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The Jones Act and The Truth Squad

Decorated war hero and stalwart American military supporter Sen. John McCain (R-AZ) has stepped up to take another whack at the Jones Act, the law that bans foreign-owned vessels from serving in the U.S. domestic waterborne trades. McCain's bill, S. 3525, also seeks to repeal the requirement that ships plying those waters be built in the U.S.

McCain makes a number of familiar economic arguments in support of his latest effort to sink the Jones Act. But the timing of his bill isn't random. He specifically cites the Gulf of Mexico oil spill, caused by the April 20 explosion of British Petroleum's Deepwater Horizon drilling platform, as a reason for offering the measure now.

"This antiquated and protectionist law has been predominately featured in the news as of late due to the Gulf Coast oil spill," McCain said in his statement accompanying introduction of the Open America's Water Act. "Within a week of the explosion, 13 countries, including several European nations, offered assistance from vessels and crews with experience in removing oil spill debris, and as of June 21, the State Department has acknowledged that overall 'it has had 21 aid offers from 17 countries.' However, due to the Jones Act, these vessels are not permitted in U.S. waters."

McCain goes on to say that the Obama Administration has not sought a blanket waiver of the Jones Act so as to allow any vessel to aid in Gulf cleanup and recovery efforts. While he supports that short-term option, he would much prefer to scrap the Jones Act in its entirety, "saving consumers hundreds of millions of dollars."

So our foreign friends stand ready to help us out in the Gulf, only they're prevented from doing so by an obsolete law dating back to 1920. What a frustrating state of affairs. The only problem: it isn't true.

The fact is that the Jones Act is no impediment to our soliciting foreign assistance in this or any other natural disaster. "Specialized foreign oil spill response vessels are welcome and already working - they either do not need a Jones Act waiver, or can get one without delay," according to a statement by the Maritime Cabotage Task Force. The lobbying group counts among its membership U.S. vessel owners and operators, shipbuilders, labor, equipment manufacturers, dredging contractors and trade associations.

But don't take MCTF's word for it. Here's a statement from the Deepwater Horizon Unified Command Center: "No vessels have been turned away [in the Gulf] due to the Jones Act."

And why not let a lawyer chime in? This according to H. Clayton Cook Jr., of the firm of Seward & Kissel LLP: "Waivers have not been granted because they have not been needed," he says in a recent memo to Maritime Transportation & Logistics Advisors, LLC. "The Jones Act expressly allows the operation of foreign 'oil spill response vessels ... in waters of the United States ... for the purpose of recovering, transporting, and unloading [spilled oil] in a United States port' (Title 46 United States Code 15113) without the necessity of a waiver."

So McCain and his supporters appear to be using the Gulf spill as nothing more than an excuse for dismantling Jones Act protections. Of course he makes the economic case as well, citing a 1988 report by the General Accountability Office that the law was costing Alaskan families up to $4,281 more a year for goods shipped from the mainland on U.S.-owned and operated vessels. MCTF responds that those figures are "outdated and widely discredited."

The economic argument cuts both ways. A report commissioned by the Transportation Institute and authored by PricewaterhouseCoopers identifies nearly 500,000 jobs that are directly or indirectly protected by the Jones Act. Proponents claim the law generates $100.3bn in annual economic output.

We all know how "economic impact" figures can be grossly inflated - there wouldn't be any publicly financed sports stadiums without this little trick - but just look at the size of the U.S. domestic waterborne fleet: more than 39,000 vessels, moving a billion tons of cargo each year. That represents a substantial resource, which helps to fuel the U.S. economy and is also readily available in times of war or national emergency. (By the way, notes Mark Yonge, managing member of Maritime Transport & Logistics Advisors, the Jones Act has nothing to do with cargo preference laws that require the use of U.S.-flag vessels for military movements, and agricultural shipments generated by American aid efforts. The two issues are often confused.)

In any case, the U.S. doesn't stand alone in its use of maritime cabotage. Forty out of 53 maritime nations surveyed by the U.S. Maritime Administration exercise "strong cabotage principles," MCTF points out.

Now we have the A Whale, a massive Taiwanese-owned, Liberian-flag tanker that has been repurposed as an oil skimmer, awaiting approval from the U.S. Environmental Protection Agency and U.S. Coast Guard to begin operations in the Gulf. Whether it can get the job done is still uncertain, but if it fails, it won't be the fault of the Jones Act. All the same, Yonge worries that media reports to the contrary will lead to a major misperception on the part of the American public. "They will never know that the Jones Act never interfered with recovery activities in the Gulf," he says.

During his presidential campaign, Sen. McCain launched a "Truth Squad" to counter what he claimed were inaccuracies or falsehoods spread by the opposition. Perhaps it's time for him to revive that effort.

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