When President George W. Bush, Canadian Prime Minister Stephen Harper, and Mexican President Felipe Calderón met in Quebec in mid-August, they were greeted by news stories that had migrated into the mainstream media from the populist fringe, alleging that the three national leaders were conspiring to create a supranational North American Union (NAU).  Responding to these rumors, President Bush dismissed them as “scare tactics.”

What set off concerns about an NAU (to be patterned after the European Union) was the creation two years ago of the Security and Prosperity Partnership of North America (SPP), at a summit held in Waco, Texas.  The SPP has as its goal the economic integration of North America, to be furthered by the regional harmonization of regulations on transportation, food and product safety, intellectual property, and a host of other issues.  At a summit in Cancun, Mexico, in March 2006, a North American Competitiveness Council was formed, with heavy representation from major corporations whose desire is to see all borders vanish, at least as barriers to the movement of goods and people.  Their constant drone is that security measures against terrorism, drug running, and illegal immigration are slowing commercial transport.

These new groups all spring from the 1994 North American Free Trade Agreement.  NAFTA was supposed to combine cheap Mexican labor with American capital and technology to improve competition with Asian rivals.  C. Fred Bergsten and Jeffrey Schott of the Institute for International Economics testified to Congress in 1997 that “we wanted to shift imports from other countries to Mexico—since our imports from Mexico include more U.S. content and because Mexico spends much more of its export earnings on imports from the United States than do, say, the East Asian countries.”

Following this model, imports from Mexico grew rapidly in the 1990’s, but something else is driving activity now.  Both the Bush administration and its critics are living in the past in thinking that global “free trade” is the foundation for anything resembling a North American Union.

Today, it is the massive wave of imports from Asia that is clogging West Coast ports and sending shippers and retailers on a search for new routes to bring even more foreign products into the United States.  Container-ship traffic from China is growing at a rate of 15 percent per year.  Between 2003 and 2005, annual imports from China increased by $92.2 billion; from other parts of Asia, by $41.0 billion.

At the very center of the SPP issue is a planned corridor of highways and railroads, dubbed the “NAFTA Highway,” running from Mexico into the American Midwest.  Human Events launched the story from the right, but it soon spread all the way across the spectrum to the Daily Kos on the left.  Most of the stories have rehashed the debate over NAFTA, but what is really behind this transportation network heralds the collapse of NAFTA and its dream of a stronger continental economy.

The Chinese firm Hutchison Whampoa has partnered with Wal-Mart in a $300-million expansion of Lazaro Cardeñas to handle perhaps two million containers annually by the end of the decade.  The American Chamber of Commerce in Guangdong, China, has conducted seminars promoting this Mexican port.  Punta Colonet, about 150 miles south of Tijuana, is also being eyed for expansion to offload millions of additional containers filled with Asian imports.  The Kansas City Southern Railway has bought the Mexican rail links, and the state of Texas is negotiating with a Spanish firm to build a corridor of toll roads from the border heading north.  The final terminus of the planned transport network is the Kansas City, Missouri, “SmartPort.”  Its website proclaims that “the idea of receiving containers nonstop from the Far East by way of Mexico may sound unlikely, but . . . that seemingly far-fetched notion will become a reality.”

While U.S.-based manufacturers will continue to suffer under the barrage of Chinese goods, Mexican industry will be smashed flat by what should be called a new Silk Road rather than a NAFTA highway.  Clearly, the regional economic development goals of NAFTA are being abandoned.

Hundreds of the maquiladora assembly plants along the U.S.-Mexico border have relocated to China, leaving their Mexican workers behind.  There is little chance for Mexican wages to rise if, at $1.50 per hour, they can be undercut by Chinese labor at one third of that wage.  NAFTA was to be a means to lift Mexicans out of poverty and stem the flow of illegal immigration.  A similar argument was made last year about the Central America Free Trade Agreement (CAFTA).  As Rep. Bob Inglis (R-SC) said during that floor debate, “I stand here convinced that it is the best strategy available to combine with our neighbors to the south to compete with the Chinese.”

The new transport plans make a mockery of these arguments, as they are being constructed purely to help China improve her competitive advantage over all North and Central American commercial rivals.  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.

It is well past time to rethink the sophistry of “free trade” with China.  Instead of spending billions to give aid to Chinese traders, a major effort should be launched to rebuild and expand the production base of North America and to stem the massive outflow of capital and technology to Beijing.  China is America’s ambitious geopolitical rival—and everyone’s economic rival.  A key part of that effort would be to restructure NAFTA to create a true trade bloc that would drive Chinese goods off the continent, rather than into its heartland.