Adam Smith Would Have Supported the Jones Act

By Michael D. Purzycki

Advocates of free trade often criticize the Jones Act as an unnecessary protectionist measure. Today, with inflation and supply chain weaknesses prominent in the news, the requirement for all cargo moving between American ports to be transported by U.S.-flagged ships strikes many as a senseless increaser of prices. Critics allege that the Jones Act makes intra-U.S. shipping “prohibitively expensive,”1 and call for “repeal or significant reform of this outdated law.”2 Why, they ask, should consumers pay higher prices so American sailors can protect jobs that foreign sailors could do just as well, for less money?

However, a strong case for the Jones Act can be found in the writing of one the first great advocates of the free market: Adam Smith. While he is remembered as the father of modern capitalism, he did not believe in market forces reigning supreme in every sector of the economy. One of the exceptions to his laissez-faire beliefs was the Navigation Acts, Britain’s equivalent of the Jones Act in Smith’s time, which he defended on national security grounds.

There is a lesson in Smith’s stance for the Jones Act’s critics. All sectors are not created equal – those that help support national security are different in importance, and different in the need for government intervention, from those that support private consumption. By giving American seafarers opportunities to practice their skills, the Jones Act helps the United States prepare for great power conflict. This is especially vital when Russia’s invasion of Ukraine has reminded the world how important NATO is to international security, and how vital it is for the U.S. to be ready to quickly defend its allies when they are attacked.

The Importance of the Merchant Marine

Passed in 1920, the Jones Act was intended to rectify a national security weakness that had emerged during World War I. As the Navy League has put it, “having realized the nation’s merchant fleet was not independently robust enough to neutralize German attacks,” Congress was determined not to allow such vulnerability in future conflicts.3 By making the transportation of cargo between domestic U.S. ports the preserve of American ships and their crews, it sought to give the U.S. Merchant Marine experience that would prove valuable during another major war.

If there were ever a situation in which the Merchant Marine proved its worth, it was World War II. Merchant mariners were the ones who brought American weapons, ammunition, and food to Britain in the face of Nazi U-boats. Their casualty rate was higher than any branch of the military, with 9,300 merchant mariners killed.4 But thanks to the Merchant Marine, when the Allies began to liberate Europe from Hitler, “[n]o Allied army was ever driven back from a hard-won beachhead for lack of supplies,” as TIME put it in 2016.5

Today, thanks to the Jones Act, the U.S. has “thousands of skilled mariners who, during surge sealift operations, can operate government-owned sealift vessels and provide supplemental crews on international fleet ships,” in the words of the Navy League.6 The act has endured for more than a century despite long-standing criticism from those whose belief in free trade trumps what value they might see in America’s sealift capability. For the sake of national and international security, it should be kept in place; however, many voices continue to clamor for its repeal.

When Free Trade Works

There are cases in which free trade makes geopolitical as well as economic sense. After World War II, the U.S. undertook the reconstruction of Western Europe and Japan, helping to ensure they would not fall into the Soviet orbit during the Cold War. It did this not only through direct funding efforts like the Marshall Plan, but by opening the American market to European and Japanese exports, helping to revive industrial bases devastated by the war. As Robert D. Atkinson and Michael Lind noted in American Affairs in 2019, when West German and Japanese industries began to gain ground against their American competitors, “the U.S. government looked the other way (or in some cases, provided active support for these policies), in the interest of a unified alliance against the Soviet Union.”7 Pairing NATO and the U.S.-Japan alliance with economic growth across the Atlantic and Pacific tightened the links between the U.S. and its allies in the struggle against communism.

Similarly, had the United States ratified the Trans-Pacific Partnership (TPP), today it would be standing at the head of a twelve-nation bloc making up 40% of the world’s GDP – including highly developed economies like Japan, Australia, Singapore, and Chile – while pointedly excluding China.8 The U.S. would be taking the lead in writing the rules of trade in the Pacific, rules serving the interests of American industries and workers rather than the Chinese Communist Party. Instead, since the U.S. abandoned the TPP, a successor agreement has emerged – one that China now seeks to join.9

The value of excluding China points to the need for a national security exception to free trade. While Vladimir Putin’s war in Ukraine has understandably focused the world’s attention on eastern Europe, a Chinese invasion of Taiwan, or a Chinese attack on Japan, is a continuous possibility. When conflict with rival great powers is on policymakers’ minds, sealift capability should be, too. If the U.S. cannot get its troops and their supplies to the front, it will be at a disadvantage. A country unable to protect its vital interests is a country unable to enjoy the benefits of international trade.

