It's Not America's Hemisphere Anymore: China Barges In to Build Nicaragua Canal
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Since it first opened in 1914, the Panama Canal has provided the primary shipping conduit linking the Pacific and Atlantic Oceans through the Americas. And in that time, it has also represented U.S. dominance in the region. Even after the canal passed entirely into Panama’s control in 1999, the United States has maintained a strong military presence in the region, establishing its continuity as the region’s key economic and political player.
All that is about to change.
Nicaragua and China have come to an agreement allowing the construction of a new inter-oceanic canal in Nicaragua, connecting China with the Caribbean and its Atlantic-American trade partners. This won’t just increase the flow of goods between China and the Americas. It will also usher China into the region as a major political force—something that is likely to raise alarm in Washington, which will regard any Nicaragua-China alliance as a destabilizing influence in the hemisphere.
China’s role in the development of this canal is partly about expanding its global trade. But it’s also a way for China to push back against Washington’s militarized “ Pacific Pivot,” as well as the U.S. drive to establish a Trans-Pacific Strategic Economic Partnership (commonly shortened to Trans-Pacific Partnership, or TPP) that seeks to contain China’s global economic growth.
The TPP is a U.S.-led free trade agreement—a partial draft version of which WikiLeaks recently exposed to the public—that is being devised in secret by 12 Pacific Rim governments and 600 of the world’s largest corporations. It seeks to define the rules for investment and trade in the 21st century.
Unless China is willing to adopt rules that will rewrite its regulatory and investment laws to conform to the standard of this agreement—for example, by curtailing its state-owned investments and opening its state-owned enterprises to Wall Street investment rules—China will remain outside the TPP.
This is not to say that China needs to submit to this bullying. For example, China has capitalized its own development fund with the BRICS (Brazil, Russia, India, China, and South Africa) association, and organized its own economic partnership with ASEAN member countries in Southeast Asia (many of which are also involved with TPP negotiations) under the auspices of the Regional Economic Comprehensive Partnership (RCEP).
China’s FDI strategies have surpassed analysts’ expectations, and last year China became the third largest investor country, behind the United States and Japan. According to a recent press release by the United Nations Conference on Trade and Development, China’s tremendous investment in many African countries has driven up FDI in Africa, defying the global trend. In Nigeria alone, China’s investment rose from $75 million to $1.2 billion between 2004 and 2010. The United States, while still a much larger investor, has been unable to match the growth of China’s investment in resource-rich developing countries.
Due to its increased shipping of resources and goods, China has emerged as the new center not only for global manufacturing but for investment as well. To put this in perspective, China’s container traffic measures over 5,000 transits a year, with hauls exceeding 10,000 gross tonnage per ship. According to a World Bank Data chart, China’s container traffic surpasses that of the United States by a ratio of nearly three to one.
The TPP—with its current 12-nation membership, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—has a combined GDP of more than $27 trillion, representing over a third of global GDP.
Yet despite its economic power and its military influence throughout the region, the United States has not been able to conclude this agreement. There has been focused criticism nationally and internationally against the TPP, as it is seen as an undemocratic agreement primarily written by corporations for the benefit of corporations. Additionally, for the TPP to conclude, it still needs congressional approval. The push to “fast-track” Obama’s Trade Promotion Authority is likely to meet further resistance from lawmakers.