speaker 8: We know that they're not polluting and linking. It means
Speaker 8: that the mariners are known by the Coastguard. They've gone
Speaker 8: through background checks, they've been t trained to the highest
Speaker 8: standard worldwide. And so you know, think about those inland waterways.
Speaker 8: Those are you know, those run by stadiums, they run
Speaker 8: by refineries, they run.
Speaker 7: By personal homes.
Speaker 8: You don't want to just have whoever there just because
Speaker 8: they happen to be the cheapest and save a couple bucks.
Speaker 3: Okay, but thank you first of all.
Speaker 4: And I take your point about the six hundred and
Speaker 4: fifty thousand jobs, but you know there's three hundred something
Speaker 4: million Americans who aren't employed by the Jones Act per
Speaker 4: Collins argument, paying more for any goods. Why should the
Speaker 4: rest of US three hundred and thirty million Americans who
Speaker 4: aren't employed, and me and Tracy maybe partially because it
Speaker 4: comes up so often, who aren't Jones Act employed? What
Speaker 4: about the cost of that? So why should we be
Speaker 4: bearing that cost?
Speaker 8: So I take it to the with the cost argument, right,
Speaker 8: and I don't necessarily think that's true. You can look
Speaker 8: at the US Virgin Islands, right, which does not have
Speaker 8: the Jones Act, and compare prices there to Puerto Rico,
Speaker 8: and you'll see that the Virgin Islands is actually more expensive.
Speaker 8: And what matters to consumers isn't just cost anyway, right,
Speaker 8: It's reliability. It's that stability in the marketplace and knowing
Speaker 8: everybody is playing by the same set of rules, knowing
Speaker 8: that shipment will show up, and that really matters. And also,
Speaker 8: I would say the Jones Act doesn't involve any government dollars, right,
Speaker 8: So the taxpayer is not paying to subsidize this fleet.
Speaker 8: But if you got rid of the Jones Act, you
Speaker 8: would have to eventually pay for those mariners, pay for
Speaker 8: those shipyard workers, and make those investments. So the government's
Speaker 8: going to pay for that regardless. So do you want
Speaker 8: it to be taxpayer dollars or do you want it
Speaker 8: to be ameliorated and sort of baked into something just
Speaker 8: the cost of doing business in the United States.
Speaker 2: I think it's helpful for these types of things to
Speaker 2: think about the counterfactual sometimes. So I'm going to ask
Speaker 2: both of you to respond to this question. But if
Speaker 2: we got rid of the Jones Act tomorrow, waived a
Speaker 2: magic maritime wand or whatever, and I went away, what
Speaker 2: would the world look like? Let's do call in first.
Speaker 6: Well, I think that's a great question, because the real
Speaker 6: cost the Jones Act is not that it costs x
Speaker 6: amount of dollars more to send a container to Puerto Rico.
Speaker 6: It's what does the United States look like with the
Speaker 6: Jones Act versus what does the United States look like
Speaker 6: without the Jones Act? And the United States without the
Speaker 6: Jones Act is a country that is better connected to
Speaker 6: each other through more efficient supply chains. We can envision,
Speaker 6: for example, right now, we make shipment of oil so
Speaker 6: expensive that we export it all over the place, but
Speaker 6: East Coast refineries will import it from say Nigeria or
Speaker 6: Saudi Arabia instead of Texas because it's just not competitive
Speaker 6: after you factor in the cost of shipping. Some goods
Speaker 6: are impossible to ship within the United States because of
Speaker 6: the Jones Act. With the United States is one of
Speaker 6: the world's leading exporters of liquified petroleum gas basically propane.
Speaker 6: Puerto Rico buys it from foreign sources. Phy buys it
Speaker 6: from as far away as West Africa. Not because it's
Speaker 6: more expensive. There are zero ships to transport. It's literally
Speaker 6: impossible because of the Jones Act. We've seen examples of
Speaker 6: lumber producers in Pacific Northwest saying, look, we go to
Speaker 6: send our lumber to other parts of the United States.
