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Wednesday, September 2, 2015
Former World Bank Chief Economist: Jones Act Very Costly
By Michael Hansen @ 10:10 PM :: 4748 Views :: Jones Act

by Michael Hansen, Hawaii Shippers Council, September 2, 2015

Project Syndicate, which bills itself as the “World’s Opinion Page,” posted on September 2, 2015, a piece entitled “Puerto Rico in crisis,” written by the noted economist Anne Krueger.

Ms. Krueger is the lead author of the most widely referenced paper on the Puerto Rico financial crisis, “Puerto Rico – a way forward,” which is commonly known as the Krueger Report and was commissioned by current Governor Garcia Padilla to chart a course out of the island’s long term economic decline.  A former World Bank chief economist and former first deputy managing director of the International Monetary Fund, Krueger is Professor of International Economics at the School of Advanced International Studies, Johns Hopkins University, and Senior Fellow at the Center for International Development, Stanford University.

The Krueger Report emphasized the need for Puerto Rico to be exempted from Jones Act cabotage, and in her instant op-ed Ms. Krueger continues to call for an Jones Act exemption for Puerto Rico.

Key excerpts:

Puerto Rico ought to be the jewel of the Caribbean. It is not. Tourism has been stagnant for decades, even as travelers have flocked to other Caribbean destinations. European firms doing business in North and South America locate their corporate headquarters in Miami, Panama City, and elsewhere, with almost none choosing Puerto Rico. And now the island’s economy, after a decade of torpor, is declining at an accelerating rate as people leave for the US mainland. Public debt has soared, and the government says it cannot pay.

But there are also disadvantages to this arrangement. For example, Puerto Rico is subject to the Jones Act, which requires using very costly US-built ships and crews for all sea transport to and from the mainland. The island must also comply with the federally mandated minimum wage, despite an income level about half that of the poorest US state. And municipalities cannot benefit from Chapter 9 of the US bankruptcy code.

For the Puerto Rican authorities, this means making the island friendlier to business, including by removing onerous labor-market regulations. Meanwhile, the US government could exempt Puerto Rico from the Jones Act, extend to it Chapter 9 bankruptcy coverage, and align the island’s welfare and labor requirements with its productivity level.

Read more at Puerto Rico in Crisis

HSC: Unions Reply to Krueger

PDF: Krueger Report

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