HO CHI MINH CITY, Vietnam — Facing problems such as woefully inadequate economic opportunities, the Western Hemisphere has witnessed mass migration, particularly from Central and South America, to the U.S. since the second half of the 20th century. At the same time, the U.S., besides the migration crisis from its neighbors, is struggling to curtail its reliance on China to manufacture goods. Hence, one approach to address both the large-scale migration in the Western Hemisphere and U.S. dependence on China is Mark Green’s (R-TN) proposed Western Hemisphere Nearshoring Act (H.R. 7579), a win-win for the two’s economies.
Migration Crisis across Western Hemisphere
According to Just Security, there are four primary drivers behind the migration crisis across the Western Hemisphere:
- Chronic lack of economic opportunities
- Social instability: civil wars in Central and South America, corruption, brutality by cartels, gangs, and dictatorships
- The effects of climate change
- Increased technological subtlety of smuggling procedures, including sophisticated communication and online financial transactions.
In 2021, U.S. Customs and Border Protection dealt with more than 2 million migrants at the southern border, with border apprehensions greater than 150,000 each month, according to Washington Examiner. Given the recent suspension of the Title 42 public health authority that approved the intensified repatriation of illegal immigrants, the U.S. now could endure an even greater number of migrants.
US Dependence on China
According to Washington Examiner, China has the monopoly over the production of various crucial resources in the U.S. supply chains:
- Strategic minerals, namely precious earth metals and alloys, both of which play a vital role in the manufacturing of military vehicles, comprising submarines, fighter jets, as well as complex radar and missile guidance systems
- Medicine and medical equipment, like PPE (Personal Protective Equipment). China’s acetaminophen accounts for 70% of US total imports of the drug, while the figure for penicillin is approximately 50%. Overall, China is the largest provider of active pharmaceutical ingredients for a variety of drugs on the US market.
Western Hemisphere Nearshoring Act
The Western Hemisphere Nearshoring Act was introduced on April 26, 2022 and referred to the House Foreign Affairs and the Ways and Means Committees. Two Congressmen, Mark Green and Albio Sires (D-NJ) introduced the bipartisan bill, along with eight Republican cosponsors.
H.R.7579 – Western Hemisphere Nearshoring Act is to facilitate the transfer of U.S. manufacturing in China to the Western Hemisphere, especially to Latin America and the Caribbean. Among others, the bill consists of:
- A low-interest loan program run by the Development Finance Corporation (DFC) and funded by U.S. tariffs on China in order to incentivize U.S. companies with China-based factories to get involved in Western Hemisphere nearshoring
- Duty-free trading with the U.S. over 15 years and tax advantages with 75% accelerated depreciation for organizations that are approved for Western Hemisphere nearshoring
- Free trade negotiations conducted by The Office of the United States Trade Representative (USTR) with Latin America and the Caribbean
Nearshoring factories from China to the Western Hemisphere, the U.S. looks forward to the diversification of value chains for its businesses while staying secure and strong. According to the Center for Strategic and International Studies (CSIS), Mexico’s exports to the U.S. went up by $13 billion, whereas China’s came down by $90 billion. This has proved the enormous potential Western Hemisphere nearshoring could offer to strengthen U.S economy as well as minimize the influences China exerts on the U.S., given the former’s endless efforts to flex its muscles globally.
Furthermore, nearshoring is a golden chance for the Western Hemisphere to tackle its migration crisis and foster economic growth. According to the Inter-American Development Bank (IDB), Western Hemisphere Nearshoring can bring about an increase of $78 billion from exports of merchandise and service in Latin America and the Caribbean with promising profits in industries like the auto industry, textiles, pharmaceuticals, and renewables.
More investments, higher-quality infrastructure and more jobs in the Western Hemisphere mean fewer spurs to migrate to the U.S and greater charges for drug cartels, the latter of which leads to improvements in institutional quality and thus targets corruption in drug trading, according to CSIS.
Western Hemisphere nearshoring is promising, but needs more work to be successful. A host of countries in the area, specifically Mexico and Central America, suffer structural economic woes and complicated political systems. Considering remedial actions against inefficient governance, corruption and deplorable institutions, the many special economic zones (SEZs) and other special jurisdictions in Western Hemisphere countries are to diminish the fluidity of the overall economic state.
By gaining more local autonomy, SEZs can make sense of spaces through which institutions, with the respect for rule of law, and intellectual property rights could recognize the value proposition of nearshoring.
In conclusion, the Western Hemisphere Nearshoring Act, though still progressing, is the key to the current issues in the Western Hemisphere and the U.S. This proposed legislation promises both the Western Hemisphere and the U.S. positive economic breakthroughs.
– Lan Nguyen