Speaker 6: We're getting beat out by Canadian competitors that can use
Speaker 6: more efficient international shipping, so we're being put on the
Speaker 6: back foot. We've seen government report side examples of steel
Speaker 6: in the Western United States being purchased from Asia instead
Speaker 6: of Eastern producers. Why because multiple times it says Jones
Speaker 6: Act shipping makes it uncompetitive for Americans to sell to
Speaker 6: other Americans. So we think about all the supply chains
Speaker 6: that we better connected, all the efficiencies that would bring.
Speaker 6: On the more micro level, you can think of, say,
Speaker 6: ferry operators in Washington State that could buy ferries a
Speaker 6: half a third of the cost of what they're paying
Speaker 6: now to modernize their fleets and improve transportation. So I
Speaker 6: think that the difference between the US as is versus
Speaker 6: without the Jones Act, it would be a huge, huge gain.
Speaker 7: Sara, I'm glad you asked that.
Speaker 8: World without the Jones Act is a pretty scary place, right,
Speaker 8: because I want you to remember the content.
Speaker 7: I'm serious. I want you to think about the context
Speaker 7: we're living in. Right.
Speaker 8: The People's Republic of China has made a strategic decision
Speaker 8: to overinvest in its own maritime capability.
Speaker 7: They are deliberately.
Speaker 8: Undermining the prices low bullying the prices for shipbuilding, for
Speaker 8: shipping services, for ship to shore cranes. They want to
Speaker 8: be the only provider out there, right, They want the
Speaker 8: whole world to be dependent on them for shipping because
Speaker 8: they know that is the backbone of commerce, right, is
Speaker 8: how we transport these goods. So if we waive that
Speaker 8: magic wand first off, so six hundred fifty thousand people
Speaker 8: would be out of work, which would be a brain
Speaker 8: on your taxpayers, right, so we would have to pay
Speaker 8: for that. You would basically eliminate the American shipbuilding industry overnight.
Speaker 8: Because even Japan, even South Korea cannot keep up with
Speaker 8: Chinese subsidies. They're exiting the container ship market, they're exiting
Speaker 8: other shipbuilding markets. So absolutely China would swoop in and
Speaker 8: do that. You would also have ships of unknown provinces, right,
Speaker 8: but they'd probably be owned by China through various shell
Speaker 8: companies crewed by unbedded mariners, sailing moving hazardous materials at
Speaker 8: best case, up and down our inland waterways past all
Speaker 8: these soft targets. So if you wanted to keep that
Speaker 8: security on the seas, right, you would have to I
Speaker 8: don't know, quadruple the sides of the Coast Guard or
Speaker 8: the CBP to do those vessel inspections right now that
Speaker 8: you know, Coast Guard CBP you know, are active at
Speaker 8: international courts, certain courts where foreign vessels can come and visit.
Speaker 7: But you would have to really increase that.
Speaker 8: I mean, keep in mind, the Coastguard is smaller than
Speaker 8: the NYPD. They do not have the bandwidth to handle
Speaker 8: all these unregistered ships that we don't know how safe
Speaker 8: they are, we don't know how much they're polluting, you
Speaker 8: don't know who's on there. I think it is very scary.
Speaker 8: I was totally serious.
Speaker 4: To Collins point about, you know, various entities within the
Speaker 4: United States having the important you talked about national security
Speaker 4: or economic security, and the fact that for like base commodities,
Speaker 4: you know, for example, at times when there's a really
Speaker 4: tough winter in New England that we can't ship LNG
Speaker 4: from Houston to New England. Doesn't that create an economic
Speaker 4: vulnerability for the US, the fact that we can't supply
Speaker 4: ourselves with our own raw materials in certain instances.
Speaker 7: So I don't think that's true. And I think that
Speaker 7: your New England LNG example.
Speaker 8: Is a really good one, right because what happens all
Speaker 8: too frequently is the Jonzact becomes a cover and a.
Speaker 7: Scapegoat for other policy failures.
