It’s a sad day when the United States suffers from more restrictive policy than China, yet here we are. Last week Beijing announced that it will allow foreign ships to do something that would be illegal in this country: transport goods between domestic ports.Although details remain scant, it appears that China will permit foreign vessels to engage in cargo relay by which cargo is transported by a company between two ports within a country and then transferred to another vessel owned by the same company for shipment abroad (or the reverse). To be conducted on a trial basis through the end of 2024, the liberalized rules will apply to the transportation of containers from the ports of Dalian, Tianjin, and Qingdao to Shanghai’s Yangshan port (the world’s busiest).The international reaction has been very positive, with some observers noting the move’s potential to help address supply chain woes.The president of the European Chamber of Commerce in China, for example, called the easing of shipping restrictions “a very welcome step which may ease some of the bottlenecks exporters are experiencing” while shipping giant Maersk’s Asia Pacific head of operations said it “may also address some of the factors behind the bottlenecks in supply chains as it could potentially shorten transit times and free up additional capacity for our customers."Beijing's announcement isn't entirely surprising, with the liberalization of international trade cargo under consideration since at least 2019. The logic of less restrictive cabotage laws is apparently sufficiently compelling that even China, hardly an economic freedom exemplar, sees its virtues.Not so the United States, which is subject to the onerous Jones Act. Deemed the world’s most restrictive cabotage law by the World Economic Forum, the Jones Act limits domestic waterborne cargo transport to vessels that are U.S.-flagged, U.S.-built, and mostly U.S.-crewed and owned. Such vessels are significantly more expensive to build and operate than internationally-flagged ships, which no doubt helps explain the lack of cargo relay and transshipment in the United States. As the Congressional Research Service points out:Once loaded, containers of imports are discharged from a ship in a U.S. port, Jones Act-compliant vessels must be used if they are transshipped by water to other U.S. ports…Transshipment of international containerized cargo by feeder ships is prevalent abroad, but the practice does not exist in the United States. Instead, essentially all movement of containers between ports in the contiguous United States, including import and export containers, occurs by truck or train.Lacking the hub and spoke model of smaller vessels (“feeder ships”) transporting containers to ports for eventual placement on larger ships, containerships instead stop at a few U.S. ports to pick up and drop off goods for import and export before sailing to a foreign destination. That the United States is an outlier in its lack of feeder shipping suggests the current approach is suboptimal, producing inefficiencies that are particularly ill-advised at a time of pronounced supply chain strains.Reform should be a pressing agenda item. Fortunately, a new bill introduced earlier this month by Sen. Mike Lee offers a step in this direction by, among other actions, providing temporary waivers of the Jones Act for vessels transporting cargo from one U.S. port to another in order to relieve congestion, backlogs, or delays at a port. Unfortunately, even such modest reform is unlikely to be passed by a Congress and White House that are in thrall to pro-Jones Act special interests.So long as this is the case the United States will remain stuck in the maritime past, clinging to outdated protectionism while even the likes of China pursue liberalization. What a pity.
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