Where America’s Day Begins
Tumon–While the rest of the country debates President Trump’s Twitter use, health care reform, tax reform, border security, the war on terrorism, and the 2018 midterms, it’s easy for some stories to fall by the wayside.
The 2016 election was dominated by many issues, but trade was a key factor that helped push Donald Trump over the top. The main villain was China. Yet, trade isn’t the only arena where we’re going to do battle with this Asian economic powerhouse.
In the Pacific, China is spreading dollars, subsidizing building projects across Tonga and the Federated States of Micronesia. The latest island project for China was centered on Yap. In these ventures, China provides the dollars and workers for resorts, schools, and other key infrastructure projects. In return, it accelerates their “Going Global” strategy and increases the reach of their intelligence services. Local reports, like one from Tim Murphy of New Zealand’s’ Newsroom, reported that China’s Pacific push was due to its rivalry with neighboring Taiwan, which subsided when a pro-unification government was elected in 2008.
So, with China exerting soft power all over the Pacific, who can push back? Well, we can of course. America—the back-to-back world war champions of the world. The problem is finding where our bases of influence are located on the map.
The key brick that could form President Trump’s Pacific Wall against China rests in Guam; a U.S. territory that’s 9,000 miles away from Washington, D.C. Most Americans would be hard pressed to know that we also have some key military bases in the region. Moreover, it could be another point at which Trump and China’s Xi Jinping could meet at the negotiating table over trade, intellectual property rights, and North Korea.
If there’s one thing that’s explicitly clear in Guam, it’s that there’s also untapped economic potential that could help bolster its standing with the political class in D.C. and help strengthen our vital strategic position in the region amidst a lurking Chinese tiger.
Townhall took the grueling 26-hour journey to meet with the island’s governor, its business leaders, and its locals, some of whom have been there since the 1960s. What’s clear is that while Guam may seem to be in the middle of nowhere, it’s right at the heart of the Asian theater.
[The spot where Magellan landed in Guam]
‘When Main Street USA Gets A Cold…We Get Pneumonia’
Guam is hot; I mean really hot. Ethan Epstein of The Weekly Standard was part of the trip as well. By the time we left the hotel early in the morning, like before 9 o’clock, it was already 90 degrees. The humidity was unbelievable, but we had to meet Gov. Eddie Baza Calvo, a Republican.
It wasn’t like visiting a governor stateside. There’s virtually no security. No presentation of photo identification, no state police, and no barriers. You literally just walk right up to the governor’s office. In the lobby/waiting area, the walls were adorned with maybe a dozen black-and-white pictures of the island from before World War II, when much of Guam was leveled during the Japanese occupation and the subsequent American liberation. The beautiful pictures were taken by, of all people, a young L. Ron Hubbard, the founder of Scientology, when his father, a Navy officer, was stationed here in the 1920s.
Entering the office, Calvo said if there is one part of American sovereign soil that is farthest from Washington, D.C.—you are now in it. That comes with its advantages and disadvantages. He then gave us the 35,000-foot overview of the island, which at times, touched upon the dark days of Japanese occupation. His father was beaten for not removing his shoes before entering a classroom. The Japanese beheaded his uncle, a priest.
There are two pistons that drive Guamanian economy: the military and tourism. Andersen Air Force Base and Naval Base Guam are located at the two opposite ends of the island.
Calvo has been governor for almost seven years, but has lived through the Asian booms that have benefitted the island. The first phase was Japan’s rise in the 1960s, but now everything is centered on China. Koreans, Taiwanese, and Filipinos are the other major nationalities that visit and do business the island. For China, they have to get a mainland visa to enter Guam, though the U.S. territory of the Northern Marianas has a visa waiver program for Chinese tourists, which 200,000 use annually.
While Guam has seen a 30 percent increase in Chinese tourists—numbering around 30-40,000 a year—it gets more visitors from Taiwan. If Guam could a visa waiver for the Chinese it would likely mean more visits and more money, but that’ll be a Department of Homeland Security decision. The relatively new visa policy for China means one is granted not a one-year, but a 10-year, multi-entry visa into the U.S. That’s helped Guam, contributing to a 100,000-person increase in tourism per year. After all, Guam is closer than, say, New York City or Hawaii for some people.
