The trade war between the US and China seems to be moving onto a competition over global hegemony. Naturally, the diplomatic relations between the two countries in history are being reevaluated; the US announced a support for China to join the World Trade Organization in 2001 and China has been playing the so called ‘the world factory’ ever since; the Trump Administration’s trade war on China recently, however, turned China to seek both economic cooperation and diplomatic relations in Latin America and the Caribbean nations; China in fact tied diplomatic relations with Dominican Republic, Panama and El Salvador between the years 2017 and 2018; the US checked this move and the smoldering discontent burst into flame when Dominican Republic, Panama and El Salvador broke off relations with Taiwan, a traditional ally of the US.
Historically, the US has been exercising its influence to the Americas under the Monroe Doctrine, the policy of opposing European colonialism in the Americas beginning in 1823. From the 20th century, Monroe Doctrine played the basis for the US to expand economic and military support for the Latin America as a measure to prevent communization of the regions.
But things changed as the Chinese economy has marched on since the dawn of the new millennium up to the neck-high of the US today. Brazil, Argentina and Venezuela expanded their economic cooperation with China by making the most of their natural resources. And their economy indeed grew rapidly and started to stand clear of the US shadow. China poured huge investment into Latin America in return of receiving energy and raw materials and both parties enjoyed a sweet ‘honeymoon trip’. As a result, the political landscape in Latin America has changed and will be more complicated than ever before. It is notable that Mexico has seen its first leftwing government led by the president Andres Manuel Lopez Obrador, and changes to the traditional one-way cooperation system between the US and Mexico seems to be inevitable.
Traditionally, Latin American nations are anti-US. The rightwing governments of Brazil and Argentina, however, are endeavoring to strengthen cooperation and expand trade with the Trump Administration but its effectiveness and sustainability are rather obscure and skeptical. Meanwhile, Venezuela is divided into Maduro government and Guaido provisional government. While the western world supports the latter, Russia and China support the former militarily, creating an atmosphere of ‘new cold war’.
So the neighboring countries are forced into which side they stand and South Korea in particular is experiencing a difficult time in terms of both diplomacy and economy. In fact, some of the Korean companies are being pressured directly from the governments of both superpowers.
The superpowers and the neighbors
The relations between the US and China has gradually developed through the Nixon Doctrine and the Détente Diplomacy in the 70s by finding ways for overcoming ideological confrontation and for mutual cooperation. Despite the US involvement in the Vietnam War, the then US secretary of state Kissinger drew China into the international society through the Détente Diplomacy and contributed to creating a peaceful atmosphere. China had difficult time due to the failure of the Great Leap Forward in the 60s and sought a way to find a breakthrough through cooperation with the US which also sought a way to check on Russia by encouraging China to be a member of the World Trade Organization, and by supporting investment and trade. Nevertheless, China still keeps distance from the ‘market economy’ despite the years long efforts of the US. What is more? Xi Jinping seemed to have been strengthening his dictatorship since taking over the power. Seeing things not have turned as they intended while China rose to G2 in the 2000s, the Obama Administration checked on China through strategic economic dialogues but without substantial results; and the US citizens voted for Trump as a result.
Meanwhile, the Latin American countries have enjoyed a rise of raw material price and a high level of export volume thanks to China’s rapid raw material import since 2000s; soybean and iron ore of Brazil, soybean and beef of Argentina and copper of Chile are good examples between the years 2000 and 2014. As a result, the three countries enjoyed unprecedented economic boom for 10 years and the economic status of Brazil in particular has risen significantly. Moreover, the three countries saw leftist governments after 2000 and this made the bond with China stronger. Mexico, on the other hand, seems to be left aloof from China due to fierce competition for the US market as well as its manufacturing-based economy and industry. In addition, the market economy-driven National Action Party of Mexico launched a stronger check on socialism China showing their strong disapproval by the president Calderon receiving Dalai Lama of Tibet.
