preventable government action adds more to the cost of living for every citizen

Dear Forum:

Probably no single preventable government action adds more to the cost of living for every citizen in Hawaii, than the restraint of trade known as the Jones Act.
This 100 year old act of protectionism is crony capitalism at its worst: every person in Hawaii suffers, so a few can benefit.
Due to near-monopoly protected and inefficient shipping possibilities between the mainland and Hawaii, the costs of goods shipped here (or exported there) are needlessly and significantly higher. We all pay more and get less than we should as a result. Local businesses suffer and fail as a result, also.
The justifications were marginally logical 100 years ago, and for Hawaii today make no sense at all, neither economic nor for national defense.
Puerto Rico has recently undergone a study by the federal General Accounting Office, which concludes that it raises the cost of shipping and the cost of living for everyone there. They will probably receive an exemption. Guam already has a partial exemption.
It protects Matson (recently spun off from Alexander & Baldwin), Horizon lines (currently near bankruptcy) US seafarers unions, and few others only.
Linda Lingle recently came out in support of continuing the Jones Act, after having avoided taking a public position for decades.
Charles Djou is firmly against the Jones Act, as was Ed Case and John Carroll.

Every Hawaii Democrat currently elected or running for office firmly supports this outmoded and harmful crony protectionist legislation, and they always have.
Please read below to get up to speed on this vital issue.

We desperately need a exemption for Hawaii.
aloha

(If you would like to be added to the email list from the Hawaii Shippers Council to get updates on this,
contact them directly: pacmar@hawaiiantel.net   )
-------- Original Message --------
Subject:     Cong Hanabusa off-course on Jones Act
Date:     Fri, 17 Aug 2012 10:38:22 -1000
From:     Michael N. Hansen <pacmar@hawaiiantel.net>
To:     Michael N. Hansen <pacmar@hawaiiantel.net>

August 17, 2012
Congresswoman Colleen Hanabusa off-course on Jones Act

Dear Friends,

Democratic Congresswoman Colleen Hanabusa (HI CD-1) recently affirmed her support for the Jones Act, which requires U.S.-built ships in domestic trade, then correctly noted her concern that the United States has lost the ability to build ships, and finally she said shipping is not a cost factor for Hawaii businesses and consumers.  This completely incoherent message indicates how far off-course Cong Hanabusa is in regards to the Jones Act.

The Congresswoman’s statements were made on August 8th when she appeared on KHVH-Rick Hamada Show’s candidate forum series, and were in response to a listener question asking about her position on the Jones Act.   Beginning her response, Cong. Hanabusa said, “Sally, you know, and Rick knows this very well.  I’ve always been somebody who supports the Jones Act.”

Jones Act

The Jones Act, or formally Section 27 of the Merchant Marine Act of 1920, requires that a vessel be U.S.-built, -flag, -owned and -crewed in order to transport cargo between two domestic points within the United States.  There is an analogous statute covering domestic passenger carriage, the Passenger Vessel Services Act of 1886.

The origins of the Jones Act are widely misunderstood including by Cong Hanabusa, who repeated the usual self-serving Jones Act industry falsehood that “It’s really something that started to help our military. It’s a merchant marine statute.”  In fact U.S. Senator Wesley Livisey Jones (R-WA) introduced his eponymous legislation to exclude Canadian ships and merchants from the Alaska trade, and protect that trade for his domestic merchant constituents in Seattle.  As such, the Jones Act was conceived as purely protectionist commercial legislation.  It wasn’t until later that the Jones Act industry began to wrap itself in the flag to justify its protections and high costs on the basis of national security.

In surprising contrast to her support for the Jones Act, Cong Hanabusa went on to say, “And, as we look, the one thing that troubles me the most, is you talk about an industrial base – we have lost our presence in terms of shipping and the ability to build ships.”  The Congresswoman is correct to say that the United States is no longer competitive in shipping and shipbuilding especially in respect of the kinds of large, self-propelled ships that Hawaii and the other noncontiguous jurisdictions – Alaska, Guam and Puerto Rico – depend upon for interstate surface transportation.