Speaker 8: Right, New England has an energy policy issue that I
Speaker 8: love ships, But the cheapest, most efficient way to move
Speaker 8: natural gas is as gas in a pipeline, right, if
Speaker 8: they want, And so if they want, they also don't
Speaker 8: have storage capacity, right, which means they cannot buy natural
Speaker 8: gas during low season. They're only ever buying it at peak,
Speaker 8: and their need is a radic so they don't have
Speaker 8: a long term charter. They're buying it on the spot.
Speaker 8: And what's really expensive about liquified.
Speaker 7: Natural gas is that liquification.
Speaker 8: So if you were to take gas out of Pennsylvania,
Speaker 8: first you got to move it down a pipeline. You
Speaker 8: got to liquify it and then move it and then
Speaker 8: regasify it. And then you can only do this it's
Speaker 8: very small amounts, right, which is going to be more
Speaker 8: expensive because it really matters is that kind of volume.
Speaker 8: So even if the transportation we're free, you're already looking
Speaker 8: at having to charge quite a lot of money for
Speaker 8: gas in New England, right, So even though it was free,
Speaker 8: you still are going to bear that cost. So in
Speaker 8: order for gas in New England to be cheap, you
Speaker 8: would have to force energy producers and those kind of
Speaker 8: liquifying facilities to do this at below market rate.
Speaker 7: Right.
Speaker 8: We're in a capitalist society, so people are going to
Speaker 8: look for the cheapest option, and sometimes the cheapest option
Speaker 8: is not going to be American. So the liquified natural
Speaker 8: gas is a great example.
Speaker 2: Colin, could I ask you to respond to the sort
Speaker 2: of national security point, because when you hear statistics like
Speaker 2: the Coast Guard is smaller than the New York Police Force,
Speaker 2: that seems pretty worrying.
Speaker 3: Yeah.
Speaker 6: So a couple arguments that have been made here. One
Speaker 6: is about the alleged danger of foreign ships and having
Speaker 6: them in our waters. Folks. The choice here is not
Speaker 6: do we let foreign ships into our waters? And do
Speaker 6: we not? They're here, They're already here. You can go
Speaker 6: out like marine traffic dot com. It will show you
Speaker 6: all the ships in US waters.
Speaker 3: You can find foreign.
Speaker 6: Ships sailing up to Albany, New York. You can see
Speaker 6: them sailing past Philadelphia, up to New Orleans, up to Sacramento.
Speaker 3: That Jones.
Speaker 6: That doesn't say you can't come into US waters. It
Speaker 6: just regulates what you can do. Within US waters. So
Speaker 6: they're here and talk about hazardous materials. I mean, they're
Speaker 6: all the tankers coming out of Houston Corpus Christi with
Speaker 6: energy products. I mean the vast majority are foreigns, so
Speaker 6: they're already here. We have customs and border protection, we
Speaker 6: have the Coastguard to inspect these vessels. They are subject
Speaker 6: to port state control. So I find that a bit
Speaker 6: of a red herring. With regard to the issue with China,
Speaker 6: I find this ironic because Jones Act shipping companies are
Speaker 6: some of the biggest patrons of Chinese shipyards. I mentioned
Speaker 6: earlier that US built ships are incredibly expensive, you know,
Speaker 6: four to five times more. Well, one result of this
Speaker 6: is that people don't want to buy new ships, so
Speaker 6: they keep old ships going for a long time. Internationally,
Speaker 6: ships are used for twenty twenty five thirty years. The
Speaker 6: last seventeen Jones Act ships they were scrapped had an
Speaker 6: average age of like forty three. So they'd keep these
Speaker 6: old ships running, and they do it by sending them
Speaker 6: to China to get maintained a Chinese state owned shipyards.
Speaker 6: And they turn around and use the money they save
Speaker 6: from going to China instead of a US or an
Speaker 6: allied shipyard and say, please keep the Jones Act in place.
Speaker 6: It's really critical for a national security to stop China.
Speaker 6: I mean, we're joking, but this is real life. I
Speaker 6: mean two years ago at Jones Act shipping company Paytia,
Speaker 6: they took a forty three year old ship built in
Speaker 6: nineteen eighty and it was bill of steam power. So
Speaker 6: instead of supporting US shipyards buying a new ship, no, no, no,
Speaker 6: they sent to China, ripped out the steam power, put
Speaker 6: in LNG, spent tens of millions of dollars to do so,
Speaker 6: so we can keep running for years to come, and
Speaker 6: then we tell ourselves it's all about national security.
