Jones Act: Impacts & Lessons for Australian Shipping Policy

The Jones Act is often cited in global shipping debates as both a protector of domestic industry and a cautionary tale about regulatory overreach. As Australia faces persistent supply chain pressures, the question arises: should we look to the Jones Act for inspiration—or steer clear of its pitfalls?

What is the Jones Act?

Enacted in 1920, the Jones Act is a US federal law requiring that goods transported between US ports be carried on ships that are built, owned, and operated by American citizens or permanent residents. Its official aim is to bolster the domestic maritime sector and safeguard national security by ensuring a robust merchant fleet. For over a century, the Act has shaped everything from shipping costs to the availability of vessels in US waters.

• Cabotage restrictions: Only US-flagged ships can transport goods between US ports.

• Shipbuilding requirements: Vessels must be constructed in US shipyards.

• Crew nationality: Crews must be predominantly American citizens or permanent residents.

The Jones Act’s legacy is fiercely debated. Proponents highlight job creation and strategic independence, while critics point to high freight costs, limited competition, and supply chain inflexibility—issues that have come under fresh scrutiny in 2025 amid global logistics disruptions.

Australia’s Shipping Dilemma: Parallels and Contrasts

Australia, as an island nation, is uniquely dependent on shipping for both domestic freight and international trade. Yet, the local coastal shipping sector has shrunk dramatically in recent decades, leaving the nation reliant on foreign-flagged vessels for much of its interstate cargo.

In 2025, the Albanese government has flagged shipping reform as part of its broader supply chain resilience strategy. Key proposals include:

• Incentives for Australian-flagged vessels to increase their share of coastal trade

• Enhanced cabotage rules to prioritise local operators

• Stronger compliance on workplace and safety standards for foreign ships in Australian waters

While these moves echo some Jones Act protections, Australian policymakers are wary of replicating the US law wholesale. The experience of the Jones Act offers several lessons:

• Cost Inflation: US shipping between domestic ports is estimated to cost 2–3 times more than comparable international routes, with downstream effects on consumer prices—an outcome Australia can ill afford given our already high logistics costs.

• Fleet Shrinkage: Despite its intent, the number of Jones Act-compliant ships has fallen over the years, as high costs deter investment. Australia faces similar risks if regulation makes local shipping uncompetitive with global operators.

• Disaster Response: Jones Act waivers are routinely required during US natural disasters to allow foreign ships to bring relief supplies quickly. Australia’s disaster-prone geography means flexibility is crucial.

Real-World Impacts: From Groceries to Gasoline

The effects of the Jones Act have been most acutely felt by regions like Puerto Rico and Hawaii, where reliance on US-flagged shipping inflates everyday costs. A 2024 Congressional Budget Office review estimated that the Act adds billions annually to freight expenses and consumer prices.

By contrast, New Zealand has maintained a more open coastal shipping market, allowing foreign-flagged vessels to compete freely and keeping domestic freight costs lower. Australian businesses, particularly those in agriculture and mining, have warned that tighter cabotage could hurt their global competitiveness if not carefully balanced.

In 2025, as Australia’s fuel security and supply chain resilience dominate headlines, policymakers are treading carefully. The government’s proposed “Australian Strategic Fleet” would see a handful of locally-crewed ships on standby for emergencies, rather than a full Jones Act-style system. This hybrid approach seeks to secure critical capabilities without locking in the cost penalties seen in the US.

What’s Next for Australia’s Shipping Policy?

As the government consults on its shipping reforms, the lessons of the Jones Act are front of mind. The key takeaways:

• Protecting local maritime jobs and industry is important, but not at the expense of affordability and supply chain agility.

• Flexibility is vital: policy should allow for rapid response to disasters and market shocks.

• International best practice—balancing security, competition, and efficiency—should guide Australian reforms.

For businesses and consumers, the debate over shipping policy isn’t just about ships and sailors—it’s about the price of groceries, fuel, and manufactured goods. As Australia weighs its next moves, the Jones Act serves as both a warning and a source of insight for creating a resilient, competitive coastal shipping sector.