Maritime Issues:

Assessment of the International Trade Commission's 1995 Analysis of the Economic Impact of the Jones Act

RCED-98-96R: Published: Mar 6, 1998. Publicly Released: Mar 6, 1998.

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John H. Anderson, Jr
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Pursuant to a congressional request, GAO reviewed the International Trade Commission's (ITC) 1995 report on the economic impact of the Jones Act, focusing on: (1) ITC's estimate of the impact of reduced transportation costs on Alaska's North Slope oil production; (2) ITC's estimate of the impact that repealing the Jones Act would have on the number of U.S. workers in the domestic maritime industry; (3) ITC's methodology for calculating the differential between the shipping rates of domestic and foreign vessels, and the accuracy and completeness of the data ITC used; and (4) whether ITC included in its analysis the additional costs to foreign vessel operators of complying with relevant U.S. laws if they were allowed to engage in domestic trade.

GAO noted that: (1) ITC's estimate of the impact of reduced transportation costs on Alaska's transportation costs on Alaska's North Slope Oil production is not excessive; (2) ITC's estimate implied a small reduction in domestic oil production; (3) ITC's assumption about the number of jobs that might be affected by the repeal of the Jones Act appears reasonable, given that major segments of the maritime industry are generally recognized as currently being competitive with foreign-flagged vessel operators; (4) critics believe the degree to which these segments remain competitive depends on how existing immigration and other relevant laws would apply to foreign-flagged vessel operators and foreign seaman working in the United States if the act was repealed; (5) GAO cannot predict at this point how all relevant laws would apply; (6) likewise, the accuracy of ITC's estimate about the percentage of workers that could lose their jobs in the coastwise maritime sector cannot be determined because ITC's estimate relies on an assumption about how cargo would be divided between US- and foreign-flagged ships; (7) ITC's methodology appears to be reasonable, though declines in Alaskan oil shipments would probably decrease ITC's estimated rate differential of 89 percent; (8) while ITC's overall approach seems reasonable, the applicability and accuracy of the data it used to calculate the rate differential cannot be verified because a substantial portion of shipping information was proprietary and unavailable to ITC; and (9) ITC did not fully consider the costs of compliance.

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