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Trump Makes China Great in Latin America

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China Power

Trump Makes China Great in Latin America

Trump’s approach to trade and foreign policy will only make more room for China in the Western hemisphere.

Trump Makes China Great in Latin America
Credit: Flickr/ Cancillería del Ecuador

When U.S. President Donald Trump hosted Chinese president Xi Jinping at Mar-a-Lago on April 5, Trump’s granddaughter, five-year-old Arabella Kushner, serenaded Xi and Chinese first lady Peng Liyuan with a popular Chinese folk song and poetry. Some American pundits, such as Thomas L. Friedman, saw this as a sign that “Trump is clearly out to make China great again.”

The truth is that China hasn’t needed Trump to make itself great again, particularly in Latin America. Beijing has been unilaterally pursuing a purposeful strategy, often taking advantage of U.S. equivocation on Latin American strategy. And despite his bombast, Trump’s recent actions do not change Washington’s long standing policy paralysis towards Latin America, thereby giving China even more opportunities to gain in the region.

Dropping the TPP Ball

The TPP was envisioned by former U.S. President Barack Obama as the primary tool with which the Washington would retain the strategic initiative to lead in the Pacific region. In many ways, it was more than a trade deal; it was a key strategic maneuver. Clyde Prestowitz, founder and president of the Economic Strategy Institute, said that the essence of the TPP is “‘geopolitics’: that many of our friends in Asia were feeling neglected in America, and that it was being pushed aside in the region by China. Without a sign of American strength in the area, China might step into the vacuum.” Indeed, Obama often spoke of the TPP as a tool that will prevent China from writing the rules of trade in the near future. However, Donald Trump announced that the United States would withdraw from the TPP on his first day in the White House, effectively creating a leadership vacuum in the Pacific region — including Latin America.

The Pacific Alliance, a free-trading group comprising of Chile, Colombia, Mexico, and Peru, lost no time in replacing the TPP. In mid-March, ministers and high-level representatives from nations that have signed on to the TPP, as well as China, Colombia, and South Korea, met for the first time since the United States’ withdrawal from the trade accord. According to Heraldo Muñoz, Chile’s foreign Minister, the signal from Viña del Mar, where the meeting took place, was clear: with or without the U.S., “multilateral trade and Pacific integration [is] alive and kicking.”

So as the United States withdraws from Pacific trade leadership, countries are turning to China. Peru’s president, Pedro Pablo Kuczynski, made his first foreign trip last year to China, not Washington. This is hardly surprising since China is now Peru’s number one trading partner. It is also not surprising, then, that on March 23, Peru was admitted as one of 13 new members of the China-led Asian Infrastructure Investment Bank. Whatever the United States intentions, countries like Peru are drifting further into China’s orbit.

“China Wins if NAFTA Dies”

As Trump mulls renegotiating or withdrawing from the North American Free Trade Agreement (NAFTA), China has positioned itself to gain in the aftermath. Consider that NAFTA strongly reinforces Mexico’s structural ties with the United States by offering zero tariffs and providing legal guarantees. As a result, Mexico has become a top export market for the United States, buying over 15 percent of everything made in America and then sold abroad. The value of U.S. exports to Mexico topped $230 billion in 2016. The 23-year-old agreement has helped Mexico not only boost trade but also transform its economy, moving from a commodity-driven economy to an advanced manufacturing exporter.

But the potential demise of NAFTA would put all of that into jeopardy and give China an opportunity to capitalize on the economic foundations it has already built in Mexico. For example, China’s state-owned JAC Motors invested $2.2 billion in a joint venture to produce SUVs with Carlos Slim’s Giant Motors, making China a major player in the Mexican car industry.

Any significant expansion of Beijing’s corporate presence and political and military relationship with Mexico would likely trigger further anxiety from the United States and force a reassessment of the strategic and commercial threat that China poses to U.S. interests in Latin America. Little wonder, then, that Shannon O’Nell, the senior fellow for Latin American Studies at the Council on Foreign Relations, declared that “China wins if NAFTA dies.”

Kicking the Can Down in Mercosur

When it comes to South America, the Trump administration appears set to continue previous American administrations’ inability to make a purposeful decision to engage more deeply with the region. Economically, the Trump administration seems willing to antagonize South American countries in the name of protectionism and scoring domestic political points. For instance, on January 23, the Trump administration issued a 60-day stay to review the lifting of a 16-year ban on the import of Argentine lemons, previously ordered by Obama. The stated reason was that “every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.” It is a decision that surely left a fair few tucumanos with bitter tastes in their mouths.

By contrast, Chinese companies are busy embarking on new projects in South America. Shandong Gold, a state-backed Chinese company, recently agreed to pay almost $1 billion for half of Barrick Gold’s Veladero mine in Argentina. The Veladero mine is expected to produce as much as 830,000 ounces of gold this year, making this a major victory for China’s economy.

Even politically, the United States seems to flirt with avoiding leadership, an alarming development from the putative leader of the free world. The Trump administration informed the Washington, D.C.-based Inter-American Human Rights Commission that it would not participate in three hearings on March 21 about Trump’s executive orders on immigration, as part of a review of human rights cases in countries across the hemisphere. The highly unusual step of boycotting several sessions was a bad mistake that will weaken U.S. efforts to condemn Cuba, Ecuador, and other systematic human rights abusers.

Falling Behind in the Final Frontier

The United States has long prided itself in having the most ambitious space program in the world, something that Trump tried tapping into during his address to Congress on February 28. During his speech, Trump outlined his lofty ambitions to put “American footprints on distant worlds” by 2026, a nod to the country’s 250th birthday.

But given Trump’s general antagonism toward scientific funding, how much of his outer space agenda is realistic, and will China’s achievements in space exploration be greater, even if it receives less press in the West? In 2013, China had its first “soft landing” on the moon, and hopes to be the first country to send a probe to the dark side of the moon in 2018. By 2025, China wants to have human astronauts on the moon again, symbolically picking up where the United States left off in 1972.

Perhaps more ominously for the United States, Chinese and Argentinian officials announced that a new space-monitoring base in Patagonia, Argentina, will be operational by March 2017. Although Chinese sources have described the base as purely for space exploration purposes, not everyone is convinced. Pundits have pointed out that there are secret clauses in the Sino-Argentinian agreement, though Argentina’s president Mauricio Macri has vowed to make the contents public. When Macri visits the White House on April 27, he will undoubtedly be asked about those secret clauses.

It would seem that, even in the realm of space exploration, the United States finds itself fighting a rearguard action while China is largely free to pursue its own agenda in Latin America. All of these factors combine to suggest that barring a dramatic change of course from Washington, we will see a much greater China in Latin America in the foreseeable future.

Antonio Hsiang is Professor and Director of the Center for Latin American Economy and Trade Studies at the Chihlee University of Technology. He obtained a Ph.D. in Political Science and MA in Political Economy from Claremont Graduate University and MA in Latin American Studies from New York University.