The Effect of the Jones Act on Puerto Rico

The Merchant Marine Act of 1920 (the Jones Act) requires that maritime vessels moving goods from one US port to another be US- built, US- owned, US- crewed, and US- registered. This protectionist policy raises the cost of maritime shipping between US ports, disadvantaging US domestic trade relative to international trade. The economic burden of higher domestic trade costs falls disproportionately on residents of US islands. Our research attempts to quantify these impacts by estimating the economic costs of the Jones Act on Puerto Rico. There are two primary ways that the Jones Act can reduce Puerto Rican imports. First, Puerto Rican buyers can respond to high costs on imports from US mainland sources by purchasing foreign products instead of products made on the US mainland. Second, producers that use sea- shipped inputs in their production processes may choose to locate outside Puerto Rico, thus avoiding Jones Act costs entirely. Location decisions of this kind would reduce Puerto Rico's demand for sea- shipped imports from all sources rather than reducing the share of imports coming from the US mainland.