Keeping Up with the Jones Act

Often when Congress tries to help one industry by passing a law in its favor, it only hurts another. Latest case in point is that of the Pacific Northwest's softwood lumber industry, which has been losing its traditional East Coast markets at a spectacular rate to Canadian lumbermen in British Columbia. In the past ten years Western Canadian lumber shipments to the East have jumped from 7% to 57% of the market.

A basic reason for the Canadian gain is the Jones Act of 1920, which was designed to protect the uneconomic U.S. merchant marine from low-wage foreign competition. Among other things, the Jones Act requires that all shipping between U.S. ports must move in high-cost U.S. vessels. This means that Pacific Northwest lumbermen must pay $36 per 1,000 board feet to ship green lumber to East Coast ports in U.S. vessels, while Canadian lumbermen pay as little as $26 on foreign-flag freighters. Canadian lumber, which is often of better quality than Pacific Northwest lumber, thus consistently undersells it. And to compound the injury, the regulations have hurt rather than helped the U.S. merchant fleet: the Eastern lumberyards' switch to Canadian softwood has put out of business five of the eight U.S. shipping lines that used to serve the Pacific Northwest.

Desperate for relief, Northwest lumbermen have been pressuring Washington to exclude lumber shipments from the Jones Act, to put quotas on imports of Canadian lumber, and to raise lumber tariffs to the legal maximum of 8%. With the issue pressed by Democratic Congressmen from Washington and Oregon, President Kennedy has pushed through Congress a bill appropriating $165 million for construction of roads into the Pacific North west woods to cut the cost of hauling out logs. But when he tried to amend the Jones Act, the President ran head-on into opposition from maritime interests and from Southern Congressmen, who are not inclined to help the Northwest compete against their own Southeastern timber industry.

The U.S. Tariff Commission is currently studying the arguments for lumber quotas and tariff increases. And last week U.S. negotiators sat down with Canadian officials in Ottawa to try to persuade them to put voluntary quotas on lumber exports. But the Canadians--who already run a $1.2 billion trade deficit with the U.S.--see no reason to increase it.

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