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Members of Congress, Economists and Maritime Leaders Highlight Importance of the Jones Act to Puerto Rico and to the Nation’s Economic and National Security During Congressional Roundtable
New Study Validates that Retail Prices in Puerto Rico Are Not Affected by the Jones Act
WASHINGTON (July 26, 2018) – The House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation held a roundtable Wednesday on “The Impact of the Jones Act on Consumer Prices in Puerto Rico.” The bipartisan group of congressional members, economists and maritime leaders discussed the findings of a new fact-based, comprehensive study on the economic importance of the U.S. Jones Act to Puerto Rico and highlighted its significant economic and national security contributions to the island and nation.
Invited roundtable participants included:
- John Reeve, Economist and Principal, Reeve & Associates
- Michael G. Roberts, Senior Vice President, General Counsel and Corporate Secretary for Crowley Maritime
- Augustin “Augie” Tellez, Executive Vice President, Seafarers International Union
- Jonathan Kaskin, National Vice President for Legislative Affairs, Navy League
In this newly released report, “The Impact of the U.S. Jones Act on Puerto Rico,” economists from Boston-based Reeve & Associates and San Juan-based Estudios Tecnicos, Inc., concluded that the Jones Act has no impact on either retail prices or the cost of living in Puerto Rico. Moreover, the report found that the state of the art maritime technology, Puerto-Rico focused investments and dedicated closed-loop service offered by the Jones Act carriers provide a significant positive economic impact to the island at freight rates lower or comparable to similar services to other Caribbean Islands.
In his opening remarks, Congressman Duncan Hunter (R-CA), Chairman of the Subcommittee on Coast Guard and Marine Transportation, reminded the Subcommittee about the importance of the Jones Act to the nation and the importance of explaining the facts about the law:
“The bottom line is that the Jones Act was designed to maintain domestic U.S. shipbuilding capacity and to create employment opportunities for American mariners. American jobs, serving American commerce. These shipyards, welders, and mariners are the same individuals we would rely on to provide our country the maritime capacity required in times of conflict. There have been a lot of unsubstantiated claims regarding the Jones Act, including the claim that the law negatively impacts Puerto Rico […]. We are here to discuss a report from a new team of economists to provide actual data on real consumer prices to determine the Jones Act’s impact in Puerto Rico.”
Congressman John Garamendi (D-CA), Ranking Member of the Subcommittee on Coast Guard and Marine Transportation, reinforced that the Jones Act does not drive up the cost of consumer goods in Puerto Rico:
“This study is extremely important. By all accounts and by my reading of it, it is accurate, and it covers the issues that needed to be covered…The comparative market analysis of consumer prices for common household goods found that there is virtually no difference at all between what you would pay at the Walmart in Jacksonville, Florida, and what you pay in San Juan, Puerto Rico.”
Invited participants to speak at this roundtable refuted prior claims that the Jones Act drives up the cost to ship goods to Puerto Rico. Mr. Reeve stated:
“Freight rates between the U.S. mainland and Puerto Rico are very comparable to those between the U.S. and Puerto Rico’s neighbors such as the Dominican Republic, Haiti and the U.S. Virgin Islands […]. If you apply a freight rate to ship a can of chicken noodle soup, three cents of that $1.58 soup can would be the actual price of port-to-port shipping. That is just two percent […]. Therefore, there is essentially no cost.”
Speaking specifically to the cost of automobiles in Puerto Rico compared to the United States, Mr. Tellez highlighted a Puerto Rico-specific tax, rather than the Jones Act, as the dominant contributing cause of the higher cost of vehicles in Puerto Rico:
“There is a tremendous difference in the cost of cars in the Puerto Rico as compared to the United States. The difference in price comes from the Hacienda. They tack on a figure on every car, from 16 to 35 percent. It does not matter whether that car is coming from the mainland or from a foreign country. It is not because of the Jones Act, it is this arbitrary tax imposed by the government.”
Participating in the roundtable, Mr. Roberts discussed the benefits of customized shipping and logistics services and the investments made by American carriers in Puerto Rico:
“Direct freight service instead of one-stop or two-stop freight service gives Puerto Rico’s suppliers and consumers an extremely efficient and reliable supply chain. It also gives Puerto Rico’s producers reliable and inexpensive access to their customers on the mainland […]. The carriers in the market have invested around $1 billion in ships, infrastructure and equipment to renew their fleets and enhance their services in the Puerto Rico market.”
Adding to the discussion, Mr. Kaskin highlighted the underlying importance of the Jones Act to maintaining fully-qualified, active, certified U.S. mariners for national security by stating:
“Now that this report shows that the Jones Act is not responsible for retail prices in Puerto Rico, Congress should be even more committed to this legislation, since any reduction to the Jones Act fleet would be detrimental to our national security.”
In later remarks, Rep. Hunter reinforced the important role of the Jones Act in ensuring national security, specifically the necessity to have a readied force and shipbuilding capacity in times of need:
“We need every single commercial yard that we can involved in American trade, so that when the stuff hits the fan, we have the people and the ships and the ability to make more ships quickly if we needed to have it […] in the end it’s national security.”
Rep. Garamendi also highlighted how the Jones Act helps maintain state-of-the-art shipbuilding capabilities, which are essential in times of conflict:
“Not only does the Jones Act provides tens of thousands of jobs with all kinds of vessels being made in about every place there is water, but it has created advanced shipbuilding in the United States […]. Because of the Jones Act, American shipbuilding can and is leading in [the use of LNG] technology.”
Reinforcing comments by his colleagues, Congressman Peter A. DeFazio (D-OR) added to the discussion his view on the indispensable nature of the law:
“The Jones Act is not a relic. The Jones Act is vibrant and the Jones Act is absolutely essential for the economic and the maritime security of this country.”
In summary, the findings of the new report, “The Impact of the U.S. Jones Act on Puerto Rico,” which were reinforced at the roundtable, include:
- The Jones Act has no impact on either retail prices or the cost of living in Puerto Rico.
- Foreign vessels can deliver directly to Puerto Rico from foreign countries. Foreign vessels made up 57 percent of San Juan’s port traffic in 2016.
- There is no Jones Act freight rate premium for ocean transport. Freight rates for shipments between the mainland and Puerto Rico are very similar to or lower than rates for shipping between the mainland and neighboring islands.
- Southbound service is vital to Puerto Rico consumers, while the northbound service is a key contributor to economic development on the island.
- Carriers provide highly effective logistics systems, including economical and environmentally-friendly vessels that ensure a high level of supply chain efficiency. The regular use of 53-foot containers by Jones Act carriers, which offer 43 percent more cubic capacity than a standard 40-foot unit, provides an estimated $92 million annually of cost savings to Puerto Rico.
A complete summary of the report findings can be found here. For more information and a downloadable copy of the report, please visit www.americanmaritimepartnership.com/puerto-rico-economy/.
About the American Maritime Partnership
American Maritime Partnership (AMP) is the voice of the U.S. domestic maritime industry, a pillar of our nation‘s economic, national, and homeland security. More than 40,000 American vessels built in American shipyards, crewed by American mariners, and owned by American companies, operate in our waters 24-hours a day, seven days a week, and this commerce sustains nearly 500,000 American jobs, $28.95 billion in labor compensation, and more than $92.5 billion in annual economic output. You can learn more by visiting www.americanmaritimepartnership.com.