Americas Quarterly - Winter 2012

Memo to Washington ERIC FARNSWORTH

gotten away with it: in the absence of strategic challenges from the region, this policy approach has sufficed. But we may not have that luxury much longer. As the U. S. has continued to look beyond this hemisphere in pursuit of what are perceived to be more urgent foreign policy goals, China has entered the region aggressively and is changing the game.

The expansion of Chinese trade and investment with Latin America is a new economic and commercial challenge in a previously consolidated market. On the positive side, to the extent that it has contributed to regional growth and kept financial contagion from the global economic crisis at bay, China’s engagement with the region has been beneficial. An economically growing region means that the pie is expanding for everyone, including the United States. That is a global public good, which International Monetary Fund (IMF) Managing Director Christine Lagarde acknowledged during her late 2011 travel to the region. Nonetheless, for the U. S., individual investment opportunities and market share are being lost to China, whose share of Latin American trade grew from less than 2 percent in 2000 to 11 percent in 2010.

Over the same period, the U. S. went from 53 to 39 percent of Latin American trade. To paraphrase Obama, this is not ideology—it’s math. While the U.S. remains the top trading partner overall, the challenge is readily apparent. In a post–Cold War world, where global competition is as much economic as military, the inability or unwillingness to contend for markets abroad has strategic implications. Complacently watching as established markets are captured by others is inexplicable, particularly when some of those markets were originally developed by years of patient, taxpayer-financed efforts to reduce violence, build capacity and support democracy. Just when the U. S. should be reaping the reward, others are swooping in to gain the advantage.

From a foreign policy perspective, the story is even more compelling. The reality is this: China’s still-early but growing efforts in the Americas provide Latin American and Caribbean nations with additional trade and investment options that reduce U.S. leverage to promote open market, democratic values.

This is not about exporting revolution or communism or any such thing. In fact, China’s efforts in the Americas are not driven by whether the potential partner is communist, populist, autocratic, or democratic. Otherwise, the Chinese would have stronger economic and political relations with Cuba and the other Alianza Bo-

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Americas Quarterly WINTER 2012

livariana para los Pueblos de Nuestra América—Tratado de Comercio de los Pueblos (Bolivarian Alternative of the Americas—ALBA) countries (primarily Bolivia, Ecuador, Nicaragua, and Venezuela) than with Brazil, Chile and Peru. But China goes where the natural resources and primary commodities are and, unlike the actions of the Soviet Union during the Cold War, cares little about the nature of the government that controls them.

The Chinese are not necessarily looking for a political relationship, nor do they have much sympathy for ideologically driven regional leaders, some of whom they regard as buffoons. Rather, they are looking for economic benefits based on the domestic political calculus of the leadership in Beijing.

IS CHINA A THREAT TO THE NORMATIVE
ADVANCES IN THE HEMISPHERE?

Since the end of the Cold War, however, the re- gion has struggled to develop a regime of dem- ocratic behavior that is intended to prevail in the hemispheric community of nations. De- mocracy, including freedom of the press, is to be respected; labor and the environment protected; corruption and illegal activities inspected and prosecuted. It is difficult to implement such standards unless leverage exists to develop a broad consensus that promotes certain behaviors, and at least one nation or regional organization is willing and able to enforce the regime effectively.

For example, U.S. efforts to promote labor and environmental reforms through trade agreements are undermined when other nations have the ability to sign similar agreements with China that do not include similar provisions. Programs of multilateral lending agencies like the IMF, World Bank and Inter-American Development Bank that promote financial reforms and good governance become less relevant if borrowing nations can receive funds from China or elsewhere, including Venezuela, without conditions. To put it starkly, the oft-maligned IMF has no influence with nations such as Argentina that do not currently require IMF funding or access to global capital markets. 5

In fact, China’s huge purchases of hemispheric commodities and the provision of credits on favorable terms have greatly assisted Latin American commodities exporters in the ongoing global economic crisis. In some cases this has allowed leaders the flexibility to postpone indefinitely the necessary economic and political reforms that would other wise be consistent with open