The Hawaii Shippers Council has put forward a very moderate Jones Act reform proposal that would address this “troubling” problem identified by Cong Hanabusa in its most critical aspect for the noncontiguous jurisdictions.  We propose that the noncontiguous trades be exempted from U.S.-build requirement of the Jones Act for large, self-propelled oceangoing ships, which would allow Foreign-built U.S.-flag ships to be used in the Alaska, Guam, Hawaii and Puerto Rico trades.  This targeted reform would not negatively impact any jobs, maritime or otherwise, in the noncontiguous jurisdictions.

Former Republican Cong Charles Djou (HI CD-1) who is challenging Cong Hanabusa in the November 6th general election, declared his Jones Act position in a candidate survey conducted by the Honolulu Star-Advertiser in advance of the August 11th Hawaii State primary election, stating, “I favor exempting Hawaii from the Jones Act, as most agree this protectionist law increases the cost of goods sold in Hawaii.”  In all likelihood, a full exemption from the Jones Act for Hawaii is not realistic for a variety of reasons and could not be passed in Congress.

Ka Lei Eggs

Disingenuously, Cong Hanabusa went on to justify her pro Jones Act stance by saying that Ka Lei Eggs, the only remaining animal related agricultural producer left in the state outside of the cattle industry, is not affected by shipping by using a clever dodge to arrive at that conclusion.  This was not very courteous treatment of Ka Lei’s third generation owners who are constituents of Cong Hanabusa’s former State Senate district and whose family is well known to her.

Cong Hanabusa said, “I tell people one thing when they talk about the Jones Act and high costs.  Look at the cost of eggs in Hawaii. I grew up in Waianae; Mikilua that’s where Ka Lei Eggs is from. . . . .  Look at that cost, compare that cost to Safeway’s eggs or someone else’s eggs.  You will find the local eggs which have no shipping is still more expensive.”  Essentially, the Congresswoman asserted that because Ka Lei is a local producer they have no shipping costs, while mainland eggs, which are significantly cheaper, do incur shipping costs, therefore shipping is not a cost issue for Hawaii producers and consumers.

Nothing could be further from the truth.  One of the co-owners of Ka Lei, Lois Shimabukuro, appeared December 12, 2011, on Hawaii Reporter TV to discuss the “Jones Act Impact on Hawaii Business.” Ms. Shimabukuro described in no uncertain terms how domestic shipping “impacts the cost of our ability to do business and provide food for the state” and said “it’s come to the point where we are wondering whether it’s worth continuing the business.”  She noted that Hawaii has already lost its dairy, pork and fresh chicken industries.

Ms. Shimabukuro relates how they once relied upon local manufacturers who conveniently provided cost effective products for their operations: from the Weyerhaeuser plant in Iwilei that produced cartons and egg trays to the Carnation Corporation feed mill at Pier 23 in Honolulu Harbor that once manufactured finished feeds from bulk grains.  Today Ka Lei must import feed in containers and egg trays from North Carolina which makes the cost of the trays “less than the cost of the freight.”

The single largest impact on animal agriculture in Hawaii has been the loss of the local feed mill that once shipped in bulk feed grains and manufactured finished feeds.  Bulk handling and transport is much less costly than container shipping, which is better suited for finished merchandise, and local milling provides fresher feed that can be ordered on short notice as opposed to arranging shipments of finished feeds in containers from a mainland source.

Carnation sold their operation to Fred L. Waldron & Co. Ltd. in the mid-1990’s and Waldron failed a couple of years later ending the local milling of feeds.  The owners of HFM First in Foods / Hawaiian Flour Mills, Kerr Pacific Corporation, looked seriously in the late 1990’s at building a smaller feed mill alongside the grain silos at Pier 23, but decided against it because of the lack of Jones Act bulk carrier ships to transport the feed grains.  Closure of the Carnation feed mill led directly to the demise of the dairy, pork, fresh chicken and beef cattle feed lot industries in Hawaii.

