Home This Week Editorial High time for an independent study
Issued : Wednesday, April 25, 2012 12:00 AM
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High time for an independent study

Edition: April 26, 2012 | Volume: 40 | No: 16

When the task force from the U.S. Government Accountability Office (GAO) leaves Puerto Rico after a weeklong, fact-finding mission to establish the impact of the Jones Act on the island's economy, it will have input from all sides. That is a good start toward establishing the good, the bad and the ugly pertaining to the maritime law.

First, the ugly. To be sure, the members of the task force know that the issue is politically charged in Puerto Rico. As much is clear in the recent declarations made by Rafael Cox Alomar, the Popular Democratic Party candidate for resident commissioner, who recently alleged that the controversial cabotage law was costing Puerto Rico more than $1 billion annually. The math from the study is fl awed because it doesn't contemplate other costs—such as energy costs, labor costs, permits and market idiosyncrasies—of doing business on the island.

Critics of that study see such important data as cargo volumes and total yearly freight costs totally missing from the report. That the candidate pressed forward with his press conference to make public the findings— despite advice from some economists on his team who questioned the numbers—is evidence of the politics clouding the Jones Act issue.

In an effort to contribute to the GAO's mission to separate positive facts from harmful myths, this newspaper is revisiting the Front-Page story "The Jones Act: Good or Bad for Puerto Rico" written eight months ago, building on that thorough investigation with new facts that lead us to the conclusion that the maritime law is actually good for Puerto Rico.

The numbers speak for themselves. Of principle importance, foreign carriers wouldn't be able to achieve the same level of efficiency as current U.S.-flagged carriers in such areas as intermodal surface transportation within the U.S. and marine-terminal operations, which are much larger components of carriers' operating costs.

The entrance of much bigger and longer 48-foot and 53-foot containers used by U.S. maritime carriers into the local market allows for 60% more volume to be transported, at relatively similar costs, than the 40-foot containers used by international shipping lines.

That is a whopping 60%, and is but one number that underscores the need for serious independent analysis of the full impact of the 1920 law. It is high time that all aspects of the Jones Act be examined.

Other questions to answer? What is the true impact of the trade imbalance with northbound cargo? U.S. carriers are obligated to serve Puerto Rico on a scheduled basis; would the foreign carriers serve as regularly if they only have 27% of cargo going out? What would happen if a war broke out in separate theaters and we didn't have a trustworthy merchant marine fleet to service the sea lanes? Go back to World War I for the answer to that one.

Yes, there are many pressing questions that everyone must ask and also some exemptions to the Jones Act that are very much needed.

One exemption begging modification pertains to bulk cargo, which puts a huge burden on businesses relying on barges and tankers. Big users of bulk-cargo service, such as the Puerto Rico Electric Power Authority (Prepa), can pay as much as 30% more in transportation fees for liquefied natural gas (LNG) because the government agency has an LNG exemption that is limited to vessels built in 1996 or before. Thus, Prepa is unable to use newer vessels that could help bring down the cost of energy. Knowledgeable people who have dealt with exemptions before feel this is something that can be obtained from Congress.

The hope of all players in the market is that a thorough study will once and for all establish the truth about the Jones Act. That will help detractors recognize the benefits in intermodal cost efficiency and the importance of the maritime statute to national security, while establishing that exemptions essential to energy independence are the best thing for Puerto Rico. The Jones Act issue is too important to Puerto Rico to be used as a political football.

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