A container ship is seen docked at the port of San Juan as people deal with the aftermath of Hurricane Maria on September 25, 2017 in San Juan Puerto Rico.
As Puerto Rico faces the ordeal of recovering from the devastation of Hurricane Maria, its ability to import supplies is being curtailed by an arcane law that has long bedeviled the American island: The Jones Act.
Enacted in 1920, the Jones Act is a cabotage law that restricts the movement of goods between two U.S. ports. It requires that the ship be made in America, owned by Americans and staffed by a predominantly American crew. The law is of little interest or concern in the mainland 48-states but it has long been a major problem for Hawaii, Alaska, Guam, and Puerto Rico by severely limiting their ability to import goods.
In the wake of Hurricane Maria, members of Congress have submitted a request for a ‘waiver’ that would allow foreign-flagged vessels to bring goods from U.S. ports to Puerto Rico. The Trump administration has, so far, denied the request for a waiver. President Trump was frank with reporters for the reason: “a lot of people that work in the shipping industry… don’t want the Jones Act lifted.” That is true, the shipping and shipbuilding lobbies have a strong vested interest in the maintenance of the Act.
The traditional justification of the Jones Act, and earlier cabotage laws, is that the United States needs to build a strong seafaring capacity in case of war. This national security justification still finds proponents, but it is fundamentally outmoded. While there is certainly a legitimate national security interest in creating and protecting certain industries, there are narrower ways to support the shipping industry than the expansive reach of the Jones Act. Would allowing foreign-flagged ships to deliver goods from Seattle to Alaska or from Miami to Puerto Rico really pose a threat to U.S. national security? That seems like a stretch. After all, most American shipyards, save for a handful, long ago ceased relying on contracts to build large oceangoing merchant vessels and instead focused on military production to stay in business. It is wishful thinking to believe that shipbuilding can be a truly national industry in an era of global supply chains.
The reality, as President Trump acknowledged, is that the U.S. shipping industry doesn’t want to give up their control on shipping between U.S. ports. Change is unlikely because the benefits of a more open trading system are diffuse, but the harms are concentrated. The benefits from a more open trading regime are spread amongst the many consumers in Puerto Rico who would benefit from cheaper goods. It isn’t the sort of cause that is going to spark a massive lobbying campaign. The harms from a change, however, would be concentrated and the shipping industry has been effective at ensuring political support for the law.
We should be wary about attempts to invoke national security as the basis for a protectionist measure. Article XXI of the GATT does allow for a national security exception to the free trade agreement but usually these amount to attempts at ‘pretextual protectionism,’ where national security is the window dressing on a classically protectionist measure. For instance, in 1975, the Swedish government imposed a quota system on the import of “leather shoes, plastic shoes and rubber boots.” The reason? The government cited the decline of the domestic industry, which “has become a critical threat to the emergency planning of Sweden’s economic defence [sic] as an integral part of the country’s security policy.” The footwear industry needed to be protected to ensure that there was a strong domestic industry “in case of war or other emergency in international relations.” That logic parallels the justification for the Jones Act—one nation’s shipping industry is another nation’s shoe industry. In a more worrisome example, China is imposing burdensome cybersecurity law that would keep out many U.S. competitors and defending it on the grounds of national security. Other nations have sought to invoke national security to construct protectionist measures, including the European Union’s subsidies for Airbus.
While it is unlikely that Puerto Rico will get a waiver to the Jones Act in the wake of Hurricane Maria, this episode has focused renewed attention on the outdated Jones Act. Proponents will continue to argue that the cabotage law is justified on national security grounds but that argument is spurious. For American citizens living in Puerto Rico, as well as in Hawaii, Guam and Alaska, there will continue to be a real harm to their pocket books from this protectionist measure. This week, Senator John McCain said: “Now, more than ever, it is time to realize the devastating effect of this policy and implement a full repeal of this archaic and burdensome [Jones] Act.” That doesn’t seem likely to happen—President Trump bluntly acknowledged this—but it is a worthy fight.
Image: Joe Raedle/Getty