LOCAL ISSUES
Why is Milk So Expensive in Hawaii ? by Joe Kent Sometimes when I go to my local grocery store on Maui , I like to listen to what the tourists are saying . One time I found a lady just dumbfounded , staring at all the prices . Everywhere she looked , she had sticker shock . When I asked her what was wrong , she said , “ I can ’ t believe it ! Everything is so expensive !” It ’ s a helpful reminder to those of us who are used to paying more than five dollars a gallon for milk – that ’ s not normal . Where I live in Lahaina , milk is more than twice as much as on the mainland . And it ’ s almost four times more when you buy the local Big Island brand . Of course , we all know why prices are so high on the islands . It ’ s because everything needs to be shipped here . But why does that mean I pay double or triple the price for milk ? Surely shipping doesn ’ t cost that much . . . does it ? Last week , I went to the Association of Private Enterprise Education conference to find out . At the APEE conference , hundreds of economists from around the world gathered to meet and present research . Surely someone had an answer to my milk question . I interviewed economist Ken Schoolland from Oahu , who attributed the problem to a federal law called the “ Jones Act ”. He explained that the law creates shipping protections . Any ship that comes to Hawaii must be built , manned , and flagged in America . That means international ships aren ’ t allowed to visit us . I asked , “ And do they cause our prices here to rise ?” “ Very much so !” he said . According to professor Schoolland , a ship coming from Hong Kong can no longer stop in Maui to drop off goods . It must first go to California , and then be transported onto an American ship , with an American crew , and then it could finally come to Maui . Hardly an efficient way to run a business ! That was very surprising . . . but I had to be honest , something didn ’ t add up . I can understand that the Jones Act raises the costs of goods shipped to Hawaii . But then why is the milk imported from Texas cheaper than the local Big Island brand ? After all , if the Jones Act were so damaging , you would think that the Texas milk would have the higher price tag . But the Texas milk is much cheaper . Dr . Keli ’ i Akina , president of the Grassroot Institute on Oahu helped me make sense of this puzzle . He explained it using eggs as an example . “ Have you ever gone to the store and bought eggs ?” he asked . “ What costs more , mainland eggs , or local eggs ?”
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I answered , “ Probably mainland eggs .” “ No actually , local eggs cost more ,” he said . “ Is that right ? Why is that ?” I asked . “ Because everything about producing those local eggs , from the iron that is used for the cages of the chickens , to the feed of the chickens , to the buildings that are produced to house the chickens . . . everything is shipped in . And by the time we pay that surcharge because of the Jones Act , even though the eggs have been laid in Waimanalo and trucked down to your Safeway , they cost more than eggs that are shipped in .” “ Really ? I always wondered about that !” I said . “ The ( cost ) factors of production are shipped in ,” he said . I was amazed . I added , “ And the same is true with milk ! I was at the store the other day , and the milk imported from Texas is around five dollars , and the local Lani-Moo is closer to eight dollars .” “ Well , that ’ s an interesting case ,” Dr . Akina said , “ Parker Ranch , in order to get it ’ s cattle , would have to ship them from Asia to Canada , have them trucked down to San Francisco , put onto vessels owned by a local Hawaiian company and brought to Hawaii . Now think about that – the huge cost added .” I asked , “ So you ’ re saying that not only imports would be better , but exports would be better without the Jones Act .” Dr . Akina agreed . “ If we had more ships coming to Hawaii , disembarking their cargo , they would have empty hulls . Those hulls would be like a vacuum and siphon in products , that at low cost , could help revive our export industry .” Many other economists at the APEE conference , including world renowned economist Mark Skousen , and Matt Kibbe of Freedom Works , agreed that the Jones Act is extremely damaging to Hawaii . According to Bloomberg Journal , of all the 50 states , Hawaii is hurt the most by the Jones act . Without the law , our prices for almost everything in the islands could fall by more than 30 percent . It ’ s hard to imagine what our islands would look like if almost everything was a third cheaper . Imagine buying gas for a bargain . How about a meal for mainland prices ? What would happen to the tourism industry if we suddenly had an economic boom in Hawaii ? Would agriculture spring back to life ? It ’ s difficult to know exactly what Maui would look like if the Jones Act were repealed . But I have a feeling that a visit to the grocery store would be much nicer if it were !