Can the U.S. Do Sealift?

Today, America’s ability to bring its forces and supplies to battle is far from certain. In January 2020, Rear Admiral Mark Buzby told the Surface Navy Association Symposium that, in a September 2019 exercise to test the Ready Reserve Force’s ability to sail on short notice, only about 40% of the vessels involved proved ready to leave port.10 This is a troubling statistic at a time when the U.S. may have to rapidly move personnel and equipment across the Atlantic to protect NATO allies from Putin’s forces.

Meanwhile, an October 2020 report by CNA on COVID-19’s effects on seafarers around the world, described “despair in the US Merchant Marine.” It was unclear whether Military Sealift Command’s (MSC) “Gangways Up” policy, keeping mariners on their ships to protect them from the pandemic, was truly “balancing the health of the fleet with the wellbeing of the mariners.”11 Mariners’ health should be factored into discussions of the Jones Act. If the crews who transport troops and equipment are not physically or mentally healthy, even vessels ready to set sail may not be of much use.

These vulnerabilities coincide with the relatively low priority the U.S. places on military sealift. At a February 2022 conference of the National Defense Industrial Association, Eric Labs, a naval analyst at the Congressional Budget Office, described sealift as the “black sheep” of shipbuilding.12 Even though sealift vessels move about 90% of Army and Marine Corps combat equipment and supplies, less than two percent of the Navy’s shipbuilding budget is being allocated to sealift platforms.13 If low investment in vessels is paired with the U.S. undermining the crews needed to man those vessels, American sealift could be doubly weakened when the country needs it.

Britannia Ruled the Waves

When 17th century England sought to become the world’s preeminent sea power, it understood the importance of a nation’s hard power to its trade. Beginning in 1651, the Navigation Acts sought to ensure England had a robust maritime workforce. The first act, passed during England’s brief period as a commonwealth after the execution of King Charles I, read:

“…no Goods or Commodities whatsoever, of the Growth, Production or Manufacture of Asia, Africa or America, or of any part thereof…as well of the English Plantations as others, shall be Imported or brought into this Commonwealth of England, or into Ireland, or any other Lands, Islands, Plantations or Territories to this Commonwealth belonging, or in their Possession, in any other Ship or Ships, Vessel or Vessels whatsoever, but onely in such as do truly and without fraud belong onely to the People of this Commonwealth, or the Plantations thereof, as the Proprietors or right Owners thereof; and whereof the Master and Mariners are also for the most part of them, of the People of this Commonwealth”14

After the monarchy was restored in 1660, King Charles II continued the policy. The second Navigation Act, passed in the first year of his reign, stated:

“…noe Goods or Commodities whatsoever shall be Imported into or Exported out of any Lands Islelands Plantations or Territories to his Majesty belonging or in his possession or which may hereafter belong unto or be in the possession…in any other Ship or Ships Vessell or Vessells whatsoever but in such Ships or Vessells as doe truely and without fraude belong onely to the people of England…or are of the built of, and belonging to any of the said Lands Islands Plantations or Territories as the Proprietors and right Owners therof and wherof the Master and three fourthes of the Marriners at least are English.”15

This was, as James Fallows noted in a 1993 Atlantic article comparing different philosophies of trade, “blatantly protectionist legislation.”16 At first glance, these laws appear likely to alienate an advocate of the free market like Smith. And yet, the patron saint of capitalism supported them.

