Hurricanes

Hey, Congress: If You Really Want to Help Puerto Rico Recover, Dump the Jones Act

Crony law benefitting U.S. shipping companies will drive up costs, extend hurricane crisis.

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Puerto Rico
Carol Guzy/ZUMA Press/Newscom

Puerto Rico is in a dire state after Hurricane Maria. The island has lost all power even as a heat wave bakes it—and it may be months, not days or weeks, before electricity and services are restored. Meanwhile, the place's agriculture industry has been decimated. Recovery will require the island to import everything from lumber to food to fuel to medical supplies.

Unfortunately, a protectionist law may get in the way. The Jones Act—technically, the Merchant Marine Act of 1920—has had nasty financial impacts on trade to Puerto Rico and many other port cities and islands within the United States and its territories.

The Jones Act requires that all ships traveling between U.S. ports be made, owned, and crewed by Americans. So a ship from another country, or whose owners are from another country, cannot travel from port to port within the United States delivering or picking up goods.

Fortunately the Department of Homeland Security has recognized this problem and has waived the Jones Act for fuel shipping for the time being. But given the tremendous amount of devastation Puerto Rico faces, the costs that are going to be involved in recovering, and the already poor financial state of the island, there has never been a better time to dump the Jones Act entirely.

The Jones Act exists to boost the American shipping industry. It has long contributed to the dramatic costs of shipping to Puerto Rico. A New York Fed report from 2012 shows that it costs twice as much to ship something from a port in the U.S. mainland to Puerto Rico as it does to ship to Jamaica and the Dominican Republic nearby. There are only a handful of Jones Act–compliant options, and that lack of competition allows U.S. shippers to charge much higher prices.

People who think the government should intervene to stop price-gouging during a disaster should know the Jones Act practically facilitates it and makes recovery all the more expensive. Cato Institute Adjunct Scholar Scott Lincicome warned about the consequences in 2015:

During the Deepwater Horizon oil spill, the government…refused to issue Jones Act waivers so foreign vessels could aid in the cleanup and containment. Despite several offers for foreign assistance during an ongoing ecological disaster, the government cited the Jones Act to justify turning them away. Many suspect that the Obama administration was reluctant to go against the pro-Jones Act labor unions (tr. every labor union) he needed to cement his re-election. It's not a leap to say that such cronyism may have delayed the eventual resolution of the spill.

In response to Puerto Rico's current crisis, Lincicome tells Reason if a complete repeal is not in the works, then at the very least its rules should be waived for all shipping to Puerto Rico for the foreseeable future, not just for shipping fuel. "You're looking at a clear and avoidable economic burden being placed on the people of Puerto Rico," he says.

He adds that the island's citizens suffer this economic burden every day as it is. It's only being temporarily halted due to the crisis.

"We're alleviating that burden because they're a sympathetic group right now and there's a spotlight on the tragedy," Lincicome says. "In the good times or normal times, those costs are considered OK. It's a really sad state of affairs."

Lincicome has seen no evidence that the disaster might cause Congress to rethink the law. Sen. John McCain (R-Ariz.) periodically attempts to get the Jones Act repealed, but nothing comes of it. And opening America's ports to foreign competition certainly doesn't seem like something President Donald Trump is likely to embrace.

"In this political environment it's going to be pretty darned tough to get Republicans on board," Lincicome says. "Politicians are convinced that protectionism is good politics."

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  1. While not exactly a comment on whether the Jones Act should be repealed or not, it would be useful to point out that Puerto Rico has, transiently, been ‘compensated’ for the Act and faces considerable internal management issues.

    I mean, the public housing in Puerto Rico, second in size only to New York’s, is near entirely financed by HUD and the USDA. The money gets frittered away locally building $100+K tin-roofed shacks in ‘hurricane alley’.

    1. One might suggest that the legal limbo in which Puerto Rico exists is the source of no small percentage of its economic and legal woes.

      Not sure what to do about that, though. Maybe Congress should set a “shit-or-get-off-the-pot” deadline where PR becomes a sovereign nation if it can’t put together a decisive referendum by date x?

      1. It’s a bit bizarre that there are even still ‘territories’ of the United States in the first place in 2018. Maybe we should say ‘become a state or GTFO’ because at the moment they are equal part being screwed over by the U.S. government and being entirely subsistent on benefits from the same.

        1. Unfortunately, I think there are a lot of places we hang onto because “Empire” and “strategic interests” that we have no intention of ever making states, not even in an abstract, hypothetical, “maybe someday” way. Like Guam.

          1. Basically it seems like we rolled into mostly tiny, impossible to defend islands and said ‘ok, we’re taking over. Here’s a stipend, now shut up and fall in line or we’ll relocate you all and call this island a weapons testing zone’.

            Of course, none of them appear to have a robust ‘leave us alone America’ movement. It seems they’re quite happy accepting boatloads of money for doing very little except remaining a Territory. Pretty sure they tried to do this with the Middle East, but apparently this only works for Islands.

            1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

              This is what I do… http://www.netcash10.com

          2. 20x the number of people in PR.

        2. I don’t think the US government wants them to become states. Also, Puerto Rico is really the only territory large enough to become a state. The next most populous is Guam, with a population of about 160,000. That’s less than a third the population of Wyoming, the least populous state. And American Samoa and the Northern Mariana Islands barely have 50,000 apiece.

          1. PR a sate? Hell no.

        3. I think Republicans don’t want it to be a state, as they would add two more completely safe Democrat seats to the Senate.

          1. Whatever, I think the key thing to remember here is that white people like to steal from brown people and even set up little weird potemkin villages to keep them out of the country. At this point, free healthcare, free housing, AND a living wage should be guaranteed to these people. Because free trade fair trade white nationalism.