When Dominican Republic, Panama and El Salvador tied diplomatic relations with China during the years 2017 and 2018, Mike Pompeo, the US secretary of state, called up ambassadors of these three countries and gave a strong warning about severing the diplomatic ties with Taiwan, and pressured them by reducing economic aid in the region. The Trump Administration also considered designating the three Central American countries as rogue nations for the reasons of hampering democracy and human rights violation. For the US, the Caribbean Sea has been an important sea route as well as a military foothold towards the Atlantic Ocean; so the US secured its firm position and influence in the region even on the risk of wars in the past: the Bay of Pigs Invasion in 1960 in Cuba, the illegal support of the right-wing rebel called the Countras in 1980 in Nicaragua, the invasion of Grenada in 1983, and the invasion of Panama in 1989 to overthrow Noriega.
The US strategies in Latin America
Historically, the US has been exercising its influence to the Americas under the Monroe Doctrine, the policy of opposing European colonialism in the Americas beginning in 1823. From the 20th century, Monroe Doctrine played the basis for the US to expand economic and military support for the Latin America as a measure to prevent communization of the regions. Under the cause of upholding freedom and democracy, the US checked on Spain, France and the Netherlands from invading the Americas from 1823; and the Monroe Doctrine also contributed to modernization of Central and Latin Americas.
*The Monroe Doctrine: On December 1823, the fifth president of the United States of America James Monroe first stated the doctrine during his seventh annual State of the Union Address to Congress as a unilateral foreign policy; it did not have an effect as an international law but powerful countries such as the UK recognized and it has fossilized as the foreign policy of the Americas ever since.
After World War II, the Monroe Doctrine was used as the foundation for the US to interfere in domestic affairs of neighboring countries to prevent the spread of socialism led mainly by the Soviet Union; as a result, the Monroe Doctrine made Central and Latin Americas isolated from outer world, and these countries were mocked as ‘the backyards of the US’. In fact, the US plan of building the ‘Free Trade Area of the Americas’ in the Neoliberalism wave during the 90s faced the oppositions of Brazil (then by the president of Luiz Inacio Lula da Silva) and Venezuela (then by the president of Chaves) in 2004 and the US had to realize its shrunken influence in the region. Worse still, the US surveillance on Brazilian president leaked by Edward Snowden, a former contractor for the CIA, in 2013 was resulted in canceling the summit between the two countries, and the bilateral relations was getting worse as a result. In an effort to improve relations with the Central and Latin American nations, the then US secretary of state John Kerry announced an end to the Monroe Doctrine but it was inevitable for the US to see its ever shrinking influence on the regions nevertheless.
*The Snowden Leaks: Edward Snowden, a former contractor for the CIA (Central Intelligence Agency), disclosed the US surveillance on phone calls of the German, Mexican and Brazilian leaders and on gathering personal information in 2013. Snowden was charged with treason but sought asylum in Russia where he is staying now.
Chinese strategies in Central and Latin Americas
Exchanges between China and Central and Latin Americas started when China joined the United Nations in 1970 in order to draw support from the third countries. But the exchanges between them were more like ‘announcement’ instead of ‘substantial economic cooperation’ as China needed more of checking on Taiwan which then had more diplomatic ties with Central and Latin American countries. The China’s joining the UN was an expansion of the South-South Cooperation.
*South-South Cooperation: It is a term historically used by policymakers and academics to describe the exchange of resources, technology and knowledge between developing countries, also known as countries of the Global South as they are most located in the southern hemisphere. It was more like expanding influence and raising status of the related countries before 1980 but rapidly developed into substantial economic cooperation after 2000.
China’s rapid economic growth after 2000 made Central and Latin American nations important to secure smooth flow of raw materials and energy, alongside improved diplomacy and security. The huge investment of China in the regions also turned their relations in good terms while weakened the position of Taiwan in the regions. The establishment of the ‘Community of Latin American and Caribbean States’ also helped exchanges and cooperation between the interested parties without much trouble with the US. In addition, the global financial crisis and the low oil price made economic situation in Argentina and Venezuela hard, and the international financial institutions’ investment and loan for the Central and Latin American nations became stagnated; naturally, China’s flow of cash into the regions made a significant contribution which resulted in more dependence of the Central and Latin American nations on China, and the bigger influence of China to the regions.
