The Jones Act Explained | Part 1

hi my name is Cheryl and Vera I make

videos about Puerto Rico the United

States a bunch of things but lately I've

been making a lot of videos about the

social political climate in Puerto Rico

in the US and one video that I have been

avoiding making has been about the Jones

Act I haven't been able to find a video

anywhere like this on the internet that

kind of just explains what the hell the

Jones Act is so I figured I would like

to be the video that I want to see in

the world the Jones Act is a 100 year

old law that basically states that

anything that is imported by ship from

one US location to another u.s. location

has to be carried on US flag ships that

were built in the US owned by US

citizens and are mostly crewed by US

citizens so that's the gist of the Jones

Act but why is this such a controversial

thing and why is it screwing over so

many Puerto Ricans on the island let's

get into it shall we

I am obviously not an economic expert or

a policy expert but I reached out to a

few people that were experts and I

recently had a conversation with a man

named Colin Grabow I think I said your

last name right sorry if I didn't who is

a policy analyst at the Cato Institute

and he focuses primarily on laws like

the Jones Act so I reached out to him

asked him a bunch of questions and

here's how that men


you are a policy analyst at the Cato

Institute Center for trade policy

studies where your research focuses on

domestic forms of trade protectionism

such as the Jones Act such as the Jones

Act I thought that maybe it would be

helpful for me to start off by giving

you my understanding of what the Jones

Act is and then kind of work from there

and see if there are any any fact checks

or Corrections and then you did state a

lot of really interesting facts at that

zoom conference so I was going to kind

of reiterate those facts and then and

see if we can dive a little deeper into

those sounds good yeah okay so the Jones

Act is a 100 year old law that requires

goods transported by ship from one u.s.

destination to another to be carried on

US flag ships that were constructed in

the US owned by US citizens and are

being crewed by US citizens you might

get so far basically that's it

which is note that the ownership rule is

actually it's 75% Americans you can have

25% ownership as far as cooing the

vessels you can have a small number of

the Korean card holders so non Americans

but permanent residents also crew but

for all intents and purposes that's

that's basically a u.s. built us flagged

US crude US owned and then also the

Jones Act is a hundred years old

buts worth noting that these types of

laws these cabotage laws that govern the

transportation of goods within the

United States by by vessel these date

back to actually the 1700 s there's one

of the first laws passed in the US so

thank the Jones Act is probably best

understood as a tweak or modification

slight modification of bulls or laws are

already in place so it's not as though

before the Jones Act and it was open

season and you go use any ship wanted or

whatever so I bring this up because a

lot of people say wow this law is a

hundred years old and a lot has changed

in those 100 years and

you know I'm not sure if this law really

reflects current realities and I'd say

why should the laws a lot even older

than that a hundred years seems like a

long time but it's relatively new so

yeah yeah I mean I'd say 100 entry is a

long time but if you really want to look

at the Jones Act in context it's it's

even older than that because it's like I

said it's basically just a modification

of laws that have been in place for

either longer so I'd say it's even more

out of step more out of date with with

our modern realities okay so it does

have the the unintended consequence of

making things twice as expensive to ship

from the u.s. to Puerto Rico that's kind

of the main controversy around that's

that's that's the main controversy is so

you look at those provisions again the

u.s. billed you as crew et cetera start

with us flagged so their or depend on

how you count these things so on a

neighborhood 40,000 ships in the world

now out of those 40,000 how many are

Jones Act compliant to meet those four

conditions there are 98 right now that's

you know a lot less choice all as

options along this competition right

there and then you take that us build a

requirement they have been built here in

the United States I think a lot of

people think well that's great it's good

to build stuff here in the United States

but these ships are much much much more

expensive than ones built in other

countries according to the Congressional

Research Service they can be up to five

times more expensive than one build

another country so instead of Paynes say

50 million dollars for a ship you paid

250 million dollars for a ship and that

extra two hundred million dollars that's

that gets passed along to consumers so I

think just basic economic theory teaches

us when you have reduced competition and

you have very high costs that's gonna be

reflected in higher shipping rates and

that's I think what the evidence shows

now exactly how much of that their

shipping rates get passed on to the

consumer and and you know you go to buy

a gallon of milk of the store how much

extra does that cost because the Joan

there's a lot of debate over that

because obviously a lot of factors go

into determining the price of something

it's you know the tax the store has to

pay the wages it pays its employees has

many many costs of which shipping is one

so separating that that Jones that cost

out from the rest of it it's a hard it's

a difficult exercise so I think there's

a widespread agreement the Jones Act

absolutely cost Plato Rico there's less

agreement exactly the size their

significance of that cost some people

would say yeah it's very significant

it's very it's very high and then if you

listen to supporters that Jones Act they

will try to tell you that it's probably

it's partly nothing I think I remember a

study or something that you sent me that

showed people were tried to justify the

cost by comparing like Walmart prices

first you know there's a study put out

by the American maritime partnership

which is the main lobbying group for the

Jones Act that represents all the

corporations and businesses that benefit

from the Jones Act from that reduced

competition and they put out a report in

2018 I don't think it's a coincidence

this report came out you know less than

a year after Hurricane Maria which hit

Puerto Rico and there's a lot of

attention about the Jones Act and the

impact on Puerto Rico after the

hurricane and this report tried to make

the case that there was basically no

impact to consumers that nobody paid any

extra money when they went to the store

the methodology was basically they

looked at they went to the website of

Walmart and they looked at the price of

things in Jacksonville Florida and they

compared it to what it cost a Walmart

store in San Juan they took thirteen

items there was no explanation for how

these thirteen were picked and they said

well if you look at these thirteen the

prices are either the same or lower in

San Juan than in Jacksonville

they take Jacksonville because that's

the city that most of the ships are

going to Puerto Rico from the US

mainland originated from and so

therefore there's no cost well I mean

there's any number of problems with that

methodology you know I'll just say

anecdotally I myself went to the website

of Walmart for San Juan and Jacksonville

and I was able to find you know a number

of products were more expensive in

Puerto Rico

than in Jacksonville I think for example

I found ice cream was like three dollars

in Jacksonville and it was like two or

three times that price in San Juan and I

think yogurt was more expensive in San

Juan I don't think any economist would

would would agree with that conclusion

that they reached two summers ago when I

went to Puerto Rico I was shocked at how

much money I was spending on food and

just basic items I was spending LA

prices for a sandwich in San Juan in a

gentrified part of San Juan so you know

there are lots of different factors but

it seemed it seemed it was a little

shocking to see how much people that are

getting paid a lot less we're how much

they're paying for the same that's right

I mean where we go if it was a US state

it would be the poorest u.s. state that

has a 43% poverty rate and yet you know

putting this burden on these people that

they were artificially raising the price

of goods that they have to buy it's

perhaps worth noting that Jose Andres

the restaurateur was based out of here

in DC I believe he also owns the

restaurant in Puerto Rico and he said

you know panic doodlee that he pays

something like fifteen to twenty percent

more for the food he buys if I recall

correctly for for the restaurant you

know that he operates and you know he

has the advantage of I assume offering

restaurant being able to buy in bulk and

getting special deals but but he notices

the price of these things so I think

it's it's very real