The Jones Act Arguably Cuts the U.S. Ship Fleet in Half

By Caleb Petitt of The Independent Institute.

"The Jones Act is a regulation that requires ships to be U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-crewed if they move goods between American ports (cabotage).  For over 100 years, the Jones act has thus restricted competition in American shipping.

The U.S. only had 92 Jones Act-compliant ships in 2024. However, there were 185 U.S.-flagged ships that year. The other 93 are foreign-built ships that have been flagged in the United States. While those ships cannot engage in cabotage, they can take advantage of other programs that protect U.S. shipping, namely, the Maritime Security Program (MSP) and cargo-preference laws.

Cargo-preference laws require that a specified percentage of goods imported for government projects be brought on U.S.-flagged ships (no matter where they were built). These laws are meant to provide a stable source of demand for such ships. The MSP provides stipends to ships that participate. Currently, 60 ships do so, and as of 2022,none were Jones Act-compliant.

Thus, U.S. maritime regulations divide the fleet in half. Jones Act-eligible ships almost exclusively engage in cabotage; the monopolistic returns are needed to compensate for the high cost of the ships. Foreign-built U.S.-flagged ships enroll in MSP and take advantage of the cargo-preference laws to compensate for the higher operating costs of being U.S.-flagged, which are 2.7 times greater than those of foreign-flagged ships.

Each half of the fleet serves in a niche created by the regulatory environment and could not survive without government protection. Having an uncompetitive fleet imposes heavy costs on Americans. Dropping the domestic building requirement would be an important step in simplifying maritime regulation, expanding the merchant fleet, and reducing shipping costs.

Advocates of the Jones Act often say that it is important in fostering shipbuilding. Even a cursory look at the data on America’s annual shipbuilding capacity would show that it has failed to do so. The average annual gross tonnage of commercial ships produced from 1865 to 1914 was 286,775 tons; it was just 158,987 tons from 2014 to 2024. The Jones Act certainly has not ensured that America will maintain a robust shipbuilding capacity.

Jones Act supporters also fret that foreign-flagged ships might one day carry goods up our rivers and be used as ferries. While I do not share their concern, the domestic shipbuilding requirement for cabotage could be dropped without foreign-flagged ships taking over America’s waterways. It would double the ships that could engage in cabotage overnight and drastically lower the cost of adding ships to the merchant fleet.

Moreover, the cost of goods to Americans, especially those in Hawai’i, Alaska, and Puerto Rico, would fall as the number of ships that could bring them goods from the American mainland increased. America’s sealift capacity would grow quickly because Americans could buy foreign-built ships for cabotage. Today, that capacity is insufficient to meet the military’s needs in a crisis; ending the Jones Act domestic building requirement would quickly solve that problem.

The Jones Act cuts the current U.S.-flagged fleet in half. How could the foreign-built half be relied on for sealift operations and military supplies, but not be relied on to carry goods between American ports? Deregulating American shipping by dropping the domestic production requirement from the Jones Act would lower shipping costs, increase sealift capacity, and create consistency in America’s regulatory code."