Posted on: Monday, November 26, 2001

Island Voices
Jones Act debate should be altered

By Brad Cole
O'ahu resident

Every day or two lately we have the dubious pleasure of reading a letter or column in your paper about the costs of the Jones Act to the United States in general and Hawai'i in particular.

The purpose of the Jones Act and similar navigation acts through the years has been to limit the entry of foreign-flagged, -manned or -built vessels into U.S. intercoastal trade. This policy is intended to ensure that the U.S. Merchant Marine is able to support the economy and foreign policy.

It also over the years has transferred wealth and income from consumers to carriers and their employees. It is an indirect tax to support the above policy.

Rarely do I see much debate over this policy, mostly over the estimated costs, which labor economist Lawrence Boyd Jr. demonstrates can be variously calculated (Island Voices, Nov. 16). In this time of war, a thorough examination of the effectiveness of this policy choice would be timely; certainly, assessing the degree to which U.S.-owned tonnage overseas serves our policies must be included.

U.S. shipowners have chosen since World War II to transfer their ships overseas to reduce their costs in a competitive world market. Currently, we are one of the largest owners of tonnage when these vessels are taken into account.

The debate over the impact of the Jones Act locally usually seems characterized by a failure to provide a balanced, thorough analysis of the businesses in question. For example, lately much has been made of the departure of the MS Patriot and Independence from the cruise business here. The fault has generally been laid at the door of the Jones Act rather than the efficacy of the management's strategy, which should be examined.

Globally, the cruise business flourished during the '80s and '90s due to several factors. This led to increased operating margins, which attracted entry and encouraged expansion. In consequence, since the late '90s, one has read numerous stories of declining profitability in established markets and the search to expand into new markets.

That's what has been the primary factor here. So the debate really ought to be about whether we want to start insulating highly paid managers from the impact of poor choices while rewarding them for their successes.