The China-U.S. Free Trade Battle, A View From Latin America
Pursuit of free trade may be at an all-time high as Washington seals the TPP deal and Beijing pursues its New Silk Road. Here's how it all looks from Bogota.
BOGOTÁ — The free-trade paradigm is tightening its grip on the world. The recent evidence is clear, from the recent signing of the Trans Pacific Partnership (TPP) trade pact among 12 Pacific Rim nations (China excluded), to the Chinese response in the form of the so-called New Silk Road.
The TPP, which encompasses economies worth more than 40% of the world's GDP, is considered by some as the most significant regional trade agreement ever. Driven by the United States, it is meant to counter China's rise and ensure Washington's own "pivot" toward Asia, ensuring new American friends and maintaining the balance of power in this part of the world.
China's exclusion reflects the strategic interests of the United States and Japan, says Gonzalo Garland, a lecturer at the IE Business School in Spain, and "especially counterbalances China's economic weight."
China's current strategy, he says, is "to welcome the accord and show some interest in it, within the philosophy that any free trade accord is positive. Yet undoubtedly, China is eyeing it with a mix of distrust and interest."
The TPP agreement, which includes Japan, Chile, Peru and Mexico, has been criticized for the secrecy of its negotiations. Anything known about it so far has been divulged only by WikiLeaks, which has revealed the possibility of intellectual property rights used to limit free speech on the Internet, a supposed ban on sales of generic medicines and privileges for companies that move their investments to TPP states.
"This can be criticized from two sides," says Javier Garay, a professor at Colombia's Externado University. "Firstly, the negotiations were carried out behind the public's back. Second, as with all free-trade treaties, there are sectors that will lose out, and they want to protect their interests."
The presence of Peru, Chile and Mexico advances the argument that, beyond its desire to counter China's economic weight, the United States wants to recover the ground it lost in Latin America after the 2008 financial crash. China used that as an opportunity to finance countries that had hitherto been dependent on their North American neighbor.
[rebelmouse-image 27089518 alt="""" original_size="640x480" expand=1]A shipping container in Cartagena, Colombia. Photo: Wirralwater
While the TPP was being negotiated, Colombia, Peru, Mexico and Chile were forging their own pact, the Pacific Alliance. That has linked Colombia to Latin American states but not to the "big players" in the world economy, says Javier Díaz, president of the National Foreign Trade Association (Analdex). Today the Pacific Alliance is the closest Colombia has to a pact with Asia, and it only entered into vigor in the middle of this year. Its practical benefits are already being questioned.
Max Rodríguez, a Colombia representative for the Peruvian promotional agency PromPerú, says that the benefits of such pacts must be examined over time. "Thanks to the Pacific Alliance, right now trade between member states is stronger and economic performance is better than the regional average," he says.
Colombian investments in Peru between 2011 and 2015 have doubled, from $5 billion to $10 billion, while Peru's in Colombia have increased 50%. "Saying there have been no results is a fallacy," Rodríguez quips.
Professor Garay blames the current government for having halted trade liberalization policies pursued by the previous government headed by President Álvaro Uribe. "It's not just a foreign policy and trade issue, but about domestic policies," he says.