Aloha, Puerto Rico

An economic boon for the territory—and for Hawaii—would be an exemption from the antiquated Jones Act governing shipping from U.S. ports.

by Keli’i Akina and Andy Blom, Wall Street Journal, June 5, 2016

Congress is wrestling with legislation to put Puerto Rico back on its feet while avoiding a taxpayer bailout or chapter 9 bankruptcy. Legislation empowering a strict fiscal-control board is an important first step. But lawmakers also need to implement policies that enable the Puerto Rican economy to grow. Exempting the territory from the Jones Act would be a good start.

The Merchant Marine Act of 1920, better known as the Jones Act, specifies that ships carrying cargo between two American ports must be built in the U.S. and be 75% owned by American citizens. Further, at least 75% of a barge’s crew must be U.S. citizens, and it has to fly the American flag.

In practice, the law has been incredibly damaging—to Puerto Rico as well as Hawaii, which has its own economic worries. One study estimated that the Jones Act has cost Puerto Rican residents $29 billion in the past 40 years. The cost of shipping a 20-foot container from any U.S. port to Puerto Rico is twice as expensive as shipping to the virtually equidistant Dominican Republic, a 2012 Federal Reserve Bank of New York study showed.

This makes most aspects of everyday life more pricey. A vehicle costs $6,000 more in Puerto Rico than on the mainland, and food is twice as expensive as in Florida. Energy can cost two or three times more per kilowatt-hour than on the mainland, according to the U.S. Energy Information Administration. Because of the Jones Act, liquefied natural gas cannot economically be imported to the island.

The fleet of U.S. vessels that comply with the Jones Act has dwindled to fewer than 100 today, from 2,300 in 1946. Many of those ships are antiquated and expensive to maintain. Allowing “international relay”—that is, a non-Jones Act ship on a single voyage transferring goods between two U.S. ports—would bring significant relief to Puerto Rico.

The Jones Act also damages Hawaii, which is the next-highest state or territory in debt service. Puerto Rico needs Jones Act relief to survive, and Hawaii needs it to avoid becoming Puerto Rico.

The congressional Republican Study Committee in February released a statement explaining that it didn’t support a bailout for Puerto Rico but instead wanted “pro-growth reforms that would alleviate the burden that current federal policies place on the territory.” Why not Jones Act reform for Puerto Rico? An exemption was made for the U.S. Virgin Islands in 1922. Congress could alleviate Hawaii’s burden at the same time by reforming this anachronistic, anti-growth law.

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Mr. Akina is the president and CEO of the Grassroot Institute of Hawaii. Mr. Blom is the executive director of Grassroot Hawaii Action.