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An Outdated Protectionist Law Is Hurting Puerto Rico

Michael D. Tanner

If anyone wants more evidence of how protectionism hurts the
poor and most vulnerable among us, Puerto Rico now offers a prime
example.

The island was devastated by Hurricane Maria. Tens of thousands
have been left homeless. Basic goods and services, such as food,
water, and fuel, are in short supply. Electricity is out for
virtually the entire island, and may not be restored in some places
for months. Nearly 85 percent of the island has no cell-phone
coverage. Much of the country’s already-shaky economic base,
including tourism and agriculture, has been all but wiped out.

Yet despite the unfolding humanitarian crisis, the Trump
administration has so far refused to waive the law’s
restrictions.[/pullquotre]

Yet vital aid to the island is being slowed by the Jones Act, a
100-year-old example of protectionism and corporate welfare. The
Jones Act requires that all cargo shipped to Puerto Rico is carried
on ships built entirely in the United States, owned by a U.S.
citizen, flying a U.S. flag, and staffed by a majority-American
crew. Relatively few ships meet those requirements. And at a time
when even a brief delay in getting assistance to suffering
islanders could cost lives, the Jones Act is an unneeded impediment
to that aid.

Yet despite the unfolding humanitarian crisis, the Trump
administration has so far refused to waive the law’s
restrictions.

Over the years, the Jones Act has been larded with all sorts of
national-security justifications, but its real purpose is to
protect jobs in the U.S. shipbuilding and merchant-marine
industries. No doubt those are good jobs, though the number of
people employed in shipbuilding has fallen by 40 percent since
1980. But like most protectionist measures, this law ends up doing
far more harm than good. And those most likely to be hurt are those
who can least afford it.

This is not just true of the Jones Act, but of protectionism
generally. For example, economists estimate that trade and the
availability of low-cost imported goods improves the purchasing
power of middle- and upper-income Americans by roughly 29 percent.
But trade increases the purchasing power of the poor by more than
62 percent. At the same time, the Peterson Institute for
International Economics estimates that past gains from U.S. trade
and liberalization of investment range from $9,270 to $16,842 per
household. Another study found that that “a 1 percent increase in
trade raises real income by 0.5 percent.” That might not seem like
a huge boost for the wealthy — the global elite, to use the
pejorative preferred by protectionists — but it makes a big
difference in the lives of the poor.

For now, the bigger debate over protectionism can wait.
Suspending the Jones Act for the duration of Puerto Rico’s recovery
should be a no-brainer. Better yet, let’s repeal this antiquated
example of special-interest protectionism. And let’s begin to
understand that there is a very real price to be paid for all
special-interest protections.

Michael
Tanner
is a senior fellow at the Cato Institute and the author
of Going for Broke: Deficits, Debt, and the Entitlement
Crisis.