Even as Nigeria is still grappling with the implementation of its Cabotage Act, lawmakers in the United States of America from where Nigerian copied the law have began deliberations on the 90-year old Jones Act with a view to reviewing it.
The proposed legislation is being sponsored by Senator John McCain, the defeated Republican presidential candidate in 2008 elections and a known opponent of the Jones Act.
Mr McCain is using the recent Deepwater Horizon spill as the main plank on which his Bill is based, alleging that President Barrack Obama’s administration turned down 21 aid offers from 17 countries, including European nations that offered vessels and crews with experience in removing oil spill debris, because of the Jones Act
“The administration has the ability to grant a waiver of the Jones Act – just as the previous administration did during Hurricane Katrina – to allow international assistance in recovery efforts. Unfortunately, it has not done so,” Mr McCain alleged.
The development coincides with similar moves in India to tinker with her own version of the Cabotage law where the country’s shipping ministry is considering liberalisation of domestic coastal shipping laws to permit foreign carriers to enter, though it faces opposition from the domestic industry.
If the Indian Cabotage trade is restricted to domestic carriers, the ministry reasons, it is likely that non-Indian lines would avoid using the new one million-TEU DP World terminal that opens in September in Cochin and continue to employ feeder lines of their choice from Colombo.
But justifying the Jones Act’s abrogation, Senator McCain said the 1999 US International Trade Commission economic study “suggested that a repeal of the Jones Act would lower shipping costs 22 percent.” Also, a 2002 economic study from the same commission found that repealing the Jones Act would have an annual positive welfare effect of USD 656 million on the overall US economy.
Calling it a law that hinders free trade and favours labour unions over consumers, Senator McCain said: “This restriction only serves to raise shipping costs, thereby making US farmers less competitive and increasing costs for American consumers.”
Tim Brown, president of the Masters, Mates, and Pilots Union, said the repeal of the Jones Act might reduce shipping costs, but would also result in the displacement of hundreds of jobs for American seafarers.
Some have called for a repeal of the Jones Act to allow additional foreign-flag vessels to be used in the BP oil spill cleanup, reported American Shipper. But those who oppose its repeal there are enough laid-up American ships that could be used instead.
Mr Brown said Senator McCain was using the crisis of the Gulf of Mexico BP rig explosion to gain more support for a bill that would not otherwise “have a prayer” of passing.
But Senator McCain said the Obama administration has the ability to grant a waiver of the Jones Act as did George W. Bush during Hurricane Katrina disaster.
His bill, he said, went far beyond disaster relief. “The best course of action is to permanently repeal the Jones Act to boost the economy, saving consumers hundreds of millions of dollars. I hope my colleagues will join me in this effort to repeal this unnecessary, antiquated legislation in order to spur job creation and promote free trade.”
Despite its controversial linkage between the Jones Act and Deepwater Horizon and the timing of its introduction, McCain’s Bill, formally titled “Open America’s Waters Act”, contains several economic arguments that foreign opponents of the Jones Act have long favoured.
The Jones Act requires that all goods transported from one US port to another be carried by vessels built in the US and owned crewed and operated by American citizen entities, but McCain argued that the law hinders free trade and favours labour unions over consumers. “This restriction only serves to raise shipping costs, thereby making US farmers less competitive and increasing costs for American consumers,” he added.
He also cited two studies, in 1999 and 2002, from the US International Trade Commission that respectively estimated a 22% reduction in shipping costs and annual savings of $656m for the US economy after a repeal of the Jones Act.
Taking into account inflation, the annual savings today would stand at $1bn, and would be a “true economic stimulus”, Mr McCain argued.
He cited other studies that estimated the average family in Alaska and Hawaii pays between $1,900 and $4,800 more each year for increased prices paid on goods shipped from the mainland.
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