Cabotage: The effects of an external non-tariff measure on the competitiveness of agribusiness in Puerto Rico

Abstract

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.