Puerto Rico and the Jones Act
Posted on September 27, 2017
The Times reports that the government has refused to waive the requirements of the Jones Act to aid Puerto Rico’s recovery from Hurricane Maria, as it had to aid Texas and Florida with their recoveries. What’s the Jones Act? It’s an early twentieth-century law that requires that all shipping between US ports must be carried on US ships built by the US shipping industry and with a US crew. The decision seems outrageous—if we can decrease the price of shipping to Puerto Rico to aid its recovery, obviously we should. But the news has led to a lot of commentary suggesting that the Jones Act itself is an antique that needs to go once this crisis is past.
I want to express a contrary view. If you had to characterize my views on international trade, you would probably say I’m a free trade advocate. But I do think there are certain industries that are strategically important but that would not exist in the United States in a perfectly free market. What you think about these industries is a good test of your approach to free trade. Some people favor free trade because they think it’s good for the country. Some people favor free trade because they have an ideological commitment to it. If you fall into the first camp, you might say, as I do, that the government should put its thumb on the scales, distort the markets, to make sure these industries exist here. If you fall into the second camp, you abhor that kind of thinking.
What kinds of industries am I talking about? Agriculture, steel, energy, and, I would say, shipping and ship building. Another cautionary example is the rare earth mining industry. Rare earths are elements that are necessary for the manufacture of modern electronics. There is no Jones Act for rare earths, and as a result the United States has no real rare earths industry.
Maybe the Jones Act isn’t the best way to promote the existence of a US shipping and shipbuilding industry. Maybe it is the best way. That’s really a question for economists to figure out. Maybe special provision needs to be made for Puerto Rico or other islands, who probably bear an unreasonable share of the costs of the Jones Act, given the lack of other means of transporting big cargoes to them from the mainland. But what I don’t like is the approach that puts ideological commitments above the national interest or “what works.”
Just to repeat what I said at the start: of course all laws and rules that are making it more difficult to aid the three million US citizens in Puerto Rico should be waived.