View Point

Friday, December 26, 1997

Jones Act serves Hawaii
and the nation very well

By R.J. Pfeiffer

Editor's note: This commentary is in response to state Rep. Gene Ward's column in the Dec. 5 Star-Bulletin, "To fix the economy, junk the Jones Act."

As a lifelong Republican, I was greatly disappointed to see state Rep. Gene Ward adopting the same nonsensical arguments for the repeal of the Jones Act that have been unsuccessfully purveyed on the Washington, D.C., scene for the last two years.

These mystifying and outright false accusations have no basis other than the wishful thinking of those who would turn the $14 billion domestic American shipping industry over to foreign interests. These arguments cannot withstand even an elementary examination of the facts, let alone common sense.

First, Ward implies that the Jones Act is responsible for a 40 percent higher cost of living in Hawaii than on the mainland. There is no analysis of which I am aware to support such an irresponsible statement. "The Price of Paradise" identifies housing as the main culprit, but, regarding food, notes that trans-Pacific shipping adds perhaps no more than 5 percent to the retail price.

Moreover, in March 1997 the U.S. Department of Transportation completed a study of competitive conditions in the Hawaii trades. The department concluded that, among other things, (1) excess capacity has placed downward pressure on ocean rates, (2) after adjusting for inflation, shipping rates in 1995 were 30 percent less than their 1985 level, and (3) the level of service provided and the rates charged by ocean carriers reflect the economic characteristics of the Hawaii market.

Because Ward believes that the Jones Act is costing the people of Hawaii $1 billion per year, I suppose he expects foreign vessels to carry cargo to Hawaii for free because Matson's and Sea-Land's annual westbound revenues combined total less than $1 billion.

Ward then quotes Rob Quartel's widely discredited independent consultants who claim that the Jones Act costs families in Hawaii $3,000 annually. Curiously, he avoids mention of the University of Hawaii study released Nov. 19 that found serious errors (such as triple counting) in Quartel's analysis and that concluded the repeal of the Jones Act would mean an annual loss per Hawaii household of $611 to $3,563, and the loss of up to 17,025 jobs.

Ward also contends that Hawaii cattle ranchers find it less expensive to send cattle to the mainland via Boeing 747s than aboard a Jones Act ship. The facts are that in 1992 Matson offered the same rate to move cattle as was then offered by a foreign-flag cattle ship that is exempt from U.S. taxes, does not employ U.S. citizens and does not comply with U.S. Coast Guard regulations. Matson is charging the cattlemen the same rate today, more than five years later. Yet, this ridiculous statement is repeated over and over again.

In 1991 a Maritime Administration survey found that 47 countries around the world -- virtually every significant maritime power -- reserve their domestic waterborne trade for ships of their own nation. Ward references Great Britain as one of the greatest maritime trading nations in the world and one which has no restrictions on the movement of its domestic waterborne commerce. I would add that in the summer of 1995 a British parliamentary inquiry determined that the British merchant fleet had shrunk to the point that it could no longer support a major military operation overseas.

In fact, when Britain agreed to provide increased NATO peacekeeping forces in Bosnia, it had to use an American ship to transport the United Kingdom's 24th Air Mobile Brigade to the Balkans. Is this the path Ward proposed for the United States?

Ward's declaration that the U.S. flag fleet has withered away from its 1945 peak of 2,500 ships completely ignores the evolution of waterborne commerce in the past 50 years or so. Matson's MV R.J. Pfeiffer carries as much cargo in one year as did 21 of our 1920s vintage ships. Individual ship annual carrying capacity and efficiency have increased so dramatically that a comparison of the number of hulls in the fleet is misleading.

Perhaps his most disingenuous statement is that President Bush (who supported the Jones Act) suspended the Jones Act during the Gulf War because it was an impediment to the movement of critical military resources.

In truth, the totality of the suspension was two foreign-flag tankers that were permitted to make two voyages carrying crude oil from the Strategic Petroleum Reserve near the Gulf of Mexico to refineries in New England. Yet, while these foreign interests happily cruised into American commercial markets, American-flag tankers were sailing in harm's way, delivering 20 percent of the petroleum products used in Operation Desert Storm.

The president of the United States always has had authority to waive the Jones Act in the interest of national defense for a simple reason: If American ships are called into battle, the people of Hawaii, and other shipping-dependent areas, still must have food, clothing and shelter. The United States must meet these needs by whatever means necessary.

Reduced to its essential terms, the Jones Act simply requires companies operating in the domestic commerce of the United States to comply with U.S. laws. This requirement includes corporate taxes, the National Labor Relations Act, the Fair Labor Standards Act, Coast Guard standards, employing American citizens, etc. American ships are subject to these laws and foreign ships are not. This same fundamental principle applies to every other company doing business in the United States, from agriculture to retail.

The Jones Act has been supported politically by Presidents Clinton, Bush, Reagan, Carter and Ford for starters. It is supported by American military leaders, most recently in a statement by Lt. Gen. Roger Thompson, deputy commander in chief, U.S. Transportation Command. There also are 239 co-sponsors of a pro-Jones Act Resolution in the U.S. House of Representatives. The Jones Act has been the foundation of American maritime policy for the last 200 years and, if the progress or veracity of Jones Act opponents is any measure, it will remain so for another 200 years.

One must also consider the support that a Jones Act carrier, such as Matson, provides to Hawaii such as jobs, taxes, corporate contributions, etc. I admit to a bias in favor of Matson, but in my 60-plus years in the maritime industry I have worked for some formidable competitors of Matson. Where are they today? When more attractive cargo offerings materialized in other trades, those competitors abandoned Hawaii.

Matson has served Hawaii well for more than 115 years. Non-Jones Act competitors would not dedicate the huge sums of money Matson has over the years in the way of ships, terminals and equipment to guarantee dependable service to the shippers/consignees in the Hawaii trade. Matson provides dependable, timely and efficient service. Also, reasonable freight rates.

People have referred to me as an experienced international maritime expert, and I say Hawaii residents should not be subjected to the disservice put forth by the ill-informed who advocate the elimination of the Jones Act. Such action would harm the United States, not only its 50th state.

R.J. Pfeiffer is chairman emeritus of
the Matson Navigation Co. in San Francisco, Calif.

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