In October 2012, Hurricane Sandy caused massive disruption and destruction to the Mid-Atlantic region of the United States. The intensity of the storm forced the Port of New York and New Jersey to close, forcing cargo diversion to the Port of Norfolk in Virginia. Because of the Jones Act restriction on foreign vessels moving between U.S. ports, the restriction on short sea shipping was viewed as a barrier to recovery. Much of the critical infrastructure resilience and security literature focuses on the "hardening" of physical infrastructure, but not the relationship between law, policy, and critical infrastructure. Traditional views of transportation systems do not adequately address questions of governance and behaviors that contribute to resilience. In contrast, recent development of a System of Systems framework provides a conceptual framework to study the relationship of law and policy systems to the transportation systems they govern. Applying a System of Systems framework, this research analyzed the effect of relaxing the Jones Act on freight transportation networks experiencing a disruptive event. Using WebTRAGIS (Transportation Routing Analysis GIS), the results of the research demonstrate that relaxing the Jones Act had a marginal reduction on highway truck traffic and no change in rail traffic volume in the aftermath of a disruption. The research also analyzed the Jones Act waiver process and the barriers posed by the legal process involved in administration and review for Jones Act waivers. Recommendations on improving the waiver process include greater agency coordination and formal rulemaking to ensure certainty with the waiver process. This research is the first in studying the impact of the Jones Act on a multimodal freight transportation network. Likewise, the use of the System of Systems framework to conceptualize the law and a critical infrastructure system such as transportation provides future opportunities for studying different sets of laws and policies on infrastructure. This research externalizes law and policy systems from the transportation systems they govern. This can provide policymakers and planners with an opportunity to understand the impact of law and policy on the infrastructure systems they govern. / PHD

Small islands developing states (SIDS) sustainability is a United Nations’ aim. Their markets are often influenced by external policies imposed by larger economies. Could an anti-competitive measure affect the food vulnerability of a SIDS? This research examines the effects of an external non-tariff measure (NTM) on Puerto Rico’s (PR) agribusinesses. It explores the effects of a maritime cabotage regulation (US Jones Act) on the affordability and accessibility of produce and grains. PR imports 100% of their needs of grain and over 85% of fresh produce. PR’s food imports are generally from the US and the trade service is restricted to the use of the US maritime transportation. As a result, the supply chain of these two sectors although different, are limited by the US Act that may impact the cost of food, its availability, firms’ efficiency and other structures of production. Using a mixed convergent design, PR’s agrifood supply chains were explored and analysed in relation to the maritime cabotage regulation. Oligopolistic structures and collusion between maritime transporters and local agribusinesses importers limit the access to data, but other internal factors also have a role. Fieldwork shows that while the cabotage regulation itself is a constraint, interaction with others NTM and the current political framework between US and PR are relevant. Factors such as lack of efficiency, poor innovation and a self-limitation of the agribusinesses firms were found. The novelty of this research is the use of mixed methods to evaluate the effects of cabotage on the agrifood supply chain.

