The American Maritime Monopoly

 Abstract

The Jones Act, a federal law enacted in 1920 under the Merchant Marine Act, was designed to protect the US shipping industry by enforcing cabotage regulations. Its regulations require that ships carrying goods between US ports must be US-owned, built, manned, and registered. Although regarded as strengthening national security and creating domestic maritime jobs, the law received a lot of attention. Critics argue that its protectionist actions raise consumer prices, stifle competition, and stifle economic growth, especially in outlying territories like Puerto Rico.

This article examines the economic impact of the Jones Act, focusing on the case of Puerto Rico. Although an important US territory, Puerto Rico suffers from excessive import costs due to legal restrictions. For example, the law's requirements will raise the import price of liquefied natural gas (LNG) to Puerto Rico, forcing the region to rely on more expensive foreign sources. The analysis shows that importing LNG using non-compliant vessels could result in significant savings for Puerto Rico, potentially reducing energy prices by 8%. 

In addition, the law's restrictions affect Puerto Rico's export industries, particularly the pharmaceutical industry. Although Puerto Rico is a major pharmaceutical producer in the continental United States, the transportation requirements imposed by the law increase export costs, reduce competitiveness, and limit business potential. Ultimately, this study highlights the negative economic consequences of the Jones Act, not only for Puerto Rico, but also for other outlying territories of the United States. The law is harmful those regions with disproportionately higher import costs and reduces the competitiveness of exports, and perpetuates economic inequality and undermines the general well-being of those regions..

 The American Maritime Monopoly