City Journal Winter 2016

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Steven Malanga
Storm of Protectionism « Back to Story

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Update: Mr. Malenga, you may or may not be pleased to know that the Obama administration apparently shares your ill-informed disdain for the Jones Act and is quietly gutting it by dead-of-night administrative decisions with no open discussion or review.
You don't want to lose our shipyards and sailors, Mr, Malaga. Next will be our aircraft industry. We have already lost integrated circuits to China and Korea. Pretty soon there ail be nothing we are skilled at making and our trade will be at the mercy of countries like China that are race-loyal and protectionist as they come. When that time comes, our President will dance to their tune. Although he will probably lie (out of self-preservation) and say that he picked the tune. There is nothing we do that the Chinese with stolen or borrowed technology cannot do better and cheaper.

California used to make ships, Mr. Malaga. They used to make machine tools. They used to make chemicals and airplanes and cars.

Now all they make are vegetables (with imported peasant labor) while their teachers desperately try to turn the peasant children into the rocket scientists of tomorrow. They squander billions trying to educate a peasant mass that doesn't want to be educated for non-existent jobs that they shipped overseas a generation or two ago.

From being third from the top in the nation in education fifty years ago, they are now third from the bottom.

But they have their clean air and none of those dirty factories and refineries. And they have imported a few million lawn boys and housekeepers and wet nurses to suckle yuppie babies thereby boosting the efficiency of the California economy even more, haven't they, Mr. Malaga?

Don't Californicate America, Mr. Malaga. Although I am sure you are right. The Chicoms would be happy to take over all of our shipbuilding and airplane building for us, and to sell us all of our munitions and tanks and such at a very reasonable price.

And, yes, you are indeed right, that would be wonderful and very economically efficient, wouldn't it?
I'm responding to Tom Davis, below:

I DID go to sea, and spent 10 years in the American merchant marine. The day when seamen's wage differentials were a primary factor in persuading ships to flag foreign rather than American passed long ago. Since the 1980s or earlier, it's been the cost of environmental and safety regulations, not seamen's wage and benefits, that have mostly distinguished American-flagged from foreign-flagged vessels.

That's a primary reason why not one of the big maritime pollution disasters has been caused by an American-flagged vessel or rig. The Deepwater Horizon (technically a "vessel") and Exxon Valdez were both foreign-flagged, even though the latter was American-owned.

Again, conservatives (as opposed to libertarians) do not ignore "the commons," which include environmental resources, but recognize that they need protection. Fisheries management is one area where the market simply cannot be allowed to rip, or world fisheries would be quickly destroyed.

When I sailed aboard merchant ships, we still routinely threw garbage bags overboard every day in mid-ocean, not to mention other pollutants. The countries whose low safety standards you say we should revert to are much worse. We can never go back to those days, nor should we want to.
If the Jones Act were repealed, all U.S. shipbuilding capacity would quickly vanish to other, cheaper shores. We wouldn’t have to worry about whether or not to call on foreign vessels for the next Deepwater Horizon, because that would be our only option.

“Protectionist”? Sure. But the maritime industry has long been one of the world’s most regulated, going back 200 years and more.

All maritime nations subsidized their merchant marines to varying degrees, and almost all have cargo preference laws like the Jones Act, for reasons of national security as well as prestige. Therefore the conditions for a free market do not exist, and perhaps never existed in this sphere. When it comes to shipbuilding, it’s not company against company in a neutral playing field, it’s government against government. It’s not fair competition to send your players naked onto the field when every other player is wearing protective gear.

Once gone, it would take a generation to rebuild a skilled class of shipbuilders. Do we really want China, Pakistan, Brazil, India or Turkey building our Navy’s ships? Many modern U.S. Navy ships have classified features we don't want foreign nations to know about. China already does a pretty good job of stealing our tech secrets without us helping them even more.

Do we want flagged carriers of other nations taking over inland and coastal transport completely from our vessels? What are the security implications of vessels owned and crewed by by other countries carrying shiploads and bargeloads of petroleum products (and soon, liquid natural gas) near our ports and heavily populated coastal areas?

Yes, there's a price to pay. American shipbuilding harbors waste and inefficiencies, just like many of our defense industries. In this area, national security should trump market efficiency, as it always has. that doesn't mean we have to abandon efforts to fight waste, but not by outsourcing all American shipbuilding capacity. Some maritime nations no longer pay that price, and allow other countries to build their tiny navies and merchant marines. But then, their vessels don’t protect the world’s sea lanes.

On those occasions when Jones Act waivers are required, the president can authorize them, as President Bush did in the aftermath of Hurricane Katrina.

Yes, free markets are important. But they must be balanced against other values. To insist on them in an absolute manner is to be a market utopian, not a true conservative. Protecting the Jones Act has long been a bipartisan project on which Americans of all political stripes have agreed over generations.

--Senior Writer, The Waterways Journal
Cheaper does not necessarily mean better - or right. It would be much more desirable to give these issues a measured deliberation instead of producing a dogmatic screed.