[Entrance to Gov. Calvo's Office]
Concerning military expenditures, the construction of a base for the Marine Corps for its pending relocation from Okinawa has begun, but it’s still in its early stages. Andersen Air Force Base houses Raptors, B1 bombers, B-52s, and Global Hawks; the base was used for bombing runs during the Vietnam War. It’s been robust. Since Calvo has been governor, unemployment has dropped from 13 percent to six percent.
The strategic importance of Guam was also heavily stressed. The governor is a self-described “history buff.” He believes in full incorporation into the fabric of the United States, true citizens in terms of representation and political participation. Yet, he understands the history of the island. During the McKinley administration and the era of Manifest Destiny, the island, as well as the other U.S. territories, including the Virgin Islands and Hawaii (the latter of which became a state) were seen as a way to protest the flanks of Florida and the west coast from European or Asian imperial ambitions.
Yet, as we move toward the third decade of the 21st century, the United States doesn’t know how to treat the territories since that defensive strategic position may be outmoded.
Guam falls under the Office of Insular Affairs within the Interior Department, an agency that has a smaller budget than the government of Guam. The island is the closest sovereign soil to the Far East, where the economies of these nations are both partnered and competitive with the U.S. There are 2 billion people within a three-to-five hour flight of Guam, Calvo said. Oh, and it's also close to the largest standing armies in the world.
American Samoa is the only American soil south of the equator, near Australasia and New Zealand. And those people are worried about foreign encroachment as well, Calvo said. Meanwhile, the governor says Puerto Rico and the Virgin Islands are on the doorstep of Latin America while Guam is at the foot of the robust and at times—aggressive Asian market.
[Gov. Eddie Calvo]
He said that maybe it’s time to see Guam and the rest of the territories not as liabilities, but as assets, along with “how to maximize” their potential, especially in Asia.
Calvo was quite direct when he mentioned that the greatest impediments to growth and financial stability to this island have been federal action or inaction, except its impact is much more amplified.
“When Main Street USA gets a cold because of an action or missed action, or inaction by Washington, D.C., the territories, because we’re not part of the representative government process, he said. “We get pneumonia or tuberculosis because these activities that occur in Washington, D.C. are so out of touch with what are the realities of Guam.”
Calvo, a supporter of Ted Cruz prior to backing President Trump, said the same elements that brought the political earthquake of 2016—the feeling of a disconnect between D.C. and Main Street and the issues of Middle America—are felt here as well.
The Environmental Protection Agency has also messed with the island, with then-EPA administrator Gina McCarthy instituting Clean Water and Air edicts that totaled $1.4 billion, which amounts to about a quarter of the entire GDP for the island. Those environmental goals, which were a mixed bag of consent decrees, regulatory edicts, and court actions, were scheduled for completion by 2023-2025.
“Do you want to put us in the Stone Age?” Calvo says he told McCarty at one point.
Then there’s the issue of federal reimbursement to the territories through their social welfare programs. Washington made a stipulation to Guam that they would reimburse territories and states that absorbed immigrants from nearby independent Pacific islands that are geopolitically aligned with America. These immigrants use up $140 million in Guamanian services, $1 billion cumulatively, but the U.S. only reimburses the island $14.5 million a year.
Concerning social programs, there’s housing, Medicaid (many come here to give birth as the baby gets access to this care and, more importantly, U.S. citizenship), and medically indigent care (MIP), which is a local program. Calvo said that anyone who’s been here six months or longer as a resident gets health care access. Eighty percent of enrollees are immigrants—they’re overwhelming the system with the lack of reimbursement from Washington.
With no job prospects, many immigrants are getting a tutorial from the island’s criminal justice
system. Thirty percent make up the prison population; usually for drug or alcohol offenses. It costs $110 per day to house these inmates, who were supposed to be deported by Uncle Sam.
