OREGON AND WASHINGTON STATE COMPARATIVE ANALYSIS OF
INFRASTRUCTURE AND THEIR TRADE RELATIONSHIP WITH CHINA

By
Joseph P. Givens, B.A.
East Stroudsburg University of Pennsylvania

A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master
of Arts in Political Science to the office of Graduate and Extended Studies of East
Stroudsburg University of Pennsylvania

May 10, 2019

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ABSTRACT
A thesis submitted in partial fulfillment of the requirements for the degree of Master of
Arts in Political Science to the office of Graduate and Extended Studies of East
Stroudsburg of Pennsylvania.

Student’s Name: Joseph P. Givens:
Title: Oregon and Washington State Comparative Analysis of Infrastructure and Their
Trade Relationship with China
Date of Graduation: May 10, 2019
Thesis Chair: Adam McGlynn, Ph.D.
Thesis Member: Ko Mishima, Ph.D.
Thesis Member: Samuel Quainoo, Ph.D.
Abstract
The Preservation and expansion of infrastructure and global trade remain hotbutton policy issues for nations across the globe. A beneficial way of approaching the
infrastructure and trade question is to commence a comparative analysis of different local
government jurisdictions with similar institutional characteristics. My thesis analyzes and
considers the domestic infrastructure shortcomings in the states of Oregon and
Washington, which both act as the gateway to Asia. With an emphasis on the People’s
Republic of China, given the intrinsic trade relationship between the States of Oregon and
Washington and its pivotal role in the Global Economy. We explore how both states fund
their local infrastructure systems, with emphasis on their respected port systems, and the
vital attention that it needs for both Oregon and Washington State to increase their trade
intakes.

TABLE OF CONTENTS
Chapter I. Introduction.......................................................................................1
West Coast State’s Analysis..............................................................................4
Importance of Trade to the U.S. & China ……….............................................8
Chapter II. U.S.-Sino Relations.........................................................................13
Early 20th Century Relations & Nixon Visit.....................................................14
Deng Xiaoping Reforms...................................................................................18
Chapter III. Research Methodology ................................................................25
Chapter IV. Oregon & Washington State Overview........................................26
Washington State..............................................................................................26
Oregon State……….........................................................................................32
Chapter V. Importance of PPP’s………. ........................................................38
P3 Model Benefits............................................................................................39
Trump Admin Infrastructure Initiative.............................................................42
Chapter VI. China’s Role as a Global Infrastructure Investor.........................45
Argentina..........................................................................................................52
Boliva………...................................................................................................55
Ecuador………. ..............................................................................................57
Chapter VII. Conclusion……………………………………………………..61
References .......................................................................................................65

Chapter 1
Introduction
In 2050 the United States, despite a ballooning Trade Deficit, will be one of the
top trading nations in the world. Research spearheaded by Citigroup's chief economist
revealed that world trade (the total sum of exports and imports) would swell from $37
trillion in 2010 to $287 trillion by 2050 (Badkar & Ro, 2011). Other countries that will
join the United States as the top trading nations will include the United Kingdom,
Germany, Japan, South Korea, Hong Kong, Indonesia, India, and China. Trade data from
the U.S. Commerce Department reveals that the bulk mentioned above are some of the
top trading partners of the United States. Most of them are countries based on the
continent of Asia. A significant chunk of these goods and services are coming from Asia,
making the West Coast a pivotal player in ensuring that the cargo makes it in and out of
the ports. The only puzzle that hinders the U.S. from successfully achieving this goal in
the long-term is the nation's decaying infrastructure. The vast network of roads, bridges
and rail systems that connect Americans to our ports, suburbs, metropolitan, and rural
areas are in dire need of repair and investment.
The United States, without one iota of doubt, is still one of the world’s most
robust and vibrant economies. The size of our overall economy in terms of Gross
1

Domestic Product (GDP) stands at $18 trillion, our unemployment rate stands at 3.9%,
and Consumer Confidence remains high. Nonetheless, our economy, which values at $18
trillion is reliant on our infrastructure, which includes our roads, bridges, rail, and ports to
keep the economy afloat. Congestion continues to rise on our roads, and a lapse
inadequate oversight to maintain these structures is causing our infrastructure to decay at
a quicker pace. The American Society of Civil Engineers (ASCE) every year releases a
state by state report of infrastructure conditions across the entire country. Last year ASCE
gave the United States a D+ ranking after they examined all our infrastructure
components, which comprised of roads, bridges, rail, and other miscellaneous parts of our
infrastructure. Former Secretary of Transportation Ray LaHood worked vigorously with
the Obama Administration to reinvest in U.S. infrastructure under the American
Recovery and Reinvestment Act (ARRA). LaHood bluntly stated in an interview with 60
minutes that U.S. infrastructure is on “Life Support” (LaHood, 2014, Page 1). Besides,
LaHood emphasized that a lack of investment is causing our infrastructure to falter.
LaHood is not alone in his assessment as several economists, engineers, and historians
back his claim. Most notably American engineer and historian Henry Petroski in his book
The Road Taken: The History and Future of America's Infrastructure, insufficient
infrastructure levies burdensome costs of the economy and public safety is placed into
dire situations as well. Roads and bridges remain deficient resulting in longer wait times,
which adversely affects businesses. Businesses will be forced to raise prices to produce
and distribute their goods. In the United States, the state and local governments are the
majority stakeholders of the nation’s roads, highways, transit, and water systems.
Funding for these infrastructure projects and operations has been on a steep decline since
2

the 1930s. During the New Deal era, more specifically the late 1930s, infrastructure
investment peaked at 4.2% of GDP and fell to less than 3% by the 1960s (Stupak, 2018).
As of 2016, the number stands at 1.5% of GDP.
The West Coast most notably serves as a gateway to Asia and is crucial in terms
of ensuring trade remains healthy, reciprocal and robust to satisfy the needs of both
parties. The United States West Coast consists of five states, Alaska, California, Hawaii,
Oregon, and Washington. Only California, Oregon and Washington are considered major
players in the vitality of the trade relationship with Asia though. These ports in the three
states mentioned above provide a vital connection between the United States consumer,
industrial, and agricultural sectors and Asia. As several Asia economies are still in the
"developmental" stage, there remains a high degree of salience of the West Coast ports.
Not only do these ports symbolize a growing Trans-Pacific relationship that provides jobs
and an economic catalyst that strengthens the agricultural, industrial, and retail sectors of
the United States economy. In 2013 the Pacific Maritime Association estimated that
cargo handled along the West Coast ports International Longshore and Warehouse Union
(ILWU) supported over 9 million jobs throughout the United States. When dealing with
the consumption aspect, about $35.2 billion of direct, induced/consumption expenditures
and indirect personal income was generated locally once handling cargo at the West
Coast was added. When focusing on how containerized cargo impacts employment,
estimates reveal that containerized cargo handled at these ports supports nearly 9 million
jobs. Those specific jobs are with the manufacturers producing Asian Exports, retailers
importing numerous and miscellaneous items that include apparel, shoes, furniture, and
toys. These products are not just limited to consumer items, auto parts, computer
3

components, and agricultural items are also pivotal goods being shipped off to Asian
markets.
West Coast State’s Analysis
In a state by state economic analysis, these ports are crucial to the economic
viability when concerning California, Oregon, and Washington. In California, port
activity at the State ILUW maritime terminals supported 3.7 million jobs and contributed
$743 billion in economic output. In total, port activity represents 37% of the Golden
State's Gross State Product. Oregon and Washington, given their respected sizes, do not
rely on ports as much as California, given the Golden States size. Still, port activity is a
crucial determinant in generating economic activity. In Oregon, ILUW terminals were
responsible for 68,600 jobs and contributed $9.6 billion to the Beaver State's Economy
(Martin Associates, 2014). The port activity represents less than 5% of Oregon's State
Gross Product. In Washington state, ILUW terminals helped employ 524,736 individuals
and port activity represented 60% of the state’s GDP (Martin Associates, 2014). These
findings should not only underscore the vitality of the U.S.'s economy, but these ports act
as a pivotal driver to the respected State and Local economies. Services that suffer from
disruption or hindrance in the form of a shutdown or slowdown will have an adverse
effect, not only on the National Economy but individual state economies as well (Martin
Associates, 2014). Though not directly due to inadequate infrastructure, the 2002 work
shutdown at the West Coast Ports had a gigantic on supply chain decisions of the crucial
importers and exporters. Such structural slowdowns will not only dilute the economic
importance of these ports to these respected states but to the United States Economy as
well.
4

The Federal Maritime Commission in a report released in the summer of 2015,
backs the Pacific Maritime Association by pointing out the shortcomings in U.S.'s port
infrastructure. Improved Ocean shipping and Port standards will contribute lead to more
efficient international supply chains. Improving Supply chains will not only increase
trade volumes by lowering the costs of imported and exported good, but the distance that
these goods travel to be sold and sourced also increases (fmc.gov, 2015). The report
underscores the need to curtail congestion, as it goes hand in hand in improving
efficiency standards, and salient in most trade-related issue today. Transportation costs,
which are directly related to infrastructure quality, have become more of a burden than
the implementation of Tariffs on goods coming in from other countries in a Study by
Bensassi, Marquez-Ramos, Martinez-Zarzoso, etc. Their research investigated the
relationship logistics infrastructure and trade by looking at a regional export from Spain.
The research team cited a study from Jacks and Pendakur from 2010 – found that growth
in global trade correlates with technological improvements in communication and
transportation sectors. They use the United Kingdom as an example from the years of
1870-1913 during the transportation revolutions. The results were not able to definitively
prove that maritime revolution was a catalyst in the shaping of the late-nineteenth century
trade boom (Bensassi, Marquez-Ramos ect al, 2015). Though the authors point out that
the decline of maritime freight rates across other miscellaneous countries may reveal a
new and compelling story. Work from Bernhofen tells a different story, as their work
focuses on containers and the intermodal transport system. Bernhofen's et al. found that
containerization had a considerable effect on world trade during the time of 1962-90. The
study states that containerization had a significantly impacted on the operation and
5

relocation of ports, but the entire transportation sector that went in tandem with the
creation of a new and more efficient intermodal transport system.
The state of Washington established a unique position in the Pacific Northwest as
an integral player in the movement of goods, people and services. The State is known for
its two seaports in both Seattle and Tacoma, and together the two ports represent the third
largest shipping hub in North America (www.fmc.gov, 2015). Today the Port of Seattle is
the leading economic driver of the Pacific Northwest. The state of Washington is home to
corporate giants such as Boeing & Microsoft. Those same firms designed the products in
the U.S. and made in Asia. Infrastructure is crucial to the longevity of these respected
firms. The port drives regional growth by generating 9.6 billion in personal income, 20
billion in real business income, employing 216k individuals and establishing a tax base of
nearly 900 million in state and local taxes. Trade flows in terms of cargo currently
represent $47.4 billion of economic activity or 11.6 percent of the state’s GDP. These
impressive economic numbers, however, are not only being hindered by decaying
infrastructure but are outright jeopardizing the state's economy. In 2017 ASCE released
their state by state analysis of infrastructure standings across the Union. The ASCE
overall gave the United States a D+ ranking. Fortunately, ASCE gave Washington a C
ranking, higher than the national average. Long before ASCE conducted their report on
infrastructure, the Washington State Department of Transportation (WSDOT) and
Washington State University (WSU) held a joint study/survey of freight dependent firms
and transportation costs. The numbers vary depending on what study and report one
view, but WSU & WSDOT hold that congestion on our urban road networks costs U.S.
businesses $85 billion annually. The wasted money is a direct reflection on wasted motor
6

