THE REAL CHINA THREAT: CHINA AND UNDERDEVELOPMENT IN LATIN AMERICA, AND WHY THE U.S. SHOULD CARE

Abstract

The arrival of China in Latin America represents a major paradigm shift for the region, raising questions about the U.S. interest in its own hemisphere. China has shown it has the capacity, the will, and the cash to engage the region’s governments, economies, and societies. However, these are still early days for the Sino-­Latin American relationship, and nothing is inevitable about the future shape or character of a Sino-­Latin American axis. Consequently, U.S. foreign policy must arrive at a consensus on what China’s entry into the region means for its interests. How should the U.S. understand the “China threat” in Latin America, and what response does it require? This paper contends that the U.S. response to China’s entry so far has been focused on the wrong issues. Seen through the lens of power transition theory, China’s entry into Latin America represents a challenge to U.S. hegemony, a view seemingly confirmed by activities such as arms sales to anti-­U.S. regimes. This perspective is counterproductive because it sidelines Latin American perspectives, encouraging an overly narrow understanding of U.S. interests in the region. From the Latin American persepctive, the real China threat is that China’s entry threatens to undermine the region’s long-­term development. This paper’s analysis found that China’s rise has had a twofold effect on the Latin America’s export basket: competition from China pushes manufacturing sectors down and demand from China pulls primary products sectors up. In competition for shares of global manufacturing markets, China’s competitive strength has come at the cost of Latin American growth. In bilateral trade and investment relations, China’s strong resource demand is encouraging many countries to specialize in primary product production. Trade between China and Latin America thus exhibits many of the symptoms of a dependency relationship: nearly all Latin America’s exports to China are primary products, while nearly all Latin America’s imports from China are manufactured goods. This dynamic has led many countries in the region to de-­diversify their exports in favor of a greater emphasis on primary products. Over time, the weakening of manufacturing capacities and the emphasize on natural resource extraction will prevent Latin American economies from moving production up the value-added ladder. This conception of the real China threat not only better reflects China’s actual motives and behavior, but also it accounts for the convergence between U.S. and Latin American perspectives, which share a common interest in Latin America’s economic development, and lays the groundwork for policy responses that will allow the U.S. to regain its relevance in the region. The implications of this paper’s analysis for U.S. policy point to the importance of re-­engaging Latin America in a discourse of development. The U.S. has a strategic need for a strong and stable Latin America. Far from signaling the death knell of U.S. influence in Latin America, therefore, the arrival of China presents the best opportunity in a generation for U.S. foreign policy to address the issues most important to the Latin Americans themselves. The U.S. and Latin America share an interest in facilitating a productive role for China in the western hemisphere that does not threaten the region’s long- term development.