By Collin Roth and CJ Szafir
President Donald Trump’s decision yesterday to waive the Jones Act for 10 days in Puerto Rico is a welcome development for the storm ravaged American territory. The Jones Act is a 95 year old law that requires commercial vessels shipping between American ports to be American-made and crewed by Americans. And in pervious natural disasters, including Hurricanes Harvey and Irma, waivers have been granted to assist in recovery efforts.
Until Thursday, President Trump hesitated to waive the Jones Act for Puerto Rico, bluntly telling reporters Wednesday, “a lot of people that work in the shipping industry… don’t want the Jones Act lifted.” Ensuing public calls, most notably from Puerto Rico Governor Ricardo Rossello and U.S. Senator John McCain (R-AZ), resulted in Thursday morning’s announcement of a 10 day waiver for Puerto Rico.
The recent controversy over Jones Act waivers raises important questions about whether the Act ought to remain in place at all. Free market conservatives have long argued that the law has outlived its usefulness (if it had any) and now amounts to pure protectionism that raises prices for consumers.
The Merchant Marine Act, better known as the Jones Act, passed in 1920 under the guise of national security in the aftermath of World War I. Supporters of the Jones Act, reeling from German U-boat attacks on American shipping, deemed it a national priority to ensure that America maintain a domestic labor force and building capacity for commercial shipping. While the U.S is no longer worried about German U-boats, shipbuilders have argued that the Jones Act protects American jobs from foreign competition. The U.S. Maritime Administration concluded that 107,000 workers are employed in U.S. shipyards, generating billions of economic activity.
While the law often earns attention in the wake of natural disasters, the Jones Act has severely impacted Guam, Hawaii, Alaska, and Puerto Rico. For Puerto Rico, in particular, the Jones Act has been a heavy burden. The island, largely dependent on maritime shipping for fuel and other goods, suffered from a poor economy and a debt crisis before Hurricanes Irma and Maria. And, studies have estimated the Jones Act is responsible for doubling the price of shipping goods to Puerto Rico. A 2011 study from the U.S. Department of Transportation concluded that “U.S.-flagged vessels have daily operating costs more than twice those of foreign-flagged vessels.” These costs are passed on to Puerto Rican consumers, as noted by a George Mason study.
The economics are not hard to understand; when the government limits supply and competition, prices rise.
Now consider the long-term devastation in Puerto Rico from Hurricanes Irma and Maria. The island of 3.4 million is expected to be largely without power for 3 to 4 months. For large swaths of the population this means going without air conditioning, water pumps, and other common amenities like refrigeration. Fuel shortages are hampering travel and reliance on generators as a power supply. Forty-four percent of Puerto Ricans lack clean drinking water. Roads are washed out, livestock have been devastated, and cell phone coverage is nearly non-existent.
A 10 day waiver may assist in the initial effort to get emergency supplies to Puerto Rico, but the Jones Act will be back in full force as residents of the island spend the next months and years trying to rebuild and recover. The reimposition will almost certainly raise the cost of recovery for a reeling community.
And that is the heart of the problem.
Perhaps it is time to unshackle America from the burdens of the Jones Act. The devastation in Puerto Rico has brought the old law to new light. It’s an archaic, protectionist law that serves to artificially raise the cost of shipping in the United States. Fortunately yesterday Senator Mike Lee (R-UT) and John McCain introduced a bill in the Senate that would permanently exempt Puerto Rico from the Jones Act.
That’s a good start and conservatives should support it.
