Unintended Consequences of Protectionism: The Jones Act and Highway Congestion

In 1920, the US government passed the Jones Act, an act requiring all sea shipping between US ports be done on ships that were built, crewed, flagged, and owned by Americans.  The act is a clearly protectionist measure designed to protect domestic shipping from foreign competition (although there is also a national defense argument for it).  The idea is that a cheaper foreign shipping company could not undercut US shippers on domestic trade routes.  If I were to ship something via ocean from Miami to Boston, I’d have to do it on US built, crewed, flagged, and owned ships.

The Jones Act, to the extent it is binding, raises the cost of ocean shipping in the US (if this were not the case, say it were already cheaper to ship on US ships than foreign ones, then the Jones Act would not be binding).  When the relative price of something rises, it encourages the use of substitutes.  The main substitutes for domestic shipping are trucking and railroad (and air to a lesser extent).  With the rise of ocean shipping costs from the Jones Act, transporters would turn to trucking and rail.  Furthermore, since trucks take up a lot of room on the highways and freeways, it is likely the marginal increase in trucking from the Jones Act increases congestion on the highways.  In short, the unintentional result of the Jones Act is to increase traffic congestion (and, potentially, traffic accidents as well).

Some interesting thoughts for further research:

  1. Do trucking and rail companies lobby in support of the Jones Act (bootlegger and Baptist)?
  2. Has the Jones Act had a measurable impact on the level of traffic (this is an empirical question that would be extremely hard to answer because of the age of the Act)?

One thought on “Unintended Consequences of Protectionism: The Jones Act and Highway Congestion

  1. #2 A “measurable” impact? Probably not, for the reason you gave: there is no meaningful non-Jones Act market in shipping with which to compare.

    – I suspect the Jones act affects US vs foreign ocean shipping far more than it affects shipping by rail or trucking which are, and always have been more expensive than ocean shipping, especially over long distances.

    – A decision to ship by ocean or land is more often a matter of short delivery time than absolute price. Delivery by truck is much faster over short to medium distances than either rail or ships, but typically more costly. In other words the higher prices for shipping from US port to US port caused by the Jones Act probably isn’t a large factor in truck vs ship decisions.

    – There are now (as opposed to in 1920) a much larger number of points within the US that couldn’t be served at all by ships, either foreign or domestic, but which are now easily served by rail or trucking.

    – And of course the Jones Act encourages imports and discourages domestic production to the extent that port to port shipping within the US is more expensive.

    Bottom line: I don’t think the Jones Act itself has had much impact on the number of trucks on the road.

    Just my 4 cents worth.

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