Latin America pivots to China on trade and development

By: | Issue #650 | at 08:00 AM | Channel(s): International Trade  

As the U.S. goes it alone, China steps into the void.

The Belt and Road Forum that took place in Beijing last month included among its attendees two leaders that roused international curiosity: President Mauricio Macri of Argentina and President Michelle Bachelet of Chile. A couple of months before that event took place, Chile and Peru were among seven new members approved by China to join the Asian Infrastructure Investment Bank.

The Belt and Road initiative is generally understood to be a massive program being undertaken by Beijing to improve intra-Asia infrastructure connections as well as those between Asia and Europe on the model of the ancient Silk Road. The Asian Infrastructure Investment Bank (AIIB) is a multilateral financial institution initiated by China to support the building of infrastructure in the Asia-Pacific region.

Given recent developments, it would appear that these programs may have dramatically expanded their reach, or are about to. But the converse is also true: Latin American economies are increasingly looking to China for leadership on trade and development.

Secondary Impact of TPP Withdrawal

The reasons are not mysterious and can be summed up in a single word: Trump. One of the new president’s first acts was to withdraw the United States from the Trans-Pacific Partnership (TPP), providing a clear sign that the US was retreating from leadership in the Asia-Pacific and creating a vacuum that China was happy to fill. Meanwhile, the smaller economies of Latin America, adrift without their US anchor, were easily sucked into that vacuum.

The implications of these shifts extend way beyond trade to the geopolitical structures that have prevailed in recent decades. “In many ways, TPP was more than a trade deal,” said Antonio Hsiang, Professor and Director of the Center for Latin American Economy and Trade Studies at the Chihlee University of Technology in Taipei. “It was a key strategic maneuver.”

Indeed, TPP was a central aspect of former President Obama’s foreign policy, as he pivoted away from the quagmires of the Middle East and turned his attention to Asia to counter China’s expanding influence in that region. TPP, as Hsiang said, wasn’t only about trade—it was also about preventing China from getting too big for its britches geopolitically. At the trade level, TPP was meant as a tool to prevent China from writing the rules of regional and global trade. With the US out, it should come as no surprise that our smaller neighbors to the south are looking to China for leadership and help…

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Peter Buxbaum's avatar

American Journal of Transportation

More on Peter Buxbaum

Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly. He was educated at Columbia University.