American Mercantilism: How America Treats Puerto Rico Like King George Treated America

 /  Oct. 15, 2017, 6:45 p.m.


President Donald Trump is wrong to suggest that Puerto Ricans “want everything done for them.” Sometimes, they just want him to get out of the way.

It took Trump days to respond to lawmakers' pleas that he provide a temporary waiver for a federal law called the Jones Act, which Trump had previously waived for Texas and Florida (President George W. Bush had previously provided waivers for Hurricanes Katrina and Rita, and President Barack Obama provided one for Hurricane Sandy). When he finally decided to grant a waiver, Trump refused to waive the law for the full year that would have allowed for real recovery, instead choosing to grant Puerto Rico a mere ten days.

Yet we're still left with this question: if the law has such detrimental effects that we must suspend it whenever disaster strikes, why do we not suspend it permanently?

The Jones Act, officially known as the Merchant Marine Act of 1920, sets one simple requirement: if a ship is traveling from one American port to another American port, it must be American-built, American-owned, and crewed by Americans. On paper, the reason for the bill was to shore up the US Merchant Marine, the fleet of commercial ships that a nation can call upon in wartime. The United States had suffered a major embarrassment in World War I, when it had to rely on its allies’ ships for supplies because its own Merchant Marine was not large enough to meet its needs. But to get the real reason behind the law, we have to go back even further.

When Columbus set sail for America in 1492, the strain of economic thought that dominated Europe was mercantilism. According to their theory of mercantilism, whoever had the most gold was the wealthiest, no matter what else was going on in the economy. This is why when the Spanish discovered the Americas, they became obsessed with sucking it dry of precious metals, whether by sending out conquistadors to look for lost cities or forcing Native Americans to work and die in terrible conditions in their silver mines.

By the time the British began setting up their own colonies, mercantilism had evolved. Under the British system, the thirteen colonies could only trade with Britain. The colonies were supposed to take on a subservient role—they sent raw materials to Britain, where the British manufactured these raw materials into expensive finished goods and then resold their goods to Americans at a hefty price. For a long time, British officials turned a blind eye to violations of these laws, but when King George began to raise taxes on the colonies, mercantilism came back in full force. No longer able to make lucrative deals with French or Dutch merchants, merchants in port cities like Boston had to accept the less-competitive prices offered to them by the British. In fact, many of the sponsors of the Sons of Liberty and the Boston Tea Party were Boston merchants who were protesting against the king for this reason.

So how did mercantilism, which America once rejected, come to be embraced in the Jones Act? The answer is the same as it was in the sixteenth century: someone was looking to make a profit. More accurately, the American shipping industry was worried about competing with Latin American and Caribbean shipping companies, which could often build and crew a ship for far less money than their American competitors. Seizing upon the Merchant Marine’s embarrassment as a pretext, shipping companies formed an alliance with parts of the military. These united business and defense interests trampled the protests of America’s overseas territories.

Now let's return to Puerto Rico. In the ninety-seven years since the Jones Act was put in place, it has driven up the cost of nearly everything on the island. Compared to its Caribbean neighbors—who don't care who brings them the goods that they need—Puerto Rico can only turn to American ships to conduct trade with its largest trading partner: the continental United States. Not only does that mean fewer ships coming in, it means the ships that do choose to dock in Puerto Rico can charge higher prices. A report by the International Monetary Fund in 2015 found that American goods are twice as expensive in Puerto Rico as in the neighboring US Virgin Islands, which is not covered by the Jones Act. Even before Hurricane Maria, Puerto Ricans were made poorer and their economy crippled by the effects of the Jones Act.

In exchange for this loss, has the law accomplished its stated goal of building up America’s Merchant Marine? Not at all. According to the Cato Institute, American shipping peaked at 25 percent of global shipping in 1955, but today it makes up a pathetic 2 percent. Instead of pumping life into the American shipping industry, the Jones Act sheltered companies from the pressures that would otherwise have pushed them to innovate. Now American shipping is unable to compete on the global marketplace, and Americans, like Puerto Ricans, face higher prices from a worse shipping industry.

In the aftermath of Maria, nearly every Puerto Rican lost power, millions of homes were destroyed, and years' worth of food was ruined by storm and flood. More than anything, Puerto Rico needs shipments, whether of food, clothes, or fuel. Yet up until the waiver was granted, a ship docked in Florida that does not meet the Jones Act's strict definition of “Americanness” would have been banned from bringing these things to the island.

Now might not be a likely time to see the Jones Act repealed. The shipping industry and parts of the military still back the bill, and among the things Trump has been consistent on, his fondness for mercantilism has always been clear. But Puerto Rico, at least, needs a permanent exemption. Shipping companies have little to lose: they might make some profit from price-gouging while the disaster is ongoing, but in any normal time the island is a footnote compared to the business they do at mainland American ports. Puerto Rico, on the other hand, has a great deal to lose. Not only will the Jones Act make recovery in the months after Maria more expensive, it will continue to slow progress in the years of rebuilding to come.

The featured image in this article is licensed under Creative Commons. The original image can be found here.

Sam Owens

Sam Owens is a second-year Economics major. This past summer, he worked at the Immune Deficiency Foundation, a patient advocacy group for individuals with primary immune deficiencies. On campus, he is communications director for the College Republicans, volunteers for New Americans, and participates in the Writer's Workshop.


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