President Donald Trump allowed his ten-day waiver of the Merchant Marine Act of 1920 to expire on October 8, reinstating enforcement of the federal law restricting which maritime vessels are allowed to ship goods over the ocean between U.S. states.
The Merchant Marine Act of 1920, also known as the Jones Act, prohibits trade vessels employing foreign crew or containing foreign-made parts from shipping goods between U.S. ports.
On September 28, the White House had announced it would suspend Jones Act enforcement in Puerto Rico until October 8.
On September 27, Trump had defended his initial decision to deny Gov. Ricardo Rossello’s request for the law’s suspension, telling reporters “we have a lot of shippers and a lot of people that work in the shipping industry that don’t want the Jones Act lifted.”
National Security Rationale
Thomas Grennes, an economics professor at North Carolina State University, says the Jones Act was supposed to help defend citizens from foreign invasion.
“It’s very old, as you probably know—almost 100 years old—and the rationale given by the proponents was you need a strong merchant marine to have a strong navy, and you need a strong navy for national defense,” Grennes said. “It was argued in terms of national security.”
‘It’s Just an Obstacle’
The Jones Act inserts the government between people who need goods and the businesses supplying those goods, Grennes says.
“If you have a disaster such as a hurricane, where people are desperately trying to get some relief immediately, you rule out one possibility of getting help, from foreign-flag vessels that might happen to be in U.S. ports, that would be willing to send supplies, that are not able to because of the Jones Act,” Grennes said. “It’s just an obstacle.”
The benefits of the Jones Act are concentrated among a small group of economic interests, and its costs are diffuse, Grennes says.
“It’s beneficial to a small number of people, but it’s costly in general, so it costs billions of dollars to consumers,” Grennes said.
Making Domestic Trade Costlier
Salim Furth, a research fellow in macroeconomics at The Heritage Foundation, says the Jones Act makes trade with Puerto Rico easier for foreign businesses than U.S. ones.
“The good news for Puerto Ricans is that they’re allowed to trade freely with other countries, so at least they can rely on ships from other countries to supply their need, but there’s no reason the U.S. should be cut out of helping Puerto Rico to recover,” Furth said.
Repealing the Jones Act would benefit Puerto Rico’s economy and create more opportunity for residents, Furth says.
“Repeal would make it a more attractive location for all sorts of other businesses and would make it more affordable for tourists, which is obviously a major industry in the Caribbean,” Furth said. “It would allow Puerto Rico to develop and contribute by being a trading partner with the mainland United States.”