China, the U.S. and Their Latin American Trade Policy

China and the United States held their Sixth China-U.S. Sub-Dialogue on Latin America this past week discussing their future policies on Latin America. The annual consultation was created to demonstrate how cooperation and a reduction in misunderstandings could promote increased trade in the region by both parties as well as avoid possible conflicts of interest in the future. The consultation was extremely amicable, with the U.S. cochair praising investment in Latin America and China’s contribution in the overall reduction of poverty levels in the region.

Reports on the conference made clear the peaceful dialogue between the two investing nations into Latin America. While the U.S. had neglected Latin American trade, China needed copious amounts of natural resources to fuel its growing economy over the last few years. The trade relationship became stale between the US and its neighbors, and China became the key to global growth for many countries in the developing world. The lack of concern over China’s growing influence in Latin America, especially with trade giant Brazil and U.S. adversary Venezuela, is likely not due to simple manufactured goods not displacing American high tech consumer good in Latin America. The U.S. would be hard pressed to criticize another country for investing in a region it has chosen to neglect post 2001. Latin Americans, who were the trade darlings of the first few months of President Bush’s first term in office, likely expected a future move towards regional trade liberalization. With the eventual focus on the Middle East and China’s boom coming in the same era, Latin America had to diverse its own trade towards anyone who would be interested in doing business.

Some countries in Latin America have been experiencing their own economic boom cycles since the drop in the U.S. economy in 2008. China’s growth and their requirement for natural resources and agricultural products was a major factor in Latin American countries not succumbing to economic collapse during the last global recession. In the long term, Latin America is still stuck in the old model where it is dependent on boom and bust cycles related to commodity prices for the health of their economies. Along with traditional dangers, the investment of Chinese companies in infrastructure may only solidify commodity exports to the East, while bringing in low cost consumer goods and driving under many manufacturing companies in Latin America. China and Latin America complete for research and development as well as intellectual property while they seek to transform their economies into high-tech manufacturers.

The U.S. should probably take a less relaxed approach as all BRICS nations are transforming so they are able to compete with the U.S. and Europe in the future. Latin American R+D as well as manufacturers need to be supported from within by making locally beneficial policies with their outside investors. Profits from agricultural sales need to boost their manufacturing sector before they sink it in their new trade relationships, an issue that should be addressed by the U.S. as it influences the North-South relationship to a great degree. Trade between China and the U.S. with Latin America is always a positive outcome, but Latin America lacks a voice in talks that see the investing nations as the only players within their own region. Investees need to make sure to take care of themselves in these complex trade relationships.