Parag Khanna on a Western Hemispheric Foreign Policy

Though I prefer not to think of the global economy in terms of blocs — unilateral free trade is my preference — there are times when we are forced to think in terms of blocs because rival powers are moving in precisely that direction. With that in mind, Parag Khanna’s suggestion that the U.S. should strengthen its ties to the Latin American states has an intuitive appeal:

According to energy expert Daniel Yergin, the new Western Hemispheric energy axis runs from Alberta, Canada — from which the United States gets another 1 percent of its oil imports each year — through Texas and the Gulf of Mexico down to Venezuela, French Guiana, and Brazil. U.S. energy policy should be increasingly Western Hemispheric — just as China’s energy policy is increasingly Middle Eastern. In this context, the Keystone XL pipeline from Alberta to Texas can be delayed (as it just was), but it is nonetheless inevitable.

Building a new hemispheric economy is crucial to tackling not only energy independence but also industrial competitiveness. Latin America’s 900 million people (about 12 percent of the world’s population) represent a $6 trillion economy — equal in size to China’s. Furthermore, Latin America is younger and more urbanized than Asia, making it a highly productive partner for the United States. Additionally, Latin economies now feel the Chinese economic threat as much as the United States does. China has dumped everything from clothing to cell phones onto the region, threatening an estimated 90 percent of Latin America’s manufacturing exports (which account for 40 percent of all its exports) and undercutting trade. Almost half of Brazil’s manufacturing exports go to other Latin American countries, and two-thirds of those markets (in everything from shoes to cars) are at risk from Chinese competition.

Rather than outsourcing to Asia and accelerating the rise of economic competitors, U.S. firms could look much closer to home, forging joint ventures in energy and manufacturing across the region. This is already happening to some extent, but the opportunities have not been seized. With coastal Chinese wages rising, numerous U.S. companies are relocating to Mexico, which offers logistical proximity, a more predictable exchange rate, and a closer political relationship — all of which mean less risk and eventually greater profits. Even the $100 billion IT outsourcing industry could be brought back from India into the United States’ time zones. In the long run, such a hemispheric industrial policy is the only way for the Americas to remain competitive with an Asia that has caught up in brawn and is catching up in brains. [Emphasis added]

Latin America’s relative demographic vitality is particularly noteworthy. Mexico is aging rapidly, but the region as a whole is aging less rapidly than China. While I don’t agree that “a hemispheric industrial policy” is the only way we can keep up, one suspects that U.S. firms will freely gravitate in this direction, particularly if the growing Latin share of our population strengthens cultural ties. (Current projections suggest that the U.S. population will be approximately 30% Hispanic by 2050, and presumably a larger share of the prime-age population.) 

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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