fuel, lost productivity, and vehicles using a public road network. The study surveyed over
1,000 different Washington State private businesses and found that fifty-six percent
would raise prices on the consumer to make up for the rising cost of doing business.
Rising Business costs due to congestion and poor infrastructure standards will be passed
onto the consumers causing spending to plunge. Given that consumer spending makes up
two-thirds of the economy and when you add up all the direct, indirect and induced
impacts – the state is projected to lose up to 27,250 jobs and $3.3. Billion (2011 Dollars)
in economic output (WSDOT, 2011).
Case in point the United States must start to invest in its infrastructure network to
alleviate these obstacles. Research done Jeffrey Stupak from Congressional Research
service reveals that allocation of these funds has been in decline since the 1960s. In
numerical terms, Non-Defense gross investment has gone from 4% of GDP to about
2.5% in 2016 (Stupak, 2018). Stupak further reveals that these investments in NonDefense spending were even higher during the 1930s, as was the case given the New
Deal policies coming from Franklin Delano Roosevelt. Stupak holds that more funding
towards the public capital stock, which would include improved roads, bridges,
waterways, etc. Raises output in the near term and also allows individuals and businesses
to be more productive in the future. Thus, allowing more time and additional resources
that can be utilized to generate more economic output. Through a meta-regression
analysis done by Stupak, found that on average for the United States, a 1% increase in the
public capital stock (in real terms as of 2015: $134 billion), resulting in a higher level of
private sector economic output by 0.083% or in real monetary terms $12.7 billion. When
conducting the Meta-Regression in the long-term, a 1% increase would result in private7

sector economic output by 0.122% or $18.7 billion. The Congressional Budget Office
(CBO), estimates that a 1% increase in public capital would increase the long-term level
of private sector output by 0.06% or in monetary terms $9.2 billion. Stupak in his
research does, however, note that these regressions were limited in scope and solely
focused on the effect it would have on private-sector economic output (Stupak, 2018).
Did not study what effect it would have on total economic output, given that the impact
would be substantially more significant.
Importance of Trade to the U.S. & China
The United States must keep up with its infrastructure network to not only retain
its economic edge but to remain a mixed economy as well. Given the waning state of the
U.S.’s infrastructure, the additional transport cost will affect international trade prospects.
Behar & Venables from the University of Oxford holds that trade flows depend on
Characteristics of a source and destination countries, includes their economical size as
reflected in income. Transport Costs shape the prospects of trade and go by variables
such as distance, geography, infrastructure quality, trade facilitation measures, cost of
fuel and transport technology (Behar & Venables, 2011). Distance, according to Behar &
Venables, the distance will impede trade by increasing the cost of freight and the length
of transit. With Asia China, rising in the ranks as a significant economic player the
United States will have to look for ways to enhance its infrastructure to compete at a
global level. Research by Marcus Noland, in 2009, from the Asian Economic Policy
Review underscores the value of a robust trade relationship between the U.S. and Asia.
The United States and Asia have equal footing in continuing their goals for shared
prosperity and what links the two together is their stalwart belief trans pacific integration
8

is vital. U.S. leadership for the past half a century regardless of what political party
dictates policy from Washington has continued to advocate for the liberalization of
markets, trade and a financial system that made Asia the economic juggernaut that it is
today (Noland, 2009). U.S. Policy has never solely focused on regional issues in Asia,
instead, we have set our eyes on global economic matters that affect the world. Likewise,
many governments within Asia take bilateral problems with the United States at the
highest level of concern. Strengthening economic relations between the two has always
been a top policy initiative for the two entities, especially in the realm of trade. In his
testimony in front of the House Ways & Means Committee – Subcommittee on Trade
Matthew P. Goodman the William E. Simon Chair in Political economy spoke
extensively on the salience of expanding trade in the Asia-Pacific region. Goodman holds
that the massive and mounting economic structure drives U.S. trade and investment in the
Asia-Pacific area. Since the end of Cold War, the region has grown three-fold in
economic size and the 21 nations who are joint members of the Asia-Pacific Economic
Cooperation Group (APEC) – today make up over two-thirds of global gross domestic
product (GDP). Today APEC accounts for nearly half of all global trade, totaling a mass
sum of $20 trillion worth of goods and services flowing around the Pacific Ocean last
year (Goodman, 2017).
The surge in economic activity within the Asia-Pacific region has led to rapid
economic growth, and U.S. exports growth to the Asia-Pacific economies continues.
Despite the habitual rhetoric of a ballooning Trade Deficit, especially in Asia, U.S. goods
which consisted of agricultural products, manufactured goods, and services that totaled
$452 billion in 2016 (Goodman, 2017). Trade within the Asia-Pacific Sphere has a clear
9

linkage of not only benefiting U.S. based firms but American workers as well. Trade with
the Asia-Pacific region has led to 3.4 million jobs thanks to exports transported to the
region. These reasons alone are not the only reasons to have a healthy trade relationship
with Asia. Within the next Decade or 2030, Asia's middle class is expected to swell to 3.2
billion, which is eight times the current projection of the U.S's population during that
same period (Goodman, 2017). A growing Middle-Class benefit not only the global
community but the United States as well. A growing middle class in Asia will indeed
have the disposable income to purchase U.S. goods and services, which will lead to more
U.S. exports. More U.S. exports will translate into rising incomes and job creation. The
United States should continue to ratify more Free Trade deals to remain on the pathway
to prosperity.
With the Doha International Trade talks in a never-ending standstill due to
agricultural disputes, the necessity of Bilateral Deals seems to be the only feasible path to
success in cultivating growth. Robert McMahon of the Council on Foreign Relations
wrote extensively on Bilateral Free Trade deals and primarily focused on Past
Presidential Administration's efforts to get Free Trade deals implemented. He notes that
broader trade deals are seldom ratified into law, making it necessary for countries to
implement smaller trade deals to achieve trade liberalization with other markets
(McMahon, 2006). McMahon's research reveals that the very first Free Trade Agreement
(FTA) implemented by the U.S. was a pact with our longtime ally Israel. The FTA with
Israel or better known as the U.S.-Israel Free Trade Agreement was signed into law in
1985 under the Reagan Administration (McMahon, 2006). Post 1985 the United States
the United States has ratified multiple FTA's with other countries such as Australia,
10

Bahrain, Chile, Colombia, Jordan, Morocco, Oman, Panama, Peru, and South Korea.
Seldom, because multilateral FTA's are often onerous to implement due to various major
parties expressing different objections. Nonetheless, the North American Free Trade
Agreement (NAFTA) and the Central American Free Trade Agreement (CAFTA) have
successfully become part of U.S. trade law.
Presidential Administration's according to McMahon focused on Free Trade deals
in different parts of the globe which consisted of the Middle East, the Pacific Rim, and
Latin America. The goal of FTA's is not merely for economic reasons. As mentioned
above multilateral deals are often difficult to ratify, smaller deals often act as catalysts to
improve the standings in developing and emerging market countries. The U.S.
implements these FTAs not merely for economic integration, but to expand our national
security strategy across the globe. The U.S. recognizes that national security and
international trade impact on another, given that trade measures have often been used to
safeguard national security (Sohn & Yeo, 2005). National Security talks between the U.S.
and South Korea played an instrumental role in the negotiations for a trade pact between
the two. Bringing national security to the table would act as a catalyst to enact a trade
deal and stabilize the Korean Peninsula (Sohn & Yeo, 2005). Like our trade talks with
South Korea, our trade pact with Singapore has produced related benefits. The
implementation of the FTA has quelled the fears of many in Southeast Asia that the U.S.
has immersed itself too deeply in the affairs of the Middle East. By July 2005 the U.S.
and Singapore signed a Strategic Framework Agreement that expanded diplomatic and
military operations between the two (Nanto. 2010). Robert McMahon

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McMahon in his research cites work by Jeffrey Schott, a senior fellow at the
Institute for International Economics, whose research focuses on international trade
policy. Schott holds that "These deals are essentially about provoking domestic reform in
the partner countries which will make it easier for them to pursue further trade
liberalization at the multilateral level if they introduce more market-orientated reforms in
their domestic policy" (McMahon, 2006, Page 2). The United States has experienced
success in implementing trade deals in the Middle East, most notably with the ratification
of FTA's with Bahrain, Israel, Jordan, Morocco, and Oman. Going back to Asia, the U.S.
is replicating this strategy in that region of the world as they're doing with the Middle
East according to research done by Douglas Holtz-Earkin. The U.S. currently has two
FTA's in the region with Singapore and South Korea. Holtz-Earkin holds that applying
the same logic to the Middle East makes sense, given that the U.S. is expanding its
influence in the Asia-Pacific by expanding trade ties with China's neighbors. As
mentioned at the beginning of my thesis I mentioned that the U.S. along with nine other
countries will become the top trading nations of the global community by 2050. The bulk
of those nations, not surprisingly, come from Asia with China being destined to become
number one in that timeframe.

12

Chapter 2
U.S.-Sino Relations
The history and economic relations between the United States and China are rich and
helped shape the trade relationship between the two. Relations between the United States
and China dates to the late 18thcentury at the Guangzhou Province; upon the arrival of
Protestant Missionaries, whose goal was to establish a clinic, which would later manifest
into Guangzhou Hospital given the influx of patients (Monroe, 2014). To better
understand the intrinsic relationship between the United States and the People's Republic
of China, we must also look at China's relationships with other countries as well.
Between 1839 through 1949 China went through what is better known as it's "Century of
Humiliation," during that time China lost large portions of its territory to foreign entities
(Monroe, 2014). With multiple nations claiming a stake in China's territory, then U.S.
Secretary of State John Hay presented his idea of an "Open Door" policy. The Open-Door
policy would keep China open to trade with all countries on an equal basis. Done so that
no country would have complete control over China. Then-Secretary Hay sent notes
those powers occupying land in China including Great Britain, Germany, France, Russia,
and Japan. The notes were not legally binding; nonetheless, they marked the beginning of
the U.S.'s trade Policy towards East Asia (Monroe, 2014).

