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China's tango in Latin
America
By Saul Landau
(Posted with permission from Foreign Policy in Focus)
A century ago, US policy planners looked
to a then weak and divided China as the answer to
the country's future trade and economic problems.
Anxious exporters implored president William
McKinley to act because "the Chinese market
rightfully belongs to us", as a member of the
Riverside (New York) Republican Club told
secretary of state William Hay.
This
low-wage labor source and vast potential market in
the East would also supposedly solve the periodic
depression problem, which in 1893 shook the
country's economic structure and motivated the
elite to think about how expansion eastward would
resolve that issue.
"Under the stimulus of
a narrowing marketplace at home and widening
market opportunity of an awakening China,
America's leadership made a conscious, purposeful,
integrated effort to solve the economic crisis at
home by promoting national interest abroad," wrote
historian Thomas McCormick. It did so "by using
America's most potent weapon, economic supremacy,
to begin the open-door conquest of the China
market."
In 1898, McKinley "took the
Philippines", alleged McCormick, because it made
the ideal jumping-off base for future China
excursions. The US kept a naval base there for 100
years, when technology no longer required
refueling stops. "East Asia is the prize for which
all nations are grasping," wrote Brooks Adams,
sixth president John Quincy Adams' grandson.
In 2005, the weak and vulnerable "prize"
that feuding Europeans had carved up for imperial
aspirations at the end of the 19th and early 20th
centuries, now blankets all continents with its
goods – and its capital. As the "made in China"
label has become ubiquitous in US department
stores, the Chinese government has scooped up US
Treasury securities worth hundreds of billions of
dollars. Maybe that makes the US China's "prize".
Indeed, US officials may well worry that the
Chinese might stop recycling dollars they earn
from trade surplus back into the US economy.
In early March, a US Embassy official
confided to a visiting businessman that he
believed that Chinese leaders viewed the US as a
declining superpower whose time had passed and
which would be forced to share world power with
other powerful nations, including China.
Latin American invasion
To
demonstrate how China's strategic position has
changed in the past two decades, the embassy
official explained that China has not only widely
penetrated the US consumer market, but also
invaded Latin America, a region that the US has
traditionally dominated.
He referred to
two high-level visits. In November 2004, Chinese
President Hu Jintao signed 39 commercial
agreements with five Latin American nations.
Chinese investments in Argentina alone totaled
some US$20 billion. He then made an investment
trip to the Caribbean as well. In January and
February, Chinese Vice President Zeng Qinghong
followed his boss's visit with his own entourage
of officials and top business executives. During
these two aggressive trips to pursue investment in
strategic areas, China stepped into potentially
contentious turf when they signed an accord with
Venezuela's President Hugo Chavez for future
Venezuelan oil and gas exploration. Zeng also
offered Venezuela a $700 million credit line for
new housing construction to help reduce Venezuelan
poverty, ignoring US complaints over Chavez's
"authoritarianism".
Chavez, who has won
three free and fair elections in the past six
years, gets stuck with the "authoritarian" label,
while his pro-US opponents who staged a 2002
military coup merit the "democratic" badge. For
all the tension between the two nations, US
imports from Venezuela still stood at $25 billion
last year, far outweighing exports to that
country, which totaled $4.8 billion.
But
Beijing's real poke in Washington's eye came with
the announcement that it would give credits to
Cuba. In the globalization era, Cuba remains the
exception to all rules. The Bush administration's
Latin American policy targets the "containment" of
Chavez or the "punishing" of Fidel Castro, who
holds the world record for "most years of
disobedience".
So far, official Washington
has ignored or denied the significance of China's
Latin America strategy. Indeed, "President Hu
Jintao spent more time in Latin America last year
than President George W Bush," Miami Herald
columnist Andres Oppenheimer has observed.
"China's vice president, Zeng Qinghong, spent more
time in the region last month than his US
counterpart, Vice President Dick Cheney, over the
past four years."
Helping meet China's
demand for energy
At the end of 2004 and
the beginning of 2005, China offered more than $50
billion in investment and credits to countries
inside the traditional Monroe Doctrine's shield.
That's beginning to rival the cash infusion from
president John F Kennedy's highly-publicized
Alliance for Progress, which pumped $20 billion
into the region in the 1960s (that would be worth
about $120 billion today after adjusting for
inflation).
Trade with Latin America can
help meet China's wildly expanding energy demands.
In 2007, the Central Intelligence Agency
estimated, China will import half its oil. China
also needs to import other raw materials and food
as its economy grows.
As US dependency on
foreign oil grows and the price of crude reaches
record levels, most recently over the $60 per
barrel mark, the Chinese might maneuver themselves
into a position to actually sell some of that
viscous substance to the US. Long before the
Alaska drilling results in a drop of crude prices,
China's new investments have targeted oil, gas and
minerals, signs that the Chinese pursue strategic
gains and markets rather than simple profit
designs.
China already operates two
Venezuelan oil fields, and after signing a January
agreement in Caracas, China will also begin
developing other fields – seemingly in decline -
in eastern Venezuela. China also agreed to buy
120,000 barrels of oil a month and build an
additional fuel-producing facility. Venezuelan
officials announced that they expected trade with
China to reach $3 billion in 2005, more than
double 2004. And - Castro-haters hold onto your
hats - a huge Chinese oil company will begin
searching for potential oil fields off the Cuban
coast.