Speaker 1: Thing.
Speaker 6: That's farcical.
Speaker 4: Soda.
Speaker 8: Shipyard repair and shipbuilding are two very distinct industries, and
Speaker 8: you're correct we don't have the shipyard repair work in
Speaker 8: the United.
Speaker 7: States that we should have. I'm very glad. I'm not
Speaker 7: a businessman.
Speaker 8: I don't have to make these types of business decisions.
Speaker 8: But frankly, you can't really get ship repair work done
Speaker 8: even in our allies because China has low balled that
Speaker 8: market so so much.
Speaker 4: Why isn't they're more of a shipbuilding industry Given the
Speaker 4: existence of the jones AC and the theoretical natural demand
Speaker 4: or the theoretical demand that creates Why is shipbuilding so
Speaker 4: meager in the United States? And why aren't they building
Speaker 4: more Jones AC compliance ships right now given the evident scarcity.
Speaker 8: Sure, so the reason you don't see as much shipping
Speaker 8: as I would like is frankly because we've chosen as
Speaker 8: a nation to make investments in other modes. Right if
Speaker 8: shipping was subsidized in the same way that trucking was, right,
Speaker 8: think about the high system, think about pipelines, think about
Speaker 8: all these other areas where a lot of goods have moved.
Speaker 8: So the shipbuilding market is right size for the Jones Act, right,
Speaker 8: So we are, you know, right now? We build it
Speaker 8: enough ships that we need for the jone deck market.
Speaker 8: We don't scrap super easily like China does, because scrapping
Speaker 8: is expensive and bad for the environment. So yeah, we
Speaker 8: like to extend the useful life of our vessels as
Speaker 8: much as possible. We don't do it scrap and rebuild
Speaker 8: pricing scheme like China does, right, which is a big,
Speaker 8: big part of it. And I wish that we did
Speaker 8: build more ships for the international market. And I think
Speaker 8: we may see a shift in that right, like from
Speaker 8: the Ships for America Act and some other areas. But
Speaker 8: what's really been happening is in the nineteen eighties, the
Speaker 8: United States decide to step away from construction subsidies, which
Speaker 8: are very very strong in the rest of the world. Right,
Speaker 8: so the United States decides, We're not going to do
Speaker 8: any more ship building subsidies. You have to build here,
Speaker 8: but you know, you have to use American laws, American workers,
Speaker 8: et cetera.
Speaker 7: And at the same time that.
Speaker 8: We did that, South Korea, Japan, Europe all invested trillions
Speaker 8: in terms of subsidies, in terms of financial schemes and
Speaker 8: other options. What China has done is really astounding. CSIS
Speaker 8: has a new report out this year about how they're
Speaker 8: just flooding the market with tonnage to try and drive.
Speaker 7: Out all of their shipbuilders.
Speaker 8: So you're seeing even our allies having to close their
Speaker 8: shipyards and decrease their shipbuilding because of the unfair playing
Speaker 8: field that's done by China. So if you say let's
Speaker 8: get rid of the Jones at, let's get rid of
Speaker 8: this US build requirement, you're basically throwing our shipyards to
Speaker 8: the wolves, right and saying Okay, you keep fighting by
Speaker 8: American rules. You have to pay minimum wage standards, you
Speaker 8: had to have safety standards, and you have to go
Speaker 8: fight against a shipyard in China where people don't even
Speaker 8: have shoes on. Right, you know it's not a fair fight.
Speaker 8: So if we were living in a perfect free market world, we'd.
Speaker 7: Be having a different discussion. But we're not. Shipbuilding is
Speaker 7: a strategic asset, all right.
Speaker 2: I'm going to ask a sort of middle ground question
Speaker 2: in an attempt to reconcile both positions. But let's say
Speaker 2: you don't get to throw away the Jones Act, but
Speaker 2: you get to make a change to it. And you
Speaker 2: get to keep the Jones Act, but you have to
Speaker 2: make a change to it.
