Permanently exempting Puerto Rico from the Jones Act will help the U.S. territory recover from Hurricane Maria by widely opening its market for exports from the mainland, including Pennsylvania.
The 1920 Jones Act requires all shipping between two U.S. ports to be via naval vessels owned, built, and flagged in the U.S. It was enacted at a time when the size of a country’s naval prowess was the measure of a nation’s might. Its usefulness in protecting our national interests is outdated in the age of globalization and technological advancements. The steep decline in the number of ships eligible to carry cargo under the act demonstrates its ineffectiveness. According to the U.S. Department of Transportation, the number of U.S.-flagged oceangoing freighters dropped from 2,926 to 169 between 1960 and 2016, while the total number of freighters navigating the planet’s oceans increased from 17,317 to 41,674.
The laws of supply and demand, plus myriad other factors, make U.S. shipping one of the most expensive modes of moving ocean cargo. This cost is detrimental to Puerto Rico. A 2010 University of Puerto Rico study concluded that the island lost $537 million per year as a result of the Jones Act. Although some experts claim the act’s effect on the Puerto Rican economy is “uncertain,” most agree that the net effect is negative. A 2012 report by the Federal Reserve Bank of New York stated that the act boosts the cost of imported goods to island residents, makes exports less competitive, and diminishes the viability of Puerto Rico as a major regional trans-shipment port.
Hurricane Maria, the fifth-strongest storm ever to hit the U.S., washed away any doubts about the need to permanently exempt Puerto Rico from the Jones Act. The storm left the island without electricity, killed at least 48 people, destroyed thousands of homes, and caused more than $95 billion in damages. Puerto Rico does not have the options of interstate trucking, rail, or pipelines to transport the large volume of material, food, and fuel needed to rebuild the island following the storm. It is inhumane to let the Jones Act bottleneck progress when there are 3.5 million U.S. citizens in distress. Permanently exempting Puerto Rico from the Jones Act also would help the island address its $72 billion debt.
The U.S. Department of Homeland Security granted Puerto Rico a 10-day emergency exemption that expired Oct. 11. Analysts project that it will take at least 10 years for Puerto Rico to recover from Hurricane Maria and several decades more to fully address its debt, barring another major storm during those periods.
A permanent exemption from the Jones Act for Puerto Rico would not only boost the island’s ability to address its economic challenges but also increase commerce with its neighbors on the mainland.
The port of Philadelphia stands to gain from increased exports to Puerto Rico. For example, cheaper freight rates between it and San Juan can lead to stronger commercial ties between two of the nation’s largest traders in pharmaceutical products. Pennsylvania is the largest exporter in the country of nucleic acids and salts, the building blocks of the modern pharmaceutical industry ($374,605,896), while Puerto Rico is the U.S.’s largest importer of such chemicals ($1,401,139,108). The island is one of the world’s biggest centers for pharmaceutical manufacturing, according to the Pharmaceutical Journal. Puerto Rico hosts more than 500 medical production facilities and produces nearly 10 percent of all drugs consumed in the U.S. Increased trade in these materials between Puerto Rico and Pennsylvania will help the island rebuild from where its economy is strongest.
Another opportunity for increased trade between Pennsylvania and Puerto Rico is in the area of natural gas. As the second-largest producer of natural gas in the country, Pennsylvania can put itself in a position to export liquefied natural gas to Puerto Rico as demand for the product is likely to increase on the island. Puerto Rico has been discussing the transition from oil to gas to generate electricity for years. Elimination of the Jones Act trade barrier and the need to totally rebuild the island power grid may be the factors that accelerate that transition. The port of Philadelphia has the advantage to seize this opportunity as it is closer to San Juan (1,508 nautical miles) than the ports of Houston (4,334 nautical miles) and New Orleans (3,892 nautical miles).
Pennsylvania shipbuilders will not lose buyers for their ships if Puerto Rico is exempted from the Jones Act. There will still be enough hauling companies that need vessels to serve the hundreds of other U.S. ports that remain under the purview of the act. Exempting a U.S. territory from the act is not a novel idea. The Virgin Islands, American Samoa, and the Northern Mariana Islands have been exempt for decades.
Permanently exempting Puerto Rico from the Jones Act would be good for the island and good for Pennsylvania. It would eliminate a barrier to addressing two momentous crises on the island while developing stronger commercial ties between Puerto Rico and Pennsylvania.
Will Gonzalez, Esquire is the executive director of Ceiba, a coalition of Latino community-based organizations in Philadelphia. He has over 30 years of experience working on the housing, economic, and civil rights of low- to moderate-income families. He grew up in Puerto Rico and has family on the island.