US Territory, China-Dependent – The Diplomat
As the world’s second largest economy, China is extending its influence in many Pacific Island Countries and Territories (PICTs). Chinese President Xi Jinping is pushing a “blue economic passage” by connecting trade routes through China, Oceania, and South Pacific. This part of China’s Belt and Road Initiative offers lucrative aid and infrastructure contracts to PICTs like Papua New Guinea and Fiji.
Beyond infrastructure, Chinese tourism is one of the most significant revenue streams from China for PICTs. For instance, Fiji earned $46.6 million from the Chinese tourism market in 2018. A 2017 World Bank report on PICTs economies stated that the expansion of China’s middle class is likely to result in continuously growing outbound tourism from China. China will continue to engage with PICTs in the tourism sector. This trend will further aggravate the PICTs’ dependence on the Chinese market.
U.S. territories are not immune to such Chinese economic influence. The Commonwealth of the Northern Mariana Islands (CNMI) is a U.S. territory located in the western Pacific Ocean, approximately 136 miles northeast of Guam. The CNMI is known for its rich history, beautiful beaches, and unique Chamorro and Refaluwasch cultures. The CNMI is also strategically located in the Second Island Chain and is under the threat of China’s economic subversion.
While it is an intersection of U.S. military power projection in the Asia-Pacific region, the CNMI is also a hub for Chinese tourism. The tourism industry consisted of 72 percent of the commonwealth’s GDP in 2017, which is the highest among U.S. territories. The lack of visitors arriving in the Marianas due to the COVID-19 pandemic has crippled the local economy and exacerbated the depletion of government funds, including pension benefits. The CNMI is now even more susceptible to profitable Chinese investment deals than it already was.
Chinese influence continues to increase in the Marianas. Saipan’s affordable tour packages, a Chinese visa waiver program, its proximity to China, and sizable ethnic Chinese population attract more Chinese tourists than other U.S. territories. Chinese influence is deeply rooted in the CNMI’s economy at every level, from local mom-and-pop stores to luxurious resorts. Chinese tourists have already supplanted visitors from traditional markets like Japan.
Some Chinese tourism service businesses have created immigration and labor issues for the CNMI. For example, the U.S. Department of Justice charged Imperial Pacific, a Chinese casino company, with labor violations because it hired Chinese developers that employed illegal immigrants from China to work at a construction site. Given potential corruption in CNMI politics, the buildup of Chinese businesses, the exploitation of labor related to the expanding Chinese tourism service investment, and the recently decreased visitor arrivals due to the COVID-19 pandemic, the CNMI government is eager to diversify its tourism industry and search for new ways to develop other source markets.
Three steps can help to diversify the CNMI’s economy, weaning it off dependence on the Chinese market, and encourage the United States to remain alert to Chinese activities in the Western Pacific Ocean. First, the government of the CNMI should increase incentives to welcome tourists from different countries and initiate government-led travel programs with visitor markets that are proximate to the CNMI – such as Australia, New Zealand, and Taiwan – to reduce reliance on the Chinese market. The local government can encourage visitors to stay at locally owned hotels and support Chamorro and Refaluwasch businesses.
Ecologically sustainable tourism, or ecotourism, can foster environmental and cultural appreciation, understanding, and conservation in the Marianas. The CNMI can learn from Palau’s actions with regard to the Chinese market and emphasize ecotourism by limiting the number of charter flights from China and adding an environmental impact fee for visitors. The CNMI government can use fees collected from visitors to improve its health care and education systems.
Second, the CNMI government should focus on diversifying its economy away from tourism, which only exacerbates dependency on the Chinese market. Saipan can focus on creating a conducive environment to attract foreign investment, developing a sustainable blue economy, conducting scientific research, and possibly exploring ways to exploit its natural resources. Traditional key source markets, such as South Korea and Japan, have immense potential to uplift the CNMI’s economy through businesses initiatives. The CNMI government is willing to sign travel bubble deals with them to boost its tourism business industry. The CMNI government can offer incentives, such as special economic zone and tax deductions, to attract Japanese and South Korean companies to support the growth of the local economy and create job opportunities for CNMI youths.
The CNMI can steer away from an entertainment-driven economy to focus on fisheries, agriculture, mining, and other industries. For example, Saipan can license foreign fishing vessels and create a sizable export fishery market like its regional neighbors. It can also host academic conferences and construct laboratories to promote marine science research, similar to those in Hawaii.
The Marianas might benefit from mining through licensing fees, wages paid to local laborers, and purchases from island businesses involved with the mining companies. For example, the CNMI government gave JG Sablan Rock Quarry a permit to mine pozzolan, a cement additive, on Pagan. Deep-sea mining can serve as a last resort to provide an economic alternative for the CNMI, but it might have irreversible environmental impacts on the ocean floor and destroy marine animals’ habitats. More scientific research can be done to understand the natural resources around the CNMI and to determine whether mining is sustainable for the environment.
Finally, the CNMI government can host U.S. military bases, joint exercises, and security dialogues. It can serve as a destination for military dialogues between the United States and Asia-Pacific nations. In 2019, former U.S. Secretary of State Mike Pompeo visited the Federated States of Micronesia and negotiated to renew Compacts of Free Association that grant the United States exclusive military access to the land, air, and sea routes of Micronesia, Palau, and the Marshall Islands. The CNMI, as a U.S. territory, can serve as an alternative for U.S. military positioning in the region.
Washington has emphasized the importance of the Mariana Islands because China possesses the land, sea, and air capabilities to threaten the United States in the Second Island Chain. In September 2020, former U.S. Secretary of Defense Mark Esper emphasized the importance of the Second Island Chain and showed concerns over China’s growing influence during his visits to Palau and Guam. The Marianas are an indispensable part of the U.S. defense posture in the western Pacific Ocean.
Similar to Guam and Hawaii, increasing the number of military bases in the CNMI can boost the local economy because military personnel and their families will bring revenue to the Marianas. Military bases will also create employment opportunities for CNMI residents. Positioning U.S. military forces on Tinian can deter China from bypassing the Second Island Chain, provide support to U.S. allies, and uphold the rules-based maritime order. To be successful, the U.S. military would need to provide a detailed plan for mitigating environmental pollution and land rights issues. Limiting negative ecological impacts and fulfilling promises to restore the environment is a must for the U.S. military to reconcile with the people of the CNMI.
The Mariana Islands face similar economic and security challenges as many PICTs. Chinese influence will persist in the Pacific because PICTs lack better alternatives to diversify their economies. Pacific Islanders and their governments may have a more favorable assessment of Chinese activities than many U.S. observers might expect, despite the fact that these activities cause domestic problems and security concerns for Washington.
The Marianas can learn from other PICTs to create a sustainable economy. It could become an example for other PICTs to perceive the benefits of working with the United States and diversifying their tourism industries to sustain economic growth. Doing so might directly impact how other Pacific Island governments approach China’s growing influence in Asia-Pacific.