Puerto Rico: The Island with One Market

September 25, 2007

The following article is a discussion of one of the ways the Puerto Rican economy has been totally dependent on the U.S., economic system. It is also a projection of how the new market conditions in the United States may effect the island.

Reprinted from El Imparcial (May 29 and June 1) by Cesar Andreu-Iglesias

The reduction of tariffs signed by the United States, "The General Agreement on Tariffs and Trade," destroys the most frequently used argument against Puerto Rican Independence.

The report, "The Economy of Puerto Rico with Particular Reference to the Economic Implications for Independence" (Washington March 1946) enumerates the economic benefits that Puerto Rico receives by its association with the United States.

The most important point (of the report) is, without doubt, the one which states "the benefits of operating inside the American tariff system whose virtue is the trade between the island and the United States." This is what has been called "free trade", one of the pillars on wiich economic progress rests, according to the defenders of the Free Associated State. The above cited report states: "The relations of free trade which have existed for 45 years between the United States and Puerto Rico have fomented insular production for the continental market and have discouraged production for other markets, including for the Island itself... Almost all the Puerto Rican exports are destined for the United States and have consisted totally of articles whose prices have been maintained above world prices by virtue of the American tariff."

The privilege of selling Puerto Rican products in the American market is paid with the privilege that the U.S. has of selling its products in the Puerto Rican market. The absence of barriers is reciprocal, except that the United States isn't obliged to buy everything consumed in Puerto Rico. Of course Puerto Rico neither produces in great quantity nor with much variety. But the fact is that Puerto Rico must buy from the U.S. practically all that it consumes. And the economic danger that this represents for our country was recognized some 20 years ago by the Tariff Commission when they said in their report: "Many of the goods that Puerto Rico has obtained in the U.S. have been purchased at prices no higher than those that would have prevailed if Puerto Rico had been able to import the same or similar goods from whatever source; and in the majority of the U.S. imports, the prices haven't exceeded the world levels in a quantity equal to the total of the duty front the United States."

On his return from Geneva, Dr. Carlos J. Lastra who had observed there for some days in the Kennedy Round Talks as a member of the U.S. delegation, gave a press conference. According to information published on the 16 of July 1964, he explained to journalists the significance of this set of talks and the possible repercussions that it would have on the Puerto Rican economy. With reference to the declarations, the statement reads in part: "Alluding to the specific case of the island, I feel that the country is in a contradictory situation; as it is a country in the process of developing inside the system of the U.S. which is highly industrialized."

The distinguished economist put his finger on the key. Certainly the Puerto Rican economy is locked in this rave contradiction, which is reflected in many ways: agricultural crisis, minimum-wages, worker-management relations etc. And Puerto Rico, which constitutes an economic entity in itself, is forced by its colonial condition to function within the orbit of the U.S. economy. The announced general lowering of tariff barriers, to which the U.S. is now internationally obligated, is only an example of these grave contradictions.

All countries in the process of develoment manipulate their tariff duties in harmony with the diverse branches of production. Barriers are raised to avoid foreign competition against certain products when it serves the national interest. They are lowered or eliminated when it suits the general good. Colonies, however, are kept from undertaking such measures.

The U.S. is known throughout its history as a nation of high tariffs. These barriers permitted the U.S. to protect the development of its national industries against foreign competition. To this is owed the survival, even today, of certain sectors of production, that without the tariff protection would disappear before foreign competition. Similarly, the uncertain fate of many Puerto Rican factories today. is due to inadequate tariff protection.

The lowering of tariff rates that will come as a consequence of the Geneva talks will affect the production of certain articles produced in Puerto Rico. They cannot all be enumerated with certainty, but it is possible to get a general idea if the following is taken into account: the plastics products (foreign) not pay a tariff 23% above their price to be sold in the U.S.: leather products-handbags and suitcases, 22%; synthetic fabrics, 42%; clothing 27%; machinery and electrical equipment 13%; optical instruments 21%; tobacco 27%...It is easy to understand that if they reduce drastically these import taxes Puerto Rico will be affected, as many foreign countries will be able to compete with much lower prices.

A governmental study published exclusively in E1 Imparcial in a series in February 1964 argued already that the proposed tariff reductions, besides affecting a series of industries would harm agricultural production. The study mentioned pineapple, tobacco, dried fruits, vegetables and meat. As for the leading products, the document said: A reduction of ,8.00 per quintal in the price of imported tobacco will facilitate the displacement of tobacco produced in Puerto Rico by the production in other competitive zones...The reduction of tariffs could also stimulate the shipping of pineapple from places outside of the U.S..

Thus, industrial production as well as agriculture will be adversely affected by the GATT. And will there still be Puerto Ricans who renounce their sovereignty, an indispensable condition to defending Puerto Rican interests in and outside the country?

Tags: Puerto Rico, US trade, dependence

Like this article? Support our work. Donate now.