By: Thomas A. Allegretti, Chairman, American Maritime Partnership
Over the past year, there has been debate about changes to the Jones Act in the context of Puerto Rico’s financial crisis. Congress has wisely rejected calls to change the law, and for good reason. Once the actual facts are considered, there is simply no justification for changing the Jones Act, for Puerto Rico or otherwise.
The Jones Act ensures that companies operating in the domestic commerce of the United States, including service to Puerto Rico, are subject to American laws. The military strategy of the United States also relies on the availability of U.S. vessels and crews and a shipyard defense industrial base, which the Jones Act supports. Further, as a Lexington Institute report recently noted, the “venerable Jones Act provides an important barrier to terrorist infiltration of the homeland.”
The opponents of the law ignore these national and economic security benefits and instead focus their attention on false and misleading statements about the cost impact of the Jones Act on Puerto Rico. Take, for example, the recent statements in an article titled “It’s Time To Abandon Ship On The Jones Act” by Daniel Garza, the executive director of The LIBRE Institute.
LIBRE proclaims that the Jones Act “comes at a cost of $682 million a year” to the United States. The source for that figure is a 2002 U.S. International Trade Commission (ITC) report that has been discredited by the U.S. Government Accountability Office (GAO), which called the ITC’s findings “uncertain,” “undeterminable,” “incomplete,” and “unverifiable.” The GAO further said “precise, verifiable estimates of the impact of the act are not available.” Because of the GAO report, the ITC completely abandoned that estimate and now says it cannot calculate the cost of the Jones Act, if any. In other words, LIBRE’s principal finding is not only wrong, but it also has been publicly acknowledged as wrong for more than a decade.
Further, LIBRE makes the claim that because of the Jones Act, Puerto Rico consumers are paying “more than double” the competitive price for everything shipped to the island and that “any product” shipped to the island comes at a higher cost. LIBRE’s claim is wildly off the mark. Ocean shipping costs for some of the most basic household goods – vegetable oil, canned soup, ketchup, milk, peanuts, pizza sauce – represent only 2 to 5 percent of the retail prices of these goods in Puerto Rico. That’s pennies on the dollar. If consumer goods really cost twice as much in Puerto Rico, another dubious statement to be sure, it is not because of the Jones Act.
LIBRE goes so far as to assert that the Jones Act is “adding $0.15 cents per gallon” to gasoline in Puerto Rico. Yet the Gasoline Retailers Association of Puerto Rico, just this past January, said that while gasoline in Puerto Rico was cheaper than in the mainland United States, it is currently higher than the mainland “due to the imposition of taxes on petroleum and its derivative.” Moreover, a majority of the gasoline used in Puerto Rico is imported from foreign locations using foreign-flag, non-Jones Act vessels.
The facts – independent, unbiased facts – simply do not support the assertions being made about the Jones Act’s impact on Puerto Rico. But, one thing is supported by the facts: a sure way to undermine Puerto Rico’s economy and its chances to redevelop a thriving economy is to drop the reliable service that the Jones Act provides.
Thomas A. Allegretti is the chairman of the American Maritime Partnership, the voice of the U.S. domestic maritime industry.