Will Hurricanes Move US to Repeal Jones Act? - Global Trade Magazine
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  September 25th, 2017 | Written by

Will Hurricanes Move US to Repeal Jones Act?

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  • The hurricanes put the squeeze on fuel supplies in much of the US.
  • Hurricane Irma caused scarcities of fuel even for the needs of emergency responders.
  • Jones Act waiver allowed fuel to be shipped on non-US vessels.

Hurricane Harvey caused shutdown of oil refineries near Houston, putting the squeeze on fuel supplies in much of the United States, including Florida. Then came Hurricane Irma, and fleeing Floridians gassed up their cars causing more shortages and higher prices. In Florida, and in other places hit by Irma such as Puerto Rico and the US Virgin Islands, fuel was scarce even for the needs of emergency responders.

So on September 8, the Department of Homeland Security approved a waiver of the Jones Act for week, allowing the transportation of gasoline, diesel, and jet fuel to be shipped from New York, Pennsylvania, Texas, and Louisiana to South Carolina, Georgia, and Florida on non-US vessels. The Jones Act mandates that vessels transiting between points in the United States must be built in the US and wholly owned by US citizens. The act can be waived if that is necessary in the interest of national defense.

Free traders have long urged the repeal of the Jones Act, arguing that it raises costs and prices for cargo shipped within the US. Proponents say that the strictures are necessary to have a ready merchant marine in case of emergency or war, and that it preserves US jobs.

Now that the government has temporarily waived the act, the issue emerges once again as to whether it should be done away with completely.

The debate is taking place not only between divergent political and economic interests but perhaps also within the mind of President Trump himself. One the one hand, he supports the fossil fuel industry and that sector opposes the Jones Act. On the other hand, he champions the causes of the blue-color workers who helped elect him.

So far, there have been no pronouncements on the Jones Act by the Trump administration, but one issue did come up with may provide a clue as to which way it is leaning. Trump decided to scuttle a review started during the Obama administration which was examining whether loopholes which emerged over the 100-year history of the law ought to be closed.

Beginning in the 1970s, rulings started to come down allowing foreign ships to deliver equipment to offshore oil platforms. The oil and gas industry clearly argued to keep those exceptions alive. Labor groups, not surprisingly, wanted the review to go forward, claiming the Jones Act helps maintain half a million US jobs.

Trump sided with the oil industry in that case; or did he? Maybe his decision was really about undoing an Obama initiative, a habit of the president’s. It will be interesting to see how this plays out.

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