At one point, Calvo issued a unilateral order to his customs officers—the territory falls outside federal customs jurisdiction—to deport non-citizen immigrants after they have served 70 percent of their sentence, which would occur through a commutation of sentences. The island would then offer them a one-way ticket back home. Calvo’s actions briefly put him in conflict with the DHS, but now working with Guam’s customs agents.
In the past, guest workers on a H-2b visa had a job waiting for them here, as there simply aren’t enough locals or workers from the mainland to fill all the jobs. The Obama administration changed all of that.
The island wasn’t subject to the H-2b visa cap, which meant that there was always an accessible source of labor. In the latter half of 2016, the Obama White House changed this policy with almost 100 percent of visa applicants rejected. This has resulted in a critical shortage of workers, particularly in construction but also in nurses.
Circling back to the economic woes facing the island, the governor discussed his experience in business bottling Pepsi.
On the mainland, transportation costs are around 2 percent of the total costs concerning raw materials and shipping finished goods. In Guam, it’s near 30 percent. Calvo said it’s not the fault of the grocers; they’re working on about the same margins.
Transportation also includes energy costs, which brings us to the Jones Act. The Jones Act was discussed pervasively with those I met, as it makes the island an extremely expensive place to live and do business. In short, it’s a vestige of the politics of empire and Calvo hopes President Trump and the Republican Congress can eliminate or reduce it.
Related to the Jones Act is aviation cabotage. Calvo detailed how 1.6 million tourists go through Guam’s airport, with 200 flights through Guam each day. The territory is a nexus point—equidistant to Australia and Japan—but a lot of airlines and ships can’t stop here due to cabotage, which prevents a foreign-flagged airline from flying between two airports in the United States. If Guam was exempted, it could serve as a nice pit stop for travelers in the Far East and the South Pacific, to say nothing of another source of tourist income.
Yet, even with the endless economic grievances—and there are many—every Guamanian I met also make one thing clear: they’re patriotic Americans.
One of the hardest things Calvo has done as governor, he said, was to greet the bodies of the first two Guam National Guardsmen killed in the war against terrorism. (Since then, over 40 have died fighting in Iraq and Afghanistan.) What’s also striking is that these two dead Americans served in the armed forces, but, along with the rest of the island’s population, couldn’t vote for president.
While we just celebrated the Fourth of July, America's birthday, Guam also celebrates Liberation Day on July 21, the day in 1944 when U.S. Marines freed Guam from the grips of Japanese occupation. Unlike Americans on the mainland, they know what happens when freedom is stripped.
While The Guardian reported that the aforementioned military projects for the transfer of Marines are angering locals, who equate it to colonization, the governor said that 70-80 percent support the military buildup, though Calvo withdrew his support over the labor issue with H-2b visas. He also said that support for statehood would be greater.
“We paid our dues in being a part of America,” he said. “Unshackle these handcuffs that allow us to reach our full potential economically.”
Epstein noted this “craving” for statehood in his piece for The Weekly Standard. That’s a debate for another time, but the island’s strategic importance cannot be overlooked.
Calvo says that the territories shouldn’t be viewed solely through a military lens, but that could be where he gets the most traction with D.C. elites to make the point that there are Americans on the island and it could be the area where Chinese influence is curtailed.
To maintain that strategic position, he could argue, and I’m sure he has, for the loosening and reevaluation of old policies, like the Jones Act. The problem is that there is no senator or representative demanding these changes. The island has a delegate on the Hill, but doesn’t have the power to impact policy, nor do they have a full vote on the House floor.
[Guam's Pacific War Museum]
Three Wise Men And A Lurking Chinese Tiger
Concerning national security, locals John T. Brown and Lee Webber say it means something different here.
Brown is an attorney, while Webber is the former publisher of the local Pacific Daily News. Both men are members of the Guam Chamber of Commerce and have a deep grasp of the socioeconomic and political ties on the island. Webber explained how this is the only piece of U.S. soil that has been occupied by a foreign power since 1812; the Japanese occupied it from 1941-44.
