Posted by on July 8, 2020 7:58 pm
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Categories: Geopolicy

 

By Erick A. Brimen

 

In my new Fortune editorial, I explain how the United States can facilitate investments in special economic zones in Latin America to fuel development and relieve the driving pressure behind immigration. But these zones present an even bigger opportunity: rebalancing trade with China.

 

The U.S. needs to revive its economy and pry loose China’s stranglehold on global supply chains. The Trump Administration is working to reshore supply chains through SelectUSA and other initiatives. But China’s economic influence is massive. We need to counter it by building stronger relationships in our hemisphere. If companies can’t afford to locate operations in the U.S., the administration should steer them to special economic zones in Latin America.

 

China has used special zones with relaxed business regulations for decades to attract manufacturing and foreign investment. On taking power in 1978, Deng Xiaoping faced a deep, lingering economic paralysis left over from Mao’s Cultural Revolution. He tackled this problem by allowing market-based reforms in four geographically confined areas. One was an obscure fishing village named Shenzhen.

 

Each with a separate legal and administrative status, these zones gave businesses room to breathe by lowering taxes, respecting commercial property, and cutting through mountains of communist red tape. From the outset the idea was built on attracting foreign trade and investment, with Shenzhen benefiting from its adjacency to Hong Kong.

 

The effect was profound: Shenzhen’s GDP grew from $4 million in 1980 to $374 billion in 2019. Today, the vast majority of the world’s electronics are manufactured there.

 

The Chinese zones were a pivotal moment in economic history. Their success powered growth across the country and led to its inclusion into the World Trade Organization in 2001. In 2010, China overtook America in manufacturing, and by 2018 it held pole position in 128 of 190 countries according to an analysis by the Lowy Institute.

 

Only now in the wake of a pandemic do we realize the full extent of our over-reliance on China, as its state media openly suggested the possibility that it could shut down our pharmaceutical and PPE supply chains when we push for answers on how the pandemic spread. We must escape this trap, but we can’t simply bring all manufacturing back into this country. There’s a middle way between over-dependence on China and a total recentralization in the U.S.: free-market regionalism centered on the Western Hemisphere.

 

We can reset the balance of world trade by using special economic zones in our region, relying on the best of the ones already here and fostering the growth of next-generation zones. This will build a resilient balance of trade and insulate our country when the next pandemic strikes.

 

Deng’s experiment forty years ago changed the world. Hong Kong, Singapore and Dubai have likewise used the zone model to yield rapid yet sustained economic growth and prosperity. Now is the time for America – and the Americas – to bring this strategy home.

 


Erick A. Brimen is CEO of Honduras Próspera LLC and authored this opinion piece in a personal capacity as a U.S. citizen.