13

Early 20th Century Relations & Nixon Visit
Strengthening trade relations, however, was not enough yet to appease the
Chinese. By the late 1890s, despite all the goodwill to enhance trade relations, antiforeign was mounting amongst the Chinese. Ultimately, leading to the Boxer Rebellion,
named after a famed martial artist who started the group. The Rebellion gained steam, not
just for it’s anti-foreign and anti-Christian beliefs, but for its overwhelming support
towards the Qing Dynasty. Notably, the slogan around the Boxer Rebellion was called
“support the Qing, destroy the foreigner.” (Monroe, 2014, Page 4). The Rebellion was
short-lived, however, thanks largely due to the combined military strength of multiple
other nations, this included the U.S. Marines. By 1901, the Qing Dynasty was forced to
sign a settlement known as the “Boxer Protocol.” Upon signing the protocol, the Qing
Dynasty would go on to lose its legitimacy. Multiple events followed that would
undermine any hope in U.S.-Sino relations.
The most notable would include the “Red Scare.” Upon the end of WWII, the
United States and the Soviet Union became rivaled nations as they entered the Cold War.
The friction between the two World Powers caused a great deal of anxiety to grow
amongst Americans who believed that communists and communist sympathizers were
secretly penetrating the U.S. government as spies for the Soviet Union, compromising the
country’s security and military secrets. China was grouped into the “Red Scare” due to
the Chinese Communist under Mao Zedong, winning the Chinese Civil War over the
Western-backed Kuomintang. Relations further deteriorated by 1950 during when the
North Korean People’s Army invaded South Korea. The United States military with the
assistance of the United Nations (U.N.) defended South Korea from the North Korean
14

Army. China, however, came to the aid of North Korea, which was later aided by the
Soviet Union. America’s fear reached a fever pitch after the Soviet Union, joined China
& North Korea exacerbating concerns that communism was on the rise on another side of
the world (Monroe, 2014). By 1953, the Korean War had ended in a stalemate with the
ratification of an armistice treaty, thus dividing the Korean Peninsula into two nations,
the Democratic People’s Republic of Korea (North Korea) and the Republic of Korea
(South Korea). Before the Korean War outbreak, President Truman declared that the
United States would no longer interject itself into the affairs of the People’s Republic of
China and the Republic of China. Given China’s support towards North Korea, Truman
reversed that policy after the Korean War, by seeking the neutralization of the Taiwan
Strait, the water channel separating Taiwan and China. Believing it to be in the United
States best interest, Truman ordered that the U.S. Navy Seventh Fleet shield Taiwan from
a tentative attack from the Chinese. The Taiwanese government under Chiang Kai-shek
sent thousands of military troops to the offshore islands of China. China responded by
shelling the islands, the U.S. countered by threatening to use it’s Nuclear Defense
Apparatus towards China. By 1955 Congress passed the Formosa Resolution, authorizing
then-President Dwight Eisenhower to authorization to defend Taiwan and the other
miscellaneous islands of the coast of China. Three years the People’s Republic of China
once again used proactive force against Taiwan by shelling the islands. The United States
once again threatened to use its nuclear arsenal against China. The strategy proved useful,
until 1964, when the People’s Republic of China successfully tested its atom bomb and
became a nuclear power (Monroe, 2014).

15

Five years later President Richard Nixon was inaugurated as the 37th President of
the United States on January 20th, 1969. In his inauguration speech, Nixon said, “We
seek an open world – a world in which no people, great or small, will live in angry
isolation” (archives.gov, 2019). There were no lines of Communication between the
United States and China – given their isolationist stance under Chairman Mao Zedong.
Nixon embarked on an ambitious world tour during the Summer of 1969, some of the
most salient trips were to Pakistan and Romania. Those two respective countries had the
strongest ties with China, and Nixon empathically stated his belief that “Asia could not
move forward if a nation as large as China remained isolated” (Jian, 2003, Page 34).
Nixon decided to keep all actions related to China a secret from the State Department, by
using foreign nations as a line on talks. Notably, Nixon used President Yahya Khan of
Pakistan to channel through him a solemn commitment to meet with Mao (Ghosh, 2013).
Nixon did not shy away from wanting to speak to Mao while speaking to the public.
However, Mao refrained from engaging with Nixon, believing that it would hinder his
image as a communist leader.
By the Spring of 1971, “Ping-Pong Diplomacy,” became a pivotal step forward in
forging diplomatic relations between the two. Japan that year was hosting an international
Ping-Pong tournament. Glenn Cowan, an American Player, hitched a ride on a bus to
sight-see China. While on the bus Cowan meets with Chinese Champion Zhuang Zedong.
The two created a friendship and pictures of Cowan and Zedong made their way to media
outlets in both countries. Mao in a move that astounded the international community
began allowing American players to come to China. The final step that paved the way for
Nixon to visit China would be Kissinger’s Secret Trip to China. Kissinger met with Zhou
16

Enlai, who served as China’s Vice Chairman of the Communist Party. Kissinger arrived
in the People’s Republic of China on July 9th, 1971, with Enlai he meets with high-level
Chinese Officials to make arrangements for President Nixon to visit China. Kissinger
attended six different meetings during his two-day trip. Although the trip was significant
Beijing was adamant that no meeting between Mao and Nixon would happen, unless the
U.S. kept their word regarding Taiwan. Kissinger pledged that the United States would
withdrawal two-thirds of U.S. forces out of Taiwan once the Vietnam War had ended.
Kissinger also reiterated that the U.S. would not recognize Taiwan as an independent
nation and would continue to see it as part of China. Upon Kissinger’s successful mission
to China Nixon had announced that he was invited to China and had accepted Mao
Zedong’s invitation. In addition to his announcement to visit China, Nixon vowed to
normalize relations with China. President Nixon, his wife, and First Lady Pat Nixon,
along with the U.S. delegation which included Kissinger arrived in China in February of
1972. The language barrier and Mao’s frail health had at one point put the historic meet
in jeopardy. Nixon prevailed by turning a fifteen-minute meeting with Mao, into an hour
plus. Mao did not want to commit to anything at that point, and the two only spoke on
general terms. Their talks were depicted as full of laughter and exchanging of jokes. The
ground-breaking meeting marked a new chapter in U.S.-Sino relations. By February 28th
after several meeting, Nixon and Mao came to together and signed a document known as
the Shanghai Communique, which outlined areas of agreement and disagreement
between the two nations (Jian, 2003).
The biggest takeaway from the summit was the agreement that trade between the
two countries would benefit one another and that exchanging representatives with one
17

another would only improve communications. The Shanghai Communique, however, was
non-binding, purely symbolic at face value. The two countries would go onto exchange
diplomats, as these talks established a precursor to full diplomatic negotiations that began
under President Carter in 1979. Historians lauded the Nixon trip as the first substantial
step in solidifying U.S.-Sino relations. Before these meeting, the U.S. and China viewed
each other with disdain and hostility. Without this meeting, there would be no dialogue
between Washington and Beijing. To further extrapolate the significance of the trip, from
1970 to 1979 trade volumes went rose significantly. Starting at zero in 1970 to $2.378
billion in 1979 (Juebin & Renyi). Three years earlier the Cultural Revolution under Mao
officially ceased upon his death in 1976, which brought renewed leadership under Deng
Xiaoping. The top leadership officials supported Deng within the communist party of
China. Most importantly, however, many sought changes within the country due to the
tepid state of the economy. The notion was supported by Chinese economic planners who
learned that a planning system was far too arduous to implement and inefficient to satisfy
the needs of most people in China.
Deng Xiaoping
Reforms Deng Xiaoping sought to introduce a series of market reforms to reshape
the economic landscape radically. He looked to what was going on in North vs. South
Korea and East vs. West Germany and compared & contrasted how each was performing
economically. The Chinese under Mao suffered under the economic consequences of
central planning, which included a shortage of consumer goods, limited variety, and no
quality. Deng unveiled his four-point plan which included reforms in Agriculture, StateOwned Enterprises, Open Door Policy (Trade) and the Price System (Chow, 2004). Deng
18

first rewarded households with the responsibility of managing their land for agricultural
purposes. Initially under the Maoist system farmers worked as teams and could be paid
under an individual basis for working harder than others due to their shared output among
one another. Deng changed this to reward individual farmers and with that change saw a
monumental increase in agricultural production rose in China and farmers saw their
incomes rise. State-owned enterprises were given more autonomy in terms of marketing,
and production rather than having the central planning commission make those decisions.
By 1980 over six thousand industrial enterprises obtained autonomy and in turn produced
nearly half of the total output of all state industrial enterprises (Chow, 2004). Other
reforms included financial independence, giving the enterprises the ability to keep their
earnings as their profits upon payment of taxes to the government.
The third implemented reform became known as the “Open-Door” policy – under
Deng Xiaoping foreign trade and investment were encouraged. Under Mao, China’s
economy was mainly a closed market before the reforms took effect. Deng’s opening of
China invited more imports to come into the country and promoted exports to be shipped
out. By 1987, the foreign trade volume increased swelled to 25% and by the late 1990s to
37% of GDP (Chow, 2004). With the opening of China, foreign companies/investors
were encouraged to set up factories in Export Processing Zones (EPZ). These zones had a
history of success, particularly in neighboring Taiwan, which established the Kaohsiung
Export-Processing Zone in 1966 (Chow, 2004). These EPZs lead to joint ventures and
brought in investors from outside the zones. The second pivotal component was utilizing
the capitalist system as an economic engine for continued development. By 1982 the
Shenzhen economic zone was entirely constructed and was strategically placed in one of
19

the most central trading hubs in all of Asia – Hong Kong. The investment brought along
an infrastructure system for China to use. The final component of Deng Xiaoping’s
economic reform consisted of reforming the Chinese Price System. The main goal for the
Chinese administration was to decontrol prices gradually and allow the market forces to
determine costs (Chow, 2004). These reforms, ironically, not only benefited the People’s
Republic of China, the reforms benefited the United States economy as well. Despite
continued anxiety from policymakers, media, and the public over the U.S. trade deficit
with China, which currently stands at $334 billion, or 1.9 percent of GDP (Chow, 2004).
The United States enjoys a myriad of benefits from its trading relationship with
China. After Canada and Mexico, whom the U.S. enjoys a free trade deal with, China is
the third largest purchaser of U.S.-made products (goods and services). China in total, as
of 2015, purchased $165 billion worth of goods from the United States. Economist and
trade analysts predict that in the next twelve years, the United States will export $369
billion in products and services to China, with the figure swelling to $525 billion by
2030. That latter figure will represent 10 percent of U.S. exports, symbolizing an
enormous size of China’s market. Trade is only one example of the U.S.-Sino economic
relationship. U.S. businesses since 2000 have seen their business income from direct
investment triple, which has added 2.4 percentage points towards our GDP growth. U.S.
businesses now have the incentive to spend their earnings toward smaller suppliers and
subcontractors at home, given the lucrative earnings potential overseas. As the middle
class in China, particularly throughout Asia, investors should remain confident in China’s
ability to consume more U.S. exports.

20

In a more in-depth analysis of China’s economic performance, the country’s
entrance into the World Trade Organization (WTO) has further enhanced its economic
clout. GDP growth since 2000, has averaged almost 10 percent annually, even when you
add in the slowdown it experienced, which reflects the country maturation into a
developed economy (U.S.- China Business Council, 2017). The country continues to
outpace the United States and the Eurozone, in terms of world economic output. Worth
noting however that China’s living standards are lower than that of the U.S. and the
Eurozone. The United States continued integration with the People’s Republic of China
has come with a plethora of economic benefits. In 2015 U.S. goods and services to China
totaled $165 billion, which accounts for seven percent of all U.S. exports. These products
consist of agricultural products (soybeans, pork products, etc.) and a string of
manufactured products (transport, construction equipment, and high-valued electronic)
(U.S.-China Business Council, 2017). U.S. exports to China directly employ 1.5 million
jobs and contribute $128 billion to the United States economy. Trade relations with China
also benefits productivity here in the United States as well, which is the cornerstone of
generating wealth. Empirical studies have proven that openness to trade stimulates a
country’s competitive edge and entrepreneurship, which in essence leads to productivity
growth. Thus, thanks to trade relations with China, U.S. productivity has increased by
0.17 – which in turn boosts economic growth (U.S.-China Business Council, 2017). But
perhaps the most pivotal benefit from the U.S.-Sino trade relationship would be that now
Chinese firms are investing in the United States. In 2015 alone, the People’s Republic of
China spent $15 billion in the United States, a colossal jump from the paltry $277 million
invested during the year 2000. According to the Bureau of Economic Analysis (BEA),
21

more than 38,000 Americans work at U.S. affiliates of Chinese Firms. When taking the
supply chain into effect and it’s overall interaction with these affiliate firms, our best
estimates reveal that Chinese investment in the United States in total supports 104,000
jobs and contributes $11 billion towards GDP.
The United States, while still the largest economy in the world, must look to the
long run to maintain the competitive edge. It can only be done by growing and repairing
its infrastructure network. Freight dependent businesses that deal with congestion and
long roadways are experiencing higher costs when delivering these items to the ports.
Asia’s middle class is growing, and the United States economy is becoming an integral
part of it. With China being a core player in that relationship. The economic reforms
under Deng Xiaoping not only opened China to the global economy. The country itself
began to implement several structural reforms to enhance its economic prose. Most
notably the Chinese, since the 1990s have started investing in infrastructure to make their
economy competitive within the global environment. Over a decade ago the country
unleashed a four trillion-Yuan package towards infrastructure and social welfare
development (Chow, 2004). The main idea was to promote connectivity and boost
urbanization to bolster the country’s living standards and economic development.
Chinese investment projects towards infrastructure were not merely limited to roads; they
also included metro, bridges, rail, and utilities. The People’s Republic of China in their
own right has also built the world’s most extensive high-speed rail system (The
Economist, 2017). Infrastructure has become so pivotal to the Chinese that they added it
as an initiative to their Foreign Policy in 2013 upon the arrival of their new President Xi
Jinping. That same year the People’s Republic of China launched the One Belt Road
22

