Shipping exces argue pros and cons of Jones Act

Source: Ctpost

A nine-decade-old federal law designed to protect the America's shipbuilding industry has outlived its usefulness, according to critics of the rule, who attended the opening day of MarineLog's Tugs & Barges Conference & Expo on Tuesday at the Stamford Marriott.

The critics say the Jones Act, which requires that products transported by water between United States' ports are aboard American-built ships, is unrealistic given the cost of building the vessels domestically. That has led to more trucks on highways, creating more traffic and polluting the air.

It's a sore point for Rowayton's William Gray, president of Gray Maritime Co., who said America's shipbuilding industry cannot provide enough reliable ships at an affordable price to comply with the act.

"Large (U.S.) shipyards cannot build ships at reasonable prices," said Gray, one of a four-person panel discussion on the Jones Act. "Since World War II, the U.S. Merchant Marine has dropped from 2,000 ships to 140 or less. This is a tragedy, or some would say a disgrace."

The decline in American-built merchant ships coincided with expansion of the highway system, said Frank Peake, vice president of American Shipping Group, which has offices in New Jersey and Washington state.

Development of an efficient marine highway system, combined with rising fuel costs and the widening of the Panama Canal could lead to construction of more ships in the U.S., but it will require improvement of port infrastructure.

"The biggest challenge is understanding market dynamics. It has to be self-sustainable without government subsidy," Peake said, adding that there needs to be a partnership between other modes of shipping transport. "We also need to have the rail and trucking communities embrace this. They have to view this as not a competition but a partnership. I don't think we're close to that yet."

Environmental concerns could lead to a re-thinking of the Jones Act, said Robert Kunkel, another panel member, who espouses the construction of merchant ships powered by compressed liquefied natural gas, a technology embraced by European shipbuilders.

"The Jones Act is a basic maritime conception that no one wants to take a look at," said Kunkel, president of Alternative Marine Technologies of Stamford and Norwalk and an adviser to Coastal Connect, a business that wants to operate roll-on, roll-off ships carrying cargo between American ports. "I hope the country wakes up to what the value of the marine industry is. U.S. ship building needs a spark. We've got to do something here to create more jobs for U.S. seafarers."

But the Jones Act serves a purpose, argued panel member H. Clay Cook, a counsel in Seward & Kissel LLP's corporate finance group, who disagreed with Gray's contention that American shipbuilding has not benefited.

"It's not just union jobs at shipyards. It's manufacturing jobs where pumps and other equipment are built," said Cook, who cited a 2010 PriceWaterhouseCoopers study showing that the Jones Act was responsible for 40,334 vessels, 499,676 related jobs, $100.3 billion in economic output and $11.4 billion in federal, state and local taxes.

The Jones Act has benefited Wisconsin-based Marinette Marine Corp., a division of Fincantieri Marine Group LLC, said Carlos del Real, marketing manager-government programs at Marinette, one of the exhibitors at the event.

"The Jones Act supports national security," he said, adding that European shipbuilders are subsidized by their governments.

Marinette builds U.S. Navy and Coast Guard vessels, as well as combined articulated tug and barge units and double-hull tank barges that carry petroleum products for companies between U.S. ports and oil production facilities.

"If we didn't have the Jones Act, these companies would have gone to China," del Real said.