Is China good for the Americas?

Oliver Stone is at it again. His new documentary, “South of the Border,” blames the ills of the Western Hemisphere on the United States, global capitalism and corporate media. It’s a tired line, but one that will fuel the debate about whether Latin America should seek political and economic alternatives to an overbearing and self-interested United States. Of course, as they say in politics, you can’t beat something with nothing, which is why an increasing number of Latin America observers view with favor the possibility of closer Latin American ties with China. But China’s emergence in the Americas is having far-reaching implications that may be little appreciated or understood.

China is a nation singularly pursuing economic growth as a means to maintain domestic political order. From 1979 to 2009, the country averaged 9.8% annual growth. Even in the worst global downturn since the Depression, China grew at 8.7% in 2009. As Europe teeters on the brink of another financial crisis and the United States struggles with high unemployment and sluggish growth, China has returned to its eye-popping pre-crisis growth rates.

Fueling China’s expansion have been inputs and raw materials from much of the developing world. For Latin America, Chinese interest has been an economic boon. Exporters of raw materials, primarily in South America, have ridden the wave. Indeed, China’s emergence as an economic power has created a shift in Latin America’s terms of trade, giving the region attractive economic options that previously did not exist. Brazil and Chile count China now as their top export market; China is the second market for Argentina, Costa Rica, Cuba and Peru. If trends continue, China will soon displace the European Union as Latin America’s second-largest trading partner after the United States.

Not all nations have benefited equally, of course. Mexico and much of the Caribbean Basin including Central America have found that China’s rise has created additional competitive pressures. Nonetheless, Chinese economic engagement in Latin America is largely celebrated by observers — engagement that the Chinese government stresses is benign. Indeed, it is difficult at this point to project a political or security dimension to China’s interest in the Americas. If anything, Beijing has shown a desire to stay out of local politics.

Overheated commentary from conservative U.S. commentators about China trying to take over the Panama Canal or harboring a desire to project power into the hemisphere is not supported by Chinese pronouncements or behavior. Focusing on these non-issues misses the point. But there is room for skepticism about China’s emerging economic role in the Americas.

Economic growth fueled by exports of primary goods to China is attractive so long as the demand for commodities is high, but it hides the need for economic development based on knowledge-based, value-added innovation and production, which Latin America lacks compared with its competition. When economies are growing, the political imperative for change is reduced. Economic gains can simply be redistributed. Still, most of these gains are realized by nations that add value to primary goods, and then re-export the value-added products, often to those who sent the primary goods in the first place.

And all investment is not the same. U.S. investment generally brings with it anti-corruption provisions, payment of taxes, technology transfer, management expertise, labor force protections and capacity building, corporate social responsibility and hiring at the local level. Chinese investment, not as much. The United States also has traditionally tried to use economic and financial incentives to encourage regional reforms.

China, on the other hand, promises only a commercial relationship without political or policy interference, and for that reason, they are well-received. They don’t particularly care if the government in power is capitalist or populist, authoritarian or democratic, corrupt or not. They don’t care if the government is pro-U.S. or anti-U.S. Their emphasis is to do business in the region undisturbed.

Despite the potential downside for long-term regional development, Chinese investment and trade are therefore an attractive option for regional leaders, particularly those seeking a course independent of the United States and liberal economic orthodoxy. On the flip side, U.S. ability to promote labor and environmental protections, human rights and the rule of law is being reduced, because the region now has other options.

A perfect example is the pending trade agreement with Colombia. Even as action by Washington remains on hold, Colombia has announced its intention to conclude such a pact with China. Do not expect the Chinese to demand labor or environmental protections as part of their agreement. Do expect that Colombian ardor for the agreement with the United States to cool, and as a result, for U.S. jobs linked to a potential increase of exports to suffer and U.S. leverage on labor, the environment and human rights to be reduced.

China is pursuing its economic self-interests aggressively in the Western Hemisphere, and it is doing so effectively. But it is pursuing its own interests, not necessarily the interests of the region. That doesn’t make Chinese moves illegitimate or threatening, but it does mean that observers of the China phenomenon should take a longer view of the implications of China’s emergence in the Americas, and not just focus on the immediate effects on growth. In that vein, it’s time to put to rest the idea so frequently heard in the region and in policy circles that Chinese economic engagement is unquestionably positive for the Americas, while U.S. economic engagement, south of the border, is not.

Eric Farnsworth is vice president of the Council of the Americas, an international business organization based in New York.