Jones Act as a first date question

In the depths of the Internet you can find tips for all kinds of life’s challenges. A few weeks ago, I read instructions on how to find a suitable partner in online dating: by asking what the other person thinks about the Jones Act. This X  had received almost 700,000 views and more than 6,000 likes.

What is the Jones Act and why am I writing about it on a maritime blog? To summarize, the United States’ Jones Act is a law enacted a hundred years ago, according to which only vessels built, owned, manned and flagged in the United States are allowed to operate internal water traffic in the United States, practically coastal, island and inland water traffic. In particular, the Jones Act affects traffic on the major islands of the United States, such as Hawaii and Puerto Rico.

The Jones Act has passionate advocates. They say that without that law there would be hardly any inland water transport as it is now, and no local shipping companies in the United States. The big global shipping companies would travel their own routes, and for example the connections to the islands would be much worse than they are today. In addition, the Jones Act ensures security of supply by keeping a certain part of the tonnage under the US flag, which can then be used in crisis situations.

Opponents of the Jones Act are even more passionate. They say the lack of competition has meant that a ship built in the U.S. can cost up to three times as much as a ship built elsewhere. Consequently, US shipyards are internationally uncompetitive and build ships mainly for the state. In addition, opponents calculate that, due to the Jones Act, domestic transport in the United States is inefficient and expensive due to the lack of competition. This has led to the fact that goods travel mainly by trucks and trains, i.e. they have moved away from water to more expensive forms of transport. Even in war the Jones Act has not been useful, in Operation Desert Storm only one ship met the Jones Act criteria.

Free market economy

At the end of the 18th century, Adam Smith wrote his remarkable work The Wealth of Nations, which tells about how a market economy and free trade increase prosperity in trading countries. Smith considered the division of labor and specialization of countries to be beneficial for the welfare of states. Finnish Andreas Chydenius had similar thoughts.

The economic well-being of Western countries in recent decades has been largely seen as the merit of a free market economy. One of the most fundamental ideologies of the European Union has been the removal of trade barriers within Europe, so that new innovations can be effectively introduced, and products produced in different countries can be freely sold within Europe. Currently, there is a lot of talk in Europe and the United States that trade barriers should be imposed on Chinese products to protect the Europe’s and US’s own industry, but there is no talk of barriers within the alliances.

According to some studies, Finland has been one of the countries that has benefited the most from the free market economy. We have been able to focus on selling our products to the world – largely industrial products – and in return buy everything we lack, from consumer goods to food and energy.

Criticism of subsidy policy

Nobel laureates in economics Ronald Coase and Ernest Williams Jr. introduced the concept of policy failure (government failure) in the 1960s. It means government intervention in the market, where the public administration has good intentions to correct market failures with taxes, regulations and policy programs. However, the result may weaken the situation even further.

Coase strongly believed in a free market economy – with certain exceptions. Interestingly, Coase uses lighthouses as an example of a service of which it makes sense not to rely on market forces, but rather the state offers the service to everyone. Nowadays, instead of lighthouses, satellites, radars, digital maps, etc. are used for navigation, which are offered by many private sources. However, VTS operates with state funding.

It is understandable that business life and its interest groups are often by no means particularly market economy-friendly. Traditional companies rarely see increasing competition as an opportunity. Standardization, pre-inspection of products and supply chain responsibility regulations are all very valuable efforts to ensure customer safety and eradicate unfair competition, but sometimes these activities are overemphasized so that existing companies can protect their markets from competition.

In fact, public sector business activity is often a balancing act between supporting existing businesses or new innovations and thus market disruptions. Should new operations be supported by providing marketplaces and perhaps even innovation support for new companies; or support current companies and their established operating models?

Free trade and sea transport

Worldwide maritime transport has naturally benefited from free trade. The more products are sold from one country to another, the more there is a need for shipping companies, ports, and related activities such as maritime industry, design offices, maritime education.

It is surprising to note that the maritime sector itself is by no means free from protectionism. Contrary to Adam Smith’s ideas, shipping has a long tradition of circumventing the principles of free trade and protecting the operations of one’s own country. The conferences, on the basis of which the big ocean shipping companies agree on joint traffic, are practically cartels that prevent free competition. In Finland, the support of maritime personnel and the reduction of fairway fees for ice-strengthened tonnage, as well as the removal of the fee after ten voyages, act as effective support for regular, and often domestic, ship traffic, and force shipping companies that visit our country less often to pay more.

It is certain that without support systems goods would go to and from Finland, but the flag and ownership of ships could change more than at present. In my previous blog “What happened to Finnish shipping?” I have cited a study that when considering shipping only as an extension of the export industry and protecting it from competition has reduced the competitiveness of Finnish shipping.

The Finnish shipbuilding industry trades all over the world. At the same time, there has been a huge technological leap for the most demanding ships: cruisers and icebreakers. The competition has been fierce, but our maritime industry has survived. What about shipping companies? If we continue to protect them, will it lead to the cost and uncompetitiveness of our own shipping companies like in the United States, or would it encourage our shipping companies to develop their own operations internationally competitively?

I have not been on the dating market for decades, but if any of the readers use the shipping support policy when choosing a dating partner, I would love to hear what the result was.

The article was previously published in Finnish in Navigator Magazine, an online magazine for maritime professionals, on September 20, 2024.