Speaker 5: Good question.
Speaker 2: What would the response be, Zara, Let's start with you.
Speaker 8: The change I would make to the Jones Act is
Speaker 8: that I would add shipbuilding subsidies.
Speaker 6: Okay, Colin, I would absolutely get rid of the US
Speaker 6: build requirement. The notion that we promote I mean, forget
Speaker 6: the economic effects here. Just the notion that we promote
Speaker 6: a healthy maritime industry by forcing Americans be outrageous prices
Speaker 6: for new ships is on its face absurd. We heard
Speaker 6: talk earlier about what we needed to preserve ship building. Well,
Speaker 6: how's that worked out? A GEO report last month referenced
Speaker 6: the US shipbuild industry as in a state of near
Speaker 6: total collapse. The Wallstreet Journal just last weekend article to
Speaker 6: refer to the US shipbuilding industry is tiny and rusty.
Speaker 6: In twenty twenty three, the most recent year for which
Speaker 6: we have data, the US account for zero point one
Speaker 6: percent of global shipbuilding output. I mean, obviously we're well
Speaker 6: behind China, but folks, we're behind Norway, the Netherlands. I
Speaker 6: think in twenty twenty two, we're behind Croatia. This is
Speaker 6: the United States is one of the biggest manufacturers in
Speaker 6: the world and incredibly inventive, dynamic economy, and this is
Speaker 6: what we've been reduced to. It's shameful and it's an
Speaker 6: indictment of what the Jones Act has done.
Speaker 3: Well.
Speaker 4: Actually, I want to ask you about this. Do you
Speaker 4: accept I mean CATO I associate with like nod industrial
Speaker 4: policy sort of true, less fair? Do you accept the
Speaker 4: premise setting aside how we get there? Do you accept
Speaker 4: the premise that the US should have more domestic ship building?
Speaker 6: I think that we should have you know, I defer
Speaker 6: to the national security experts what we should have, but
Speaker 6: absolutely we should have it, and the Jones Act does
Speaker 6: not give it to us. So I'm not against government
Speaker 6: intervention per se. So, for example, I think we need ships.
Speaker 6: I'm not against subsizing ships where the government says, here's
Speaker 6: money in exchange and time of war, we get to
Speaker 6: grab that ship and use that.
Speaker 3: That makes sense to me.
Speaker 6: You can cost benefit analysis, the X bunch money gets you,
Speaker 6: you know this, many ships. We can't that with the
Speaker 6: Jones Let's stop doing things that don't work and do
Speaker 6: things that do work.
Speaker 8: So I would take issue with the fact that you
Speaker 8: say that US shipbuilding is expensive. Shipbuilding is expensive, is
Speaker 8: expensive everywhere. Our shipbuilding is right priced, right, everybody else
Speaker 8: is cheating. Is kind of what's going on? Like all
Speaker 8: these countries you mentioned have heavy subsidies, financial schemes. Look
Speaker 8: at the two biggest cost drivers in shipbuilding are labor
Speaker 8: and steel components, right, and so of course labor is
Speaker 8: more expensive in the United States. That's true for every
Speaker 8: American industry. Right, we have a higher standard of living,
Speaker 8: we pay taxes. And then look at steel. The top
Speaker 8: steel producer in the world is China. Do you think
Speaker 8: that they are selling charting market prices for their steel.
Speaker 7: No, of course not.
Speaker 6: If I may so. I think there may be a
Speaker 6: notion here that people think, okay, things are okay, and
Speaker 6: then China came along, or you know, the US is okay,
Speaker 6: and then South Korea came along and things were okay.
Speaker 6: Then Japan came along.
Speaker 3: Folks.
Speaker 6: US shipbuilding has been internationally on competitive since the Civil War. Okay,
Speaker 6: this is not something that happened recently. It's been going
Speaker 6: and nobody is buying ships from Norway instead of the United
Speaker 6: States because of the cheap wages.
Speaker 3: That's absurd.