When Hu visited several Latin
American countries in November 2004, he told the
Brazilian Congress that China would invest $100
billion in Latin America over the next 10 years.
In Argentina alone, China reportedly will invest
$20 billion in the next decade.
Foreign
direct investment has declined in Latin America in
recent years, dropping from $78 billion in 2000 to
$36 billion in 2004. That's why "many Latin
American nations welcome the increase in foreign
capital that the Chinese are promising", according
to a recent Congressional Research Service report
by Kerry Dumbaugh and Mark P Sullivan. China has
also invested in energy, primary resources and
food in Peru and Chile. Colombian President Alvaro
Uribe traveled to China in mid-April promoting
increased investment in his country.
Why
did Chinese leaders choose late 2004 and early
2005 to make their whirlwind spending tour of
several Latin American nations? First, they may
well have noticed that Latin American governments
no longer race to sign onto the US-backed Free
Trade of the Americas agreement, as they did
previously to the North America Free Trade
Agreement in the 1990s.
Because the
free-trade, free-market model failed to perform as
predicted - in Argentina it led to bankruptcy -
governments that question Washington's economic
model now sit in Uruguay, Argentina, Brazil,
Venezuela and Cuba. Bolivia and Ecuador may be
next. Indeed, if the radical populist Mexico City
mayor Lopez Obredor succeeds in winning the 2006
Mexican presidential election – he is currently
the leading contender - US-sponsored trade
agreements in the region may be doomed.
Second, the petroleum mavens don't expect
supply to rise above demand in the near future.
So, given this climate, China's gaining access to
oil and gas sources in the US backyard has
flustered the Bush administration, which remains
preoccupied with Iraq, Afghanistan, North Korea
and Iran, social security privatization and
abortion criminalization.
Turnaround in
35 years
Under Bush, the US has shelved its
national interests and pursued imperial adventures
in the Middle East. While Beijing has invested
strategically, Washington has spent resources on a
strategy that will only further deplete the
national wealth.
Latin America has said
basta (enough)to the US development model.
In Argentina, Brazil, Uruguay, Venezuela and
Bolivia, presidents who adhered to the
International Monetary Fund's notion of
development have had to look for other jobs. This
should send more than a hint to Washington.
China has behaved in a civil and friendly
manner and invested in the very resources it will
need in the coming years. Over the next decades
the leading economies will vie for the fuels that
drive their production and distribution machines.
It might take several buckets of ice water to wake
up the policy planning dreamers at the White House
that war and military occupation of foreign lands
and threats to governments that don't share a
common world view - like Venezuela and Cuba - do
not bode well for the future.
China
apparently sees its future in the US and Latin
American markets. That's a complete turnaround
from 35 years ago, when China remained
"unrecognized" by the US and most of its lackey
governments in Latin America. In 1975, Chinese
trade with the region amounted to $200 million. In
2004, trade between China and all the Americas had
soared to over $40 billion. China has become one
of the foremost players in the era of
globalization, which US leaders promoted without
considering that China might avail itself of this
opportunity to move into its own turf.
While government leaders silently wring
their hands in frustration over China's capital
moves into "our backyard", some journalists are
beginning to report on China's investment
invasion. China is "nurturing alliances with many
developing countries to solidify its position in
the World Trade Organization, flex its muscles on
the world stage and act as a counterbalance to US
power", according to Chicago Tribune reporter Gary
Marx.
Indeed, China has succeeded in
forcing an open-door policy on the US, one similar
to that fashioned in 1898 by secretary of state
Hay. China's leaders now say implicitly to
Washington what acting secretary of state Edwin
Uhl wrote to the US minister in China in 1895:
"This country will expect equal and liberal
trading advantages ..."
Now China expects
the US to offer it "equal and liberal trading
advantages". Senator Richard Lugar, chair of the
Senate Foreign Relations Committee, has worried
aloud about the contradictions that arose from
Venezuela's new deals with China. Like other
prudent and truly conservative Republicans, Lugar
wonders whether Bush's aggressive anti-Chavez
rhetoric and actions might lead Venezuela to
retaliate and cut the US off from its oil supply.
After all, China will pick up the purchase slack.
"The Chinese are taking advantage of it.
They're taking advantage of the fact that we don't
care as much as we should about Latin America," a
Lugar aide told The New York Times.
Likewise, China has undercut Washington's
policy of starving Cuba for resources. Chinese
leaders have pledged large investment credits for
Cuban nickel. Beijing thus befriends US enemies,
Chavez and Castro, as US prestige slips in its own
"backyard". It has used the open-door ploy against
the US in Latin America as the US once used it
against Europe to get at Chinese resources and
labor.
Hey, doesn't globalization mean
that all's fair in the game of trade?
Saul Landau is a Foreign Policy
in Focus scholar. He wrote Dangerous Doctrine:
National Security and US Foreign Policy. He is
a fellow of the Institute for Policy Studies and
teaches at Cal Poly Pomona University.
(Posted with permission from Foreign Policy in Focus) |
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