Federal Relief to Puerto Rico Won’t Include Waiving Law That Drives up Import Costs

President Donald Trump will be visiting Puerto Rico next week to take in the massive damage from Hurricane Maria. But if the island is looking for some regulatory relief, it may be out of luck.

The administration announced some bad news for Puerto Rico: It will not be waiving the Jones Act, which significantly restricts the ability of foreign or foreign-owned ships from bringing goods to Puerto Rico.

The law requires ships traveling from port to port in America and its territories be made, owned, and crewed by Americans. Foreign ships are permitted to dock in one port and that’s it. They cannot visit several different ports sequentially within our borders. The result is higher shipping costs to islands like Puerto Rico and Hawaii because the law shields U.S.-based companies from a lot of foreign competition.

The act is a bane to Puerto Rico. As I noted yesterday, studies show it can double to cost of shipping goods to ports there compared to nearby island countries that aren’t American territories (and therefore aren’t affected by the law). The Department of Homeland Security can waive this part of the Jones Act in crisis situations and had done so specifically for fuel shipping to Puerto Rico. But the administration has announced it will not be expanding or extending any relief for Puerto Ricans as it imports what it needs to recover. From the Associated Press:

A spokesman for the Department of Homeland Security says officials believe there is sufficient capacity of U.S.-flagged vessels to move goods to Puerto Rico. Spokesman David Lapan said most of the humanitarian shipments to Puerto Rico will be through barges, which make up a significant portion of the U.S.-flagged cargo fleet.

This is flat-out centralized government planning for the benefit of a small group of powerful U.S. shipping interests. It’s no different than a city government deciding how many taxi cabs or liquor stories its community “needs” and using medallions and licensing to keep out competition. Entrenched interests cash in while worrying about competitors entering the marketplace offering lower prices or better services.

The defense of the Jones Act, like most trade restrictions, revolves around “protecting U.S. jobs,” about 1,400 in this case, according to a Government Accountability Office report. Puerto Rico has a population of 3.4 million.

Puerto Rico is swamped in debt as well as water, and terrible fiscal management of government and its failure to plan for its expenses definitely plays a role in how difficult it will be for the island to recover.

That makes it all the more important to dump the Jones Act, because guess who is going to be asked to chip in for Puerto Rico’s recovery? It will be all of us, of course. And with the Jones Act in place our tax dollars (and our voluntary donations) will not go as far as they should in helping Puerto Rico.