Speaker 6: You know, there was an article I remember, like fifteen
Speaker 6: twenty years ago that said that Dutch shipyards were building
Speaker 6: ships at one third the US price and paying their
Speaker 6: workers twenty to forty percent more. It's indefensible.
Speaker 4: I actually there's a question about the jonesack that I've
Speaker 4: had for a long time, and I want to get
Speaker 4: your take on.
Speaker 3: Colin.
Speaker 4: We did this interview with John Arnold, the philanthropase. He
Speaker 4: does a lot of stuff like with like policies, and
Speaker 4: we asked some you know, we talked about like mb
Speaker 4: stuff and highways and stuff and we're like, and Tracy said, well,
Speaker 4: what do you think about the you know, would you
Speaker 4: put any effort towards appealing the Jones Act. He's like,
Speaker 4: I'm not even gonna try that. One's not going anywhere.
Speaker 4: Can you describe to me six hundred and fifty thousand people?
Speaker 4: I don't know, you know whatever, Why given the meager
Speaker 4: size of the US shipbuilding industry, is it perceived that
Speaker 4: this law is so hard to dislike?
Speaker 2: It seems like such a political hot for some reason.
Speaker 6: Yeah, So the question is why why is this laws
Speaker 6: so difficult? Why does the remain in place despite my,
Speaker 6: you know, criticism people like me? What I would submit
Speaker 6: this is a tribute to the power of special interests.
Speaker 6: You know, I can come up with off the time
Speaker 6: ahead problems.
Speaker 3: Apparently not a big one, I can both of you.
Speaker 6: It's a small industry, yes, so, satura reference six hundred
Speaker 6: fifty thousand jobs. That's based on a study that calculated
Speaker 6: there were somewhere like ninety eight thousand jobs actually in
Speaker 6: the domestic maritime industry. Each one of those has a
Speaker 6: multiplier of like five, and you add those together and that's.
Speaker 3: The theory that should make it even less of yeah.
Speaker 6: I mean no, it's a small industry, right, so why
Speaker 6: does the remain in place? And the dynamic is this,
Speaker 6: there are any number of organizations dedicated to preserving the
Speaker 6: Jones Act. There's an American Maritime Partnership where Sarah is also
Speaker 6: what vice president, I believe, the Transportation Institute, the Lake
Speaker 6: Care Association, of a Marine Service Association, the American Waterway
Speaker 6: Operators and Marine Engineers Beneficial Association, Seafares International Union. I
Speaker 6: go on and on. I can't think of any industry
Speaker 6: in DC and association where task pro already one, two
Speaker 6: or three is get rid of the Jones Act. In fact,
Speaker 6: I've had conversations with folks where they say something like, look,
Speaker 6: I hate the Jones Act. I think it hurts our industry.
Speaker 6: But on my top ten list of issues, it's like
Speaker 6: number four or five and versus one, two and three.
Speaker 6: I need to support as senators that support the Jones Act.
Speaker 6: And this is a dynamic you see over and over again.
Speaker 6: It's concentrated benefits dispersed costs. The people that care the
Speaker 6: most about the Jones Act, that think this is existential
Speaker 6: to me are the people in the companies in the industry,
Speaker 6: those and they allocate their resources accordingly. So it's just
Speaker 6: it's you can find any number of ridiculous laws like
Speaker 6: you sugar program, same basic dynamic. We see it over
Speaker 6: and over and over again.
Speaker 2: Sarah, I'm going to give you the chance to respond,
Speaker 2: why are you so good at your job?
Speaker 3: Now?
Speaker 7: It's easy. The Jones Act is popular.
Speaker 8: It's been popular with Republicans, it's popular with Democrats, It's
Speaker 8: popular across administrations. It's also really popular with the United
Speaker 8: States and military heads of transportation command militarily see if command.
Speaker 7: The Navy have been.
Speaker 8: Asked about this multiple times and they all find a
Speaker 8: lot of value in it. They know that if you
Speaker 8: didn't have that, we would see our shipbuilding capability and
Speaker 8: most importantly, we would lose those mariners. Right, These mariners
Speaker 8: that crew these sealerships, they need time at sea to
Speaker 8: train to be ready to move up in their ratings. Right,
Speaker 8: So they need that work as well so they can
Speaker 8: be called upon when they need and they answer the call.
