Foreign Affairs

China Wins NAFTA Super-Highway Battle

Red China is investing heavily in developing deep-water ports in Mexico to bring an unprecedented volume of containers into the U.S. along the emerging NAFTA SuperHighway. This move signals China’s emergence as the unexpected economic winner in the North American Union free market.

Hutchinson Ports, a wholly owned subsidiary of China’s giant Hutchinson Whampoa Limited (HWL) is investing millions to expand the deep water ports the company manages at Lazaro Cardenas and Manzanillo on Mexico’s Pacific coast. Now Hutchinson Ports is pledging millions more to develop Punta Colonet, today a desolate Mexican bay in Baja California. Mexico plans over the next seven years to dredge and convert Punta Colonet into a 10 to 20 berth deep-water port facility capable of processing some 6 million standard 20-foot-long TEUs (industry terminology for the “Twenty Foot Equivalent Unit” that describes a single standard container).

According to Judicial Watch, “Hutchinson, Whampoa, Ltd. is the holding company of billionaire Li Ka-shing, a well-known businessman, whose companies make up 15 percent of the market capitalization of the Hong Kong Stock Market.” A Judicial Watch complaint filed in 2002, at the time HWL was purchasing the then-bankrupt Global Crossing, notes that Li Ka-Shing’s holdings includes ports, telecom, and energy assets around the world.

According to a declassified U.S. government intelligence report that Judicial Watch obtained in a Freedom of Information Act (FOIA) request, “Li is directly connected to Beijing and is willing to use his business influence to further the aims of the Chinese Government.” Judicial Watch had objected that “Li Ka-shing’s agency relationship to the Communist Chinese should disqualify him from owning Global Crossing’s network, which controls a significant percent of all the fiber optics currently leaving the United States.”

Global Crossing was a Clinton Administration darling, noted for turning former Democratic National Committee Chairman Terry McAuliffe’s $100,000 investment into an $18 million personal fortune. Global Crossing’s bold move to control the U.S. international fiber-optics network over-reached, ending in a corrupt corporate melt-down that was an unfortunate prelude to the Enron debacle. Hutchinson Ports was forced to drop the bid to purchase Global Crossing when the Committee on Foreign Investments in the United States (CFIUS) refused to approve the transaction on national security grounds.

Li Ka-shing’s Hutchinson Ports also operates both ends of the Panama Canal, which we have previously documented was returned to Panama under the Carter administration by National Security Council advisor, Robert Pastor, whom we have called the “Father of the North American Union.” HWL also has business dealings with the China Ocean Shipping Company (COSCO), China’s largest shipping line, which is owned by the Chinese People’s Liberation Army. In 1998, Congress blocked on national security grounds an attempt by the Clinton administration to allow COSCO to lease the abandoned Long Beach Naval Station.

Still, HWL has established a North American beachhead, despite the continuing security concerns. The Standard in China reports that today COSCO has established a little-known presence in U.S. ports, co-managing a terminal with Seattle-based SSA Marine at the mouth of Long Beach’s port. Remarkably, in the aftermath of the Dubai Ports World blow-up in Congress, the Bush administration hired HWL to operate in the Bahamas sophisticated equipment designed to detect nuclear material inside TEUs headed for the U.S., without requiring U.S. customs agents to be present. Now, investing millions to deepen Mexico’s ports in a plan to access the developing NAFTA corridors, HWL has found perhaps the most effective backdoor of all for gaining access to the continental U.S. market.

A set of China-promoting business projections are driving the frenzy to open Mexican ports to NAFTA corridors. Container traffic from China and the Far East has exploded, with industry experts expecting the cargo traffic from China to double by 2020. Today jumbo cargo ships containing 8,000 TEUs routinely cruise Pacific Trade routes. Unloading 8,000 containers from a single ship can take up to 3 days, even with experienced dock workers and state-of-the-art cranes.

West coast ports such as Los Angeles and Long Beach are regularly described as overwhelmed with containers arriving from China and the Far East, resulting in a virtual gridlock that causes expensive delays. As a result, “inland ports” such as the Free Trade Alliance of San Antonio and Kansas City Smartport, both members of the North America’s SuperCorridor Coalition Inc. (NASCO), are exploring with enthusiasm opening NAFTA corridors to facilitate the movement from Mexican ports 50% to 60% of all containers entering the U.S. from China that are destined for delivery in the heart of the U.S.

