Jones Act: Impacts & Lessons for Australian Shipping Policy

Australia’s shipping policy is under review in 2026, with policymakers considering how best to strengthen supply chains, support local industry, and ensure national resilience. One international example often referenced is the United States’ Jones Act—a law that has shaped American shipping for over a century. As Australia weighs its options, understanding the Jones Act’s impacts and the lessons it offers is crucial.

The Jones Act, officially known as the Merchant Marine Act of 1920, requires that goods transported between US ports travel on ships that are American-built, owned, and crewed. This approach aims to protect the domestic shipping industry and safeguard national security. However, it has also generated debate over its economic consequences and flexibility in times of crisis.

Key Features

The Jones Act is a cabotage law, meaning it governs the transport of goods between domestic ports. Its main requirements are:

• Vessel Nationality: Only ships built in the US, owned by US citizens, and registered under the US flag can carry goods between US ports.
• Crew Requirements: Crews must be predominantly US citizens or permanent residents.
• Shipbuilding Mandate: Vessels must be constructed in American shipyards.

The intent is to maintain a strong domestic maritime sector and ensure a fleet that can support national interests during emergencies.

Economic and Industry Impacts

Over time, the Jones Act has influenced the structure and costs of US domestic shipping. Supporters argue it preserves maritime jobs and ensures a reliable fleet for national security. Critics point to increased shipping costs and reduced competition, especially for regions dependent on sea transport.

In practice, the law has led to higher freight costs for domestic routes compared to international shipping. Some regions, such as US island territories, have experienced higher consumer prices as a result. The number of Jones Act-compliant vessels has also declined, as the cost of building and operating ships under these requirements can be significant.

Flexibility in Emergencies

The Jones Act has occasionally been waived to allow foreign ships to assist during natural disasters or supply shortages. These waivers highlight the need for policy flexibility, especially when rapid response is required.

Australia, as an island nation, relies heavily on shipping for both domestic freight and international trade. Over recent decades, the local coastal shipping sector has shrunk, with more freight carried by foreign-flagged vessels. This trend has raised concerns about supply chain security, local industry viability, and the ability to respond to emergencies.

In 2026, the Australian government is considering reforms to strengthen the maritime sector. Proposals include:

• Incentives for Australian-flagged vessels to increase their share of coastal trade.
• Enhanced cabotage rules to give preference to local operators.
• Stricter safety and compliance standards for foreign ships operating in Australian waters.

The goal is to balance national interests with economic efficiency, learning from international examples like the Jones Act while adapting to Australia’s unique context.

Cost Implications

The US experience shows that strict cabotage and shipbuilding requirements can increase domestic shipping costs. For Australia, adopting similar measures could lead to higher freight charges, which may be passed on to consumers and businesses. Policymakers need to weigh the benefits of industry protection against the risk of cost inflation.

Fleet Size and Investment

High compliance costs in the US have contributed to a decline in the number of Jones Act-compliant vessels. Australia faces a similar risk if local operators are unable to compete or invest in new ships. Any policy changes should consider how to encourage sustainable fleet growth.

Flexibility and Crisis Response

Frequent waivers of the Jones Act during US emergencies suggest that rigid rules can hinder rapid response. Australia, which faces its own natural disasters and supply chain disruptions, may benefit from a more flexible approach that allows for temporary adjustments when needed.

Balancing Protectionism and Competition

A purely protectionist policy can support local industry but may reduce competition and raise prices. Conversely, an open market can lower costs but increase reliance on foreign vessels. Australia may find value in a hybrid model that encourages local participation while maintaining access to international shipping resources.

Supply Chain Resilience

Australia’s reliance on foreign-flagged vessels has raised questions about the security and reliability of domestic freight. Delays or disruptions—such as those experienced by Australian exporters during periods of high global demand—can have significant economic impacts. A stronger local fleet could help mitigate these risks, but may come at a higher cost.

Cost of Goods and Services

If shipping reforms lead to higher freight costs, these may be reflected in the prices of everyday goods, fuel, and raw materials. Sectors like agriculture, mining, and retail could be particularly affected. Policymakers must consider how to protect consumers while supporting industry.

National Security and Emergency Response

Maintaining a core fleet of Australian-crewed ships could enhance the country’s ability to respond to emergencies, such as natural disasters or international supply disruptions. However, flexibility is essential to ensure that policy does not hinder rapid response when foreign assistance is needed.

One proposal under consideration is the creation of an “Australian Strategic Fleet”—a group of locally-crewed ships available for critical supply routes and emergencies. This approach aims to secure vital shipping capacity without fully replicating the Jones Act’s strict requirements. It seeks to balance national security with economic efficiency by:

• Ensuring a baseline of Australian-controlled shipping for essential goods.
• Allowing foreign-flagged vessels to continue serving non-critical routes.
• Providing flexibility to adjust the fleet’s role as circumstances change.

As Australia debates its shipping policy, several factors should guide decision-making:

1. Economic Impact: Avoiding reforms that lead to unsustainable cost increases for businesses and consumers.
2. Industry Support: Creating conditions that encourage investment in the local shipping sector.
3. Regulatory Flexibility: Building in mechanisms to adapt quickly during emergencies or market shifts.
4. Supply Chain Security: Ensuring reliable access to shipping for critical goods and services.

What is the Jones Act?

The Jones Act is a US law that requires goods moved between US ports to be carried on American-built, owned, and crewed ships. It aims to protect the domestic shipping industry and national security.

How could a Jones Act-style policy affect Australia?

Adopting similar rules in Australia could support local shipping but may also increase freight costs and reduce flexibility. The impact would depend on how strictly such measures are implemented.

Why is flexibility important in shipping policy?

Flexibility allows governments to respond quickly to emergencies, such as natural disasters or supply shortages, by temporarily relaxing rules or allowing foreign assistance when needed.

What is an Australian Strategic Fleet?

A strategic fleet would be a group of Australian-crewed ships kept available for essential supply routes and emergencies, aiming to balance national interests with economic efficiency.

Australia’s review of its shipping policy in 2026 comes at a time of global uncertainty and evolving supply chain challenges. The US Jones Act offers valuable lessons—both positive and cautionary—about the trade-offs involved in protecting local industry, ensuring national security, and maintaining economic efficiency. By carefully considering these lessons and adapting them to Australia’s unique needs, policymakers can craft a balanced approach that supports a resilient, competitive, and flexible maritime sector.