Trade
The economy dominates South America’s relationship with China and Japan
Author: Nobuaki Hamaguchi, Kobe University
The United States and Europe tend to associate South America with Amazon rainforest burning, pink-tide leftist ideology, drug trafficking, corruption and illegal migration. These issues oppose their values of justice, social stability and global order. For China, whose 2016 Policy Paper on Latin America and the Caribbean states a position of ‘non-interference in each other’s internal affairs’, these are not of concern.
China seeks South American natural resources like oil, gas, metals and food and access to its capital and consumer goods markets comprising 431 million potential consumers. South America also receives substantial Chinese investment in the resources and infrastructure sectors. For South American countries, the growing presence of China is an opportunity to pursue development agendas which may not be otherwise viable.
China has extended the Belt and Road Initiative (BRI) to South America and invested in mega-infrastructure projects, including ports and railways. Chinese technology company Huawei is also selling 5G networks to Brazil, despite US efforts to block it by tempting President Jair Bolsonaro’s administration with a military cooperation program. If realised, Brazil would become a showcase of a South American regional market using a technological platform made by China.
China has become the number one or two trade partner for all South American countries. But a high concentration in natural resources trade has created tensions in economic relations, as shown by the increasing number of anti-dumping complaints against China. WTO statistics show that South American countries initiated 23 per cent of anti-dumping probes against China over 1995–2019 — the same as the United States and European Union combined.
There is also a fear that the South American economy may be too dependent on China. The fear is becoming a reality as the COVID-19 crisis unfolds. The UN Economic Commission for Latin America and the Caribbean estimates that the value of the region’s exports to China will fall by 10.7 per cent in 2020. It will impact production and employment negatively in the short-run. Foreign investment in the region showed a sharp drop in the first few months of 2020. Beida scholar Guo Jie wrote that diversification of investment is the ideal path for China to ease the tension and sustain the economic relationship with South America.
Most of the investment comes from state-owned enterprises which have favourable access to financing from Chinese state-owned banks and are utilised as foreign policy instruments. The risks of the highly volatile South American economy to the state-owned sector may be problematic. A recent study by Margaret Myers and Kevin Gallagher showed that Chinese state finance to the South American region fell to US$1.1 billion in 2019 from US$2.1 billion in 2018, continuing a downward trend from 2015 onwards. The BRI also suffers from reputational risk as Western critics say that projects associated with the BRI are creating ‘debt traps’.
For sustainable development, local and third-party participation should be increased. An example is the co-financing for Autopistas de Uraba, a Colombia–China consortium for highway construction, by the Colombian state development bank Financiera de Desarrollo Nacional, the China Development Bank and the Sumitomo Mitsui Banking Corporation, a Japanese mega-bank. In addition to the benefit of securing diversified financial sources, third-country participation can provide additional expertise to host countries. Non-Chinese participants will also feel more confident thanks to pre-existing engagements by Chinese participants.
Economic partnership between Japan and South America go back to the early 20th century when Japan started government-sponsored migration programs. Like China, Japan approached South America in the 1970s seeking resources and economic diplomacy during its high economic growth era and after the first oil crisis. Such active engagement ended in the 1980s when South American countries were mired in severe financial crisis. Japan was unprepared to face debt defaults, interruption of joint projects and the downturn of local markets. Since then Asia and South America tended to keep one another at a distance until China recently bridged the gap.
Japan learned a bitter lesson from the 1980s downturn, but has recently become more proactive about its relationship with South America. Japan increasingly engages in high-ranking official professional development exchanges with…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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