The U.S. House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation conducted a roundtable discussion July 26 titled “The Impact of the Jones Act on Consumer Prices in Puerto Rico.” The bipartisan group of congressional members, economists and maritime leaders – including SIU Executive Vice President Augie Tellez – discussed the findings of a new fact-based, comprehensive study on the economic importance of the nation’s freight cabotage law to Puerto Rico and highlighted its significant economic and national security contributions to the island and nation.
In addition to Tellez, other guest panelists included John Reeve, economist and principal, Reeve & Associates; Michael G. Roberts, senior vice president, general counsel and corporate secretary for Crowley Maritime; and Jonathan Kaskin, national vice president for legislative affairs, Navy League of the United States.
In the newly released report, “The Impact of the U.S. Jones Act on Puerto Rico,” economists from Boston-based Reeve & Associates and San Juan-based Estudios Tecnicos, Inc., concluded that the Jones Act has no impact on either retail prices or the cost of living in Puerto Rico (see related story, this page).
In his opening remarks, U.S. Rep. Duncan Hunter (R-California), chairman of the Subcommittee on Coast Guard and Marine Transportation, reminded attendees about the importance of the Jones Act to the nation and the need to explain the facts about the law.
“The bottom line is that the Jones Act was designed to maintain domestic U.S. shipbuilding capacity and to create employment opportunities for American mariners – American jobs, serving American commerce,” Hunter said. “These shipyards, welders, and mariners are the same individuals we would rely on to provide our country the maritime capacity required in times of conflict. There have been a lot of unsubstantiated claims regarding the Jones Act, including the claim that the law negatively impacts Puerto Rico…. We are here to discuss a report from a new team of economists to provide actual data on real consumer prices to determine the Jones Act’s impact in Puerto Rico.”
U.S. Rep. John Garamendi (D-California), ranking member of the subcommittee, reinforced that the Jones Act does not drive up the cost of consumer goods in Puerto Rico.
“This study is extremely important,” he said. “By all accounts and by my reading of it, it is accurate, and it covers the issues that needed to be covered.… The comparative market analysis of consumer prices for common household goods found that there is virtually no difference at all between what you would pay at the Walmart in Jacksonville, Florida, and what you pay in San Juan, Puerto Rico.”
Speaking specifically to the cost of automobiles in Puerto Rico compared to the United States, Tellez highlighted a Puerto Rico-specific tax, rather than the Jones Act, as the dominant contributing cause of the higher cost of vehicles in Puerto Rico.
“There is a tremendous difference in the cost of cars in the Puerto Rico as compared to the United States,” he explained. “The difference in price comes from the hacienda. They tack on a figure on every car, from 16 to 35 percent. It does not matter whether that car is coming from the mainland or from a foreign country. It is not because of the Jones Act; it is this arbitrary tax imposed by the government.”
Reeve stated, “Freight rates between the U.S. mainland and Puerto Rico are very comparable to those between the U.S. and Puerto Rico’s neighbors such as the Dominican Republic, Haiti and the U.S. Virgin Islands… If you apply a freight rate to ship a can of chicken noodle soup, three cents of that $1.58 soup can would be the actual price of port-toport shipping. That is just two percent…. Therefore, there is essentially no cost.”
Roberts discussed the benefits of customized shipping and logistics services and the investments made by American carriers in Puerto Rico.
“Direct freight service instead of onestop or two-stop freight service gives Puerto Rico’s suppliers and consumers an extremely efficient and reliable supply chain,” he said. “It also gives Puerto Rico’s producers reliable and inexpensive access to their customers on the mainland…. The carriers in the market have invested around $1 billion in ships, infrastructure and equipment to renew their fleets and enhance their services in the Puerto Rico market.”
Kaskin highlighted the underlying importance of the Jones Act to maintaining fully qualified, active, certified U.S. mariners for national security.
“Now that this report shows that the Jones Act is not responsible for retail prices in Puerto Rico, Congress should be even more committed to this legislation, since any reduction to the Jones Act fleet would be detrimental to our national security,” he said.
In later remarks, Hunter reinforced the important role of the Jones Act in ensuring national security, specifically the necessity to have a readied force and shipbuilding capacity in times of crisis: “We need every single commercial yard that we can (have) involved in American trade, so that when the stuff hits the fan, we have the people and the ships and the ability to make more ships quickly if we needed to have it…. In the end, it’s national security.”
Garamendi also highlighted how the Jones Act helps maintain state-of-the-art shipbuilding capabilities, which are essential in times of conflict: “Not only does the Jones Act provide tens of thousands of jobs with all kinds of vessels being made in about every place there is water, but it has created advanced shipbuilding in the United States…. Because of the Jones Act, American shipbuilding can and is leading in [the use of LNG] technology.” Reinforcing comments by his colleagues, U.S. Rep. Peter A. DeFazio (DOregon) added to the discussion his view on the indispensable nature of the law. “The Jones Act is not a relic,” he said. “The Jones Act is vibrant and the Jones Act is absolutely essential for the economic and the maritime security of this country.”