The elephant in the room

I haven't spoken about the Jones Act in any public forum since I left the Jones Act Reform Coalition four years ago to start a new company. The coalition early on had suggested that reinvigorated coastal shipping could have significant economic and environmental benefits. So that, curiosity, and the desire to catch up with friends (and adversaries) in the maritime sector led me to attend the Maritime Administration's Short Sea Shipping Conference this month in New York. I harbored the fleeting hope that I might also hear an objective assessment of both the potential and the problems in reaching it, not the least of which was the shipbuilding restrictions placed on the market by the Jones Act.

Walking into the room, it was - no surprise - except for the panelists, pretty much the same cast of characters I had left four years earlier. The former lobbyist who had traded his Washington uniform for the hat of a semi-entrepreneur (semi, because he's operating subsidized ships), union representatives, ocean carriers, shipbuilders, Marad staff and a handful of the other usual suspects crowded the room in their uniformly blue suits. The woman port executive next to me asked, "Where are the women?" They weren't the only ones missing. Despite the fact that one of the key sessions was entitled "What Do Shippers Need," there wasn't a shipper in sight. No surprise there, either, since customers are generally considered the skunks at these picnics. I eventually spied Michael Berzon, a former shipper who now represents the Port of Hamburg and who was there to speak about what the Europeans - who have no shackles quite like the Jones Act - are so successfully doing to encourage short-sea shipping among their 19 country members.

When his turn on the panel came, Berzon rhetorically asked the shippers in the room to raise their hands. Only one young man, from a major food products and chemical company, so identified himself. He was easy to spot since he was 20 years younger than anyone else in the room and the only one without a tie besides me. Right before lunch the following day, I asked him if anyone the entire time had asked him what he thought. He said, "No."

Speaker after speaker underscored the potential value of the domestic and international short-sea markets. The audience was ready to hear the pitch. The panelist from Apex Marine talked about the five East Coast routes his company had researched, and the required cost curves to induce shippers to move from one modal competitor to another and how difficult it was to get there from here. A full third of the cost to move a box came from the ship. He'd only received six bids from 22 U.S. yards, at costs ranging from $24 million to $55 million a copy, vs. $6 million to $19 million on the open market, $9 million for a 5-year-old vessel. Others told similar stories of failure, success (in Europe) and frustration.

Surely, I thought, someone would at least talk about the Jones Act, which proscribes the market and drives up costs by limiting ownership and ship construction. But only one person ever uttered the "J-word." Everyone in the room, of course, knew it was the handcuff that made the conference a sham. Instead, when it came time to discuss solutions, one guy proposed taxing the other modes to make them less competitive. Others wanted to tap into the Highway Trust Fund, but the truckers told them in no uncertain terms that was a non-starter. One breakout group (not mine) proposed opening the Act for a few years to replenish the ship supply, but that recommendation mysteriously disappeared by the end of the conference.

The problem is that shipping, like all businesses, is ultimately about economics - not just for the unions or the carriers, but for the customer. In this business, though, no one really cares what shippers think. One carrier said he knew what they thought because he heard from them all the time. Maybe if he actually processed what they said he'd have different point of view. What they want is a competitive price, and to not be held hostage to anyone, most of all people who won't help themselves. Can you imagine a conference of aviation or rail or trucking executives without half the room filled with customers? I can't. In this industry, customers are a distraction.

So, since the conference won't mention the elephant in the room, I will: Jones Act. Let me say it again: Jones Act. Jones Act. Jones Act. Jones Act. Jones Act. You want short-sea shipping? Then delete two little words from the Jones Act: "Built in . . . (the United States)." Everything else can stay the same, and then everything else will change.

Rob Quartel is chairman and chief executive of FreightDesk Technologies. He can be reached at (703) 207-1567, or via e-mail at rquartel@freightdesk.com.

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