Initiative (OBOR), the ambitious project hopes to resurrect trade channels across the
region of Eurasia. Scholars from across the globe lauded the project, including Harvard
Law Professor Noah Feldman, who described it as being an “Eisenhower Interstate
System for an entire region of the planet” (Feldman, 2017, Page 1).
The People’s Republic of China has invested heavily in infrastructure across
various parts of the globe over the past several years. Those areas include Europe, Asia
and the continent of Africa. The OBOR initiative includes Latin America as well under
the "Trans-Pacific Maritime Silk Road." Another ambitious plan by the People's Republic
of China calls for the construction of a "Polar Silk Road" in the Arctic region as well.
With the Arctic waters no longer staying frozen all-year-round, China is attempting to
ship goods from Asia to Europe via the top of Russia. The Russian Federation is joining
the People’s Republic of China in this venture, as Russia hopes to reap the benefits of oil,
natural gas and profitable transport routes all in part thanks to the thawing ice (Johnson &
Standish, 2018). The Russian Government by 2030 hopes to invest billions in the creation
and development of new ships, ports and navigation technology to make these routes
viable in the long-term. The United States, Canada, and Japan are the only countries not
to join the OBOR initiative. Beijing has stated on numerous occasions that they’re willing
to participate in President Trump’s plan to modernize the United State’s infrastructure
network. China and other countries have indicated that they’re eager to assist in such an
overhaul. Revitalization of the U.S. infrastructure network is mutually beneficial to all.
Chen Jie, the current director of the municipal commission of commerce, is confident that
Chinese firms are willing to compete to sign onto U.S. infrastructure projects. What is
impeding the United States from joining one of China’s OBOR’s initiatives is Trump’s
23

chronic scolding of China. He is not wrong; however to chastise China, given their
underhanded tactics of counterfeiting, regulatory uncertainty and intellectual property
theft (Clark, 2018). These are underhanded tactics often the chief complaints U.S.
companies have on China and Trump wants to stifle such tactics by the Chinese.

24

Chapter 3
Research Methodology
The Research question at hand centers on comparing infrastructure and
transportation systems in the States of Oregon and Washington, and how it affects trade
with Asia. We look at and compare how each state funds their respected infrastructure
projects, especially among the ports. Additionally, I analyze state and local funding levels
in terms of GDP and assess whether funding those levels heighten trade volumes with
Asia. Notably, we look at the unique ways each state funds infrastructure, whether it be
the gas tax or through their essential natural resources. In addition to analyzing the
methods, each state pays for the infrastructure we briefly look at the condition each state
is in, what improvements are needed to keep up with future demand and how
economically pivotal these ports are to the individual state’s economy given that each
state acts as a gateway to Asia. We achieve our understanding of this by reviewing the
nations in Asia that trade with the U.S. the most, assessing the trade volume that each
port respected receives and from what country and by analyzing what the size of trade
has been like over a decade. Lastly, I will also assess what affect congestion has on these
ports and how much of an impact it has on trade with Asia.

25

Chapter 4
Oregon & Washington State Overview
Washington State
The State of Washington currently moves over $70 billion worth of goods through
its ports each year, is home to ten Fortune 500 companies, and has over 7,000 small
businesses throughout it’s respected territory (awb.org, 2017). The State also contributes
over $300 billion to the United States economy, making it a pivotal player in the nation’s
overall GDP growth. Despite, a vibrant economy, the state is not immune to
infrastructure shortcomings. The State has made a solemn commitment to its residents to
make transportation funding and infrastructure maintenance/repair a top priority. In 2015
Governor Jay Inslee (D) and the State Legislator implemented several reforms to invest
in the state’s multimodal transportation system. Those reforms consisted of an
infrastructure package referred to as “Connecting Washington,” which includes a $16
billion investment that bolsters transportation development and maintains critical
infrastructure structures pivotal to the state’s economy. The main drawback to the
program, however, is its reliance on gas taxes. The funds for “Connecting Washington”
initiative primarily come from the implementation of an 11.9-cent gas tax increase that
became law on July 1st, 2016 (WSDOT).

26

The federal government’s lackluster support to give each state the adequate
funding necessary to support transportation projects, maintenance and operation are
becoming more evident due to higher gas taxes. Washington state, however, is projected
to oversee continued gas tax deficits due to more fuel-efficient cars on the road and the
2003 Nickel Account, along with the 2005 Transportation Partnership Account (TPA),
are not generating enough funds for these projects. In retrospect, the 2003 Nickel
Account is 10 percent below the necessary funding levels, and the 2005 Transportation
Partnership Account is 21% below adequate funding levels (WSDOT). The State
currently has 75 port authorities located in 33 of its 39 counties. These ports serve as the
gateway to trade routes and the overall supply chain. In 2014, Washington Ports ranked
4th in terms of commerce (measured by weight) and ranked 5th in terms of Cargo in
terms of importance. The State of Washington is home to the largest locally controlled
public ports systems in the world – the Northwest Seaport Alliance (NWSA) consisting
the Port of Seattle and Port of Tacoma. Marine Cargo in this part of the United States
support 48,000 jobs, generated $4.3 billion in economic activity and produced $379
million in state and local tax revenue (www.portseattle.org, 2014). The state’s maritime
sector enables economic activity in a variety of industries throughout the State of
Washington and the greater United States. Ports are pivotal towards the viability of the
Washington State economy and need a robust transportation network to cultivate the
freight movement to and from various destinations. Maintenance and repair of road and
rail infrastructure are pivotal to continued port competitiveness and maintaining the
region’s economic mobility.

27

A bulk of the goods exported and imported via the Washington Ports are carried
by the state’s one of the many freight rail connections. The rail system transports close to
two-thirds of the international containers that move to and from the NSWA ports. The
Washington State rail system is the most economically feasible way to transport vast
quantities of goods and materials over the land. The Freight transportation network itself
contributes over $28 billion to the Washington economy or 7.5 of the State’s GDP
(Matsuda & Rothberg, 2016). We should note that the relationship between the maritime
sector and rail network is essential to the vibrancy of Washington's economic
performance. In 2013 Washington State’s “Rail Plan” revealed that the state must
necessitate a reliable rail network in order attract more economic activity towards the
Washington Ports and would augment the competitive nature of other ports located
within the Pacific Northwest. The Rail Plan further states that if the surface transportation
network impaired, Washington ports could become less attractive to ocean carriers,
which could result in a mass exodus of business and export opportunities (Matsuda &
Rothberg, 2016). Indeed, the Washington Freight rail network has expedited the process
to move products across the state to and out of the marine ports. Washington State has
also invested heavily into tractor-trailer trucks to ship goods. Tractor trailers and other
heavy transport vehicles based in the state of Washington ship an estimated $42 million
worth of freight on the roads every hour of the day (Matsuda & Rothberg, 2016). The
State currently has nearly 1,800 trucking firms, which generate roughly $5 billion in
gross business income. As of 2012, over 372 million tons of freight valued at $342 billion
is being transported by trucks within the state of Washington and accounting for over

28

two-thirds of the total freight shipment by weight within the state (Matsuda & Rothberg,
2016).
The Transportation initiative ratified by the Washington State Legislature
continues the state’s commitment to ensuring the public has access to efficient modes of
transportation. Such methods of transit include walking paths, bicycle routes, transit and
other miscellaneous modes of transportation. Over $9 billion will go directly to the state
for highways and local roads and another $1.4 billion will towards maintaining, preserve
and other miscellaneous operations that support Washington State roads. Additionally,
the legislation will fund a variety of different grants and programs to finance
infrastructure and transportation across the state. They include allocating $200 million
towards the Regional Mobility Grant Program and $111 million towards transit-related
projects. The former fund's local efforts to expand transit mobility and curtail congestion
on the roadways where traffic is prone to be massive. The allocated funds will also go
towards transit programs and services that will connect urban centers while the latter will
provide funding for improving public transportation within rural communities in the state.
Washington State will also spend upwards of $41 million to fund the Commute Trip
Reduction Program. The program will implement tax credits towards businesses that find
solutions to curtail air pollution and ease road congestion.
The plan comes off the heels of a Federal Law that was passed a decade ago,
known as the Passenger Rail Investment and Improvement Act of 2008. The law requires
states to become more aggressive when setting up a statewide rail policy and creation of a
state rail plan that includes proposed improvements for freight and passenger rail systems

29

and includes an examination on how freight and passenger systems function together.
Washington state's rail network is critical to the state's economy, given that the same rail
network in 2007 transported 83 million tons and 40 percent of all interstate freight
associated with a Washington state origin or destination (www.wsdot.wa.gov/rail, 2014).
Washington State, despite prominent urban hub dominating the western side, the rest of
the state is an agricultural powerhouse. The State is the 4th largest producer of wheat in
the United States, producing more than 167 million bushels in
2011(www.wsdot.wa.gov/rail, 2014). The Washington Grain Commission in 2011,
reported that 27 percent was transported by rail at some point towards the ports. The
state’s rail network is pivotal to the ongoing strength of the state’s major industries,
which includes manufactured aircraft products and forest-related goods.
The benefits of maintaining quality rail service in Washington are vital, given that
rail is generally the most cost-effective mode for shipping goods and services over land.
A variety of Washington firms rely on rail networks to stay in the black and without a rail
network they relinquish their competitive edge. Rail augments the ability for Washington
firms to attract new clients and industries, which empirical research has discovered to
exist in studies of rail service and economic growth in other regions. Washington State’s
rail transportation relies on numerous partnerships between government agencies, private
industry, and other miscellaneous stakeholders. The State Rail plan, implemented in
2013, was coordinated via the active participation of numerous stakeholders and will not
be viable in the future without constant feedback from stakeholders. The Washington
State Rail Plan outlines essential findings and underscores priorities for the state to
respond in the coming years. WSDOT (Washington State Department of Transportation)
30

broke the rail plan into five parts. First, WSDOT drafted the program by incorporating
state transportation goals and previous rail policies that the state has used in the past.
With the proposals in mind, WSDOT examined the current state of Washington’s rail
system for its strengths and weaknesses. The examination included technical analysis of
infrastructure and usage, with demographics and economic trends being used to
determine how influential the Washington Rail network is toward the state’s economy.
The state added stakeholder interviews and perspectives to the analysis of the rail
network’s strength and weaknesses, given that their responsibilities ranged from
investment decisions, operations, and planning. The feedback is pivotal towards the
overall performance of the rail network and how it’s currently serving the current
transportation needs of Washington State.
Washington’s freight rail network incorporates two Class I railroads, one regional
railroad, various short-line railroads, and intermodal facilities. The state has over 3,000
miles of railroad lines that provide mobility for goods and services to move in and out of
the state. The State’s freight transportation system is pivotal for industries, such as
agriculture, construction, forest products, manufacturing, and wholesale trade. These
industries help employ more than 1.2 million people, which is equivalent to 40 percent of
the state’s total employment (www.wsdot.wa.gov/rail, 2014). Freight Intensive industries
provided about 41 percent of the state’s total GDP in 2010, which totaled $106 billion.