Free trade is not a panacea; consider how beholden the U.S. consumer is to China, and what the consequences are. Free trade, ultimately, could make one puke all right. Just as "anything goes" liberalism would.
Boy, it's tough to justify getting rid of something like this - have you considered the additional jobs in terms of manufacturing as well as shipping? And the spinoff from those manufacturing jobs?

You may be right but this seems to be one of those laws that we should be encouraging - at first glance.
Beverly, I've asked the same question: "how do we maintain our manufacturing capability yet remain globally competitive?"

It's a complicated situation,and I don't feel I know enough to know an answer. If the USA imposes many tariffs in retaliation to the tariffs against our products, we might end up in a tariff war with foreign countries and we consumers would see higher prices. I don't like that all that well.

I'd like to see no tariffs, and let the free market allocate who can produce what for the whole world at the best price. The USA would be competitive on some items and not on others. All countries would be competitive on some items and not on others.

I'd like to see an article about your question.

How about it Mr. Malanga? What's your thoughts?
While I am a longtime disciple of Steven Malanga, I must disagree with him on this one. Sober minds are looking anew at the "free trade works" mantra. Until 1929 Republicans were staunch advocates of tariffs and a generally protectionist national policy; after the cataclysm of that year, the party switched and became a free-trade exponent.

The results of that open-minded policy have been disastrous. Even as other countries protect their own industries, the U.S.A. has led the way in lowering or eliminating tariffs, with the result that tens of millions of jobs have been shipped overseas as corporations grew fat on the margins generated by lowered labor costs. Our trade policy is totally out of balance, as the current accounts deficit will amply demonstrate.

Now we are in the end game, with 23 million Americans struggling to find jobs -- and the money to pay for cheap goods made in China and imported back into the U.S. by American corporations.

The only way this works is to negotiate a level playing field -- and play hardball with the Chinese. Until manufacturing is restored in this country, we will continue down a slippery slope to bankruptcy.

As to the merchant marine, we need one, and a robust one at that. Absent American-flagged vessels, we are sitting ducks the next time a major conflict -- not a "police action" like Iraq or Afghanistan -- erupts.

We are down to eating our seed corn, and that's not a safe place to be.

Conservative patriot here: Even granted the costs of maintaining a merchant fleet, I would balk at offshoring all our shipbuilding industry. We may not have used the merchant fleet in the latest wars, but we used it heavily (thousands of ships) in WW II.

We've already seen what happened to the silicon-chip industry: Taiwan, even now threatened with takeover by Communist China, does almost all the manufacturing. The Red Chinese have us by the tender parts already: do we want to lose the ability to do ALL such work?

The trouble is, we haven't figured out how, as a nation, to adjust to the competition from dirt-cheap foreign labor, which we can't match in a First World economy without living in shantytowns. My question is, how do we maintain our manufacturing capability yet remain globally competitive?
My spouse would be one of the 15,000 if not more that would be out of a job were it not for the Jones act- New York State has a maritime academy- there are plenty of young people that still seek out a maritime career. Maybe there should be a better way- not sure what that is-- but maybe people should look at all sides of the coin before they carelessly dismiss the livelihood of thousands of hardworking people.
I used to jump on such ideas whenever the term protectionism is used. However, I now wonder if dropping the barriers truly makes sense. American is the crusader of free trade, yet many of our major trading partners continue to maintain barriers and subsidize key industries. America may be the world's trade sucker.
Please, did anyone really believe Obama and his minions cared if New Yorkers got help? They already had those votes sown up.

Suffer you stupid liberal parasitic supporters of Obama and his Kenyan Clown Circus.
The hell with the maritime unions if they're unwilling to adapt to present realities & find new solutions to stanch or minimize the potential negative impacts of repealing the Merchant Marine Act. "When the going get tough, the tough get going" means anything but whine & bluster enough & you'll get what you want for nothing in return.
Repealing the Jones Act is not enough.

We should also be seeking to repeal all non-safety regulations and taxes which make American-registered shipping uncompetitive with 'flags of convenience'.

There was a time when young Americans went to sea to find their livelihood. How many young Americans consider such a career today? How many would consider it if jobs were available thanks to a competitive U.S. position relative to the rest of the world?
the 'captcha' required 4x for me to 'guess' what it says.... pls make it display the code more clearly?
sad, depressing. One hesitates to even try to spread word of this needless burden on out economy...
The Jones Act is just one of many "rent seeking" laws on the books. This is just one of many that has to be swept out. It stinks that this one is 100 years old. This should have been repealed decades ago.

Frankly laws like this only make it easier for corruption to occur. They in themselves are corrupt.
Thanks Mr. Malanga for demonstrating the costly effects government intervention has upon the final buyer of goods and services, the consumer, Hopefully, you and others will write articles showing that government intervention anywhere in the economy reduces individual freedom and increases consumer economic costs. Thank you, sir.