June 16th, 2013
in Op Ed
by Kevin P. Gallagher, TripleCrisis
This week Chinese President Xi Jinping will make his first official visit to Latin America since taking office. Xi will visit Trinidad and Tobego, Costa Rica, and Mexico. In a scramble the United States has sent Vice President Joseph Biden to the region on a goodwill mission at the same time.
The two leaders will spar over the airwaves, web, and blogosphere offering different visions of cooperation. The US should use this opportunity to strengthen ties with the region and take advantage of the fact that Latin America’s love affair with China appears to be cooling.
In just ten years China has gone from off the radar to the first or second biggest trading partner for all of the major Latin American countries – with China-Latin America trade surpassing $250bn in 2012. Chinese FDI is also on the rise with Chinese investment in Latin America totalling more than $30bn last year.
Perhaps most significant is the growth of Chinese lending to the region. In an updated study, colleagues and I estimate that China has lent Latin American governments $86bn since 2003, more than World Bank, Inter-American Development Bank, and the United States Export-Import Bank.
It is likely that Xi will ink a deal for a special economic zone in Costa Rica that will serve as an export platform for Chinese firms.
But the honeymoon for Latin America with China is over. Five years ago Latin American countries were excited that they had a new growth pole that wanted their goods while the US and Europe suppressed demand through austerity. Now however these countries bemoan a growing trade imbalance with China which sees them send commodities to China, with few linkages to the rest of their economies. In exchange they import light manufactured goods from China that undercut domestic producers and ignite discussions of de-industrialization across the region. What is more, many Chinese investments have met with stiff resistance from locals on both environmental and human rights grounds.
This leaves a window for the United States. But what can it offer? The US’s approach since the 1990s – to offer “trade not aid” – has lost its appeal in the region. The US has trade treaties with most countries that are willing in the region. However, they have been unpopular because of their mixed economic record. And obviously, the US can’t go back to “aid.” The US simply doesn’t have the ability to offer massive loans or special economic zones for US firms either.
So what to do? The US could begin by expressing that they want to move from being a patron to a partner. For too long the US has preached what Latin America needs rather than what Latin Americans say they want. More importantly, the US could broker deals to help the region industrialise in a manner that creates employment and that does not cause excessive environmental degradation the region. This would mean a big rethink and strong departure away from the now 25 year US foreign economic policy toward the region. It is time to stop flirting with the region and really get down with Latin American affairs.
About the Author
Kevin P. Gallagher is an Associate Professor of International Relations. (BA, Northeastern University; MA, PhD, Tufts University)
Specialization: Economic Development, Trade and Investment Policy, International Environmental Policy, Latin America.
Kevin P. Gallagher is the author of The Dragon in the Room: China and the Future of Latin American Industrialization (with Roberto Porzecanski), The Enclave Economy: Foreign Investment and Sustainable Development in Mexico’s Silicon Valley (with Lyuba Zarsky), and Free Trade and the Environment: Mexico, NAFTA, and Beyond.
Gallagher has edited or co-edited a number of books, including Rethinking Foreign Investment for Sustainable Development: Lessons from Latin America (with Daniel Chudnovsky) and Putting Development First: the Importance of Policy Space in the WTO and IFIs.
Gallagher is the coordinator of Boston University’s Global Development Policy Program. He is a faculty fellow at BU’s Frederick S. Pardee Center for the Study of the Longer-Range Future where he leads the Global Economic Governance Initiative.
Gallagher is also a research associate at the Global Development and Environment Institute of Tufts University and at the Political Economy Research Institute of the University of Massachusetts, Amherst.
He has served as a visiting or adjunct professor at the Fletcher School of Law and Diplomacy, Tufts University; Harvard University’s Kennedy School of Government; El Colegio de Mexico in Mexico; Tsinghua University in China; and the Center for the Study of State and Society in Argentina.
Gallagher is co-editor of the Review of International Political Economy.
In 2009, he served on the investment subcommittee of the US Department of State’s Advisory Committee on International Economic Policy. He currently serves on the National Advisory Committee to the North American Free Trade Agreement at the US Environmental Protection Agency and as a member of the Inter-American Dialogue’s China and Latin America Working Group. Professor Gallagher writes regular columns on global economic and development policy for The Guardian, Financial Times, and Al-Jazeera. He co-chairs the Triple Crisis blog.
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