Better known as the Merchant Marine Act of 1920, among other things the federal statute prohibits transshipment among U.S. ports by foreign-flagged vessels. It has provisions for specific and general waivers, and GOP Pres. Donald Trump enacted the latter for ten days regarding Puerto Rico in the aftermath of the recent hurricane disasters inflicted upon the islands.
This launched Graves into criticism mode, who called it a solution looking for a problem. He argued that relief efforts suffered more from internal distribution on the main island than in getting stuff there. He noted a majority of Puerto Rico’s commerce already came from foreign vessels and said it would cost Gulf Coast shippers jobs.
Rather openly, he thereby admitted the primary reason for support of the law: as a method to promote trade unionism that artificially inflates prices for American consumers. If foreign vessels with lower-paid crews could bounce from port to port, they would take jobs from a sector as a whole with about a fifth of its members in unions, about three times the American private sector average. Within water transportation, unions have greater penetration.
But unions trying to keep wages as high as possible don’t go it alone in defending the law. Industry likes it as well because it protects it from foreign competition, ignoring the deleterious effects it has economically: a series of government research reports over the past three decades estimates the Act costs Alaska, Hawai’i, and U.S. outlying possessions like Puerto Rico billions of dollars a year extra. In Puerto Rico alone, it makes shipment costs from the east coast double those from nearby Kingston, Jamaica. That has caused an atrophy of San Juan’s portage, which has shrunk 20 percent this century while Kingston’s has more than doubled to overtake it.
Defenders of the Act allege much smaller amounts to the costs and that it remains a national security bulwark, ensuring a stock of domestic commercial vessels and shipbuilding capacity. If so, it has done poorly, as American shipbuilding continues – another sector with unionization around three times the private sector average – to hemorrhage jobs and ship production. In fact, the Act has the perverse incentive of making the shrinking U.S. merchant marine fleet even more outdated and expensive to operate, through artificially inflating prices for new building and thus discouraging purchase of newer ships, which does nothing to stimulate the industry.
The Act itself has featured prominently in Louisiana disasters over the past dozen years. In 2005, Republican Pres. George W. Bush waived it for 19 days in response to Hurricane Katrina, while in 2010 Democrat Pres. Barack Obama refused to do so to aid in preventing greater oil spill damage and cleanup, where this failure to do so could have dragged out both. Graves, at that time head of the state’s Coastal Protection and Restoration Authority, nor his boss Gov. Bobby Jindal publicly requested that Obama issue one despite that failure to do so made impractical assistance from foreign vessels for mitigation tasks.
Whether Graves truly believes the thin evidence supporting the Act, constituency and special interest pressures certainly would want him on board. The Sixth District relies disproportionately on waterborne commerce, from the Mississippi River running straight through it to the Mississippi’s tributaries to shipping based near New Orleans and around Morgan City, Houma, and Thibodaux.
And it seems to have him in the case of Puerto Rico disaster aid, even if his critique comes off as overblown. Is a ten-day waiver really going to gut American industry? And perhaps he forgets that a couple of the smaller islands also suffered and can get meaningful supplies only over water.
Exceptionally ironically, Graves, normally a proponent of free markets, defends a protectionist policy against an action by a president who has protectionist sympathies. Not only does the waiver do no harm, it can help. On this occasion, Graves has too eagerly put parochial perceived interests over what’s best for others, if not the nation as a whole.
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