If anyone wants more evidence of how protectionism hurts the poor and most vulnerable among us, Puerto Rico now offers a prime example.
The island was devastated by Hurricane Maria. Tens of thousands have been left homeless. Basic goods and services, such as food, water, and fuel, are in short supply. Electricity is out for virtually the entire island, and may not be restored in some places for months. Nearly 85 percent of the island has no cell-phone coverage. Much of the country’s already-shaky economic base, including tourism and agriculture, has been all but wiped out.
Yet despite the unfolding humanitarian crisis, the Trump administration has so far refused to waive the law’s restrictions.
Of course, even before the hurricane the Jones Act was an economic albatross around the island’s neck. Economists estimate that the law has driven up consumer prices for islanders by 15–20 percent, and reduces economic growth there by more than $500 million annually. One study showed that the Jones Act cost the island as much as $17 billion in economic growth between 1990 and 2010. (Hawaii and Alaska also take big hits from this law. Some estimates suggest that the Jones Act costs Alaska, Hawaii, and Puerto Rico a combined total of nearly $10 billion annually in lost growth.)
This law ends up doing far more harm than good.
This is not just true of the Jones Act, but of protectionism generally. For example, economists estimate that trade and the availability of low-cost imported goods improves the purchasing power of middle- and upper-income Americans by roughly 29 percent. But trade increases the purchasing power of the poor by more than 62 percent. At the same time, the Peterson Institute for International Economics estimates that past gains from U.S. trade and liberalization of investment range from $9,270 to $16,842 per household. Another study found that that “a 1 percent increase in trade raises real income by 0.5 percent.” That might not seem like a huge boost for the wealthy — the global elite, to use the pejorative preferred by protectionists — but it makes a big difference in the lives of the poor.
For now, the bigger debate over protectionism can wait. Suspending the Jones Act for the duration of Puerto Rico’s recovery should be a no-brainer. Better yet, let’s repeal this antiquated example of special-interest protectionism. And let’s begin to understand that there is a very real price to be paid for all special-interest protections.
— Michael Tanner is a senior fellow at the Cato Institute and the author of Going for Broke: Deficits, Debt, and the Entitlement Crisis. You can follow him on his blog, TannerOnPolicy.com.