Smith’s National Security Exception

In his 1776 magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, Smith wrote:

“The defence of Great Britain, for example, depends very much upon the number of its sailors and shipping. The act of navigation, therefore, very properly endeavours to give the sailors and shipping of Great Britain the monopoly of the trade of their own country, in some cases, by absolute prohibitions, and in others, by heavy burdens upon the shipping of foreign countries.”17

And:

“As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England.”18

There is a sense in which Smith’s position should not be especially surprising. His book is, after all, about the economic strength of nations, not individuals or corporations. Given his understanding of the need for geopolitical power to protect trade, it makes sense that he would favor British seafaring strength over market forces when the two conflicted.

America’s strength and prosperity, like Britain’s before it, has always depended on maritime power. Like the Royal Navy in the 18th and 19th centuries, the United States Navy is the ultimate guarantor of its country’s preeminence on the world stage, both economically and politically. And like Smith’s Britain, today’s America requires a capable maritime workforce, one that can regularly exercise its skills, so it is prepared for war when the time comes.

Follow Smith’s Example

At a time of high inflation, it is understandable that consumers and their representatives would look for any possible way to lower prices. But quickly putting more money into people’s pockets is not the only aim of public policy with a maritime component. National security, including the ability of a country to win conflicts and protect its interests abroad, makes national prosperity possible in the long term – and conflicts like the current war in Ukraine show just how vulnerable economic forces are to the military power of America’s rivals.

As a superpower whose closest allies are oceans away, the U.S. must always be able to bring its troops and their supplies quickly across those oceans to its allies’ defense. The current threat of Russia, and the long-term threat of China, should focus policymakers’ attention on sealift capability. Keeping the Merchant Marine in good working order is in America’s interest, even if it raises prices a little. In the spirit of Adam Smith, and his nuanced understanding of markets and security, the U.S. should keep the Jones Act in place.

Michael D. Purzycki is an analyst, writer, and editor based in Arlington, Virginia. He has worked for the United States Navy, Marine Corps, and Army. In addition to CIMSEC, he has been published in Divergent Options, Merion West, the Washington Monthly, Wisdom of Crowds, Charged Affairs, Braver Angels, and more. He can be found on Twitter at @MDPurzycki and on Medium at https://mdpurzycki.medium.com/. The views expressed here are his own.

References

1 The Editors. “Supply-Chain Crisis Isn’t Going Away.” National Review, December 15, 2021. https://www.nationalreview.com/2021/12/supply-chain-crisis-isnt-going-away/#slide-1

2 Grabow, Colin, and Inu Manak. “The Case against the Jones Act.” Cato Institute, June 2020. https://www.cato.org/books/case-against-jones-act

3 Navy League of the United States. “China’s Use of Maritime for Global Power Demands a Strong Commitment to American Maritime.” November 2020. https://navyleague.org/wp-content/uploads/2020/11/2020_Jones-Act_digital.pdf

4 Geroux, William. “The Merchant Marine Were the Unsung Heroes of World War II.” Smithsonian Magazine, May 27, 2016. https://www.smithsonianmag.com/history/merchant-marine-were-unsung-heroes-world-war-ii-180959253/

5 Geroux, William. “World War II Shows Why We Need the Merchant Marine.” TIME, April 21, 2016. https://time.com/4303121/world-war-ii-merchant-marine/

6 Navy League of the United States. “China’s Use of Maritime for Global Power Demands a Strong Commitment to American Maritime.” November 2020. https://navyleague.org/wp-content/uploads/2020/11/2020_Jones-Act_digital.pdf

7 Atkinson, Robert D., and Michael Lind. “National Developmentalism: From Forgotten Tradition to New Consensus.” American Affairs, Summer 2019. https://americanaffairsjournal.org/2019/05/national-developmentalism-from-forgotten-tradition-to-new-consensus/

8 Granville, Kevin. “The Trans-Pacific Partnership Trade Accord Explained.” New York Times, July 26, 2016. https://www.nytimes.com/2016/07/27/business/international/the-trans-pacific-partnership-trade-accord-explained.html

9 Reuters. “China applies to join Pacific trade pact to boost economic clout.” September 17, 2021. https://www.reuters.com/world/china/china-officially-applies-join-cptpp-trade-pact-2021-09-16/

