GAO Report Refutes Jones Act Critics

 

April 2013

 

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A new government study examining the impact of the Jones Act on Puerto Rico has sunk allegations that the Jones Act is costly and inconvenient for those living there.

 

Conducted by the nonpartisan Government Accountability Office (GAO), the study found Puerto Rico’s U.S. domestic container shipping fleet has not only provided top-notch service and reliability, but has also seen significant reductions in price over the last few years.

 

“The (Jones Act) has helped to ensure reliable, regular service between the United States and Puerto Rico – service that is important to the Puerto Rican economy,” read the GAO report’s conclusion.

 

In a statement following the report’s release last month, the American Maritime Partnership (AMP) said the report clearly dispels a series of un-truths perpetuated by a small group of critics pushing for the Jones Act’s repeal.

 

“GAO disproved charges that the Jones Act raises prices for consumers in Puerto Rico,” AMP said in the statement. “GAO specifically said, ‘[S]o many factors influence freight rates and product prices that the independent effect and associated economic costs of the Jones Act cannot be determined.’”

 

AMP, whose affiliates include the SIU, is considered the most broad-based coalition ever assembled to represent the domestic maritime industry. Its 450-plus members span the country and include vessel owners and operators, shipboard and shore-side unions, shipbuilders and repair yards, equipment manufacturers and vendors, dredging and marine construction contractors, trade associations, other coalitions, pro-defense groups, and companies and organizations in other modes of domestic transportation.

 

The Jones Act stipulates that all cargo shipped between U.S. ports be transported on vessels that are owned, built, flagged and crewed by Americans. According to a study by PricewaterhouseCoopers, the Jones Act accounts for approximately 500,000 jobs, more than $100 billion in annual economic input and nearly $11 billion in annual tax revenue. While critics of the Jones Act have argued the law has resulted in higher shipping costs, the GAO study showed no evidence of those charges.

 

If anything, AMP said, the GAO report showed how those criticisms of the Jones Act were baseless and lacked the data to back up their cost-related assertions.

 

“GAO’s report confirmed that previous estimates of the so-called ‘cost’ of the Jones Act are not verifiable and cannot be proven,” AMP said. “In many cases, GAO cited allegations against the American fleet despite admitting that the claims could not be validated or verified.”

 

Conducted between October 2011 and February 2013, the study was the most comprehensive examination of the relationship between the Jones Act and Puerto Rico ever produced. AMP said the large amount of data included in the report showed just how wrong allegations of high Jones Act costs were.

 

“In fact, container shipping rates in Puerto Rico for American companies dropped as much as 17 percent between 2006 and 2010, according to the study,” AMP said. “GAO said there is no guarantee that shipping rates would go down further if the Jones Act were changed.”

 

Aside from its economic significance, the Jones Act is also considered vital to national defense. American mariners have been called on to serve their country time and time again during periods of national crisis or war, and the Jones Act has ensured U.S. Merchant Mariners were available to answer that call. Statements by the U.S. Navy and other segments and supporters of the military have underscored just how important the law is to the country.

 

As the Navy League of the United States put it, “As a maritime nation, the United States depends not only on a strong Navy, Marine Corps and Coast Guard, it also requires a strong commercial maritime industry. The Jones Act must be maintained so that … U.S. citizen mariners can continue to provide the economic and military support that is critical to our national interests.”

 

In its statement, AMP said it was happy to see the GAO report highlight some of the important national security benefits of the Jones Act.

 

“In fact, the study quoted the Defense Department and the U.S. Maritime Administration as saying the contributions of American commercial shipyards are more important than ever as the number of new military vessels being constructed is reduced by federal budget cuts,” AMP said. “American ship construction for Puerto Rico is important for national security because (according to GAO) it ‘help[s shipbuilders] sustain their operations, as well as helps them to retain a skilled workforce and supplier base. Absent new orders, that workforce could be put at risk.”

 

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