            1. bullshit, everyone knows that brown people don’t have shit worth stealing…

              1. Except the blacks. They’ll steal from the browns. And vice versa.

    2. Good, we should work to remove as many government obstacles as possible. And gigantic projects are another one.

    3. Remind me again why we need government?

      1. Because we’ve lost religion and had nothing better with which to replace it.

  2. Why doesn’t Hawaii and Alaska have the same problems with the Jones act?

    1. They do. We have 100-year-old laws making things worse for everybody all the time, and most people don’t even know about them.

      All laws should automatically sunset after 6 years so a new Congress can decide if they are worth keeping.

      1. All laws should automatically sunset after 6 years so a new Congress can decide if they are worth keeping.

        ^ So much this. Because once a law ages more than about 100 years, it becomes magic, even though (and maybe because) no one remembers the point of it.

    2. Dunno about Alaska (I suspect it may be partially mitigated by its reliance on air transport), but Hawaii does have similar problems. They’re wealthy enough that the problems isn’t as acute as for PR residents, and they deal with considerably fewer hurricanes.

      1. Everyone I know who’s ever been to Hawaii has taken note of the obscene cost of anything that has to be shipped there. I think you’re right that the only reason it’s just a complaint and not a disaster is because people keep bringing mounds of cash to Hawaii and leaving them there.

        1. My guess is that a lot of that is true shipping costs, and people will pay for having access to goods that are rare way out in Hawaii.

          1. It’s not just the one-off goods, though. Basic commodities and consumer goods are a fuckton of money there as well, from what I understand. And lying in the middle of China and Panama as they do, it shouldn’t be hard to have a freighter or two stop along the way and drop off a container or two but the Jones Act makes that option considerably more expensive for everyone else those goods are meant for.

        2. This is actually a logistical problem, although it is exacerbated by rules like these. Since land-prices in Hawaii are sky high it is actually more economical to ship in things than to grow or source them locally. In fact, I’ve been told the entire series of Islands would collapse in about three or four days without regular shipments, which helps explain the enormous cost of goods there.

          I imagine allowing foreign competition in shipping might bring prices down for them, but I wonder if it would actually make those places ‘affordable’. Honestly, I don’t think it will. At least not for Hawaii in particular.

        3. Shipping costs is a problem only because the Jones Act makes it more expensive to ship from Honolulu to either California or China than between China and California.

      2. KDN|9.25.17 @ 3:27PM|#
        “Dunno about Alaska (I suspect it may be partially mitigated by its reliance on air transport),”

        AK residents also get an annual handout of US tax money.

        1. That would be Alaska state money. The AK Permanent Fund, and the annual distribution to residents of part of the investment returns of the Fund, came from state taxes and other state revenue on oil production from state lands. The Feds and “US tax money” have nothing to do with it.

  3. How long does the U.S. taxpayer have to shore up Puerto Rico some 120 years after acquiring it? Let them be an independent nation like not a few other Caribbean islands with far fewer people. [I wonder how things would be today had the Spanish government accepted the U.S.’s offer to acquire Cuba for $100 million back in the 1840s?]

  4. So a ship from another country, or whose owners are from another country, cannot travel from port to port within the United States delivering or picking up goods.

    Why not make a port call in Jamaica, Dominican Republic, or one of the many other non-US islands, then continue on to Puerto Rico? Wouldn’t this effectively circumvent the Jones Act?

    1. “Why not make a port call in Jamaica, Dominican Republic, or one of the many other non-US islands, then continue on to Puerto Rico? Wouldn’t this effectively circumvent the Jones Act?”

      Yes, but that alone adds to shipping costs.

      1. clearly a little math would go a long way here…which option is the least cost approach?

  5. “Fortunately the Department of Homeland Security has recognized this problem and has waived the Jones Act for fuel shipping for the time being.”

    …uh, in other news: A Federal Agency can just waive its hands and ignore Congressionally enacted laws.

    1. Sometimes (in fact quite often), waiver authority is written into the laws themselves.

  6. RE: Hey, Congress: If You Really Want to Help Puerto Rico Recover, Dump the Jones Act
    Crony law benefitting U.S. shipping companies will drive up costs, extend hurricane crisis.

    That’s the point.
    Cronyism will prosper at the people’s expense in PR.
    There’s nothing wrong with cronyism as long as the right people get the right amount of cash under the table. Just look at Haiti as an example as to who got the money and who got fucked.

  7. Heck, sell the entire island to China.

  8. Scott should know that the same Senator Wesley Livsey Jones who created that coastwise navigation law to thwart the hardy boys of the Rum Fleet also wrote the Five and Ten Jones law. This was a law absolutely making light beer a shoot-first federal felony with a five-year prison term and a fine. The 10 grand fine might not sound like much, but it was enough money to pay for 15 pounds of gold. This law was passed a couple of days before Dry Hope Herbert Hoover placed his Quaker hand on the King James Version to take the oath as President on March 4, 1929. Within two weeks the papers and Time Magazine were squalling about the Stock Market Crash.
    Puerto Rico sought independence when Hoover was President, and the Virgin Islands demanded relief from dry Tee-totalitarianism. Free my peeps!

    1. whippersnapper!!!

  9. its another leftist agenda
    no matter who supports it

  10. And Davis-Bacon?

    1. The Davis Bacon requirements on PR are essentially below the executice order requiring $10.10 per hour on federal contracts that Obama signed.

  11. The problem is transporting over land to areas that are hard to get to. A lot of truck drivers don’t or won’t report for duty.

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