In a recent column for The Dispatch, I explained that government policies intended to protect incumbent U.S. suppliers, raise the prices of their goods and services, and thereby harm American consumers provide a reason to be skeptical of new Biden administration efforts to reinvigorate U.S. antitrust and competition policy. Today comes a perfect example of this very thing.

In particular, the Wall Street Journal reports the Biden administration plans to attack industry concentration and high prices in the shipping industry:

The administration, in a sweeping executive order expected this week, will ask the Federal Maritime Commission and the Surface Transportation Board to combat what it calls a pattern of consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market.

The administration says the relatively small number of major players in the ocean-shipping trade and in the U.S. freight rail business has enabled companies to charge unreasonable fees.

Tellingly, the Journal repeatedly clarifies that this action will affect only “oceangoing” shipping. That’s almost certainly because the President has long supported U.S. laws and regulations (e.g., the Jones Act) on internal and coastwise shipping that have actually been shown to drive “consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market.” Indeed, one of Biden’s first executive orders stated that he “will continue to be a strong advocate for the Jones Act and its mandate that only U.S.-flag vessels carry cargo between U.S. ports, which supports American production and America’s workers.”

Yet, as we here at Cato have repeatedly documented, the Jones Act and other U.S. “cabotage” restrictions have undermined competition and harmed American consumers and the U.S. economy more broadly:

Jones Act restrictions have inflated U.S. shipping costs because the transport of cargo between U.S. ports and on inland waterways is off‐​limits to foreign competition. Estimates of the direct economic damage vary widely, ranging from about $650 million to almost $10 billion per year, because the act has so distorted the U.S. market that it’s difficult to construct a “free market” counterfactual. One of the most recent and comprehensive analyses, by the OECD, found that repeal of the Jones Act would increase U.S. domestic output by $40 billion to $135 billion, thanks primarily to increased industrial activity in other sectors: reduced freight rates would stimulate demand for intra‐​national trade (via U.S. waterways), thus generating economic growth. These harms are particularly acute for places that lack alternative means of transport, such as Hawaii, Alaska, and Puerto Rico, and are a core reason Jones Act restrictions were often waived during times of crisis (e.g., Hurricane Maria in 2017).

And, just as economic theory (and tons of practice) predicts, U.S. maritime protectionism and other onerous shipping regulations also have accompanied — if not encouraged — concentration in the domestic industry, resulting in a small cabal of old, politically-powerful shipbuilders and Jones Act-compliant shipping companies controlling a U.S. market that has seen no new major entrants for decades. Among the U.S. liner companies offering regularly scheduled container freight service to the non-contiguous areas of the country, the biggest player, Matson, was founded in 1882, and second-place Crowley started ten years later. TOTE Maritime dates to 1975, while relative baby Pasha Group got involved in coastwise shipping in 1999. Matson and Crowley alone account for more than one-third of all Jones Act oceangoing ships (34 of 96).

Hardly a dynamic industry!

Tellingly, the movement of containerized cargo by ship is practically non-existent in the lower 48 because the Jones Act makes it too expensive to do so (never mind all those large U.S. ports and heavily-populated coastal cities). In this way, the law and related regulations boost the market power of not only Jones Act shippers, but also the very U.S. freight rail companies the Biden administration now wants to regulate. (They benefit from a lack of potential waterborne freight competition traveling between American ports.)

As I noted a few weeks ago, “I’d be much more willing to take [trustbusters’] concerns seriously if they went after the anti-competitive practices facilitated by law with the same zeal as they do the ones supposedly plaguing the ‘free market.’ ” The Jones Act would be a perfect place for the White House to start.

Somehow, I doubt they will.

Special thanks to Cato’s Colin Grabow for research assistance.