US versus China in diplomacy
The Central and Latin American nations experienced invasions and exploitations of resources from the superpowers in history. Therefore, it is not a surprise for them to have grown a sense of ‘victim mentality’. In defense, they kept this principle of ‘neutral diplomacy’ and ‘non-intervention’ of other countries. The Anti-Monroe Doctrine in Brazil and Argentina after 2000 can be interpreted to come from this. Brazil especially enjoyed a rapid economic growth thanks to the increased demand for the raw materials in the 2000s and the then president Luiz Inacio Lula da Silva’s political status raised to the level of global leader. In other words, it was the time that the Central and Latin American nations started to grow their own ways out of the US influence; Brazil and Venezuela in particular formed a regional integration to strengthen negotiation power while Mexico continued to seek non-intervention principle due to its special geographical location stuck between the US and Latin America.
Now and future of Central and Latin America
While the US-China trade war is ongoing, Mexico has seen its first leftist Obrador government in the 2018 presidential election. Considering the fact that Mexico traditionally was an ally of the US, this new leftwing government can be interpreted as a change to the traditional one-way cooperation system between the two countries. Mexico for the US has been a country that has played ‘the wall’ which prevented illegal immigrants and drugs from Central and Latin Americas but the Trump Administration rather built walls on the borders and imposed a tariff on Mexican products. The Obrador Administration of Mexico seems not to have much choice but to be cooperative to the US government for now; but the increasing exchanges with China recently can be a potential alternative.
Both Brazil and Argentina currently is run by the rightwing governments hoping to boom the economy by strengthening cooperation and by expanding the trade with the Trump Administration; but its effectiveness and sustainability are rather skeptical. The Macri government in Argentina, for example, is running austerity programs of the IMF by close cooperation with the US but things will become more complicated when the political map of the superpowers are changed. The Bolsonaro government in Brazil also is building honeymoon relations with the US but both governments are facing resistance of the opposition parties alongside negative public opinions on their policies. In other words, both governments are lacking driving force.
For Brazil and Argentina, China is the biggest importer and investor while they need to keep a good relation with the US at the same time. In other words, they need to play tightrope walkers for how long? We do not know. Meanwhile, the presidential election in Argentina this year is predicted a run of Cristina Fernandez de Kirchner, the former president, as vice-president this time, and the economic crisis will highly possibly change the current regime as a result; if so, whether the pro-US stance of Argentina could continue is obscure. Venezuela, on the other hand, is divided between the Maduro government supported by Russia and China, and the Guaido provisional government supported by the western world; reconciliation between the two governments are ongoing but possibility of reaching an agreement alongside the resignation of Maduro seems to be little; thus the uncertainly might linger for a while.
Supporters of the Guaido: the US, EU, Canada, Australia, South Korea, Japan, Brazil and Argentina (countries reserving judgment: Mexico and Uruguay).
Supporters of the Maduro: China, Russia, Iran, Syria, Turkey, Belarus, Cuba, Nicaragua and Bolivia.
What South Korea and its companies need to do?
South Korea and its businesses are no exception from influence of the US-China trade war and supremacy; we are forced into choosing which side to stand.
The most economically weak countries in Central and Latina Americas have enjoyed economic benefits by competitive offering of ‘checkbooks’ from the US or China. But the trade war between these two superpowers is turning them into a dangerous walk on a rope. Some great powers in Central and Latin Americas experienced a rapid economic growth thanks to ever increasing trade with China but the recent slump and the changes of regimes seem to turn their eyes back to the US; yet this is causing the split of public sentiment and social conflict.
Bearing his in mind, and traditionally, South Korea has walked alongside the US in terms of national security but with China in terms of economic cooperation which seemed to have been in balance. But the trade war between the US and China is not only shaking this neutral stance of the South Korean government at once but also the Korean businesses in the locals. For example, the US government strongly pressured the Korean governments and companies not to work with Huawei as a 5G plant and equipment investment partner while the Chinese government is warning the Korean governments and companies that it would give disadvantage or non-payment of subsidy or confiscation of properties if we stop supplying parts or opt out Chinese partners. What we can do? We need to pay sharp attention to how things are turning and take strategic and flexible and faster actions until uncertainty is removed.
Without a doubt, both US and Chinese markets are huge and important for South Korea. Any half-baked ideas or actions toward one side can bring a significant result so we must keep holding our head cool and level-headed.
It is notable to remember that the extremism like “America First” was backed up when pluralism or community became weakened; but the former was naturally faded out when ‘uncertainty’ was ‘resolved’.