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The Jones Act vs. Puerto Rico, Again

 

By Ryan Young, Competitive Enterprise Institute 

Puerto Rico is almost entirely without power after Hurricane Fiona. Right now, there is a ship just offshore, ready to help. It has 300,000 barrels of diesel fuel from Texas that can power hospitals, homes, and businesses. But the Jones Act of 1920 makes it illegal for that ship to dock. So there it sits.

Temporary Jones Act waivers are standard procedure in these situations, which happen nearly every hurricane season. This time it might not happen because of recent union-supported legislation that makes Jones Act waivers more difficult.

It’s time to repeal the Jones Act. It costs lives and causes unnecessary hardship for people and benefits nobody except a small group of politically connected businesses and unions.

How does the Jones Act work? It’s a Buy American law for shipping. Only U.S.-made, U.S.-flagged, and U.S.-crewed ships may deliver goods between two U.S. ports. The ship currently idling off Puerto Rico isn’t American-owned. Because it left from Texas, it may not dock at another U.S. port, including anywhere in Puerto Rico.

The Jones Act has tripled the cost of building ships in the U.S. and nearly destroyed the domestic shipbuilding industry; the Jones Act fleet is down to 92 ships. Of those 92, 29 are at least 20 years old. Jones Act shippers also charge their customers multiple times the going world rates, thanks to the ban on competition.

About the only beneficiaries are American trucking and rail companies, who mostly don’t have to worry about competing with domestic maritime shipping. The few remaining American shipbuilders and shipping companies have a tiny market, but thanks to the Jones Act, their profit margins are substantial, so they lobby aggressively to keep the Jones Act.

Today’s avoidable humanitarian problem shows how Buy American laws work. They eliminate options. When Puerto Rico’s power failed, the Jones Act left them with fewer places to turn to for help, and they cost more. People who want to help can’t. And due to a classic example of concentrated benefits and diffused costs, it is now harder to get a waiver against an unpopular law with a handful of highly motivated defenders.

To paraphrase the Cato Institute’s Scott Lincicome, Imagine a big disaster in a landlocked state. Residents are begging their fellow Americans for food and medicine, but the federal government blocks delivery trucks unless they are U.S.-made, -owned, and -operated—and there are only about 10 eligible trucks, and two eligible roads.

That’s what’s happening in Puerto Rico right now. It doesn’t have to be that way, and it shouldn’t. Puerto Ricans need power. Help is already there. There is no good reason to block aid. It’s time for Congress and President Biden to stand up against a few high-decibel lobbyists and a repeal one of the biggest never-needed regulations on the books.

For more on the Jones Act, see Mario Loyola’s CEI paper, “America Last: The Grim Reality of the Jones Act.”

 


Ryan Young is a Senior Fellow at the Competitive Enterprise Institute (CEI).