Why the sudden enthusiasm for cheap goods from China? The Bush Administration continues to give the green light to mass-marketing retailers such as Wal-Mart, Kmart, and Home Depot, to name just a few, to import Chinese and Far Eastern goods without restraint, despite their under-market nature. Evidently the Bush Administration has decided to follow the path set by the Clinton Administration in the decision to turn a blind eye to the repeated accusations that many of the goods from China and the Far East are produced in slave labor prison camps where abuses of human rights are everyday occurrences.

Opponents of Bush Administration free-trade policies, such as Global Policy Forum, have argued for enforcing “anti-dumping” provisions commonly designed in traditional international trade agreements to prevent the import of under-market goods produced by countries exploiting near-zero labor costs. The argument is that in opening the U.S. to cheap Chinese goods, we are leading a worldwide “race to the bottom,” in which “the only priority is cost effective production, at the expense of workers, resources and sustainability.” The result is that the international capitalists owning companies such as Wal-Mart earn additional billions, while U.S. manufacturing continues to out-source an increasing number of jobs and poor countries such as Mexico are only pulled deeper into poverty.

Strong conservatives are concerned today that China is the only clear winning in NAFTA. William Hawkins of the U.S. Business and Industry Council, a strong critic of our open borders with Mexico and Canada, has recently written that Mexico itself has filed 90 complaints against China at the World Trade Organization. Hawkins has argued that “the new energy being put into expanding the transportation network from Mexico into the United States heralds the collapse of NAFTA, and further discredits the trade strategy followed by the administrations of George H.W. Bush, Bill Clinton and George W. Bush.”

Hawkins continues:

Upon closer examination, something other than the “success” of the NAFTA model, as sold to the American voter, is propelling all this transportation and Smart Port activity—and that is the massive wave of imports from the previously unrecognized export superstar, China. U.S. west coast ports are swamped with container ships filled with Chinese goods, and a scramble is on to find new Pacific ports to bring even more Chinese products into the United States.

Hawkins views the plans to develop NAFTA Super-Highways as a disaster: “What is being built is truly a ‘Highway of Death’ for both NAFTA and CAFTA. The resulting turmoil in the region will be felt in the United States, and will be an additional benefit to Beijing as the rising geopolitical challenger to American power.”

Yet, as sound as Hawkins’ arguments are, their subtly is likely to be lost on the Wal-Mart capitalists who see rising quarterly profits and handsome executive bonuses from importing an ever-increasing volume of cheap Chinese goods into the U.S. market. So too, the Robert Pastor enthusiasts can be counted upon to welcome any reason to knit together the U.S., Canada, and Mexico into a North American Union, even if the driving force turns out to be a super-highway and inland port transportation scheme designed to benefit the Communist Chinese. Cheap Mexican remarkably undercut by the Chinese in manufacturing and assembly can still be used in transport, to land the Chinese goods on Mexican docks and then carry the Chinese containers by truck and train into the heart of North American.

Increasingly gone is the dream that NAFTA would stimulate the development of a Mexican middle class as a means of economically developing Mexico itself. At the dawning of NAFTA, few expected that Chinese slave labor would be allowed to undercut the sweat-shop maquiladoras that developed south of the border in the 1990s. Even fewer expected that the only Mexican labor that would remain competitive under NAFTA would be Mexican dock workers, truck drivers, and railroad workers — and these only because these Mexican “government union” workers undercut U.S. Longshoremen, Teamsters, and United Transportation Union labor.

As for Mexico’s underclass masses, Vicente Fox and his successor can be relied upon to maintain their mantra, “Go North,” at least as long as President Bush and Congress remain unwilling to secure the border. In the end, the American middle class will pay the tab of increased social costs for millions of more uneducated, unskilled Spanish-speaking immigrants from Mexico and the other Hispanic countries south of the border. At the same time, the squeeze on middle class employment opportunities will intensify as NAFTA super-highways and U.S. “inland port” cities replete with Mexican custom facilities encourage yet more outsourcing to China.

All this sounds like a good deal for China. But are cheap sneakers at Wal-Mart really worth the damage being done to the most successful middle class ever built in world history? Aristotle’s Politics give reason to ask whether the U.S. constitutional republic we have enjoyed for 230 years will long endure a middle class squeezed by an original NAFTA market that evolves into a European-style North American Union dominated by the Chinese.

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