America’s Most Under-Appreciated Industry?

While driving up and down the Western United States coast this past spring break, I found myself frequently infuriated by the number and density of 18-wheeler transport trucks on every roadway, which slowed traffic and created dangerous driving situations for personal vehicles. My complaints are not unique; especially in recent years, millions of dollars have been spent on roadway infrastructure as a direct result of increased numbers of trucks, including the creation of “truck lanes” or alternate “truck routes” to alleviate congestion and safety concerns. Despite the additional accommodations and highly developed road-freight systems in the U.S. today, the funding for road projects is beginning to run out, and green interests are now heavily critiquing the fuel efficiency of this popular transportation method. In light of the situation, economists have teamed up with shipping companies, engineers, and policy analysts to find a solution.

The most promising option so far appears to be short sea shipping, or the increased use of generally smaller “feeder ships” that travel up and down the United States coasts between ports, carrying much of the cargo that is currently being transported along road-freight systems. The method has been incredibly underutilized in the United States, despite great success in Europe and Asia, and economists are beginning to highlight the benefits of short sea shipping in a country already struggling to reduce frequent roadway congestion, safety issues, and greenhouse gas emissions. They point out that an increase in short sea shipping does not require the creation of more complex infrastructure, since most U.S. ports are already equipped to deal with a substantial increase in cargo and shipping frequency.  Some economists argue that investment in the domestic shipbuilding industry would only strengthen our competitiveness on the global market and create thousands of American jobs in an economy still recovering from the recession. Additionally, ship fuel systems tend to be approximately twice as energy efficient as semi trucks or freight trains, thereby lowering toxic emissions, decreasing pollution, and advancing green technologies in place of historically inefficient shipping methods. Economist Natasha Horowitz notes that “just one small vessel with a capacity of just 400 TEUs (20-foot equivalent units) eliminates 400 trucks from a highway”, which has the added benefit of easing traffic congestion on already heavily populated coastal roadways.

Standing in the way of short sea shipping is a piece of legislation known as the Jones Act, which mandates that shipping between U.S. ports utilize only ships built in America, crewed by American sailors. Due to U.S. labor and production regulations, these stipulations cause production costs to skyrocket when compared to foreign companies that build equivalent vessels or have less strict labor laws. Production costs are spread to consumers, short sea shipping becomes extremely expensive and borderline unprofitable for companies, and the entire method ends up being underutilized. According to studies done by the World Economic Forum and the Federal Reserve Bank in New York, economic development goals in the U.S. commonwealth are being hindered by the Jones Act, since it costs millions of dollars more to build a ship in the United States than in Korea or Japan.The domestic economic benefits of employing American laborers do not currently outweigh the actual cost it takes to employ them, due primarily to the stricter labor laws in the United States. These concerns are the driving forces behind recent efforts, spearheaded by Senator John McCain, to alter or repeal the Jones Act. On the other hand, critics argue that the social cost of outsourcing another major industry to foreign producers has not been fully explored in contemporary economic analyses of the Jones Act, and that American shipbuilding would come to a screeching halt if exposed to a more competitive market.

In an attempt to maintain the Jones Act, while still seeking to expand short sea shipping in the United States, economists and policy makers could recommend creating an exception within the Jones Act that allows the vessels used in short sea shipping to be produced by foreign companies, although they would still be crewed by American sailors to ensure compliance with U.S. labor laws. This would offset a significant amount of the current cost of short sea shipping, although the viability of altering the Jones Act is still up for debate. Regardless, everyone seems to agree that freight shipping efficiency is not being maximized within the current situation, and short sea shipping could be the next best solution available. One way or another, these concerns must be resolved sooner rather than later if domestic and global trade can be expected to continue growing.

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One thought on “America’s Most Under-Appreciated Industry?

  1. taylorqjohnson says:

    This seems like a good example of how certain government regulations (such as the Jones Act) can complicate the analysis of the costs and benefits of making certain decisions. By altering regulations such as the Jones Act (as you suggested) perhaps it is possible to maximize the benefits and minimize the costs of carrying out a certain plan.

    Like

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