31

State and Local Capital Spending in Washington State since 2010 as Percent of Gross
Domestic Product
2010

3.14%

2011

2.92%

2012

2.66%

2013

2.71%

2014

2.31%

Oregon State
Oregon’s economic clout while not as encompassing as Washington’s still
delivers a vital jolt to the overall U.S. economy. The state is currently home to seven
Fortune 500 companies, and its location along the Pacific coast has enabled the state to
become a diversified economy. 1 in 6 jobs in Oregon are port-related and are either
directly or indirectly related to the goods going in and out of the ports, the industrial and
commercial activities and recreation (Brinckerhoff, 2010). Like many other states within
the Union, Oregon’s over-dependence on gas taxes is adversely affecting existing
infrastructure and current and near future projects. Gas Tax revenues are not only
declining because of reduced buying power, but more fuel-efficient vehicles are also
enabling cars to enhance their mileage standards. Oregon’s rural communities are no
strangers to the infrastructure shortfall given that the timber funds that help finance road
repair and maintenance are evaporating. In those same rural communities, the land does
not qualify for taxation nor can it be taken over by a private enterprise. Due in part

32

because federal laws prohibit such transactions from taking place in Oregon. Despite, the
creation of numerous tourism and recreation jobs in Oregon that safeguards the state and
federal lands, those very same jobs have been there since the 1990s. Additionally, those
very same jobs have not generated the income earned at the paper mills and woods that
were meant to support county services related in part to infrastructure. Oregon has
increasingly relied on borrowing to cover real-time construction and maintenance costs.
A recent report from the state’s financial condition revealed that in the past decade,
Oregon had borrowed $2 billion to fund bridge and road repair. Such shortfalls in
transportation funding inhibit available funds for future infrastructure needs.
The State of Oregon’s maritime sector consists of 23 ports that play a pivotal role
in the state’s economy. As the State of Washington, Oregon’s ports also act as a
“gateway to Asia.” The State agricultural, manufacturing, and timber sectors rely on
these ports, and other modes of transportation to successfully move these goods. Oregon
being a part of the Western Seaboard is a trade-dependent State, with the People’s
Republic of China being a pivotal player in Oregon’s economy. In the last ten years of
trade between China and Oregon has amplified to the point where Oregon has a Trade
Surplus with the country. Data from the U.S. Census Bureau in 2012 revealed that
exports from Oregon to China have amplified by 1 percent in the last decade, surpassing
the $4 billion-dollar mark in 2010 (census.gov, 2017). Former President of China Hu
Jintao stated in 2011 that China would be importing more than $8 trillion worth of goods,
making port-related infrastructure a pivotal initiative in the coming years. Oregon’s
largest Port, the Port of Portland, today transports over 25.5 million tons of goods each
year (Read, 2012). The Port of Portland carries 12 million of the 25.5 million tons of
33

products to Port of Portland-owned facilities. The exports include an array of agricultural
products, such as hay, potash, and wheat. The imports consist of automobiles, machinery,
and steel. Oregon's transportation network, with an efficient system needed to deliver
goods and services, consists of roads and highways, railroads and waterways. With one in
six jobs being port-related, Oregon's marine sector is pivotal towards the state's economic
vibrancy. Oregon’s six primary marine ports, in terms of trade volumes, consist of
Portland, Coos Bay, Morrow, Umatilla, Astoria, and St. Helens. These ports play a vital
role in transporting these goods and services in and out of the state. A report from ODOT
reveals that one in five imported and exported goods advance in and out of Oregon's top
six ports (Brinckerhoff, 2010).
Recent data from 2010, reveals that the value of these goods coming in and out of
these ports stands at $50 billion. Employment and wages that come from these ports
contribute $4.5 billion towards Oregon’s overall economic health. The state’s most
lucrative port in terms of trade volumes is the Port of Portland, which is of itself
generates over 3 billion a year in direct, indirect and induced job wages and injects over 6
billion towards the Portland economy. The State’s marine sector relies on two modes of
transportation (Highways/Road & Rail) to get all shipped goods to and out of the ports.
Most trucking firms in Oregon rely on the I-5 corridor to transport all the traded exports
and imports in an out of the marine ports. The area in the state with the most substantial
amount of truck volume in the State goes to the Portland Metro area, which is also home
to the Port of Portland. The Port of Portland is the state's bustling port in terms of
products that are shipped in and out of Oregon.

34

Despite reports of prolonged congestion and other issues facing trucking firms,
truck movements within the state are expected to grow inbound by 1.3%, outbound by
2.8% and the internal flows by 1.9% by the year 2035 (Brinckerhoff, 2010). Oregon’s
Transportation plan, despite the maturity of the plan, predicts a near 80% increase in
freight tonnage by trucks between 2006 and 2030. In stark contrast to the State of
Washington, Oregon does not have a strong dependence on using rail as a means to
transport products in and out of the marine ports. The state itself ranks 39th when
compared to other states in terms of rail tonnage (originating, terminating, and carried
through traffic) (Brinckerhoff, 2010). The rail networks share of transporting freight
within the I-5 corridor remains relatively modest when one assesses and reviews the
distance involved. Transporters in the state are reluctant to use the north-south corridor as
a means to ship goods, due to the lack of investment by the state. Despite, a heavy
dependence on trucks to transport goods, a commodity flow analysis conducted by the
state revealed that rail carriers handled 15 percent freight originating in or destined for
Oregon (Brinckerhoff, 2010)
Like the State of Washington. Oregon has also begun diving into Public-Private
Partnerships to curtail congestion and improve infrastructure quality. Bottlenecks caused
by heavy traffic in the Portland Metro Area throughout the Oregonian Coast has been
gradually increasing in the past decade. Traffic Congestion comes with an array of
economic and environmental costs, and failure to address these problems will lead to
heighten travel delays and drop-in market access. In 2017, traffic caused by congestion in
Portland cost $3.9 billion in freight delays, fuel and lost time (Oregon.gov). Oregon, like
many states, has suffered from an array of budget shortfalls that have adversely affected
35

transportation funding for infrastructure. That is why in 2003 the Oregon Legislative
Assembly implemented the Oregon Innovative Partnership Program (OIPP), which
allowed for more innovative approaches to fund and finance infrastructure and
transportation projects (Walker, 2013). Since the early 2000’s Oregon has suffered from
stressed financial resources to support transportation needs; given that the average
infrastructure project in the state cost’s seven hundred dollars apiece. The OIPP will play
in a pivotal role in reconciling these financial burdens and gives the state options outside
of traditional funding models. The program streamlines the process for private partners to
participate in the project development process (Walker, 2013). Best value and
qualifications choose partners for these potential projects and avoid the methodology the
private sector uses when examining the project's viability. The Oregon Legislature
realizes that all plans do not attract the same business interest as others. That is why
Tolling has been a possibility for OIPP, but not yet a formal proposal. Tolling is
frequently used to fund an array of projects in Oregon. By January 2005, the Oregon
Transportation Commission (OTC) began gaining approval via ODOT and the Oregon
Innovative Partnership Program to lay the groundwork for three major highway projects.
These projects were entitled the: Sunrise Project, the Newberg-Dundee Transportation
Improvement Project and the South I-205 Corridor Project.
The Sunrise Project – Will construct a new four-lane, limited access roadway from I-205
to SE 172nd and the additional transportation infrastructure will benefit the newly
incorporated city of Damascus located in Clackamas County.

36

Newberg-Dundee Transportation Movement Project – Traffic Congestion levels have
risen nearly 40% in the towns of Dundee and Newberg, both located in Yamhill County.
The state of Oregon has proposed an alternative corridor(bypass) that is approximately 11
miles long.
South I-205 Corridor Project – This project pertains to the freight transportation and
commuter routes within the Portland Metro area. The project hopes to shorten the number
of lanes from six to four near the Willamette River Crossing, due to rising levels of
congestion by the corridor. ODOT has performed an analysis of the project and has
confirmed that widening the South I-205 Corridor to three lanes in each direction will be
feasible and will not result in any adverse effects towards transportation.
State and Local Capital Spending in Oregon since 2010 as Percent of Gross Domestic
Product
2010

2.40%

2011

2.08%

2012

1.94%

2013

1.75%

2014

1.97%

37

Chapter 5
Importance of PPPs
With state, local and municipal governments facing limited resources and tight
budgets, there is no clear timeline for when we’ll be able to fund infrastructure in the
future entirely. The dilemma in funding goes beyond maintenance and refurbishing our
roads. It extends to public capital investments for Airports, school transportation, and
wastewater treatment. For years the allocation of funds for infrastructure projects by the
Federal, State, and Local governments and the way they go about constructing and
maintaining these projects has led to the dilemma. Implementing new levels of spending,
at times, will go into inefficient construction expenses on repairing existing
infrastructure. The government’s pattern in improving infrastructure has not changed, and
such traditional practices hinder the initial investment. The inefficiencies will lead to
dismal rates of return on public capital investments. One popular alternative in alleviating
the inefficiencies in funding infrastructure would be to implement public-private
partnerships (PPP). Many countries across the world have undergone implementing PPPs
to lift the burden off the taxpayers to fund for infrastructure and to bring in private sector
resources to enhance efficiencies. A study by the Mckinsey & Company reveals that
PPPs in Europe have increased six-fold on an annual basis from the period of 1990 to

38

2006 (Rocca, 2017). PPPs have a long history of being implemented to fund projects in
the transportation sector. European countries have used PPPs to fund projects in defense,
environmental protection, government & municipal buildings, prisons and schools. The
countries that have used and benefited from PPPs the most are the United Kingdom, and
Portugal, PPPs in those two countries account for 32.5 and 22.8 percent, respectively,
with infrastructure underscored the most during the 2001-06 period (Rocca, 2017).
P3 Model Benefits
Research done by Syracuse University in 2016 found that states that implement
the P3 model for infrastructure projects have a higher rate of success when considering
cost objectives and meeting deadlines. The United States when constructing large and
expensive infrastructure-based projects, policymakers and elected officials have often
come up short to conjure up the gumption to develop a partnership with the private sector
and investors to deliver on these potential investments. The University study further
emphasized that the standard measures that the U.S. government has gone by to develop
infrastructure cause projects to go over their important deadlines and are not costeffective to the taxpayer. In 2015 the United States accounted for a quarter of nominal
GDP and 18% of global construction spending. Only accounted for 9 percent of the
worlds nominal total costs of P3 infrastructure investment at the same time (Rocca,
2017). The implementation of the P3 model for state governments to use to fund
infrastructure can mitigate delays in scheduling and overruns that are often the culprits
for the hindrance in the government in completing these infrastructure projects.