<p>Maritime shipping is the most important mode of transportation for international trade. About 70 to 80 percent of the value traded worldwide moves by sea [1]. An inherent problem in global shipping markets is that non-competitive pricing behavior among carriers is widely believed to raise the cost of freight [2]–[5]. It is also likely that the effects of this problem on international trade flows and welfare are magnified by restricted cabotage reservation schemes. Historically, countries have implemented such policies to prohibit foreign competition in domestic shipping markets. The effects of protection on international goods trade are reasonably well understood. The effects of protection on service trade are less straight-forward. Issues of quality become more important, but they are challenging to measure. Moreover, most of these cabotage reservation schemes ban service imports. Therefore, this makes it complicated to compare domestic and foreign services in the same market, given that service activities are place-specific. </p> <p><br></p> <p>In order to better understand the effect of non-competitive pricing behavior in global shipping markets on international trade flows and the incidence of cabotage reservation schemes in shipping markets, I develop three essays. In the first Essay I focus on quantifying the economic effects of non-competitive pricing behavior in the maritime shipping industry on (1) freight costs, (2) international trade flows, and (3) economic welfare. The research question that I answer is: what share of observed shipping freight charges is attributable to non-competitive pricing behavior in maritime shipping markets? I estimate the maritime shipping mark-ups applying the method of Atkin and Donaldson [6] to U.S. Census import data of shipments moved by sea during the period 2002-2017. I find that freight mark-ups account for approximately one-third of total freight charges in U.S. imports. Carriers’ mark-ups thus represent an equivalent ad valorem tariff of 1.4-2.6 percent. U.S. imports of differentiated products would be 4.2 to 11.6 percent higher if these mark-ups were eliminated. The cost of these mark-ups in terms of economic welfare for U.S. consumers represents an annual reduction of 0.1-0.2 percent of their real income. Carriers also charge higher maritime shipping mark-ups (per kg.) to high-value products, products with a lower elasticity of substitution, and products with higher import tariffs. Imported products from developing countries or from distant countries to the U.S. are also charged with larger tariff equivalent mark-ups.  </p> <p><br></p> <p>In the second Essay I estimate the economic burden placed on Puerto Rico by the Jones Act. Using Lloyd’s List Intelligence (LLI) data to document the supply of shipping services in the U.S. -Puerto Rico shipping market, I find that the Jones Act fleet serving Puerto Rico contains no ships designed for the purpose of moving general cargo or bulk commodities. I then evaluate how this lack of supply of shipping services is a burden on imports of goods that would normally travel by ships of those kinds, modelling Puerto Rico’s import demand in a gravity framework. This exercise indicates that Puerto Rico’s demand for final goods exhibits a greater substitution towards non-U.S. sources among products that tend a) to be shipped by sea, b) to be physically heavy, and c) not to be moved in containers. I then estimate a structural gravity model to quantify the tariff-equivalent trade costs the Jones Act imposes on U.S. shipments. This model yields that the Jones Act represents a tariff equivalent of 30.6 percent on average across products. Finally, I use these estimates to calculate the compensating variation of Jones Act removal. I find that the cost of final expenditure in Puerto Rico would be $1.4 billion (about 1.3 percent) lower per year without the Jones Act. </p> <p><br></p> <p>Finally, in the third Essay I investigate what specifically explains the estimated change in Puerto Rico’s import demand for U.S. products due to the Jones Act. I use detailed data of vessels’ ports-of-call in the Caribbean from LLI to document issues of service quality and availability in maritime shipping services between the U.S. and Puerto Rico during the period 2004-2020, calculating metrics for some quality dimensions (e.g., vessels age, shipping capacity, shipping frequency and more). I also evaluate market conditions such as the concentration level in the market of carriers and shipyard building companies in order to examine the presumed incidence in shipping freight costs. Additionally, I use Puerto Rico’s import data from the Instituto de Estadísticas de Puerto Rico (IEPR) to evaluate how much the Jones Act restrictions affect the mode choice decisions for shipping products between U.S. mainland and Puerto Rico. The research question that I try to answer is: what is the level and evolution of the quality of shipping services provided by Jones Act-compliant vessels in the U.S.-Puerto Rico shipping market? </p>

Small islands developing states (SIDS) sustainability is a United Nations’ aim. Their markets are often influenced by external policies imposed by larger economies. Could an anti-competitive measure affect the food vulnerability of a SIDS? This research examines the effects of an external non-tariff measure (NTM) on Puerto Rico’s (PR) agribusinesses. It explores the effects of a maritime cabotage regulation (US Jones Act) on the affordability and accessibility of produce and grains. PR imports 100% of their needs of grain and over 85% of fresh produce. PR’s food imports are generally from the US and the trade service is restricted to the use of the US maritime transportation. As a result, the supply chain of these two sectors although different, are limited by the US Act that may impact the cost of food, its availability, firms’ efficiency and other structures of production. Using a mixed convergent design, PR’s agrifood supply chains were explored and analysed in relation to the maritime cabotage regulation. Oligopolistic structures and collusion between maritime transporters and local agribusinesses importers limit the access to data, but other internal factors also have a role. Fieldwork shows that while the cabotage regulation itself is a constraint, interaction with others NTM and the current political framework between US and PR are relevant. Factors such as lack of efficiency, poor innovation and a self-limitation of the agribusinesses firms were found. The novelty of this research is the use of mixed methods to evaluate the effects of cabotage on the agrifood supply chain.

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