US Shipbuilders Gird for McCain Assault on Protectionist Law

Bill Skinner of VT Halter Marine in South Mississippi and fellow chief executives at about 150 other U.S. shipyards know what to do when Sen. John McCain starts rattling his free-trade saber in their direction.

They alert political allies, make sure industry lobbyists head to Capitol Hill and beckon employees to write or phone their senators.

The shipbuilders’ antennae are up this week, warning that the Republican from Arizona is once again threatening to “decimate” their industry with legislation to kill the Merchant Marine Act of 1920.

The law requires that any ship carrying cargo between U.S. ports must be American-built, American-flagged and American-crewed. McCain has tried repealing the law several times in the past, without success.

Now, just a couple of weeks into the new, Republican-controlled Congress, he is seeking to add an amendment that would obliterate the law commonly known as the Jones Act when the Senate takes up legislation to allow construction of the controversial Keystone XL oil pipeline.

McCain, Chairman of the Senate Armed Services Committee, has shrugged off arguments that tossing the Jones Act overboard would hurt the Navy. He calls the law an arcane, “unnecessary, protectionist restriction … that has too long hindered free trade, made U.S. industry less competitive and raised prices for American consumers.”

To large U.S. shipbuilders, however, the Jones Act has only risen in importance with the passage of time and the growth of foreign competitors buoyed by cheap labor.

If the law were repealed, Skinner said in a phone interview this week, VT Halter Marine, which employs 1,800 workers at Pascagoula and two more shipyards in Moss Point, Miss., would be put “pretty much out of business.”

The Pascagoula yard has recently built two 750-foot-long container ships that can carry tractor-trailers, while the Moss Point operations are completing work on 10 tug-in-barges — barges with their own built-in tugboats — that each can transport 185,000 barrels of crude oil. In addition, the firm does work for the U.S. government, Skinner said.

“It’s hard to compete with shipbuilders in China and Korea that heavily subsidize these shipbuilding programs,” he said, adding that the fallout of terminating the Jones Act also would “trickle down” to another 900 subcontractors and the broader economy.

The coalition opposing McCain includes the Navy, big labor unions representing workers at East and West Coast shipyards and crews of so-called Jones Act vessels.

Republican Rep. Steven Palazzo of Mississippi and Democratic Rep. Joe Courtney of Connecticut led a bipartisan group of 32 House members from shipyard states in opposing McCain’s move Tuesday in a letter to Senate Majority Leader Mitch McConnell of Kentucky and Senate Minority Leader Harry Reid of Nevada.

They noted that McCain’s amendment hasn’t been considered by a Senate committee and is unrelated to the Keystone pipeline.

The amendment, they wrote, “would gut the nation’s shipbuilding capacity and have far-reaching impacts across the nation.”

Republican Sen. Roger Wicker of Mississippi said he will oppose McCain’s move. Shipbuilding, he said “plays a crucial role in our commerce and national defense.”

Preserving the ability to build complex naval vessels, the House members warned, is “essential to the safety and security of our nation.” They referenced a 2013 U.S. Maritime Administration study that found that nationwide, the industry directly or indirectly supported 400,000 jobs, while contributing $24 billion in employee wages and $36 billion to the nation’s gross domestic product.

Mississippi shipbuilders and ship-repair shops employ 23,450 workers, according to the study. Tom Allegretti, Chairman of the American Maritime Partnership, an industry coalition, estimated that the industry contributes $2 billion a year to the state’s economy.

McCain points to a Congressional Research Service study last year that found it costs $6 a barrel for a U.S. ship to carry crude oil from the Gulf Coast to northeastern refineries, while foreign tankers can deliver crude to eastern Canada for $2 per barrel. The study also found that Iraqi oil could be shipped to U.S. refineries on the West Coast for about $2.30 per barrel, compared with $10 to carry shale oil from south Texas through the Panama Canal to the same refineries.

Matthew Paxton, President of the Shipbuilders Council of America, calls the Congressional Research Service study “flawed,” citing a separate report by the Government Accountability Office, Congress’s investigative arm, that adds context.

That report noted that foreign-flagged ships are exempt from compliance with a host of U.S. safety and security restrictions, not to mention corporate-tax laws. Contracts with mariners unions can send the costs of a U.S. crew as much as five times higher than one on a foreign vessel, it said.

McCain’s bill would require foreign ships to meet U.S. safety and security requirements.

“We keep those crews safe, those cargoes safe as they move around the United States,” counters Paxton. “If McCain’s amendment passed, the only real benefit is the outsourcing of the ship-manufacturing sectors to countries that protect their shipbuilding industry with government programs.”

Calling the legislation a national-security issue in a climate of global terrorism, he said Americans might not feel comfortable if they saw foreign-flagged vessels floating down rivers near packed sports stadiums.

“The shipyard industry, both shipbuilding and repair, is not an industry you can just turn on and off,” Paxton said. “If you start to lose it, it doesn’t necessarily come back.”

This article appeared in print in the January 21st, 2015 edition of Hamodia.