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Following Hurricane Maria’s landfall in Puerto Rico last September, a number of media reports claimed that the Jones Act had severely damaged the Puerto Rican economy both over time and in the immediate aftermath of the storm.
These claims were nothing new. For years even before the storm, the Jones Act, a nearly century-old law that requires goods shipped between U.S. ports be transported on vessels that are American crewed, and American built and owned, has been a subject of intense debate in Puerto Rico.
Proponents of the Jones Act say the law ensures reliable shipping services to the U.S. Commonwealth, among other its other benefits to U.S. national security. Opponents, however, say it unnecessarily increases shipping costs and therefore cost of goods on the island by restricting free trade.
Arizona Senator John McCain, for one, has vowed for a full repeal of the Jones Act, describing it as “antiquated law” that unnecessarily increases costs for U.S. consumers, particularly in Puerto Rico and Hawaii, and he often pointing to a 2013 Federal Reserve Bank of New York report that stated shipping costs from the U.S. East Coast to Puerto Rico, at that moment, were double what they were to the nearby Dominican Republic.
However, a new report released Wednesday has concluded that the Jones Act actually has no impact on either retail prices or the cost of living in Puerto Rico.
In fact, the report found that the state of the art maritime technology, Puerto-Rico focused investments, and dedicated closed-loop service offered by Jones Act carriers actually provide a significant positive economic impact to the island, at freight rates lower or comparable to similar services to other Caribbean Islands.
The report, titled Impact of the Jones Act on Puerto Rico, is the first comprehensive report on the impact of the Jones Act in Puerto Rico following Hurricane Maria.
The report was produced by economists from Boston-based Reeve & Associates and San Juan-based Estudios Técnicos, Inc, who analyzed the economic impact of the Jones Act by evaluating the competitiveness of freight rates in the United States/Puerto Rico market, the quality of service provided by the Jones Act carriers, and the impact of the carriers’ freight rates on the prices of goods shipped between the United States mainland and Puerto Rico.
What the authors found was that not only does the Jones Act have no impact on either retail prices or the cost of living in Puerto Rico, but the Jones Act actually ensures a high level of supply chain efficiencies which helped the island recover in the aftermath of Hurricane Maria.
“There has been much debate about the impact of the Jones Act on Puerto Rico, particularly following Hurricane Maria,” said John Reeve, the principal in Reeve & Associates and the lead economist on the study. “The findings of our analysis show that reliable, efficient, and regular Jones Act services benefit consumers and businesses on the island, and no evidence suggests that exempting Puerto Rico from the Jones Act would reduce consumer prices in Puerto Rico. On the contrary, such an action may well increase prices.”
Actually, shipping costs between the mainland and Puerto Rico make up only a small percentage of the retail price.
In one example, the report found that ocean shipping accounts for just 3 cents (or two percent) in the retail price of $1.58 for a can of chicken soup in San Juan. Furthermore, a market basket analysis of an assortment of consumer goods at Walmart Stores in San Juan, Puerto Rico, and Jacksonville, Florida, found there was “no significant difference in the prices of either grocery items or durable goods between the two locations.”
“The results were overwhelmingly conclusive regarding the economic contributions of the Jones Act to Puerto Rico. Their detailed, fact-based analysis found that Puerto Rico received very similar or lower shipping freight rates when compared to neighboring islands and that the transportation costs have no impact on retail prices on the island,” said Matt Woodruff, Chairman of the American Maritime Partnership, which commissioned the study. “Moreover, the study found that prior claims and press reports that questioned the value of the Jones Act to Puerto Rico were erroneous and their validity completely undermined when compared to the economic facts at hand.”
Some more key findings of the report 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.
There is no Jones Act freight rate premium for ocean transport.
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 full report and other facts about the Jones Act can be found at https://www.americanmaritimepartnership.com/puerto-rico-economy/
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