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McCain Prepares For Battle With Military Industrial Complex

Republican Sen. John McCain set his sights squarely on the military industrial complex Thursday, claiming that lobbying by special interests makes it “almost impossible” for Congress to repeal protectionist laws that hurt consumers.

McCain is currently sponsoring an amendment to the Keystone XL Pipeline Act that would repeal the Jones Act, a law requiring that all goods shipped between waterborne ports of the United States be carried by vessels built, owned and operated by Americans, but he has encountered staunch opposition from the shipbuilding industry.

In a speech on the Senate Floor on Thursday, McCain called the Jones Act “an archaic 1920s-era law that hinders free trade, stifles the economy, and hurts consumers— largely for the benefit of labor unions.” (RELATED: McCain Wants to End Protectionism for Shipping Industry)

In support of that claim, McCain cited a 2002 study by the U.S. International Trade Commission that found that “repealing the Jones Act would lower shipping costs by about 22 percent … [and] have an annual positive welfare effect of $656 million on the overall U.S. economy”— a figure McCain said is “likely closer to $1 billion” today.

Much of the added cost stems from the higher expense of purchasing and operating U.S. ships relative to foreign vessels. (RELATED: How to End the Jones Act’s Protectionism)

The U.S. container line Matson, for instance, recently purchased two vessels for a domestic shipping route for $209 million each, as required by the Jones Act, even though foreign ships of the same size “would cost closer to $40 million each.”

“Further,” McCain pointed out, “the U.S. Maritime Administration (MARAD) has found that the cost to operate U.S. flag vessels—at $22,000 per day—is about 2.7 times higher than foreign-flag vessels—just $6,000 per day–” largely due to the restrictions imposed by the Jones Act.

Representatives of the shipbuilding industry and other opponents of repeal generally concede McCain’s point about increased shipping costs, but say repealing the Jones Act would cause even greater economic pain while also jeopardizing national security.

In a letter sent to Senate Majority Leader Mitch McConnell and Senate Minority Leader Harry Reid on Tuesday, 32 lawmakers urged “the rejection of this misguided proposal,” which they claimed “would gut the nation’s shipbuilding capacity.” Currently, they noted, the U.S. shipbuilding industry “supports more than 400,000 jobs … which boost our economy by almost $60 billion every year.”

Beyond the industry’s direct economic impact, the letter also claims that, “shipbuilders are vital to America’s national and economic security because they build, repair, maintain, and modernize the largest and most sophisticated Navy and Coast Guard in the world.” (RELATED: Protectionism is the Solution to America’s Job Shortage)

America’s sea services, in turn, “play a critical role providing a stabilizing presence to keep the seas free and open,” thereby fostering international commerce.

McCain dismissed such warnings in his speech as the “hysterical reaction” of “special interests that have long and richly benefited from protectionism.” (RELATED: The Freer the Trade, the Better Things Get)

In reality, he argued, “opening markets to the free flow of goods and services benefits America, and benefits our trading partners. Simply put, free trade means greater growth, greater growth means more jobs, and more jobs mean greater individual prosperity for more Americans.”

U.S. businesses and consumers are allowed to purchase foreign-built cars, trucks, trains and airplanes, McCain pointed out, so “Why can’t U.S. maritime commercial interests more affordably ship goods on foreign-made vessels?”

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