The U.S. government is increasingly becoming aware of the challenges of China’s entrance in the Caribbean with their Belts and Roads Initiative. Some of China’s infrastructure-logistics development projects will be designed with a military/civilian dual-use in strategic areas. Also, China’s economic proposals aim to gain political soft power, in an area that is considered the American south border, also called the nation’s third frontier. This China initiative will eventually affect regional logistics and supply chains.
My concern is that the U.S. government in its attempts to counterbalance China’s influence in the area, could negotiate concessions to countries in the Caribbean that could hurt Puerto Rico’s economy, tourism, investment attraction, logistics and air- connectivity development efforts. An example of this is the enactment of the DR- CAFTA Free Trade agreement that did not take into consideration its effects on Puerto Rico. It treated Puerto Rico’s economy as if it was an equivalent to the U.S. mainland economy.
Obviously, this is not true; Puerto Rico is an offshore U.S. jurisdiction that is also a geographic, nearby competitor to these countries. The result of this free trade agreement was that some manufacturing left Puerto Rico to the Dominican Republic or Central America. The free trade agreement gave access to the U.S. market to products made in these countries that have lower production costs than in Puerto Rico. While at the same time it opened the P.R. economy to the products of these countries. These unforeseen results hurt local production in Puerto Rico, including the agriculture sector that left many unemployed.
Another sample is the designation of Punta Cana and Bogota airports as pre-clearance U.S. entry points. These entry points became magnets for foreign airlines and incentivized international air connectivity to these locations. This will affect Puerto Rico’s air-connectivity development efforts that should be addressed and balanced out with the appropriate policy that enhances cargo and passenger transfer flexibility on the island.
In March 2019, President Donald Trump met with some Caribbean leaders in Mar-a- Largo, Florida to discuss economic cooperation in the area. The real intention of the meeting was to counterbalance China’s influence in the Caribbean. Below is what President Danilo Medina from the Dominican Republic requested to President Trump at the meeting.
• The elimination of export taxes on steel to Puerto Rico.
• Allow companies established in the Dominican Republic to export U.S. military uniforms and boots, taking advantage of the facilities of the Free Trade Agreement, as it has done with Chile, Canada and Mexico. (This will destroy the Puerto Rico military uniform and boot industry.)
• The elimination of a travel warning advisory that the U.S. State Department placed so that U.S. citizens do not travel to the Dominican Republic due to security issues.
By “coincidence,” just two days after this meeting with President Trump in Florida, along with his national security advisor, a large high-level Chinese delegation headed by China Deputy Prime Minister Hu Chunhua arrived in Santo Domingo for diplomatic and economic discussions. It is obvious that there is tit for tat competition between the U.S. and China to cater to the Dominican Republic. Not because of its economic importance, but for its dual-use strategic geographical location in the Caribbean, that is very similar to that of Puerto Rico (only 75 miles separate these two countries).
My concern is that history will repeat itself, with negative effects for Puerto Rico. On August 16, 2020, the Dominican Republic swore in a new president. Mr. Luis Abinader, a well-educated economist who has surrounded himself with experienced professionals, some of them with multiple graduate degrees. One of the first foreign leaders to meet with Mr. Abinader after he won the elections in July of this year was Mr. Zhang Run, China’s ambassador to the Dominican Republic.
The U.S. government sent a high-level delegation to Mr. Luis Abinader inauguration. Headed by Mr. Mike Pompeo, the ambassador to the Dominican Republic, Robin S. Bernstein, and the acting undersecretary of the State Department’s Office of Western Hemisphere affairs, Michael G. Kozak. After the swearing-in ceremony, both leaders met “to discuss opportunities to strengthen our alliance and focus on promoting transparency, democracy and security in the region.” The press note adds that “together we will overcome the challenges of the pandemic and reactivate our economies.”
The U.S. government in its attempts to counterbalance China’s logistic and soft power influence on the area should not forget that it already has an excellent strategic geographical presence in the Caribbean in Puerto Rico. The aim should be to cooperate in economic development with area countries without affecting the Puerto Rico economy. At the same time, enable the air cargo and passenger transferring flexibility regulations that would make Puerto Rico the defining, dominating logistic center for the Caribbean. It will cost zero dollars to implement this solution.
Puerto Rico could be an enabler and a contributor of the U.S. Caribbean strategy. Without this policy coordination, the U.S. government on one hand helps the economies of the countries that Puerto Rico does business, cooperate and competes with, and on the other hand it will have to send more federal monies to mitigate the problems its uncoordinated policies helped to create.
Let’s hope history doesn’t repeat itself and this time the story has a happy ending.
- Jerry Lectora is an international businessman and writes about transportation and geopolitics.