PortandTerminal.com, January 2, 2019
It costs 91% more to live in Hawaii than the average of other states in America. One congressman says he knows why and has a plan to fix it.
WASHINGTON – Congressman Ed Case (D-Hawaii), who represents Hawaii’s 1st Congressional District, is fed up with the high cost of living in Hawaii and is trying to do something about it.
Specifically, Case wants changes made to the Jones Act which he feels is responsible for the artificially high cost of living in his state.
The Jones Act requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents.
Rep. Case has said that his “major issue,” with the Jones Act is that it restricts competition and has a disproportionate effect on “island jurisdictions such as ours.”
In Hawaii’s case only two U.S-flag domestic cargo lines, Matson and Pasha, qualify under the Jones Act which gives them a “virtual duopoly over our lifeline and they do not act as an effective market check on each other,” said Case.
Case says Hawaii imports “well over 90% of its life necessities, including food and other consumer goods, construction and housing supplies and raw materials for Hawaii industries like agriculture, by ocean cargo only.”
“There is only one way to get our stuff here, and that is by shipping. There is no competition from airlines, no competition from buses, trains, anything else.”U.S. Rep. Ed Case, D-Hawaii
“In the rest of our country, if (maritime) shipping rates are too high, then there are transportation alternatives like trucking and rail that act as a market check on the shipping companies,” continued Case. “But that is not a choice in our noncontiguous jurisdictions, and if there are artificially limited numbers of shippers (thanks to the Jones Act), then the price of virtually everything we need is jacked up.”
Let’s look at the cost of living in Hawaii versus other states in more detail.
The cost of living in Hawaii vs other states
Hawaii is consistently rated as one of the most expensive states in the United States to live in, costing 91.4% more to live in than the average state in the country.
The Council for Community and Economic Research, using data from 2019 Q2, calculated that as far as cities go, only San Francisco (#2) and Manhattan (#1) are more expensive to live in than Honolulu (#3).
Here’s an example. Someone earning $50,000 a year and living in Houston, TX would need to earn almost $96,000 a year to maintain the same quality of life in Honolulu, HI. When basic staples like a half-gallon of milk cost 2.3 times the national average and a 5 lb bag of potatoes cost $10.38, or 3.3 times the national average, it’s easy to see why life is so expensive in Hawaii.
The Jones Act
The Jones Act is a federal law that regulates maritime commerce in the United States. Specifically, the Jones Act requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents (Source: Investopedia).
The Jones Act increases the cost of shipping to Hawaii, Alaska, Puerto Rico, and other non-continental U.S. lands that rely on imports by restricting the number of vessels that can legally deliver goods.
That’s because the supply of American-built, -owned, and -operated vessels is relatively small compared to the global supply of ships. If you want to import goods into Hawaii, Alaska or Puerto Rico they need to come by sea, and there are very few shipping companies whom you are allowed to work with thanks to the Jones Act.
This creates a scenario in which shipping companies can charge higher rates because of a lack of competition, with the increased costs passed on to consumers. Suddenly a bag of potatoes costs 330% more than it does on the mainland.
Congressman Case’s three proposed changes to the Jones Act
Congressman Case has introduced three related bills in Congress to modify the Jones Act.
H.R. 5500, or the Noncontiguous Shipping Competition Act, which would exempt additional noncontiguous trades within the U.S. from the Jones Act, including those between the “lower 48” and Hawaii, Alaska and Puerto Rico. With the change Chase is proposing, those three trades would be given an exemption to “coastwise” shipping laws and treated in a way that is more similar to the way shipping is regulated between the mainland U.S. and American Samoa, the Northern Mariana Islands and the Virgin Islands. However, the provision would not apply in cases in which there are at least three owners or operators and each has at least a 20% market share.
H.R. 5499, or the Noncontiguous Shipping Reasonable Rate Act of 2019, which Case says would benchmark the definition of a reasonable rate that domestic shippers can charge as “no more than 10% above international shipping rates for comparable routes.” Case said while the Surface Transportation Board has the authority to adjudicate and set precedent on what a “reasonable rate” is for Jones Act shipping, “it has almost never been used and never to a clear conclusion on what is a reasonable rate. ” The bill would use as a benchmark an “international ocean rate index recognized by the Federal Maritime Commission,” which currently regulates foreign shipping.
H.R. 5498, or the Noncontiguous Shipping Relief Act of 2019, which would allow transportation of merchandise in noncontiguous trade on foreign-flag vessels crewed by U.S. citizens. The bill also has provisions that would modify the personal injury provisions in the Jones Act by allowing employers to participate in “an authorized compensation plan under the Longshore and Harbor Workers’ Compensation Act” (LHWCA). The Department of Labor Office of Workers’ Compensation Programs notes that currently the LHWCA and Jones Act “are mutually exclusive regimes providing compensation for work-related injuries suffered by different categories of maritime employees.”
Congressman Case has acknowledged that the Jones Act is supported by a powerful lobby, but he thinks it’s possible to find bipartisan support in Congress for Jones Act reform.
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