<<<Back to News Center 2010

Sunday, May 15, 2011

Resident Commissioner Asks GAO to Examine Economic Implications of Jones Act’s Application to Puerto Rico

San Juan, Puerto Rico- Resident Commissioner Pedro Pierluisi has asked the investigative arm of Congress, the Government Accountability Office (GAO), to prepare a detailed report that examines the impact of the Jones Act’s application to Puerto Rico, in terms of its effect on both the Puerto Rican economy and the broader U.S. economy.

“The costs and benefits of the Jones Act—specifically, its implications for the national economy, national defense, and domestic shipbuilding industry—have been the subject of vigorous debate over the years. The economic impact of the Jones Act has been the source of particular concern in Puerto Rico and other non-contiguous jurisdictions, which rely heavily on maritime shipping to conduct commerce with the U.S. mainland,” wrote Pierluisi in a letter sent Friday to the Comptroller General of the United States, Gene L. Dodaro.

Section 27 of the Merchant Marine Act, enacted in 1920 and known as the Jones Act, generally requires that all maritime transport of cargo and passengers between ports in the United States be carried by vessels built in the United States, owned by U.S. citizens (at least 75%), and operated by U.S. citizen crews. Puerto Rico’s neighboring territory, the U.S. Virgin Islands, is exempt from the Jones Act, as are the U.S. territories of American Samoa and the Commonwealth of the Northern Mariana Islands.

As the Resident Commissioner observed in his letter, many of his constituents, including a broad array of Island economists, have expressed the view that Puerto Rico’s economic growth and competitiveness have been hindered by higher shipping costs potentially associated with the Jones Act.

The majority of Puerto Rico’s imports come from the U.S. mainland, and most of those imported products are transported by ship. Likewise, on the export side, the products that Puerto Rico generates for sale outside the Island—generally manufactured goods—are primarily destined for the U.S. market, and most of those goods are moved by ship.

“If the Jones Act does lead to higher shipping costs, the law might have a disproportionate adverse impact on Puerto Rico,” said Pierluisi.

In his letter, the Resident Commissioner also called attention to a report prepared in 1979 by a federal interagency task force chaired by the U.S. Secretary of Commerce, which found that “exemption from the cabotage laws—sometimes pointed to as an answer to the problem— would not provide a lasting remedy” in the form of lower freight rates. “Whether the task force properly analyzed the issue—and, if so, whether its conclusion is still valid over 30 years later—are open questions,” Pierluisi wrote in the letter.

Pierluisi urged GAO, in the course of preparing any report, to consult with stakeholders in Puerto Rico, including representatives from the manufacturing and agriculture sectors. In addition, he encouraged GAO to meet with representatives from the Port Authority of the Americas in Ponce, Puerto Rico, who are keenly interested in this issue, and with individuals and organizations who oppose repeal or relaxation of the Jones Act.

“The best way to seek any change in the Jones Act is to demonstrate the impact that the law has had on our economy and on the future development of the Port of the Americas. GAO is an independent, non-partisan organization and, accordingly, its conclusions are accorded great weight by Congress. It is the best entity to conduct the requested study,” said Pierluisi.