Speaker 8: They've answered the call many many times. You know, in
Speaker 8: every war you've had a merchant rain component and it's critical.
Speaker 8: So it's successful because it's popular, it's well loved, like
Speaker 8: it's a extreme, it's extremely effective. Like I said, you're
Speaker 8: going to pay these costs regardless, So do we want
Speaker 8: to spread it out? We're all in this society here,
Speaker 8: we all share, we all enjoy these benefits. The savings
Speaker 8: that Colin is talking about is a rounding error. You know,
Speaker 8: the reason laws don't exist just to save us money? Right,
Speaker 8: that's not the old That's not how you determine if
Speaker 8: a law is good or not. Does it save people
Speaker 8: a couple of pennies or let's be real, does it
Speaker 8: shave shippers a couple of pennies?
Speaker 7: Right?
Speaker 8: Like, even if Collin's cost arguments are accurate, are those
Speaker 8: cost savings going to be passed down to the consumer?
Speaker 3: I mean, costs are costs.
Speaker 2: I don't know. All right, we could go on and
Speaker 2: on and on, but a big round of applause for
Speaker 2: these two. It's not easy to come on stage and
Speaker 2: debate these sakes.
Speaker 5: So thank you, Thank you so much, Tracy.
Speaker 4: I'm so glad we finally did the Jones Zach episode.
Speaker 4: And to be honest, it actually fulfilled all of my
Speaker 4: hopes and wishes for the episode.
Speaker 2: That's good. Did it change your mind at all?
Speaker 4: Did it change my mind. I mean that presupposes that
Speaker 4: I had an opinion.
Speaker 2: I guess what you don't have opinions?
Speaker 4: Well, I guess what I would say is that, at
Speaker 4: least if we think that shipbuilding in the US is important,
Speaker 4: and I think I am convinced of that the Jones Act,
Speaker 4: our current structure is clearly not sufficing.
Speaker 2: Yeah, I would broadly agree with that, because if you
Speaker 2: look at I guess it's sort of the proof is
Speaker 2: in the pudding, right, if you look at the outcome
Speaker 2: of the Jones Act, it hasn't actually been that successful
Speaker 2: in terms of American shipbuilding. One funny thing, right before
Speaker 2: we recorded this, we asked the audience who was in
Speaker 2: favor of the Jones Act and who was against it?
Speaker 2: And I swear like it was pretty evenly split. But
Speaker 2: also everyone in the audience raised their hand at one
Speaker 2: point or another. Yeah, everyone held an opinion on the
Speaker 2: Jones Act.
Speaker 4: I know, it is really polarizing. And I thought, like
Speaker 4: our guests, like, you know, I didn't wanted to. I
Speaker 4: did a good job of having it be kind of
Speaker 4: heated intents on stage. Of course, it is like very
Speaker 4: civil and a good conversation. But I thought from listening
Speaker 4: to Colin and Sada that you know, you actually got
Speaker 4: a pretty good sense of how strongly the opposite sides
Speaker 4: feel about this, like very old law.
Speaker 2: Oh yeah, totally. It was a great rundown of like
Speaker 2: the arguments for and against for sure, all right, shall
Speaker 2: we leave it there.
Speaker 3: Let's leave it there.
Speaker 2: This has been another episode of the ad Thoughts Podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 4: I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 4: Follow our guests Colin Grabow he's at CP GRABO, and Sadafrentis.
Speaker 4: Actually she's not on X probably wisely, but you can
Speaker 4: follow the Transportation Institute at trans Underscore. I NST follow
Speaker 4: our producers Kerman Rodriguez at Kerman Arma, Dash Ol Bennett
Speaker 4: at dashbod and Keil Brooks at Cale Brooks. More Odd
Speaker 4: Thoughts content go to Bloomberg dot com slash odd Lots.
Speaker 4: We have all of our episodes in the daily newsletter,
Speaker 4: and you can shout about all of these topics, including
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