by Michael Hansen, Hawaii Shippers Council, July 4, 2015
A lead story in the New York Times on the morning of the Fourth of July 4, 2015 entitled “Despair and anger as Puerto Ricans cope with debt crisis” highlights conditions in the Commonwealth as a result of the financial crisis and among other things mentions problems with Jones Act cabotage for the island. This high profile coverage in the nation’s leading newspaper indicates the level of attention the Jones Act is receiving as a result of the Puerto Rico financial crisis. Key excerpt:
Taxes continue to go up. But so do other costs. Living on an island, many business owners must ship their goods in from a mainland port, already a costly proposition. But a 1920 law, the Jones Act, which requires Puerto Rico to receive its shipments from the United States on American-built ships with mainly American crews, makes the cost of transporting goods even more expensive. Recently, it got costlier, Mr. Baker said.
Now there is a chorus of calls for Congress to relax the law as it relates to Puerto Rico....
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The New York Times in an editorial dated July 1, 2015, "Puerto Rico needs Debt Relief," encouraged the U.S. Congress to provide Jones Act cabotage relief to Puerto Rico. This is an important development in that the NYT is the nation’s leading newspaper and uniquely influential.
That said, Congress can take steps to help the island in other ways. Lawmakers should allow non-American ships to carry goods between the island and the mainland, which is prohibited by the Jones Act of 1920 to protect the domestic shipping industry. That will lower shipping costs to Puerto Rico, including those for oil and natural gas, an important consideration for an island economy.
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Tim Worstall a contributor to Forbes Magazine, July 3, 2015, opines regarding the Puerto Rico financial crisis, notes Jones Act cabotage is an impediment to the Commonwealth’s economic recovery, and suggests an interesting question.
There’s a number of stories around about the economic mess that Puerto Rico finds itself in. In many ways it’s akin to Greece: a poor economy locked into a monetary union, but without a fiscal union, with a much richer neighbour or two. This means that it has no independent monetary policy (nor, obviously, currency) and also doesn’t get the sort of fiscal transfers that would be necessary to compensate for this. It has a couple of other problems: the Jones Act most certainly doesn’t help. It means that transport costs to and from the island are twice what they are to and from other Caribbean islands. Quite why the American shipping trade should be worth such a stranglehold isn’t obvious: perhaps someone would like to ask the shipping unions?
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