China Comes to America: The Positive Side of Growth in China and the BRICs

David Frum, the former Bush speech writer and the creator of the phrase “The Axis of Evil” made an interesting point during a panel discussion on Fareed Zakaria GPS this week. He said that last week’s meeting between Jintao and Obama was framed by the impression by many in the US believe that China has already become more powerful economically than the United States. While this is not true by any measure, the belief that China is a superpower is a genuine fear that many Americans have and it affects the impression Americans have of themselves and their President. Do not forget that in the State of the Union speech Mr. Obama.

The reality is that since the end of the Second World War there have been many attempts to reduce poverty and produce growth in developing nations, marked by failure after failure and structural readjustments in many countries that would make the 2008 recession look like a normal day in the 90s in Argentina under IMF policies. The rise of countries like China, India, Brazil and Mexico have lifted millions out of poverty and is a result of some policies that might have actually worked this time around. Growth and development has occurred, and we should all be proud of policies that have affected the lives of individuals in a positive way. Fears of growth have always existed, and like the growth of Japan and Korea in the 80s we should deal with the wake of development in a proper manner. There is little to no question that Japan’s relationship with the rest of the world is positive and it is an example of how we can build relations with each other, and this is the responsibility of the US, as well as China and the BRICs so that growth continues…we are mostly interdependent for the most part in any case.

While developed and developing countries are linked together economically and will have to learn to be so politically as well, another benefit is the growth in trade between developing nations. This is best demonstrated in the case of Mexico, mired in the middle of a drug war and taking the hardest hit on the economy in 65 years, Mexico has started to grow again and is starting to rethink its currently slow northern neighbour and is pushing to diversify south to its cousins in South America. The US will push back to be as healthy as ever, but for the time being the NAFTA partners are seeking to diversify, like Canada creating a FTA with the EU to benefit from growth in Germany and France, and Mexico looking to link closer to Chile, Colombia and Brazil. With over 85% of trade linked between the NAFTA partners, the motivation to create not a diversion of trade, but grow trade outside of NAFTA is logical at best, and when, not if, the US engine starts up again it will be a benefit to those Mexicans and Canadians who will bring economic growth to the region.

A video by FT.com can be seen below, discussing how Mexican companies are looking south to expand their business. You can see the FT.com video here.

Mexican Companies Look South