39

P3’s accomplish this by delineating governance, allocating shared risk, integrating
resources, applying best practices, and establishing a life cycle–a long perspective of
costs and accountability (Rocca, 2017).
Research by Mckinsey Group underscores several challenges with their portfolios
that are mostly related to monetary issues. The study by Mckinsey clearly outlines eight
recurring themes that the public sector frequently runs into when constructing
infrastructure projects. 1. The responsibilities that are assigned by the government are
often murky when it comes to decision making, and that leads to the impediment of the
project’s delivery. The P3 model addresses these challenges by requiring the owner to
document and convey the standards of performance, all risk-allocation mechanisms,
requirements, repercussions, and rewards. It is done to reinforce transparency and
maintain the commercial aspect of the project. 2. Support for an infrastructure project can
quickly dissipate when a robust commitment does not back them. P3s, however, have
been examined meticulously by portfolio officials investments that are known by the
public at large, ensuring that the project commits a sponsor that will come with a strategy
on how they intend on completing the project. 3. Often we hear and read that the most
significant detriment to the public sector is the lack of innovation and the excessive
amounts of “red tape.” The P3 model, however, encourages innovation by implementing
problem-solving tactics during the bidding, construction and the operations of the project
(Rocca, 2017). 4. Lack of ownership in the mid during the implementation. Going by
conventional project delivery methods frequently leads to friction between the contractor
and the proprietor. The P3 model avoids this kind of conflict, given that the
concessionaires will implement the perspectives of the proprietors, sponsors and often
40

both because of the performance standards and obligation to let all the assets go to a state
of good repair.
5. The absence in Execution. Often large infrastructure projects run into
conflicting objectives, tight schedules, and scarce resource commitments. P3s rectify
these issues by offering accountability and transparency by defining what the delivery
should look like an extrapolation of what the major contractual components are for each
party. These would include managing the supply chain, procurement, and design of each
project. 6. Lack of project control. Having numerous participants, with a diverse grouping
of systems can equate in different modes of progress and truth of the status of the pending
project. Which leads to misuse in time for the parties to reconcile and will create friction
among each participant. The P3 model allows the concessionaires to deploy the necessary
resources and project systems needed to identify, manage, and mitigate deviations from
the plan (Rocca, 2017). Ultimately, leading to inefficient contingency planning and
adaptability to change. 7. Low initial costs. The orthodox approach to the procurement of
each project will usually award contracts to the lowest bidder, without considering what
the real costs will be during the entire cycle of operation and maintenance (O&M). P3s
are designed to home in on the long-term costs of ownership, which includes the O&M
component, before the allocation of awarding contracts. Thus preventing the
concessionaire from using the minimum required capital, now they will be able to
maximize all capital given to them during the initial period of each project. 8. No
resource enhancement. A recurring problem for proprietors is the lack of resources that
ensure the projects growth and the decisions in a satisfactory manner. P3s rectify this

41

challenge by delegating delivery responsibility to a team of well-resourced individuals
who will incentivize the negotiated terms that contract obligates.
Trump Admin Infrastructure Initiative
Shortly, after his historic win, Trump began naming individuals to serve in his
cabinet. For the Department of Transportation Trump nominated former Secretary of
Labor and Director of the Peace Corps Elaine Chao (Jacobs, 2016). Chao’s nomination
drew bipartisan praise from Republicans and Democrats alike, given her colossal amount
of experience regarding infrastructure and transportation. During the 1980s under the
Reagan Administration, Chao served as the Chair to the Federal Maritime Commission
and served as the Deputy Secretary of the Department of Transportation under President
George H.W. Bush (Jacobs, 2016). In the Spring of 2017, Chao delivered a series of
speeches to discuss the Administration’s plan to implement infrastructure projects across
the nation. Chao cited 16 different proposals that she and the Administration are
reviewing and has admitted that none of them have received universal support. One
funding mechanism of the chronic debate has been the vehicle miles traveled fee, which
would have sparked indignation from privacy groups, given that it would charge drivers
for the miles they travel (Lamb, 2018).
Earlier that year the White House revealed that they would rely heavily on
nonfederal funds to reach the $1.5 trillion thresholds/price-tag over the next decade. Chao
has further stated that the federal government should look extensively into Public-Private
Partnerships as a source of funding for infrastructure projects. She did acknowledge that
the public sector often is reluctant to work with the private sector on these types of
projects, given trust issues. Chao believes that the private sector offers immense sources
42

of capital. In her speech, Chao said quote “We need to be more open-minded in terms of
finding more sources of financing for the infrastructure.” (Lamb, 2018, Page 1).
Washington State since the early 1990s has experimented with Public-Private
Partnerships (PPP) to fund public works projects. In 1993, the Washington State
Legislature ratified the Public-Private Initiatives in Transportation (PPI) Act, which
generated the legal parameters for transportation P3s. Around that time fourteen
transportation projects came to the state legislature for an approval process, with six
receiving the green light. Unfortunately, controversy arose when the state started
imposing highway tolls on existing road networks(bridges and highways), with a private
business playing a pivotal ( and profitable) role in their management and procedure was
too heavy of a burden that the public was ready to handle. Resulting in all but one project
receiving continuance. The sole Public-Private Partnership that went into construction
was the Tacoma Narrows Bridge (TNB). The project scrapped the use of highway tolls
and relied on an alternative financing source from the State Treasurer’s office. Due to the
headache and controversy that developed in implementing PPPs under the law, the
Washington State legislature ceased continuance of the 1993 legislation and barred
further infrastructure projects from being established under the current law as written.
Nine years later the state legislature agreed to amend that law to allow the
implementation of polls on the existing bridge, but only if state-issued bonds were used
to finance the construction of the bridge. The amended law further gave Washington state
operational and maintenance responsibilities from the private consortium.
One of President Trump’s cornerstone campaign promises during the 2016
Presidential election was to invest and refurbish the United States infrastructure network.
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Empirical economic research indicates that a strong infrastructure network for any
country bolster’s economic growth and lessens congestion. Ding Xuedong, the chairman
of China’s sovereign wealth fund, China Investment Corp. (CIC), bolsters the point
further by holding. That the United States plan to fortify its infrastructure network will
bring about immense investment opportunities between the two, Xuedong, however,
warns thought that such investments come attached with a lot of anxiety for
policymakers, to reiterate the U.S. government does not have the money, and private
industry funds can be murky. China is salivating over any opportunity that it may be
granted to partake in the tentative U.S. infrastructure boom. Such an occasion, however,
will not come easy, as Beijing will need to streamline the process for American
companies to gain access to Chinese markets. During his run for President and as
President Donald Trump made a solemn promise to the American public to make
upgrades in the transportation sector of U.S. infrastructure. Trump has sought help from
Shinzo Abe, the current Prime Minister of Japan, in exploring the country’s technical
expertise in the areas of high-speed rail and what it could do to bring high-skilled jobs to
the United States. China, however, has not steered away from in inserting their expertise
in transportation, with Chen Jie, the director general of the municipal commission of
commerce of Guangzhou is confident that China has the power to compete for U.S. based
infrastructure projects. Policymakers and Experts agree that China has the capability and
the expertise to make inroads in the transportation networks of other countries.

44

Chapter 6
China’s Role as a Global Investor
By the end of 2016, China was awarded the number 1 world ranking according to
its National Development and Reform Commission in terms of urban transit systems,
high-speed railways, and expressways. Renovation of the New York Verrazano-Narrows
Bridge in 2013 offers insight on how arduous it is to negate the expertise of Chinese
construction officials. The Verrazano-Narrows Bridge is one of the New York City’s
pivotal transportation networks as it connects the Brooklyn Borough to Staten Island.
Notwithstanding criticism from U.S. companies, local authorities in New York purchase
$34 million in steel products from two Chinese companies. New York purchased the steel
from China Railway Shanhaiguan Bridge Group and the Anshan Iron & Steel, and the
local officials cited lower expense costs and vague delivery schedules. Referring to the
high price of U.S. made steel, over the past six decades the industry has become less
competitive as the United States become more conscious in other sectors of the economy.
Thus, transforming into a service orientated economy. Chinese officials have stressed
U.S. lawmakers and resident Trump that China is the destination to repair and revitalize
U.S. infrastructure and transportation networks. Mei Xinyu, an associate research fellow

45

of the Ministry of Commerce, has noted that Chinese companies are highly enthusiastic
over the prospect in helping rebuild U.S. infrastructure.
Given that as of today China is the world’s largest infrastructure market, given
their recent advancements in Africa and South America. However, Mei has noted that
regulatory barriers placed by the United States make the task cumbersome in becoming a
reality. Mei believes that the best way to bridge this gap is for a Chinese company to
buyout a U.S. company and use it as a proper channel to get the ball rolling. Mei has
urged U.S. policymakers and politicians to avoid keeping the door closed on China as
U.S. infrastructure needs the boost. To avoid immersing, into the reasons why hyperpartisanship is the new norm in the United States Congress for the past four decades.
During the tail end of 2015, before the complete depletion of transit funds, the Congress
passed a $305 billion highway bill, that funded the nation’s road and transit programs
hours before the deadline. Although the highway funding legislation was the first longterm spending bill in over a decade, compared to how other nations fund their
transportation systems, the United States falls short. To extrapolate on the literature
review, both the American Enterprise Institute (AEI) and the American Society of Civil
Engineers (ASCE), give the United States dismal reports on how we handle
transportation and infrastructure issues. AEI finds that government expenditures towards
our highways have dropped by 50% in proportion to other various government
expenditures. ASCE has studied the current condition of infrastructure in each of the fifty
states, and the United States received an infrastructure grade of a “D+.” ASCE also
suggests that we must spend $3.6 trillion by 2020 to refurbish U.S. infrastructure to
ensure it’s condition and stability. With the polarization in Congress hampering any
46

meaningful implementation of reforms toward the U.S. Transportation network, many
policymakers and city planners have looked to seek outside help. Notably, the People’s
Republic of China.
China has invested immense amounts of money in infrastructure, both
domestically and abroad, the country is now seen by many as being the largest investor
and builder of infrastructure in the world. Unearthing the necessary funds for
infrastructure projects in the United States has been described as arduous, where China
frequently appropriates the funds to invest in prominent transportation projects. Empirical
research describes U.S.-China economic relations as crucial for U.S. workers (U.S.-China
Business Council, 2017) 1.5 million U.S. jobs are dependent on trade with China and in
2017 Foreign Direct Investment (FDI) from China to the United States totaled $29
billion. Despite, the impressive statistics, the United States has seldom outsourced few
infrastructure projects overseas to Chinese firms. The scarcity of bridge and road projects
amounts to a feeble $100 million being financed by Chinese firms, which is equivalent to
a mere 1% of China’s total investment in their respected engineering contracts across the
globe (Walling, 2013). China as a country has invested itself in over 70 countries to help
assist with their essential infrastructure projects. By investing in these projects, they have
brought with them the expertise and efficiency necessary to bring about high-grade and
cost-effective plans, granting them the significant leverage to assist the United States
with our infrastructure shortfalls. Some, however, view a partnership with China with a
high degree of skepticism given the national security and funding concerns. However, the
United States had the same kind of discontent toward the Japanese during the Post-War
World II era. Today however Japan, next to the Republic of Korea, is considered to be
47