Yet, to drive home the island’s strategic importance, you have to get over what many called Washington’s “benign neglect.” Brown went into an anecdote to explain this, noting that when he visited the DHS—the front desk gave them the papers to fill out for vetting purposes that were meant for foreigners even though Guamanians are American citizens through the 1950 Guam Organic Act.
“The DHS should know where the homeland is,” chuckled Brown.
Webber added that every island in the Pacific has China stepping in, funding schools and other projects—while supplying the workforce to complete all of these ventures. Does this mean more Americans troops, ships, and jets to curb this expansion? Yes and no. A stronger military presence would help, but there was general agreement that a more prevalent FBI, CIA, and U.S. attorney presence would deter Chinese encroachment.
It’s a cause for concern because America had to pay for this island in blood. During the three-year occupation, the Japanese, knowing the Guamanians were pro-American, subjected them to rapes, beatings, and executions. Around 10 percent of the entire population was killed, along with nearly 2,000 Marines when it was finally recaptured in 1944. The point is it would be awful if history repeats itself.
Brown also added that it’s a good thing that the Department of Defense is here, but they’re not a good source of financial support for other projects. Instead of using it for military assets, he said make Guam one that is earmarked for general expenditure in the Pacific.
An American rebuilding and refurbishing project would yield more economic dividends than just a military buildup. Right now, there’s a massive undertaking to move close to 2,500 Marines from Okinawa to Guam by 2021.
Joe Arnett, a certified public accountant, said that he would like Americans from the mainland to find Guam on a map, recognize that Americans live here, and further recognize the strategic importance the island serves to America’s interests.
Brown added that if D.C. folks want to make America great again, it cannot be accomplished by just seeing the Atlantic, or having an Atlantic-based view on foreign policy. He said we’re facing a Micronesia problem; the Chinese are buying the neighborhood from under us. There’s also moral imperative, he says. This island was paid for in blood; whole villages were wiped out. There’s an obligation here. Webber directed us to a column he wrote, which can be found here.
It’s Not A Question Of Growth; It’s A Question Of Labor
At 6 a.m. the sun was shining over Tumon, the Waikiki-like strip where most of the hotels are located. It was going to be a great day and one where business leaders David John and Jonathan Kriegel would give us a more in-depth overview of the economics of the island.
John is the president of the ASC Trust Corporation, while Kriegel is the president and CEO of DoCoMo Pacific, a subsidiary of a Japanese telecommunications company. John reiterated some facts I had already heard in various meetings about the island—that Guam is a $5.5 billion economy, grounded in tourism (55 percent) and government spending (45 percent).
Concerning tourism, the island was, up until recently, totally beholden to Japanese tourists. The Calvo administration diversified the tourism industry to where Japan represents 50 percent of tourists, but Korea, the Philippines, Taiwan, and some mainland Chinese make up the rest. Guam was able to tread water when Japanese tourism levels dropped, but the overall numbers are up 54 percent since 2009.
Kriegel added that there are plans to invest in new lodging properties. Also, owners of the Hilton and Hyatt hotels want to expand. A reported 30-story hotel tower is going to happen, but there is serious question who’s going to build it due to the worker shortage caused by the Obama administration.
John said that it’s all in anticipation of an increase in tourism, as the Calvo administration wants to greet 2 million tourists a year by 2020. While that will require more hotel rooms, the issue is finding workers, he said. Three other hotel projects are also in the pipeline.
I was told the labor shortage is so bad that it could be a fight to just build a house. The two men agreed that a family pool could be in development hell for months.
Computer sciences are one of the most promising and sustaining fields of employment, Kriegel and John said. DoCoMo Pacific wants to capitalize on that, creating a tier three data center on the island, Kriegel said.
Kriegel added that the final bidding process for the new data center led to prices going up, as the new facilities needed to make this project happen would cost more to build due to the worker shortages. (When visas for guest workers went from nearly 100 percent issuance to 1 percent in second half of 2016, Guam lost around 2,000 workers in a private sector labor force of 60,000.)
