Anchored by the waves of the Atlantic on one side and the Caribbean on the other, Puerto Rico is a sea-locked oasis that remains one of the few existing modern colonies today. First colonized by the Spanish Empire in the late 15th century then acquired by the United States in 1898, the island’s long colonial history is still prevalent in its colorful customs, traditions, embrace of two languages, and—most importantly—its government. To describe Puerto Rico as a jumbled mosaic of lingering influence from the colonial age would be an understatement. The Department of the Treasury—better known as Hacienda—still bears the Spanish name it was given two centuries ago. At the same time, its legislature is structured in its newest overseer’s image—a Congress divided into a Senate and a House of Representatives. It is difficult to distinguish where the past ends and the present begins, and the line only blurs further when looking at the island’s complex economic policies.
In the middle of its transition from one colonial power to another, the U.S. Congress ratified the Foraker Act of 1900, which instituted a civil government in Puerto Rico, modeled after the American three-branch system and subject to the same federal laws. The act, still in place today, was closely followed by the Jones Act of 1920, tangling the island’s economy into an overly complicated supply chain. The Jones Act is a type of cabotage law and requires all goods ferried between U.S. ports to be carried on ships built, owned, and operated by Americans. Cabotage laws are not a new or groundbreaking approach to policy making. They were relatively standard practices of the colonial period when maritime trade was central to economies and national security.
Today, these laws exist across all political, economic, and legal systems, albeit in different forms. A study by Seafarers’ Rights International (SRI) found that national laws define cabotage differently depending on the particular circumstances of the state concerned. Cabotage in India does not adhere to the same stipulations as cabotage in Venezuela or Russia. Depending on the state, shipping services may be required to be carried out by nationally flagged, domestically owned ships. In some cases, foreign ships may be permitted to conduct cabotage under certain conditions or otherwise prohibited entirely. The United States’ definition of cabotage falls into the former.
Hailed as an “America first” law that would “unshackle commerce,” the Jones Act limits commerce to U.S.-built, owned, flagged, and crewed ships, incentivizing domestic business at the cost of inflating shipping rates. Throughout the last century, demand for maritime shipping within the United States has steadily decreased as other forms of transportation are comparatively more efficient. Thus, the Jones Act is merely a remnant of a prior time that today regulates foreign trade—except for sea-locked territories like Hawaii, Guam, and Puerto Rico, whose realities are at the mercy of these laws.
Withdrawn from the mainland, the effects of cabotage laws are particularly severe for territories like Hawaii, Guam, Puerto Rico, and even Alaska. The sheer amount of regulation on U.S.-flagged ships significantly undercuts foreign competition, making ships legitimate under the Jones Act more expensive—more than is feasible. The repercussions are particularly blatant on the Puerto Rican economy. According to a study conducted in 2010 at the University of Puerto Rico, the island loses $537 million per year due to the Jones Act. Similarly, a 2012 New York Federal Reserve study found that shipping containers from the U.S. East Coast to Puerto Rico cost $3,063. However, shipping the same container on a foreign ship to the Dominican Republic—only a few hundred miles nearby—costs only $1,504.
Ultimately, the continuously increasing shipping costs further burden Puerto Rico’s already struggling economy. Reckless issuing of bonds and negligent government borrowing have ballooned Puerto Rico’s debt to literal bankruptcy from 2014 to 2022. The cost of living for the average Puerto Rican is higher than that of a mainland citizen. Moreover, a U.S. Government Accountability Office report found that foreign shippers serving the island from foreign ports generally cost less than their American counterparts. Despite such findings, the government agency did not recommend reforming the law to any extent. The consequent exodus of the island’s working class, an onslaught of natural disasters, and the failure of the island’s power grid only exacerbated the Puerto Rican economy’s fragile state. Not only does Puerto Rico depend legislatively on the United States, but despite its sovereignty as an unincorporated territory, the Jones Act preserves the island’s economic dependence on the U.S. Its permanence in local politics remains a prevalent topic of concern on whether the drawbacks of foreign competition on mainland commerce overshadow the well-being of Puerto Rico—its economy and people. The cost of living is higher on average than that of the mainland. It is apparent that the Jones Act has lost any semblance of its initial purpose—it is as archaic as it is outdated. In making shipping vessels “100 Per Cent American,” cabotage laws inevitably inflate the cost of living for Puerto Ricans and hinder the well-being of the island’s 3.2 million residents. Whether the key to a better future for Puerto Rico is the annulment of such laws is debatable, but there is no denying that some form of reform must be accomplished to improve the island’s future.
Featured/Headline Image Caption and Citation: “Sailing Ship in Puerto Rico” Image source from Flickr | CC License, no changes made.