A shifting trade landscape in Latin America favors China and globalization

[beijingwalker]

A shifting trade landscape in Latin America favors China and globalization​

William Naylor | July 10, 2017

China’s increasing presence in Latin America is a much-discussed topic, and for good reason; as China steps up its efforts to establish itself as a super power on the world stage, it has focused on expanding its economic presence in the developing world, including Latin America. Much attention is paid to China’s aid and development projects, largely due to Chinese President Xi Jinping’s 2015 pledge of $250 billion in direct investment to the region by 2019. But an analysis of raw trade data from the ten-year period between 2005 and 2015 reveals that the meteoric nature of the rise of Chinese influence in the Western Hemisphere had begun well before flashy (and dubiously feasible) development projects caught the public eye.

Exports
In seven Latin American countries, China has surpassed the United States as the main destination for exports. And in five of those countries—Brazil, Chile, Cuba, Peru, and Uruguay—China is now the largest export market.

This is a drastic and rapid shift in the region’s economic landscape. In 2005, no Latin American country counted China as its main export partner. In all, China is in the top five export markets for twelve Latin American countries, compared to six in 2005.

Imports
Whereas the Chinese emergence as a major export partner is largely concentrated among the largest Latin American economies, China’s growing presence as an exporter to the region has grown as well. In 2005, no Latin American country counted China as its largest import partner. China is now in the top five import partners in all twenty Latin American countries, compared to seventeen in 2005.
Eight Latin American countries now import more from China than they do from the United States. And six of those countries—Bolivia, Brazil, Chile, Cuba, Peru, and Uruguay—now import more from China than from any other country.

Implications for the United States
What happened to free trade? The United States has free trade agreements with Chile, Colombia, the Dominican Republic, Mexico, Peru, and Central America, yet China has still managed to establish itself as a major economic presence in these countries. Despite the lack of constraints and the expectation that trade flows would jump dramatically between the U.S. and its southern neighbors, China has either displaced the U.S. (in Chile and Peru) or begun to pose a threat to its economic dominance (in Mexico, Central America, and the Caribbean).

President Trump’s decision to withdraw from the Trans-Pacific Partnership sends an additional signal to Latin America that the U.S. is retreating from the world stage. The door is open for China and other emerging powers to fill the void and become the new hegemonic economic power in the region.

China’s new rivals
Evidence of the Latin American embrace of the global market extends beyond the region’s increased trade interactions with China. Though the U.S. continues to exert major economic influence throughout the Western Hemisphere, countries besides China—largely also from Asia—have sought to increase their presence in the region in the last decade. The shifting landscape is evidenced by the increased Asian presence in Latin America’s imports. The percentage of imports arriving from Asia grew from a Latin American average of 19.8 percent in 2005 to 29.22 percent in 2015. In addition to the significantly increased Chinese presence in Latin American import markets, Japan, South Korea and India have established themselves as major trade partners for the region.

The Latin American export market has also shifted to reflect the changing global trade landscape. The percentage of exports leaving the Western Hemisphere grew from a regional average of 30 percent in 2005 to 39 percent in 2015, with particularly noteworthy growth from Argentina, Brazil, Cuba, Ecuador, Peru, Uruguay, and Venezuela. The most common beneficiaries of this shift are China, Germany, the Netherlands, and Japan.
As Latin America learns to adapt with an increasingly globalized, inter-connected global economy, the region’s governments must also come to terms with the reality of a diminished U.S. role in hemispheric political and economic relations. The shifts in the Latin American trade over the course of the last decade indicate that Latin American countries have anticipated and are prepared to deal with the new reality.

But questions remain. As a region, Latin American remains a relatively minor player in global trade. If regional partnerships, such as the budding Pacific Alliance between Chile, Peru, Colombia, and Mexico, can better-coordinate trade agendas, the region—or at least some countries—will be better positioned to take advantage of global commerce and the growing importance of Asian markets. If it’s managed correctly, intra-regional trade integration will help to sustain growth and seize the advantage of the global economic re-balancing, even without the United States.

https://theglobalamericans.org/2017/07/shifting-trade-landscape-latin-america-favors-china-globalization/

 

[jhungary]

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