10 Werner, Ben. “Test of Ready Reserve Force Exposes Need For Newer Ships, More People.” U.S. Naval Institute, January 16, 2020. https://news.usni.org/2020/01/16/test-of-ready-reserve-force-exposes-need-for-newer-ships-more-people?utm_source=USNI+News&utm_campaign=b5cddb026e-USNI_NEWS_DAILY&utm_medium=email&utm_term=0_0dd4a1450b-b5cddb026e-234331785&ct=t(USNI_NEWS_DAILY)&mc_cid=b5cddb026e&mc_eid=bf408583f1

11 Tallis, Joshua, Cornell Overfield, Kevin Inks, and Cherie Rosenblum. “Adrift: COVID-19 and the Safety of Seafarers.” CNA, October 2020. https://www.cna.org/CNA_files/PDF/CSI-2020-U-028490-Final.pdf

12 Harper, Jon. “Military Sealift Considered ‘Black Sheep’ of Shipbuilding Family.” National Defense, March 25, 2022. https://www.nationaldefensemagazine.org/articles/2022/3/25/military-sealift-considered-black-sheep-of-shipbuilding-family

13 Ibid

14 “An Act for increase of Shipping, and Encouragement of the Navigation of this Nation.” https://www.british-history.ac.uk/no-series/acts-ordinances-interregnum/pp559-562

15 “An Act for the Encourageing and increasing of Shipping and Navigation.” https://www.british-history.ac.uk/statutes-realm/vol5/pp246-250

16 Fallows, James. “How the World Works.” Atlantic, December 1993. https://www.theatlantic.com/magazine/archive/1993/12/how-the-world-works/305854/

17 Smith, Adam. “An Inquiry into the Nature and Causes of the Wealth of Nations.” https://www.gutenberg.org/files/3300/3300-h/3300-h.htm

18 Ibid

Featured Image: A large banner bearing “Jones Act” is featured on a large container ship (Credit: Kendra Seymour).

2 thoughts on “Adam Smith Would Have Supported the Jones Act”

  1. Yes, keep the Jones Act US flag, manning and ownership requirements, but modify it to allow Jones Act vessels to be foreign built. That would be the only change.
    The US JA fleet would greatly expand if the ships did not have to be built in the US, where it costs about 4 times as much to built the identical ships.
    For example, ships are rarely used to transport containers up and down the East Coast. Why? Solely because of the very high cost to build ships in the US. Instead trucks move these containers. Trucks clog and beat up our roads, create more pollution and create safety hazards for other traffic. AND these trucks do not have to be built in the US. Neither do airplanes, railroad equipment or any other forms of transit used for intra-US cargoes or passengers.
    Our US shipyards are presently not capable of building an entire deep sea ship. They all use foreign designs, foreign built main and auxiliary engines, electronics and everything else accept the hulls.
    The ships of today cannot be built in 24 hours as were Liberty ships during WWII. It now takes years to build a ship in the US, making the shipyards basically moot for times of crisis.
    So definitely keep the Jones Act, but expand it greatly by allowing the ships to be foreign built, meeting the author’s goals for a larger US Merchant Marine

  2. Agree fully. The first ‘prototype’ of the EPF/Spearhead class was designed and built in Australia by Austal Ships and leased to 3MEF in Okinawa. It remained on lease for 20 years. To enable US ownership of future EPFs and allow bidding for the Enterprise class of the littoral combat ship Austal had to invest heavily in development of an existing US shipyard. This does not sound such a bad result, but did lead to delays in construction and developent of the platforms. The Austal yard in Australia is directly opposite fleet base West, the Australian Navy’s second largest Naval base, and the logical site for crew transfers and re-deployment maintenance activities. Considering the current strategic environment re China it would make sense for both shipbuilding, crew transfers and ship redeployment and maintenance to occure in the same hemisphere as the present threat. The primary benefit would be greater integration of US and Australian Navies. There already exists a close partnership but broader activities for the improved efficiencyand combat sustainment activities at such a location would be invaluable. Additionally Austal has access to lower cost shipyards which can contribute to construction of ships finally assembled in the Australian shipyard.

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