On Wednesday, the Department of Homeland Security Secretary Alejandro Mayorkas announced that the federal government would approve a “temporary and targeted” waiver of the Jones Act to allow a single foreign ship laden with diesel oil to dock there.
As Florida is getting battered by Hurricane Ian, Puerto Rico is still reeling from the effects of Hurricane Fiona. Ten days after that hurricane’s passage, hundreds of thousands of Puerto Ricans are still without power.
Complicating Puerto Rico’s ability to recover is the Jones Act, also known as the Merchant Marine Act of 1920. This deliberately protectionist federal law requires that any ships that transport goods between US ports be American-made from an American-owned company and crewed by Americans . There are fewer than 100 such ships. It shields American domestic maritime shippers from foreign competition. By its very nature, it also drives up the prices of goods in far-flung parts of America like Puerto Rico, Alaska, and Hawaii. It also makes a crisis situation like a natural disaster worse because it limits who are legally permitted to assist these areas.
And so, a BP ship full of fuel to supply the country with power could not legally dock in Puerto Rico because it had already previously stopped in a Texas port. Many public officials and even some members of Congress had been asking DHS to provide blanket waivers allowing foreign ships to assist in resupplying the country. But as Reason noted on Tuesday, the Jones Act was recently amended to actually make it even harder for the federal government to give blanket permission for foreign ships to travel from port to port, even in a time of great crisis. DHS had to analyze the situation and determine that Jones Act-approved vessels were not sufficient to meet current needs and provide limited targeted waivers for specific ships.
That’s what happened Wednesday. “In response to urgent and immediate needs of the Puerto Rican people in the aftermath of Hurricane Fiona, I have approved a temporary and targeted Jones Act waiver to ensure that the people of Puerto Rico have sufficient diesel to run generators needed for electricity and the functioning of critical facilities as they recover from Hurricane Fiona,” Mayorkas announced.
He then insisted that the Jones Act is “vital to maintaining the strength of the American shipbuilding and maritime industries,” the company line in the Biden administration, which implies that it’s apparently government policy to drive up prices of goods for American consumers in order to benefit a much smaller number of people in the maritime industry. It’s anti-competitive cronyism, plain and simple.
Remarkably, the maritime industry loudly resisted even this single ship getting a waiver. The American Maritime Partnership (AMP) put out a press release Wednesday claiming to “debunk” the need for a waiver and that Puerto Rico’s shipping needs were being met, despite the governor of Puerto Rico begging the federal government to provide waivers.
The release contains this remarkable and completely shameless quote from AMP President Ku’uhaku Park that is worthy of some fisking: “This stunt by a foreign oil company showing up unannounced in Puerto Rico while on its way overseas hoping to sell its fuel at a premium to Puerto Ricans in need, and thereby triggering a public and political rush to judgment, is bad precedent, a circumvention of US law, and should never be tolerated. American Maritime is dedicated to Puerto Rico and while foreign oil traders seek to line their pockets At the expense of the Puerto Rican people, we will always be committed to our fellow citizens, including our own employees and their families, in Puerto Rico.”
So, according to AMP, there is no shipping crisis in Puerto Rico that justifies Jones Act waivers. The release is full of quotes insisting that goods from Jones Act ships are getting to Puerto Rico just fine and that supply chain problems are happening due to land transportation issues. While there’s no doubt that there are all sorts of supply chain logistics problems in responding to the hurricane, AMP’s insistence that there isn’t a shipping problem is contradicted by Park’s own words, claiming that this foreign company is attempting to “sell its fuel at a premium to Puerto Ricans in need.” He amazingly goes on to complain about the foreign oil traders who “seek to line their pockets at the expense of the Puerto Rican people” by, you know, selling them fuel they need to turn their lights back on.
How is this at the expense of the Puerto Rican people? It’s complete gibberish attempting to deflect attention away from the cruelty of the anti-competitive practices that financially benefit Park (who is an executive at American shipping company Matson). This ship can’t be “taking advantage” of Puerto Ricans unless there is a shortage of available fuel that would drive up prices. And if that’s the case, then AMP’s insistence that the island is already getting shipped what it needs is not accurate.
This concept that certain companies should be able to control whether their competition is allowed to operate is reminiscent of the loathsome, anti-competitive “Certificate of Need” license regulations that plague the health care industry and drive up prices.
Eric Boehm and others have critiqued these laws here at Reason. Certificate of Need programs put government-mandated limits on health services and equipment by essentially giving health industry incumbents the power to prevent competitors from expanding what they provide. In Virginia, the state’s Certificate of Public Need law was used to stop a hospital in Salem from building specialized neonatal care facilities that just so happen to be offered by a nearby hospital in Roanoke. Despite support by the citizens of Salem, the state balked due to objections by representatives of the nearby hospital. Officials decided that the care unit simply wasn’t “needed” and rejected the license. What the people of Salem wanted and what the marketplace could support was irrelevant to the decision.
And, of course, it gave the other hospital a local monopoly on certain health services, just as the Jones Act gives a small number of shipping firms a monopoly on domestic shipping between US ports. Park is telling the government and the people to ignore market signals, ignore what people in Puerto Rico say they need, and trust him and his buddies to decide whether the island truly needs other ships to come.
It’s like if Pizza Hut had the legal power to decide what companies can deliver food to your house. Perhaps instead of being allowed to enjoy Kung Pao chicken in the comfort of your home, Pizza Hut would decide that what you really “need” is more pizza.
Mayorkas was right to give the ship a waiver. The Jones Act is a plague on the marketplace that really needs to be purged.