one of our greatest allies in the East Asia region and our economic ties are pivotal to the
commercial success here at home. There are clear benefits of a U.S.-China partnership to
fund infrastructure projects here at home. Still, we must realize that Chinese involvement
in global infrastructure projects, has yielded positive results. These projects are still in the
early stages. Compared to other foreign capital sources, numerous hurdles and trials are
specific to the People’s Republic of China. For instance, Chinese capital controls restrict
the free movement of capital and involve investors to secure the green light from the
Chinese regulators before they send the funds overseas. These limitations have been
longstanding on the books to prevent capital flight and illicit outflows of capital, have
become arduous as they require the input of multiple government agencies and hamper
flexibility and timeliness (Walling, 2013).
Private Chinese companies must also deal with these taxing “red-tape” regulations
because they want to insert their funds overseas as well. Even though China has
implemented market-based economic policies, several institutions are still state-owned,
which includes their banking sector, Chinese banks have put in place stipulations for
conditions when other state-owned firms obtain contracts in connection with the project.
One notable example was in 2013, a near $2 billion infrastructure deal between the China
Development Bank (CDB) and American real estate company Lennar Corp. Regulatory
barriers began to impede the project, once the Chinese National Railway Company began
procuring itself as a contractor. Tax and Transparency regulations also act as a roadblock
from more considerable financial investments coming into fruition. In the Spring of 2010,
Congress passed the Foreign Account Tax Compliance Act, requiring foreign financial
institutions (FFIs) to report to the IRS information about financial accounts held by U.S.
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taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership
interest. FFIs are encouraged to either directly register with the IRS to comply with the
FATCA regulations (an FFI agreement, if applicable) or comply with the FATCA
Intergovernmental Agreements (IGA) treated as in effect in their jurisdictions
(treasury.gov, 2016). When it comes to China, overseas financial institutions like the
China Development Bank (CBD), are required by the law to provide the federal
government a list of all their U.S. clients. China has not been compliant, and their
domestic laws related to the matter give them cushion room to argue against it. Example
Liu Xiangman, the deputy director of legal affairs at People’s Bank of China once said:
“China’s banking and tax laws and regulations do not allow Chinese financial institutions
to comply [with this demand],” (Walling, 2013, Page 55). Many who heard those words
believe it to be one of the many factors that lead to the demise of the Lennar Corp-CDB
project. In the aftermath of the 2008 Financial Crisis, China has taken the steps necessary
to move away from its export-led growth model to transition into a domestic consumerled model. That is why the country is starting to become more invested allocating funds
and resources abroad, more recently in infrastructure. One part of the world where China
has been keen on in terms of financing infrastructure has been the continent of Africa.
Years of mismanagement and internal strife have plagued Africa due to Imperial powers
began exploiting the wealth of the continent.
Today the continent is a land full of nation-states with several illegitimate
governments, and understandably the people are skeptical of western influence coming in
their homeland. Many view China as the next challenger to the United State's title as the
world's superpower, African Nations now have a choice, other than a western power to
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bring in development strategies. China funding infrastructure projects within the
continent of Africa is viewed by many the most crucial aspect of their relationship.
Starting in 2001 Chinese infrastructure investment in Africa began at around $500
million, ten years later in 2011, that figure swelled to $14 billion. Two-Thirds of the
investment made by the Chinese went into two sectors, energy and transportation. China
and Africa share several economic complementariness, which acts as one of the main
points of motivation for China to finance infrastructure in the continent. To extrapolate,
both China and Africa have been exploited by Imperial forces for hundreds of years.
Today the continent of Africa is severely deficient in the realms of energy,
telecommunications, transportation and of course healthcare. China, while a notable
laggard in the healthcare sector due in part due to air pollution, the country has
implemented a highly skilled construction industry. Primarily, focusing on infrastructure
development within its nation. China’s expanding middle class and manufacturing sector
dependent on natural resources requires not only an efficient transportation network but
access to natural resources as well from other countries. Africa is a continent already
overflowing with natural resources, and they’re indeed of a viable infrastructure network
to facilitate the extraction and transportation of these precious resources. Exim Bank of
China finances the bulk of these infrastructure projects. The China Exim Bank’s central
devotion is to provide export seller’s and buyer’s credits to support the trade of Chinese
goods (Walling, 2013).
The People’s Republic of China’s rise to Prominence has been a miraculous story
of ingenuity and innovative economic reforms that were pioneered by Deng Xiaoping.
Opening the gates so to speak to allow firms to expand their manufacturing base was part
50

of the equation. The other was China’s thirst for raw materials that were necessary to
retain their competitive edge and invite more capital into the country. As we mentioned
earlier, many economists and policymakers have been cognizant over their tightening
relationship with the African continent and of course their improving relations with their
East Asia neighbors. Now the country has targeted a new region in the world to focus
their energies on, Latin America. China’s economic ties with Latin America reached a
fever pitch in 2004 when former President of China Hu Jintao visited the region for the
first time to begin a new relationship – in the form of amplifying economic relations
(Rother, 2004). These efforts proved successful as bilateral trade between China and
Latin America stood at $180 billion in 2010, a fifty percent jump from the previous year.
A remarkable achievement given those trade volumes a decade ago stood at a feeble $13
billion (Feinberg, 2019). FDI flows coming out of China to Latin America have bolstered
the economic ties the two share.
Chinese investment in Latin America stood at $15 billion by 2010, with most of it
going to resource extraction (Dollar, 2016). Bolstering of trade and heightened FDI
investment, however, is just one of China’s priorities in the region. China also hopes to
invest in the region’s infrastructure by inviting it to join its “One Belt, One Road”
(OBOR) initiative. OBOR is an ambitious infrastructure project spearheaded by Chinese
President Xi Jinping, to promote economic links between Asia, Africa, and Europe. As of
2017, the China Global Investment Tracker indicates that Chinese related infrastructure
projects total $700 billion and account for more than 1,280 projects across the globe.
Latin America and the Caribbean Islands account for 107 of these projects that total close

51

to $60 billion. Argentina, Bolivia, Ecuador, and Venezuela have been the most active
participants of these projects.
Argentina
Commercial and Financial ties between Argentina and China were reestablished
forty-five years ago and bolstered by a series of economic reforms that the Argentinean
Government implemented to make it more open to the global economy. China’s rapid rise
in the worldwide economy has replaced some of Argentina’s trading partners, which
included the United States and some European countries, to become the country’s
number two trading partner after Brazil (Narins, 2017). The trade relationship Argentina
has with China accounts for 6.5% of its exports and 17 percent of its imports. Still,
Argentina’s overall economic dependence on China is still minuscule. Nonetheless,
according to figures from the 2006-15 period, Argentina has received $19.7 billion in
overseas foreign direct investment (OFDI) (Peters, Enrique Dussel, 2018). These include
direct investments and merger acquisition operations, and the rest are resource seeking.
Argentina is rich in the oil and gas industry and the agriculture business, making Chinese
investments essential to advance their strategic interests in Latin America. These
investment patterns created by the Chinese are subject to change based on the
preservation and the continuance of investment for future participation in infrastructure
projects by Chinese firms.
China is Argentina’s top foreign investor, outpacing the flows coming from the
United States and the European Union. The reason for this lies with the default Argentina
faced in 2001, cutting the country off from the global economy and allowing China to
come in and become Argentina’s top lender (Richards, 2018). Trade, investment and
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financial flows coming from China to Argentina symbolize a variety of framework
agreements that exemplify China’s growing influence across the globe. Shortly after
Argentina’s default in 2001, Argentina signed with China the “cooperative partnership”
(Richards, 2018). Three years later then President of China Hu Jintao and then President
of Argentina Nestor Kirchner signed the “Strategic Partnership,” which expanded
economic ties in the realms of education, infrastructure, tourism and space technology.
With Xi Jinping now the new President of the People’s Republic of China, he has begun
a new chapter in its relationship with Argentina. In 2012 the two countries approved
nearly two dozen agreements, most notable was the Industrial and Commercial Bank of
China (ICBC) received approval from the Argentinean government to acquire 80% stake
in the Standard Bank Argentina. These agreements opened the floodgates of investment
of Chinese engineering and construction companies to develop Argentina’s economic
clout, whether it be financial, logistical or technological (Ge, 2018). These are positive
developments given that Argentina still lags in infrastructure investment and is far below
the recommended replacement standards. A notable example would include Argentina’s
rail network, which at one point in time was the most envied and extensive rail networks
in the world. Today Argentina’s rail network is in a state of perpetual decline (Ge, 2018).
An analysis conducted by the United Nations Economic Commission for Latin America
and the Caribbean reveals that the yearly average for infrastructure investments over
GDP figures from 2000 to 2015 was just 2.7 percent (Peters, Enrique Dussel, 2018). The
commission recommends that each country hit a 6 percent threshold, in terms of
spending, to close the gap. Argentina itself lacks the resources and entrepreneurial
expertise necessary to keep up with infrastructure demands. These shortfalls have given
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China the go-ahead to step in and launch an infrastructure program to alleviate
Argentina’s shortcomings. It is resulting in China inserting $25 billion worth of public
works projects to the country that will be implemented by the national government or the
provincial administrations.
These Projects coming from China total $7.6 billion in new projects:
*Construction of new dams (Chihiuido I in the Patagonian province of Neuquén
[$2.2 billion],
*El Tambolar in San Juan [$1.1 billion],
*Los Blancos in Mendoza, Quines in San Luis [$300 million]),
*The Potrero del Clavillo reservoir between Tucumán and Catamarca ($1 billion),
*Cuenca del Salado in Buenos Aires Province waterworks ($1 billion)
*San Martin rail line for freight transportation, including renovation work ($2
billion)
These pivotal projects consist of a large chunk of Argentina’s federal budget, with
China acting as a primary source of the infrastructure funding. Meanwhile, local
infrastructure firms and public works groups based in the country will be activated
seldom as Chinese firms will continue their comparative advantage in government
infrastructure plans, especially if they come attached with foreign funds to ease the cost
burden. Regardless of the country, politicians will always push for short-term results that
cultivate financial investments of some sort, but neglect the for long-term capabilities
remains prevalent. China has stepped in to improve Argentina’s rail network by
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implementing a series of joint projects to modernize the country’s rail network. One of
those projects includes revamping Argentina’s cargo rails. These renovations will
comprehensively strengthen connectivity between the export hubs in Rosario and the
northern agricultural provinces (Arguello). In the case of Argentina, the infrastructure
gaps that they face further necessitates the need for China’s involvement. The
Argentinean Transportation ministry has gone as far as to seeking a Public-Private
Partnership with Chinese companies to rebuild the country’s declining infrastructure.
Guillermo Dietrich, the current transport minister, is in talks with China to implement a
plan that will revamp its highway infrastructure (Richards, 2018). The project hopes to
lower transport costs to ease the burden on its agricultural sector. During the summer of
2018, the transport ministry ratified the first of two Public-Private Partnerships (PPP)
projects for new highways, valued at $2 billion (Richards, 2018). The company
overseeing this project is known as the China State Construction Engineering Corp.
(CSCEC) and has committed to building the new highway over the next five years that
will consist of over 300 miles of road. Upon completion of the way, the contract included
language that not only guarantees construction of new roads but continual upgrades and
maintenance of infrastructure (Peters, Enrique Dussel, 2018). The project by CSCEC is
the first of its kind in not only Argentina but all Latin America as well.
Bolivia
In December of 2013, President Evo Morales of Bolivia signed an economic
cooperation agreement with President Xi Jinping of China, which opens the country to
more business investment from Chinese companies and funds an array of infrastructure
projects in the country itself. The cooperation framework pledges that the two countries
55

will develop several cooperative projects in the vital sectors of Bolivia’s economy. Those
sectors include the aerospace, high-technology and mineral sector, with an emphasis on
building up Bolivia’s infrastructure. Bolivia and China have already had some successful
joint ventures in satellite technology and developing a rail network; both are crucial to
improving the landlocked country’s access to the outside world. The cooperation
framework also benefits China exports, especially high-technology sector, given that
those same exports are going to Bolivia. China sees the economic potential in Bolivia
with Xie Wenz, an economist from the Chinese Academy of Social Sciences saying quote
"Bolivia is rich in natural resources, such as natural gas and iron. There is a lot of
potential in China-Bolivia trade” (Fan & Jiao, 2013, Page 1). Bolivia's geography, being
a land-locked country, hampers any success it might achieve in a trade partnership with
other countries
China currently enjoys a trade surplus with Bolivia (Ellis, 2016). In 2014, the
People’s Republic of China exported $1.82 billion in goods to Bolivia and received $434
million in imports from Bolivia. That same year China exceeded Brazil as the number
one destination for Bolivian imports (Ellis, 2016). Bolivia’s top exports to China were
precious metals, such as zinc, silver, tin, copper, and lead. Limitations to how much
Bolivia can transport in terms of goods and services make infrastructure development
vital for the overall health of Bolivia’s economy. Xie has noted that Bolivia’s
infrastructure is exceptionally deficient, creating economic development an arduous task.
To alleviate infrastructure deficiency, Bolivia is investing more in its highway and rail
networks. In the Fall of 2015, President Morales announced that China would
substantially expand its economic and financial support with Bolivia. China's Export56

