Featured, Free Trade

How The Jones Act Makes It Difficult For Puerto Rico To Recover From Hurricane Maria

After being hammered by Hurricane Maria, the American island territory of Puerto Rico is in desperate need of assistance and rebuilding. The Jones Act, an obscure nearly century-old American law, is making that more difficult.

Passed in 1920, the Merchant Marine Act, better known as the Jones Act after its congressional sponsor, is one of the most noxious and economically destructive pieces of legislation on the books.

This law requires that domestic shipping from one American port to another, must take place on an American-flagged, American-built, and American-crewed ship. This cuts off American shipping markets from the vast majority of the world’s supply of shipping capacity.

Ostensibly, the purpose of this act was to ensure that America had sufficient domestic shipping that could be pressed into service during wartime. That might have been a reasonable concern prior to World War II. Now, it means little more than waging economic war against America’s island territories.

American territories suffer from Jones Act pricing

Vanishingly few ships today meet the Jones Act’s protectionist standards. The ones who do enjoy a monopoly that allows them to charge prices much higher than the industry standards for bulk shipping.

Due to the taxes, labor costs, and other economic realities, almost all international shipping takes place under “flags of convenience” and with ships built in either Europe or Asia.

Thanks to the Jones Act, cruise ships are effectively prohibited from making hops from one American port to another unless their itinerary includes at least one stop overseas.

Because of this, you can’t find or book a cruise from, for example, New York to Miami, unless these foreign-flagged vessels make an obligatory stop in Canada, the Caribbean, or some other foreign port of call.

This American protectionist law hurts Puerto Rico

That might sound like a trivial luxury concern for wealthy cruise line customers, but the impact on the cargo shipment of goods is substantial. Unfortunately, for most Americans this isn’t much of a problem.

As a continental landmass, few domestic goods in the United States are moved by ship rather than railroads or highways. The exceptions, of course, are for America’s islands: Hawaii, Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa.

The impact of this protectionism is substantial. It is vastly cheaper for these islands to import foreign goods from foreign ports of call, than it is for them to receive American goods from the country they’re nominally part of.

Hawaii, which would otherwise be a natural midway stopping point for trans-Pacific shipping, is instead bypassed by ships headed straight for the West Coast, so as to not trigger the Jones Act’s restrictions.

This economic hindrance in the best of times could cost lives during a disaster like Maria.

Jones Act waivers have been granted for previous hurricanes

The Jones Act gives the President the ability to waive its requirements in an emergency. The Secretary of Homeland Security has twice granted Jones Act waivers in the wake of hurricanes.

President Trump should immediately do so for Puerto Rico and the U.S. Virgin Islands, if not also for our Pacific island territories as well.

Meanwhile, Congress should listen to Sen. John McCain, R-Arizona, who has long called for the total repeal of the Jones Act. Of the territories affected negatively by this law, only one, Hawaii, has voting representation in Congress. That has allowed politicians in Washington to neglect the problem for far too long, while American citizens – including those in the territories – suffer.

(Photo of a Matson container ship by Jacopo Werther via Wikipedia.)

Comments