Today HFM continues to mill flour at its Pier 23 facility using wheat imported from Canada on foreign flag bulk carrier ships operating in a parcel trade between the West Coast of North America and New Zealand and Australia.   Those ships are prohibited by the Jones Act from carrying cargo from the U.S. West Coast  to Hawaii.  As the kinds of grains needed to produce animal feeds are largely grown in the United States and not Canada, the foreign flag bulk carrier option is not available for this purpose.

The owners of Kerr Pacific have said that they could not operate their HFM flour mill if they had to pay Jones Act freights to ship grain to Honolulu.

We would entreat Cong Hanabusa and her challenger former Cong Charles Djou to consider our very modest reform of the Jones Act that would provide so much real relief for the residents of the noncontiguous jurisdictions.  Our reform proposal is attainable if done in concert with the other noncontiguous jurisdictions, and our next U.S. Representative from Hawaii Congressional District 1 could provide much needed Congressional leadership to achieve that goal.

Best regards,

Michael Hansen

President
Hawaii Shippers Council
pacmar@hawaiiantel.net
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The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender their goods for shipment with the ocean carriers operating in the Hawaii trade.
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Cong. Hanabusa’s opponent in the November 6th general election will be Republican Charles Djou in a rematch of their 2010 contest.
Charles Djou won a special election in mid-2010 to replace U.S. Representative Neil Abercrombie (D) after he resigned from HI CD-1 to run for Hawaii governor.  Mr. Djou subsequently lost the seat to former State Senator Colleen Hanabusa (D) in the November 2010 general election 46.77% to 53.23%.

From the Honolulu Star-Advertiser, Friday, July 27, 2012
http://elections.staradvertiser.com/cifw/election12
 

Charles Djou
Party: Republican
Age: 41
Job: Attorney; US Army Reservist.
Born in Los Angeles, CA. In Hawaii since 1973, arrived from Los Angeles, CA

4) Should Hawaii be exempt from the Jones Act, the federal law that protects the domestic shipping industry from foreign competition?
Yes. My wife and I grew up in Hawaii and, like many families, we want to be able to raise our children here -- even though it's more expensive than on the mainland. We know, however, that with rising costs, many people have to relocate to the mainland to survive. That is why I favor exempting Hawaii from the Jones Act, as most agree this protectionist law increases the cost of goods sold in Hawaii.
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Rick Hamada Show KHVH 830 AM
Candidate Forum: Senatorial Candidate Linda Lingle
Friday, August 10, 2012
(go to minute 24 to her discussion of the Jones Act)
http://www.khvhradio.com/player/?mid=22340571

Former Gov. Linda Lingle made this speech on her views about the Jones Act

at the Associated Builders and Contractors Member Appreciation Dinner on July 10, 2012

http://www.hawaiireporter.com/lingle-defends-jones-act-shipping-law/123

"...As Hawaii’s next U.S. Senator, I will be the first to call for a definitive study and report by the General Accounting Office into the pros and cons of the Jones Act as it relates to Hawaii and the Pacific region.

But the Hawaii study, unlike the GAO study that is currently being conducted with respect to Puerto Rico, must consider U.S. national security interests, U.S. military supply lines, maritime security as it relates to the State of Hawaii, shipping costs, the federal Harbor Maintenance Tax and Trust Fund, the effect of foreign competition on the U.S. commercial shipbuilding industry, the effect of foreign competition on the U.S. merchant marine, along with all of the other issues that would be impacted by the repeal of the Jones Act, a law that has well-served our nation’s security interests for over 92 years...."

So as of today, I’m unconvinced that repeal of the Jones Act is in the best overall interests of the United States, Hawaii and the Pacific region..."

Please find below transcripts of Cong Hanabusa and Ms. Shimabukuro’s recorded statements referenced in the foregoing article.
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Wednesday, August 8, 2012 08:00 – 09:00 a.m.