Import Bank mentioned in its 2016-2020 National, and Social Development Plan pledged
$7.5 billion in loans to fund several strategic infrastructure projects (Ellis, 2016). The
infrastructure projects were not only financed by China, but Chinese companies would
primarily be involved in the construction. The Chinese rail company, China Railway
Group, and China CAMC Engineering corp both won the bid to construct a railway
project valued at $250 million (Fan & Jiao, 2013). Neither Chinese firm, however, was
successful in completing the project, with China Railway Road and CAMC Engineering
finishing less than 30 of its assigned work, respectfully. Failure of both firms to complete
the highway project prompted the Bolivian Ministry of Public Works to rescind the
contracts (Ellis, 2016).
Current miscellaneous projects include the following
•

A $253 million China Railway Road contract for a 158 kilometer El Espino–

Charagua–Boyuibe highway in the Department of Santa Cruz.
•

An 86.9 million to Sinohydro in November 2015 for a 49-kilometer highway

segment of from Padilla to El Salto.
•

A $179 million to Nuclear Industry Nanjing Construction Group contract for a

74-kilometer highway segment from Santa Cruz to Cochabamba.
Ecuador
Ironically, Ecuador established ties with the People’s Republic of China on the
same year when then U.S. President Richard Nixon made his historic trip to China.
Events that led up to this relationship was the United Nations acceptance of China and
Ecuador stifling its ties with Taiwan. A series of trade deals quickly followed and by
57

1980 diplomatic relations between China and Ecuador were successfully forged when
China opened an Embassy in Quito. As of 2015, China’s foreign direct investment (FDI)
to Ecuador represented 10 percent of the country’s total, while The Netherlands FDI
totaled 22 percent, United States 14 percent, and Peruvian 13 percent, making these
countries Ecuador’s most pivotal investors. China currently is allocating most of it's FDI
to Ecuador’s energy sectors (mining and oil), by 2015 China began revamping it’s FDI
towards Ecuador by inserting 15 percent of it to the service sector. Trade relations
between the two have grown tremendously during the past decade. Ecuador’s exports to
China intensified 242.1 percent from $191.9 million in 2011 to $656.4 million in 2016
(Blivas & Koleski).
Political ties between China and Ecuador were further enhanced in 2007 when
then President of Ecuador Rafael Correa broke relations with World Bank, and a year
later Correa outright refused to make it’s scheduled interest payment on its foreign debt.
Correa did not pin the blame on Ecuador for failure to pay these debts, rather his refusal
to pay debts that he viewed as being “obviously immoral and illegitimate” (Watkins &
Anderson, 2008, Page 1). Correa two months before the 2008 Financial Crisis began,
Correa visited China and inked numerous bilateral agreements between the two countries.
The language in these deals included letters of intent, memoranda of understanding and
lines of credit that included but were not limited to the financing of construction for
different types of infrastructure (Castro & Garzón, 2018). Chinese firms have invested
themselves into developing infrastructure in Ecuador but have made inroads in expanding
these economic times by investing in the country’s natural resources, technical training,
cultural exchange, information and communication technologies, and foreign aid.
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For the past eight years, China has become Ecuador’s top lender and contractor in
terms of infrastructure projects. The three types of loans that China grants to Ecuador are
1. Public Debt loans, financing is not conditioned and are available to the public; 2.
Financial advances for the sale of oil, which do not meet the standard of foreign debt,
with payments made in advance through the obligation to buy and sell oil. 3. Public debt
loans for the construction of infrastructure projects, which as of recently have consisted
of mostly hydropower projects, but also in transportation sectors as well (Castro &
Garzón, 2018). The lines of Credit that China has offered Ecuador has caused many
Ecuadorians to feel apprehensive due to the burden placed on them as taxpayers. Given
that most of these operations are commercial and not public debt contracts thus lacking a
sovereign guarantee. The current Ministry of Finance segregates these agreements into
different groupings. Some of these agreements receive the registered status of public debt
loans, while others are commercial transactions under PetroChina International and
PetroEcuador (Castro & Garzón, 2018). The lack of information on oil sales does not
release information regarding potential sales of oil and does not give a definitive
classification between commercial and public debt loans. A bulk of the investments that
China has forged with Ecuador have a grace period of two and four years. Loans granted
at the highest grace periods are the infrastructure projects, specifically the projects related
to hydroelectric dams and plants. The rationale for the long grace periods lies in the fact
that generating profits for these projects and allow for savings in the imminent face of
flood disasters was the purpose for the extended wait period (Castro & Garzón, 2018).
The “One Belt, One Road” imitative by China under the presidency of Xi Jinping
is yet another way China and Latin America are enhancing their strategic partnership.
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Ecuador has responded positively to the project and hopes that the infrastructure project
will open Ecuador to new and emerging markets. Ecuador’s own Ambassador to the
People’s Republic of China Jose Borja emphasized that getting their exports to China
under One Belt, One Road will move their commodities to China’s neighboring
countries. By the tail end of 2018, both China and Ecuador had signed yet another
cooperative agreement to advance the One Belt, One Road infrastructure initiative
jointly. The main objective for China to have Ecuador together work with them on the
Belt and Road Initiative is to promote cooperation between the two sides in the areas on
agriculture, information, technology, new energy, environmental protection and of course
infrastructure (Li, 2018). Ecuador, in the end, received a USD 900 million-dollar loan
from China and with it, according to Chinese and Ecuadorian officials, the lowest interest
rate in history. As of 2017 30 percent ($8 billion) of Ecuador’s $26.4 billion external
public debt is owned by the China Development Bank and the Export-Import Bank of
China. Just a decade ago China owned less than 1 percent of Ecuadorian debt. Ecuador’s
loans from China have an interest rate of 6-7.25 percent (Blivas & Koleski, 2018).
Ecuadorian exports in the form of oil are used to pay the Chinese firms for these loans.

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Chapter 7
Conclusion
The comparative analysis between Oregon and Washington State show’s what
each state is doing to fulfill their infrastructure needs and how dependent their respected
economies are on trade with China. Both realize that trade is a crucial component of their
respected economies and they must keep up with their infrastructure needs to keep
economic growth afloat. Both remain innovative in their approach to funding
infrastructure and are beginning to realize that raising the gas tax is an outdated and
unpopular decision as it shifts the cost to the consumer. While still a smart way to bring
in funds, such mechanisms will soon bring in less money due to reduced buying power
and more fuel-efficient vehicles on the road. Both states realize this and are bringing in
the private sector for help, given that budget shortfalls in each state are inevitable and
such agreements ease that burden. My analysis’s greatest weakness, however, is the
failure to address how much port investment weighs in on trade. We’re able to discover
how trade-dependent each is and found out how valuable each state’s transportation
system was in terms of carrying freight. But we failed to learn how investing in these
ports impacts trade as a whole. In the future, an in-depth study on comparing ports in
each state must be done to pinpoint such connections.

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Regarding the People’s Republic of China, the United States in the coming years
must be cognizant on infrastructure; especially as it pertains to the Pacific Northwest
States. The trade relationship between the two accounts for 2.6 million jobs in the United
States and given China’s middle class is growing; the United States has an immense
opportunity to invest in their customer base. Global connections in the Pacific Northwest
will be pivotal for our trade relationship with China. Given that there were 2.5 million
outbound trips from China to the United States in 2015 and many analysts believe that
number will grow two-fold by 2020. If the United States Congress ever considers
implementing an Infrastructure package to repair and revitalize our transportation
network. We should seriously consider using outside help to make this initiative a reality.
The People’s Republic of China would be an excellent source, for not only financial
resources, but for logistics and expertise in constructing new transportation networks.
Given the amount of money and projects that they have agreed to finance and build.
China’s investment in Argentina, Bolivia, and Ecuador have already yielded results. The
country’s “Belt and Road Initiative” is both ambitious and appealing, given the number
of countries that are signing on to it and has avoided the western model approach for
construction. The country has instead borrowed heavily internally to pay for it,
surprisingly though the country has a low Debt/GDP ratio of 17.7% and the United States
currently stands at 93.6% (Ye). The United States is not spending its way into debt to
finance infrastructure, and I am not in this thesis suggesting that it should. However, the
United States must address our infrastructure needs sooner rather than later.
Beijing has repeatedly said that they’re willing to participate in the United States
plan to refurbish and repair our infrastructure and transportation networks. China’s
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Transport Minister once said quote “We are willing to work with the US side, under the
framework of China’s Belt and Road Initiative and the US plan for rebuilding
infrastructure.” (Wong, 2018, Page 1) Signing on to such a project would be an
outstanding opportunity for U.S. firms and their respected infrastructure, financial,
energy, and environmental initiatives. Chinese companies are no stranger in assisting the
United States for help in constructing infrastructure projects. For example, the Chinese
firm known as China Construction America (CCA) built the Alexander Hamilton Bridge
that connects Manhattan and the Bronx. Chinese companies are often attracted to U.S.based infrastructure due to the steady cash flow that in essence will translate into more
investment opportunities and acts as a safeguard against inflation. Beyond revitalizing
U.S. internal infrastructure, the One Belt, One Road project will bring a necessary jolt to
U.S. firms and how they do business abroad. A variety of U.S. firms want to take part in
China’s One Belt, One Road project and have been making these strategic investments
for the past several years. In 2014 various Chinese construction and engineering firms
purchased $400 million worth of equipment from G.E. to install overseas. In addition to
G.E. Honeywell International is selling equipment to the Central Asia region to help
process natural gas and Citibank won a contract from Bank of China to open up more
branch offices across Asia.
While this sounds and looks good on paper, questions over the feasibility of a
U.S.-China relationship remain if we join One Belt, One Road. The grandiose spending
by U.S. firms to invest in China’s infrastructure project does not necessarily mean a
profit. The money spent by these firms, some of it, has yet to be earmarked. Besides,
China continues to watch over itself by having it’s factories ramp up steel and cement
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production, and China will make sure that those companies receive the preferred
treatment over U.S. companies. The U.S. has a right to remain overly cautious given that
we’re not alone in their trickery. Several South and Southeast Asian countries have
signed onto One Belt, One Road to enhance their port infrastructure needs. As of 2016
none of these projects in the Indian Ocean have been met with financial success. The
United States should not shy away from Chinese help, given the success of projects like
Alexander Hamilton Bridge, but must remain vigilant. Joining One Belt, One Road seems
to be more of a foreign policy initiative to monitor Chinese activity and to learn what we
must do to curtail their influence in the region.

64

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