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The Jones Act

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It should probably be repealed, and should certainly be suspended with respect to Puerto Rico:

The result of all of this is that in Puerto Rico — where incomes are much lower on average than in the mainland US — the cost of living is far higher than it needs to be.

According to John Frittelli’s 2014 analysis for the Congressional Research Service, it costs about twice as much to operate a ship complying with the Jones Act as a typical ship used for international cargo. Drewry Maritime Research concluded in 2013 that US-built, Jones-compliant vessels cost about four times as much to build as comparable foreign ships.

More expensive ships that are more expensive to operate add up to a situation in which Jones-compliant shipping is much more expensive than non-Jones shipping.

“The cost of shipping a standard-size container from New York to Puerto Rico has been much higher than shipping it to Jamaica,” writes North Carolina State University economics professor Thomas Grennes. “Similarly, the cost of shipping from Los Angeles to Hawaii has been higher than the cost of shipping the same product from Los Angeles to Shanghai.”

An absence of domestic port-to-port shipping is an occasional distortion for the US mainland, but it’s a systemic economic impediment for places like Hawaii and Puerto Rico. Puerto Rico, in particular, is so close to the United States that the most cost-effective way to transport many goods there would be for ships to stop off en route to a mainland port. But under the Jones Act, foreign-originating goods must be dropped off in Jacksonville and then shipped to Puerto Rico via an exorbitantly expensive Jones-compliant vessel. Likewise, it costs far more to ship US-produced goods to Puerto Rico than it does to Jamaica.

This raises the cost of living on Puerto Rico, makes Puerto Rico an unattractive place to produce goods bound for the US mainland, and has the bizarre effect of putting Puerto Rico at a competitive disadvantage to other Caribbean islands as a destination for American tourists.

In the US Virgin Islands, which are exempt from the law, US-made goods are about half as expensive, while the cost of living in Puerto Rico is 13 percent higher than on the American mainland. Food on Puerto Rico costs twice as much as it does in Florida, and that’s before the devastation of the island’s agriculture by Hurricane Maria.

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