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Between Puerto Rico and food shipments, the Jones Act

After a brief suspension during the moment of maximum public outcry, the Trump administration earlier this month allowed the Jones Act to go back into effect restraining trade between Puerto Rico and the U.S. mainland. According to this WSJ editorial, Puerto Ricans are paying the price:

Ricky Castro is a food and beverage wholesaler and president of Puerto Rico’s Chamber of Food Marketing, Industry and Distribution, known as MIDA, which boasts 200 members across the island. This month MIDA conducted an informal survey of 15 members and found there are roughly 1,400 containers of their provisions sitting in U.S. ports, waiting to be shipped to Puerto Rico.

Mr. Castro attributes the delay to the Jones Act, which mandates that U.S.-flagged, -built and -manned carriers conduct all shipping between U.S. ports. This means an oligopoly of three companies—Crowley Maritime Corp., TOTE Maritime and Trailer Bridge Inc.—conduct the vast majority of the protected trade between the mainland and the island, at inflated costs on aging ships. The ocean-going Jones Act fleet numbers a mere 99 vessels, compared to thousands available from foreign-flagged carriers.

Earlier here, here, here, etc.

Puerto Rico: Administration won’t extend 10-day Jones Act waiver

Protectionism for the benefit of stateside shipping interests wins out over the rescue-and-rebuild interests of Puerto Rico and its citizenry. And yes, non-Jones ships have already been coming to help in the island’s Hurricane Maria recovery, so forget the claim heard last week that lack of port capacity and the availability of U.S. government vessels makes the law irrelevant. [Scott Shackford, Reason, earlier here and here] And given the Act’s impact on consumers in Hawaii and Alaska, how can it be that all four members of the Hawaii congressional delegation, and two of the three from Alaska, are stalwart backers of the law? [Colin Grabow, Cato] More: Tyler Cowen.

Jones Act and Puerto Rico, continued

Ten day suspension more than halfway over already, time to refocus: the Jones Act “is a swamp creature that’s strangling Puerto Rico” [Colin Grabow, USA Today] The Act’s inefficiencies cost America many jobs, but they’re harder to identify than the jobs “saved” [Ike Brannon] An aged fleet [Thomas Firey on Regulation magazine analysis] A drag on the energy sector [James Coleman, Regulatory Transparency Project] Only two Washington problems are amenable to easy and correct solutions: simplify the tax code and get rid of the Jones Act [Ray Lehmann, R Street] More: Matt Yglesias. Earlier here.

Puerto Rico recovery after Hurricane Maria: waiving the Jones Act

The 1920 Jones Act confines shipping traffic between US ports to US-flag, US-crew ships. That includes traffic between the mainland and outlying islands. It’s onerous for Puerto Rico in the best of times and now, in the emergency following the devastation of Hurricane Maria, much worse than that.

The Department of Homeland Security waived the Act beginning Sept. 8 in a limited manner for the purpose of allowing oil shipments to reach areas of Texas and Florida hit by Hurricanes Harvey and Irma. Those waivers expired Sept. 22. On Sept. 25 DHS announced that it would not waive the act for Maria and Puerto Rico even for the limited purpose of oil shipments, let alone general relief. DHS says it thinks most relief supplies for Puerto Rico from the U.S. will be sent by barge and it thinks there will be enough U.S.-flag barges available.

My Cato colleague Nicole Kaeding wrote two years ago that due to the Act, “goods coming from the mainland [to Puerto Rico] can’t come on the most cost-competitive vessel. They must go with one of four U.S. shippers operating that route. The limited competition increases costs. Puerto Rico’s shipping costs are twice those of its island neighbors, making items more expensive to purchase on the island. It also limits Puerto Rico’s ability to export its products to the mainland.”

Now the restrictions also mean that, say, a Norwegian- or Liberian-flagged vessel loaded up in Jacksonville or Savannah with relief supplies will not be allowed to unload them in Puerto Rico, no matter how much port capacity may have reopened there.

Rep. Nydia Velasquez (D-N.Y.) has called on President Trump to suspend the operation of the act for a year to reflect the current emergency, and that should be just an opening bid: Congress should move to repeal the law. Easier said than done: the Act, which also greatly drives up costs for Americans in places like Hawaii and Alaska, is tenaciously defended by U.S.-flag shipping interests and associated labor unions. Inertia, and the special interests that grow up around an existing law that protects some livelihoods, are powerful things. Critics of the Act, including Sen. John McCain (R-Ariz.), have made little headway. Trump, on Wednesday, on why he has hesitated: “a lot of people that work in the shipping industry… don’t want the Jones Act lifted.”

See also Amber Phillips/Washington Post “The Fix” (with link to Overlawyered), Nelson Denis, New York Times (“The Law Strangling Puerto Rico”), Henry Grabar/Slate, Michael Tanner/NRO. Marc Scribner/CEI, and this new WSJ editorial (“DHS argues that under U.S. law the agency can’t ask for a waiver unless there’s a national defense threat and there aren’t enough Jones Act-compliant ships to carry goods. That may or may not be a cramped reading of the law by DHS, but the Department of Defense has fewer legal constraints. Defense Secretary Jim Mattis could simply find a Jones Act waiver is ‘necessary in the interest of national defense.’”)

UPDATE: This morning the White House announced a 10-day suspension of the act. A 10-day suspension itself means very little when set alongside the magnitude of the need in Puerto Rico, so let’s hope this is just the prelude to a longer term fix. I did appearances this morning on CBS Streaming and WNYC/WGBH “The Takeaway” to discuss the issue.

The high, high cost of the Jones Act

The Jones Act, which forbids coastwise trade in goods or passengers between American ports except in U.S.-made, U.S.-staffed, U.S.-owned vessels, has developed into a quintessential special interest law. It’s why Maryland and Virginia “bring in road salt from Chile rather than Ohio;” why Jacksonville, Fla. relies on coal from Colombia rather than U.S. sources; and why the economies of Hawaii, Puerto Rico and Guam are perpetually hobbled by high input costs. [Malia Blom Hill, Capital Research Center] Does it at least strengthen U.S. defense by preserving a defense-relevant merchant marine sector? The signs on that aren’t good either. [Eftychis John Gregos-Mourginakis and Joshua Jacobs, NRO; followup]

June 13 roundup

  • Put a Plimsoll line on a T-shirt and you might hear from trademark lawyers [Cyrus Farivar, ArsTechnica]
  • “Do Landlords Have a Duty to Evict Drug-Using Tenants (or Face Liability if Guests Die When Using Drugs with Them)?” [Eugene Volokh]
  • Interview with Judge Jeffrey Sutton about his new book on state constitutions, “51 Imperfect Solutions: States and the Making of American Constitutional Law” [Ilya Somin, parts one and two] Federalist Society teleforum with Judge Sutton, Randy Barnett, and Judge William Pryor;
  • “American Airlines bans insects, hedgehogs and goats as emotional support animals” [CNNMoney/WQAD] Peacocks begone: “JetBlue Updates Requirements for Emotional Support Animals” [press release]
  • Gov. Hogan vs. teachers’ unions, pension mandate, a socialist for MoCo County Executive?, and more in my latest Maryland roundup [Free State Notes]
  • “A Devastated Puerto Rico Must Still Contend with the Jones Act” [Cato Podcast with Colin Grabow and Caleb Brown, earlier]