Well, what about American workers? Can’t they do all of this construction? Yes, they can, but Guam takes at least a day to get there and airfare is anywhere from $1,800 to over $2,000—and that’s just for a seat in economy-class. Uprooting families for a 9-month job isn’t economical, nor is flying back and forth dropping $2k in ticket costs.
We’re the “tip end of the tail of the dog out here,” said John. And the worker shortage shows that. It also shows how policies, like the H-2b visa changes, might help stateside issues, like helping get a hold of our border and immigration issues, but hurt the Americans trying to make a living elsewhere.
Returning to DoCoMo Pacific’s telecommunications and IT projects, there’s another area that places Guam in a unique position strategically: submarine cables.
The southern route in the Pacific runs near Guam. The island is a popular place for these cables to land, Kriegel explained. He added that this could be the third leg of Guam’s economic stool, as these projects take years to complete, maybe decades. To establish a foundation for this information hub, you need IT workers. The closest area to recruit these workers is the Philippines, but the visa issues have made this difficult.
The discussions of guest worker shortages also drew us into the Jones Act, which cuts off trade with the emerging markets in Asia, who could deliver fresh produce and other goods. The U.S. Department of Agriculture is also an obstacle on this front. John added that so-called fresh food from the U.S. mainland after a month on a container ship isn’t fresh.
Guam’s Deplorables: The Island’s Strategic Shipyard And How The Workforce Might Be Natural Trump Supporters
Over the course of the five-day trip to the island, the one and only shipyard was the topic of discussion. It was also the main selling point for Guam’s strategic importance.
The shipyard, formerly a Navy repair facility, had a dry dock capability, something that’s crucial to maintenance of our naval vessels.
Right now, the Navy primarily uses Singapore and the Philippines (Subic Bay) for dry-docking its ships instead of Guam’s shipyard, where 300 to 500 U.S. workers were employed in good-paying jobs.
Calvo said that the Philippines are a good ally and business partner, but it’s not American soil and changes in political leadership always places its long-term use in question.
In 2005, the USS San Francisco hit a seamount doing max speed (30 knots) around 360 miles southeast of Guam. The hull was severely damaged. They were able to blow their ballast tanks and surface and make it to Guam for repairs. Hawaii was too far away, as was the Philippines. The result could have been a three-to-four billion-dollar loss for the Navy since without repairs the vessel would have to be scuttled at sea.
While it occurred off the coast of Japan, the recent collision between the destroyer USS Fitzgerald and ACX Crystal, a container ship, could happen anywhere, though some of the circumstances surrounding the crash are suspect; it seems the Crystal turned around and charted a course directly into the destroyer. Still, ships in a similar and horrific maritime collision in the waters in and around Guam could have a shot of saving their vessels and their crews.
I ate dinner with Mathews Pothen and his son, Ajay Pothen. Pothen senior is the owner of the Guam Shipyard, which owns the dry dock. They told me the military’s presence doesn’t mean the Department of Defense or, for that matter, anyone else in Washington thinks the island is important beyond its strategic location for the Air Force and Navy.
He said that the military buildup in Guam started under the Bush administration, but in the ensuing years the Pentagon has made decisions based on dollars and cents, rather than the national interest.
If you ask the military why there’s no dry dock in Guam right now, they’ll mention what I’ve reported already: the costs, which are admittedly higher here in ports elsewhere in Southeast Asia.
For Pothen, it’s the tentacle creature called bureaucracy that’s keeping his dry dock from being operational and revigorating Guam’s economy.
Ajay says the bean counters at the Pentagon are wrong, noting that a dry dock would actually save the government $750 million over the next five decades. To make things more maddening, federal law under Title 10 prohibits Navy vessels from being “repaired, overhauled, or maintained in a shipyard outside of the U.S. or Guam,” unless a sudden emergency occurs.
To circumvent this, the Navy has designated ships in the Pacific as forward-deployed vessels to avoid the statute, which not only protects national security, but also promotes the national interest by using American companies and American workers.
Interestingly enough, the Pentagon’s disregard of the national interest ties into the notion of American workers being screwed over for cheaper labor—a major element in the 2016 presidential election.
