May 21, 2013
Should Hawaii Be Exempted From The Jones Act? Lawsuit Says Yes
By SHERLEY WETHERHOLD
Lawyer and former U.S. Senate candidate John Carroll thinks he knows what’s behind Hawaii’s social and economic ills, and he’s going to keep suing the federal government until he gets rid of it. Carroll, a five-term legislator, four-term representative, Big Island rancher and attorney has sued the United States of America for the second time in hopes of exempting Hawaii from the Merchant Marine Act of 1920. Better known as the Jones Act, the statute requires all ships traveling between U.S. states to be manned, built, owned, and flagged by Americans. Critics say the regulations inflate the cost of shipping, which makes everything from eggs to electricity more expensive.
“We have joblessness, homelessness, and a very sick economy — all related directly to the fact that we don’t have free trade,” Carroll said.
This is the second time Carroll has fought the Jones Act in court, and also the second time his case has been dismissed on the grounds that the population he represents, all Hawaii consumers, is unduly large and diverse. Though Carroll cites specific damages families and businesses have suffered as a result of the Jones Act in his case, the courts have ruled that the “plaintiffs merely assert a generalized disagreement with the Jones Act and unsubstantiated claims of economic harm allegedly caused by it.”
Carroll filed an appeal on Thursday asking the courts to reconsider the matter.
Several calls to the U.S. attorney representing the federal government seeking comment were not returned.
Hawaii isn’t the only American island wanting out of the Jones Act. A resolution that sought to exempt Puerto Rico from the act was introduced in late April and adopted soon after by the Puerto Rican Senate. The U.S. Virgin Islands have been exempt since 1922. Guam is also partially exempt.
Panos Prevedouros, professor of civil engineering at the University of Hawaii, says selective enforcement of any law is discrimination. Currently, three of the seven non-contiguous U.S. jurisdictions are fully exempt from the Jones Act.
“There’s a double standard,” he said. “American Samoa and the Northern Marianas are exempt. The U.S. Virgin Islands? Exempt — and they are flourishing.”
But Robert Frame, a Honolulu maritime attorney, doesn’t think all non-contiguous territories are equal, or that deregulation is the panacea for their economic woes.
Hawaii is two times farther from the mainland than Puerto Rico, not to mention the half dozen countries that lay in the path between Puerto Rico and Florida, he said. Frame thinks Hawaii desperately needs policies to protect its shipping routes to make sure there is a steady flow of goods to a remote archipelago 2,000 miles from the closest continent.
“When you wake up in the morning, you know you’re going to have your milk, your toilet paper, and anything else that comes to the islands by way of ship. If you’re not protected by the Jones Act, you’re at the whim of some foreign country,” he said.
Dani Santos, Carroll’s head researcher, thinks Hawaii’s remote location is actually an asset. She says it gives Hawaii the potential to be the sole trans-Pacific stopover for ships from the Americas, Australia, and Asia. Without the Jones Act, she said, Hawaii “would become like a Shanghai or Hong Kong, or any huge shipping hub, because we are so perfectly placed geographically. We could (have) a huge economic boom.”
Frame thinks these optimistic assessments are half-baked.
“The Jones Act forbids foreign flagged vessels from going between point A and point B in the U.S.,” he said. “If foreign vessels wanted to keep this supposed flow of trade, they could go from Asia to Hawaii to South America or port in Vancouver between Hawaii and Los Angeles with no problem.”
But Hawaii’s market of just 1.4 million people isn’t very attractive to international shipping giants who’d rather sell to the 300 million consumers in the lower 48 states, he said.
Frame also warned that unfettered capitalism could be dangerous and the foreign freighters’ lack of national allegiance might leave Hawaii high and dry. If the shipping companies find more profitable routes, they will have no reason to sail to Hawaii, he said.
HPU professor of economics and political science Ken Schoolland says controlled capitalism is responsible for the artificially inflated cost of living in Hawaii. Schoolland called the Jones Act protectionist, catering to shipping oligopolists and crippling Hawaii’s entrepreneurs and consumers by eliminating the prospect of competition.
“Why should our cost of living be so much higher than the rest of the country?” he said. “If it’s for national security, why should it fall on the backs on the consumers of Hawaii instead being a shared expense of the whole country?”
The Federal Reserve Bank of New York published a report earlier this year on the effects of the Jones Act on Puerto Rico’s economy. While it did not make many concrete conclusions as to whether the act was beneficial or detrimental to the people of Puerto Rico, it did suggest a 5-year exemption from the Jones Act so the effects of the restrictions could be studied empirically.
The implications of exempting Hawaii from the Jones Act are manifold, the economic stakes high. While the federal government doesn’t seem keen on exempting Hawaii from the Jones Act in the near future, Carroll says he’s going to keep on fighting, one lawsuit at a time.
“The Jones Act, as far as Hawaii is concerned, is the most vicious, oppressive, unjust, restriction that there is,” he said. “I have 10 great-grandchildren coming up, I’m turning 85 next year, I’ve been fighting this thing since I was 40 years old, and I don’t intend to give up. It’s absolutely rotten that we have it, and I don’t intend to die until I get rid of it.”