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Friday, June 10, 2011

The Jones Act

Recently, I asked The Honorable Gene L. Dodaro, the Comptroller General of the United States and head of the U.S. Government Accountability Office, or GAO, to undertake a comprehensive study of the impact of Section 27 of the Merchant Marine Act of 1920, also known as the “Jones Act,” on the economy of Puerto Rico.

The Jones Act states that any ocean transportation of cargo between Puerto Rico and the United States mainland must be on American Merchant Marine vessels. The requirement does not apply to cargo transported between the U.S. mainland and the U.S Virgin Islands, American Samoa, and the Northern Mariana Islands; cargo transported to Guam is partially covered by the Jones Act. The only exemption to this area of law for Puerto Rico was made in the 1980s, when former Resident Commissioner Baltasar Corrada del Río obtained an exemption for foreign flagged cruise ships that traveled between American ports.

The impact of the Jones Act has been a source of particular concern in Puerto Rico, as in other jurisdictions that are highly dependent on maritime trade with the U.S. mainland. Many sectors in Puerto Rico contend that the impact is undeniable and that an exemption from the Jones Act would result in significant benefits for the Island’s commerce.

However, studies conducted to date have not provided sufficient empirical data addressing the impact of any exemption. Several local studies—none of which is recent—conducted by Management and Economic Consultant, Inc. in 1993, Reeves and Associates in 2001 and José Alameda in 2002, provide conflicting data on the impact of a possible exemption for Puerto Rico from the Jones Act. A study conducted by the federal government in the 1970s concluded that an exemption would not provide the desired outcome.

If this last analysis were accurate and if its conclusions are still valid 30 years later, then there is not sufficient basis for seeking an exemption to the Jones Act for Puerto Rico at this time. For this reason, it is necessary to call for a new study to examine the present and real impact of the Jones Act on Puerto Rico.

For example, it is necessary to compare the costs of imports and exports in Puerto Rico to those of other island jurisdictions that are not covered by the Jones Act. Also, we should assess the impact of the law on the future development of the Port of the Americas in Ponce and the possible transshipment of cargo and “value added” products. In sum, all aspects of interstate commerce conducted via ocean transport through Puerto Rico should be included in the scope of the study.

In my letter to the GAO, I request that affected sectors like those of the manufacturing, agriculture and charter vessel industries be consulted in order to obtain first-hand data that can be substantiated. I also indicate that the GAO should consult entities and organizations that support or oppose the repeal of the Jones Act so the study can be fully informed and serve as a credible basis for any future course of action that may be pursued or presented to Congress based on its findings.

For this effort to come to fruition it is essential to create a united front. Since I wrote to the Comptroller General, various economic sectors have supported this effort publicly. Last week the Private Sector Coalition, which represents over 25 organizations on the Island and which includes the Puerto Rico Manufacturing Association, endorsed my request and committed their resources to cooperate with the GAO and provide all the information necessary and relevant to effectively study the impact of the Jones Act in Puerto Rico. The best way to demand a change to Jones Act is by effectively demonstrating the impact it has on our economy and future development of the Port of the Americas.

It is important to note that while there is much talk about—and attention being given to— the Jones Act issue, particularly as we approach elections, in more than 30 years no Resident Commissioner has introduced a bill before Congress to exempt Puerto Rico from the Jones Act. In Washington there has always been and remains strong opposition to any change to this law from three central stakeholders: the Merchant Marine, the shipbuilding industry and the unions representing workers in both. And the only way to overcome that opposition is by supporting our claims with a compelling study by a respected, recognized institution, which clearly establishes that both Puerto Rico and the United States would benefit from exempting the Island from the provisions of the Jones Act.

The people know me and know that I never make a promise that I cannot fulfill. But I promise that if the GAO confirms based on its study that the Jones Act is resulting in significant, adverse effect on our economy, I will fight tirelessly until Puerto Rico is exempted from the Act.