Volume 10 | Issue 4 | Year 2007

According to who is talking, there is or isn’t a superhighway in the works to extend from Mexico into Canada to bring Chinese goods into the U.S. through ports in Mexico. The Bush Administration denies the plans but here and on the proceeding pages, analysts and commentators Jerome Corsi and Bill Hawkins take a look at a strategy that they claim is clearly in the works … and what this means to American business.

When President George W. Bush, Canada’s Prime Minister Stephen Harper, and Mexico’s President Felipe Calderon met in Quebec in late August, they seemed surprised by the intensity of the debate that has sprung up around their Security and Prosperity Partnership (SPP). Conspiracy theories about a supranational government, which arose from both right and left, have migrated into the mainstream media. President Bush was asked at the summit by Fox News reporter Bret Baier if a North American Union was in the works. The president dismissed such “speculation” as “scare tactics.” It would be more accurate to have declared the entire topic irrelevant and obsolete, as the events of the last decade have left these old arguments in
the dust.

The SPP is to foster the economic integration of North America by the harmonization of regulations on transportation, food and product safety, intellectual property protection, and a host of other issues. It builds on the 1994 North American Free Trade Agreement (NAFTA) which was supposed to combine Mexican labor with American capital and technology to improve competition with Asian rivals. C. Fred Bergsten and Jeffrey Schott, of the Peterson Institute for International Economics, testified to Congress in 1997 that, “we wanted to shift imports from other countries to Mexico, since our imports from Mexico include more U.S. content and because Mexico spends much more of its export earnings on imports from the United States than do, say, the East Asian countries.” With this same model in mind, the March 2006 summit in Cancun, Mexico, created a North American Competitiveness Council, with heavy representation from major corporations.

Imports rule
The assembly trade with Mexico grew rapidly in the 1990s, but is no longer driving activity. Today, it is the massive wave of imports from Asia that is clogging West Coast ports and sending shippers and retailers on a search for new routes through Mexico into the United States. Container ship traffic from China is growing at a rate of 15 percent a year. Between 2003 and 2005, annual imports from China increased by $92.2 billion, and from other parts of Asia by $41.0 billion.

Literally at the center of the SPP issue is a planned corridor of highways and railroads running from Mexican ports, through Texas, and into the American Midwest, dubbed the “NAFTA Highway.” But in effect, this new transportation network is the highway of death for NAFTA and continental integration.

The Chinese firm Hutchison Whampoa has partnered with Wal-Mart in a $300 million expansion of Lazaro Cardeñas to handle perhaps two million containers annually by the end of the decade. The American Chamber of Commerce in Guangdong, China has conducted seminars promoting this Mexican port. Kansas City Southern railway has bought the Mexican rail links and the state of Texas is working with a consortium led by the Spanish firm Cintra Concesiones de Infraestructuras de Transporte to build a corridor of toll roads from the border heading north.

The corridor leads to the Kansas City, Missouri “SmartPort.” Its Web site proclaims, “the idea of receiving containers nonstop from the Far East by way of Mexico may sound unlikely, but…that seemingly far-fetched notion will become a reality.” Its 2007 Transportation Outlook foresees “continuing increases in freight entering North American markets from Asia” via Lazaro Cardeñas. Last year, SmartPort staff journeyed to Shanghai to tour the new Lingang Industrial Zone and its deep-water port, a complex designed for exporting. A map titled “two worlds, one route” has all the arrows running from Asia to the American Midwest. No mention is made of U.S. exports heading back the other way.

The International Trade Council of Greater Kansas City offers a seminar series. One of the major sponsors is Transworld Products, which specializes in importing goods from Asia. The advantage it offers its clients is, “When you make a business alliance with Transworld Products, Inc., you will find that importing can be as easy as buying from domestic suppliers.”
While American-based manufacturers will continue to suffer under the barrage of Chinese goods, Mexican industry will be smashed flat by what should be called a new Silk Road rather than a NAFTA highway.

Hundreds of the maquiladoras assembly plants along the U.S.-Mexican border have relocated to China, leaving their Mexican workers behind (or looking for a way to cross into the United States). There is little chance for Mexican wages to rise if at $1.50 an hour they can be undercut by Chinese labor at 50 cents an hour. NAFTA was to be a means to lift Mexicans out of poverty and stem the flow of illegal immigration. A similar argument was made last year about the Central America Free Trade Agreement (CAFTA). As South Carolina Republican Rep. Bob Inglis said during that floor debate, “I stand here convinced that it is the best strategy available to combine with our neighbors to the south to compete with the Chinese.” Commerce Secretary Carlos Gutierrez made this same argument Sept. 13 as he started a trip to Panama, Peru and Colombia, countries which have free trade agreements pending in Congress.

The new transport routes make a mockery of these arguments, as they are being constructed to help China improve its competitive advantage over all American commercial rivals. Sterile debates over the SPP miss the point. Advocates of improving North American competitiveness cannot operate in a vacuum that ignores the aggressive export promotion policies of Beijing. And those who fear closer ties with Mexico and Canada have even more to worry about from expanded Chinese penetration of the regional economy.

Instead of spending billions in public funds aiding Chinese traders, a major effort should be launched to rebuild and expand the production base of North America (centered in the United States), and to stem the massive outflow of capital and technology to Beijing. China is America’s ambitious geopolitical rival, and everyone’s economic rival. A key part of that effort would be to restructure NAFTA to create a true trade bloc that would drive Chinese goods off the continent, rather than into its heartland.

William Hawkins is Senior Fellow for National Security Studies at the US Business and Industry Council in Washington, DC.

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