In the case of Guam’s shipyard, the American workers employed by the Pothens have been replaced by workers in the Philippines and Singapore being paid no more than $10 a day. Moreover, 25 percent of workers at Singapore’s ports are communist Chinese nationals.
As Trump said about free trade, it only works when everyone plays by the rules. The folks who live here know one thing: In Asia, these rules are not being followed.
Pothen senior talked about how Japan and South Korea protect their industries. In Korea, the government recently spent $9 billion to subsidize their shipping industry to ensure their workers keep building ships, where he said one dock alone employs 35,000 people.
On an island like Guam even one dry dock is critical, as Pothen’s Guam Shipyard was part of an apprenticeship program aimed at educating local high school graduates in the skilled trades, which as we all know are generally undervalued and underappreciated.
In some odd way, these displaced workers are the Pacific’s “deplorables,” something that Epstein observed as we traversed the island.
Their livelihoods are being threatened by cheap foreign labor, the political elites don’t seem to understand the importance of their work, and they’re ignored due to their geographic location. Does this sound familiar? As Webber said, Guam is the rust belt in the rice belt. It’s a valid point.
Another thing that flies in the face of logic is the fact that five U.S. submarines are homeported in Guam, but there isn’t the capability to repair these multi-billion-dollar vessels. In the meantime, stable and high-wage employment hangs in the balance.
Guam is an American tiger with stripes. It’s a fusion of American and Asian cultures.
Shipyard workers here do have a lot in common, at least in terms of their sociopolitical situation, with some of the voters who flocked to Trump. And Guam is an island that deserves more than just acknowledgement of its importance from military brass.
More importantly, those who know of Guam’s strategic location for the Pentagon need to do more than just know that it exists, or that we have two bases on it. For Congress, this could be a massive economic and diplomatic hub that could serve as a rampart against Chinese incursion throughout the Pacific.
As The Heritage Foundation said on the issues facing the U.S. with China lurching further into the region [emphasis mine]:
For the U.S., the presence of the PRC in the South Pacific does not pose immediate military threats; rather, it promises longer-term influence for Beijing, which is likely to erode regional support for the U.S. This longer-term erosion does have potential military implications. Not only do key sea lanes of communications (SLOCs) transit the waters encompassed by these island nations, but they also offer potential sites for various bases, as was the case in World War II.
Anchorages and airfields in these islands would offer alternative sites for Guam—which is already densely covered with various American military bases and facilities—making it a lucrative target for Chinese missiles and other standoff weapons. Dispersal to additional sites would complicate Chinese targeting, by both proliferating the number of sites that might have to be attacked and broadening the number of sovereign states that it would be attacking.
By contrast, if Beijing established a political foothold in these islands, it could persuade these states not to extend access to the U.S., as well as arrange for Chinese access. These need not be military bases; the ability to build space surveillance facilities and communications nodes, for example, would make these islands potential reconnaissance and surveillance sites for eavesdropping on Guam and the U.S. missile test facilities at Kwajalein in the Republic of the Marshall Islands.
Another issue that is turning this part of the Pacific into a hotspot is China’s construction of artificial islands, which are being used as military bases in the South China Sea. If hostilities were to ever break out, the Navy would need easy access to a safe port to repair its vessels. Hawaii is too far. Only Guam can do it.
Concerning labor, there may be some good news on that front as the DHS announced that more H-2b work visas would be granted in the coming months. Whether Guam will benefit from that remains to be seen, however.
It’s a hub of untapped economic potential. A slice of America at the doorstep of fledgling Asian markets, with scores of their citizens willing to fly and spend their money on the island.
When Washington, D.C., figures out where Guam is on the map, we can hope that more attention is paid to the island’s 170,000-plus residents. And how they will be the frontlines in stopping China.
Webber likened the island to “an uncut diamond,” and one that’s waiting for the U.S. to cash it in for increased geopolitical capital. It’s a crossroads into Asia that’s worth protecting and worth our attention.
I’m also happy to also report that the island didn’t tip over.
Edited by: Cortney O'Brien, Lauretta Brown, and Dennis Lennox
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