CNN’s Zakaria calls for Jones Act repeal as part of Puerto Rico aid package

by Michael Hansen, Hawaii Shippers Council, October 23, 2017

CNN published on October 22, 2017, the op-ed video, “Zakaria proposes ‘grand bargain’ on Puerto Rico’s debt.” Zakaria’s grand bargain would involve the federal government restructuring the Territory’s $90 billion of outstanding debt and substantially changing the federal regulatory structure for the Commonwealth in exchange for local economic reform and government restructuring.

Zakaria stated the federal regulatory changes and local reforms he referenced were “proposed by economist Anne Krueger.”  That is a reference to a June 2015 study, “Puerto Rico – A Way Forward,” also known as the “The Krueger Report,” after the lead author, Anne Osborn Krueger. At the time, Krueger was and is currently, Senior Research Professor of International Economics, School for Advanced International Studies, Johns Hopkins University. Previously, Kruger was First Managing Director, International Monetary Fund, 2001-2006, World Bank Chief Economist, 1982 – 1986.

The former Puerto Rico Governor Alejandro García Padilla commissioned the Krueger Report to study the Commonwealth’s dire financial situation and make recommendations. The results of the report were incorporated into Gov Garcia Padilla’s Puerto Rico Fiscal and Economic Growth Plan issued on September 5, 2015. Gov Garcia Padilla served a single four year term choosing not to run for reelection in 2016 largely due to his inability to rectify the Commonwealth’s financial situation.

Among the key reforms recommended in The Krueger Report was to fully exempt the Commonwealth of Puerto Rico from federal maritime cabotage popularly known as the Jones Act and formally in American jurisprudence as “the coastwise laws of the United States.” This undoubtedly what Zakaria meant by his statement, “repealing the Jones Act, which has made shipping goods to the island more expensive.”

This is exactly what U.S. Senator John S. McCain III (R-AZ) proposed with introduction on September 28, 2017, a bill, “To exempt Puerto Rico from the coastwise laws of the United States (commonly known as the ‘Jones Act’’).”

Puerto Rico needs a broad program of federal and territorial reforms as described by Krueger including a full Jones Act exemption, and as Zakaria mentioned a federal restructuring of the Commonwealth’s debt.

Key excerpts:

Fareed Zakaria floated the idea of a "grand bargain" between the federal government and the people of Puerto Rico to resolve the country's economic crisis.

During his 'What in the World' segment of his weekly show on Sunday, he explained how the deal could work.

"The federal government should commit a large, multi-year, multi-billion dollar program of investment, should restructure Puerto Rico's debt and repair the island's infrastructure."

"In return, after conditions get normal, the leadership of the commonwealth should also make some difficult economic reforms" he said.

Zakaria pointed out that many of these reforms have already been proposed by economist Anne Krueger. They're geared to making the island more business-friendly to bring back jobs, increase the tax base and stop the outflow of people.

Krueger's proposals include reducing the cost of electricity and repealing the Jones Act, which has made shipping goods to the island more expensive.

Her most controversial proposal involves lowering the minimum wage, implementing welfare reforms and lowering benefits to make Puerto Rico more competitive compared with other Caribbean economies.