Rick Hamada Show KHVH 830 AM
Candidate Forum: Congressional Candidate Colleen Hanabusa

Audio total length:      36:14 mins
Jones Act Discussion: 34:17 mins

http://www.khvhradio.com/player/?mid=22336936

Partial Transcript

Rick Hamada: Sally on Maui.  Thank you Sally; you have the last call for Colleen Hanabusa. Good Morning.
Sally: Good morning. I have a question about the Jones Act. How do you feel about the high prices of our goods here in the Islands.  Now that we have the drought on the mainland, what are your concerns about our limited restrictions on shipping here?
Colleen Hanabusa:  Sally, you know, and Rick knows this very well.  I’ve always been somebody who supports the Jones Act.

And let me be clear as to what the Jones Act is about. The Jones Act monitors shipping inter-state and intra-state in other words, and that’s why this issue is regarding how we get goods to the neighbor islands of course including Maui, Kauai, Molokai and Lanai.

The Jones Act, if you go back into history is really something that . . . .
music
Rick Hamada: I’m so sorry about that. Are we really that close? We have about half a minute left

Colleen Hanabusa: It’s really something that started to help our military. It’s a merchant marine statute.
And, as we look, the one thing that troubles me the most, is you talk about an industrial base – we have lost our presence in terms of shipping and the ability to build ships.
I tell people one thing when they talk about the Jones Act and high costs.  Look at the cost of eggs in Hawaii.  It’s just myself, my husband and my dog when I’m home.  And, you know, I will support Ka Lei Eggs, for example – it’s the local brand.  And, I grew up in Waianae; Mikilua that’s where Ka Lei Eggs is from.  Look at that cost, compare that cost to Safeway’s eggs or someone else’s eggs.  You will find the local eggs which have no shipping is still more expensive.

Thank you.

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December 12, 2011
Hawaii Reporter TV

Program ”Jones Act Impact on Hawaii Business”
Malia Zimmerman, Host & Publisher, Hawaii Reporter http://www.hawaiireporter.com/

Lois Shimabukuro, Co-Owner, Ka Lei Eggs http://www.kaleieggs.com/
Marissa Capelouto, President, Oahu Express Ltd. www.oahuexpress.com
Ed Case, former Congressman 2002 –2007 http://www.edcase.com/

Partial Transcript

Lois Shimabukuro Excerpt at 13:55 mins
http://www.youtube.com/watch?v=HqHLwV19fmo

Lois Shimabukuro:  It’s more challenging
Um, we bring in a lot of feed for the chickens and we’re faced with about a 33 ½ % freight surcharge that impacts the cost of our ability to do business and provide food for the state.
Um, it has become ah very expensive um with the grain prices going skyrocketing especially on corn and soy.
Um, it has, you know, it’s come to the point where we are wondering whether it’s worth continuing the business because of all the escalating costs.  We have to pass it on.
I’m a third generation.  My sister and I are third generation.  Um, we call ourselves farmers.  Um, and, um, you know, over the years, when my grandfather started the business, it was in 1947.  Um, and then my father and his brothers continued the business and grew the business.
And now we’re in the business, and we honestly feel that it’s become so, our hands are tied, you know, a lot of times, because we’re at the mercy of restrictions.  You know, there’s no manufacturing here so we can’t source local product for our business.
Um, and, like Ed said, everything has to be shipped in, you know, equipment, and it’s very costly.  Um, and, for me, the cost of my egg cartons are, um less than the cost of the freight.
So, it’s, you know, it’s just one thing after another and ah we feel that, that we have no choice so we, we ship through Matson.
Um, there would not, you know, there wouldn’t be a choice of eating local fresh eggs versus mainland eggs. Some of them are being shipped in from Iowa to the California coast and then shipped to Honolulu or to Hawaii.
Um, and, there would probably be a huge price war on mainland because there are so many producers out there you know from the Northwest down to California and you know Central United States, Midwest.
Um, but the thing that I think really bothers us is the fact there is a huge sustainability platform [problem] in Hawaii right now.
And in order for Hawaii to maintain a food supply we have to support the local production of, not just produce, but also there’s no dairy industry, there’s no pork industry, and there’s no fresh chicken industry.
Um, I think we’re the last animal related agricultural industry.