As we were reminded recently by President Trump, Puerto Rico is an island , as in “it is entirely surrounded by water.” NEWS FLASH, Mr President, it is also entirely surrounded, or, more aptly, ensnared, by American law.
Even the most mundane of laws can have a huge effect upon the very fabric of society. Something as prosaic as land title law can affect poverty rates in third world countries, and, something as subtle as a country’s regulations surrounding contingency fee litigation can impact a country’s health and safety regime. Dangle the right incentive in front of lawyers and just watch them go to town, ferreting out dangerous practices, and gleefully suing the corrupt and the negligent.
One such impactful law is the U.S. Merchant Marine Act of 1920, also known as the Jones Act. Venerable legislation dealing with seamen’s rights, and the regulation of maritime commerce within the US. Seemingly innocuous, it nevertheless has historically had a huge societal impact upon the island of Puerto Rico, and presently presents a major obstacle to the rebuilding of the island in the dreadful wake of hurricane Maria
Puerto Rico, as Trump instructs us, is an island, but it is also an American colony, and as such is considered a part of the US for purposes of the Jones Act, and unfortunately bears the full brunt of the cabotage provisions of the Act. Cabotage refers to the transportation of goods by water within a country, and the Jones Act requires that all goods carried by water between ports within the US must be carried by US flagged ships. Not only that, but those ships must be US owned and built, and crewed by Americans.
Accordingly, the only way a foreign flagged ship can deliver cargo to Puerto Rico, ( including emergency relief supplies, or supplies needed to rebuild) is by paying ruinously high customs fees. Instead, foreign cargo invariably enters the US through Florida, where it is off-loaded and re-loaded into American vessels before delivery to the island colony. , which imports pretty well everything. This inflates the price of everything, from food to automobiles. Some estimate that the cost of the Jones Act to the Puerto Rican economy over the past three decades approaches $30 billion. It is a huge handicap for the poorest part of the US.
Long before the arrival of Maria, the artificially high cost of living, courtesy of the Jones Act, coupled with a sluggish economy, where the government is the single largest employer, had lead to an exodus from the island. Over 400,000 residents have migrated to the mainland, causing a significant erosion of the tax base, and leaving the colony unable to service its massive $72 billion debt. Individual Puerto Ricans would each need to chip in about $1,400 (or 9% of their average per capita income) just to meet this year’s interest payments, which is a whopping $5 billion.
As the first of Puerto Rico’s bond payments go delinquent, a major financial crisis looms within the US, since much of the massive debt is held by US pension funds. Puerto Rico’s default quickly translates into the pension funds default, with a predictable ripple effect.
All laws cause ripples of one sort or another I guess, its just that some are larger than others.
President Trump has, grudgingly, ordered a short term suspension of the Jones Act, in ordeR to get relief supplies flowing, but the relief is only temporary, and the damage had already been done, long before Hurricane Maria blew ashore.
THE DILETTANTE 