Trade fortification

Latin American and the Caribbean countries have substantially improved their cooperation with China since the beginning of the 21st century. Since 2015, the CELAC (Community of Latin American and Caribbean States)-China Forum, particularly its working and cooperation plans, has been an important platform for the broad cooperation between the two sides, from culture and sports to trade, investments, technology, infrastructure, tourism, and telecommunications. But this cooperation is now being questioned by the measures the United States is taking against China. LAC and China should prepare for new scenarios to continue their long-term cooperation.

At the start of his administration in 2017, President Donald Trump acknowledged the increasing competition with China and coined the concept of "great power competition"; initially expecting to face alone China's increasing global presence. Since 2021, the Joe Biden Administration not only has maintained all of the Trump administration's measures against China, including all the additional tariffs imposed on Chinese imports, but has intensified the policies against China. Under the heading of "invest, compete, align", the US passed three laws (including the Inflation Reduction Act) in 2022 with the support of both the main political parties that call for less than 15 percent of the GDP to counter China's competitiveness. In addition, since 2022, the Biden administration has made clear that containing China is the main focus of its national security strategy, for example socioeconomic and international relations with China and third countries will be subordinated. This means that trade, investment, culture, educational exchanges, as well as other aspects of its relations with other countries will be viewed from a national security perspective and thus subject to "security-shoring".The US Secretary of State Antony Blinken, National Security Advisor Jake Sullivan and Treasury Secretary Janet Yellen have all stressed this several times since 2022.

What are the implications of this new US strategy against China for third parties?

First, given the aggressiveness with which the US is pursuing "security-shoring" in all fields of international relations, the cooperative relations between China with other regions and countries will not return to "business as usual". In aligning third parties against China, the US is inviting and blackmailing them to copy and paste the US' regulations and instruments to limit their engagement and cooperation with China. Second, the US is openly discussing its "security-shoring" strategy with other parties so they align with the US against China, with specific trade and investment incentives to be accepted, otherwise there will be a price to pay and exclusion from the US circle. Third, the substantial anti-Chinese sentiment in the US, and its fueling by both candidates in their campaigning ahead of the presidential election in November mean the Biden administration is increasing the pressure on other countries to fall in behind the US against China. The US is requiring them to limit China's presence, following the US' decoupling efforts in recent years. In doing so, the US is increasingly sidelining the institutions of its own creation after the World War II, such as the World Trade Organization and its principles of reciprocity and Most Favored Nation. They constitute the basis of the current international commerce and investment system. The unilateral decisions of the US under its "security-shoring" strategy are undermining these principles.

The implications are profound for the LAC countries. On the one hand, the US is increasingly requiring countries such as Mexico to emulate the US' legal and institutional actions, such as under the Committee on Foreign Investment in the United States, to limit and prohibit Chinese investments under the criteria of "security-shoring" in the US.Most of the LAC countries do not have the instruments for such scrutiny. On the other hand, the US' "security-shoring" measures are very concrete. If Mexico wishes to continue being the US' number one trading partner, as it was in 2023, it should not include Chinese value-added parts in its exports to the US, otherwise it will face general tariffs on Mexican exports. Bilateral existing agreements between the US and Mexico, such as the USMCA(US-Mexico-Canada Agreement) signed in 2020, explicitly foresee these kinds of situations. It is a similar situation for other countries in the LAC region.

As a result, "security-shoring" and US-China confrontation are generating massive challenges to the existing LAC-China cooperation, particularly in socioeconomic fields: trade, financing, investments and infrastructure projects have been extremely dynamic in the 21st century, but also affecting other fields such as culture and even Confucius Institutes, which have been closed in the US as a result of the existing confrontation.

The LAC countries and China cannot turn a blind eye to these challenges, in regions such as the LAC, the US is still the main point of reference in most of the discussed items above, notwithstanding China's increasing presence. Not only regional institutions such as the CELAC-China Forum, but also other bilateral institutions with all countries in LAC(from Argentina to Mexico) should explicitly discuss options to current and future cooperation schemes, explicitly integrating the impact of "security-shoring" in the region. In most of the cases these regional and bilateral institutions were created several decades ago, and before "security-shoring". From trade to infrastructure, investments and cultural activities, they will have to modernize their effective potential and new challenges in light of the US' "security-shoring".

Not doing so will not only continuously increase the pressure on LAC governments and Chinese companies operating in the region, but will also generate unnecessary uncertainties in the short, medium and long-run, such as Chinese investments in Mexico and the Chancay port in Peru, among many others. They do represent new forms of LAC-China cooperation that can increase in the future, explicitly integrating new global challenges. Expectations on business as usual for LAC-China cooperation is not an option today.

The author is a professor at the National Autonomous University of Mexico and coordinator of the university's Center for Chinese-Mexican Studies. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.