China’s trade with Latin America is bound to keep growing. Here’s why that matters
来源:World Economic Forum;发表于:2021-07-09;人气指数:440
China’s trade with Latin America is bound to
keep growing. Here’s why that matters
https://www.weforum.org/agenda/2021/06/china-trade-latin-america-caribbean/
LAC-China trade is expected to more than double by 2035.
Image: Photo by Cameron Venti on Unsplash
17 Jun 2021
Pepe Zhang
Associate Director, Atlantic
Council’s Adrienne Arsht Latin America Center
Tatiana Lacerda Prazeres
Senior Fellow, University of
International Business and Economics in Beijing, and Former Foreign Trade
Secretary of Brazil
*China’s trade with Latin America
and the Caribbean grew 26-fold between 2000 and 2020. LAC-China trade is
expected to more than double by 2035, to more than $700 billion.
*The US and other traditional
markets tend to lose participation in LAC total exports over the next 15 years.
It may be increasingly challenging for LAC to further develop its value chains
and benefit from the regional market.
*Scenario-planning and new
policies could help stakeholders prepare for changing circumstances.
The rise of China as a trade powerhouse has had profound
implications for global commerce over the last 20 years, with key economic
sectors in Latin America and the Caribbean (LAC) among the biggest
beneficiaries. Between 2000 and 2020, China-LAC trade grew 26-fold from $12 billion
to $315 billion.
In the 2000s, Chinese demand drove a commodity supercycle
in Latin America, helping dampen the regional spillovers of the 2008 global
financial crisis. A decade later, trade with China remained resilient despite
the pandemic, providing an important source of external growth for a
pandemic-stricken LAC, which accounts for 30% of global COVID mortality and
experienced a 7.4% GDP contraction in 2020. In a region with historically
strong trade relations with the United States and Europe, China’s growing
economic presence has implications for prosperity and geopolitics in LAC and
beyond.
This impressive trajectory of China-LAC trade over the
past 20 years also raises important questions for the next two decades: What
can we expect from this trade relationship? What emerging trends might affect
these trade flows and how might they play out regionally and globally? Building
upon our recent trade scenarios report, here are three key insights for LAC stakeholders. These
findings are also relevant for China’s and LAC’s other main trade partners,
including the United States.*
What
do we expect to see?
On the current trajectory, LAC-China trade is expected to
exceed $700 billion by 2035, more than twice as much as in 2020. China will
approach—and could even surpass—the US as LAC’s top trading partner. In 2000,
Chinese participation accounted for less than 2% of LAC’s total trade. In 2035,
it could reach 25%.
Aggregate numbers, however, conceal great discrepancies
within a diverse region. For Mexico, traditionally dependent on trade with the
US, our base case estimates that China’s participation could reach around 15%
of the country’s Mexico’s trade flows. On the other hand, Brazil, Chile, and
Peru could have more than 40% of their exports destined for China.
Overall, a healthy relationship with both of its two
largest commercial partners would be in LAC’s best interests. While the United
States may see reduced participation in LAC trade relative to China,
hemispheric relations —especially those involving deep supply-chain
integration— are an important driver of manufacturing exports, investment and
value-added growth for the region.
LAC Trade Alignment with US vs China, Scenario: Partners
in Flux
How
would China further gain ground in LAC trade?
Although trade is bound to grow in both
directions, the dynamism will more likely come from LAC imports from China—
rather than LAC exports to China.
On the LAC import side, we foresee China becoming even more
competitive in manufactured exports, because of the adoption of Fourth
Industrial Revolution (4IR) technologies including 5G and artificial
intelligence. Overall, productivity gains from innovation and other sources
will likely outweigh the effects of a shrinking workforce, sustaining the
competitiveness of Chinese exports.
On the LAC export side, an important sectoral shift could
be underway. LAC’s agricultural exports to China are unlikely to continue at the bonanza pace
of present times. To be sure, the region will remain competitive in
agriculture. But markets other than China, such as Africa, would contribute to
higher export earnings. This highlights the importance for LAC countries of
exploring new destination markets, as well as diversifying their exports to
China itself.
On balance, import growth is likely to outpace export
growth, causing a higher trade deficit for LAC vis-à-vis China, albeit with
considerable subregional differences. While a very small number of LAC
countries are expected to retain their surpluses with China, the broader
picture points to greater trade deficits for the region. In addition,
complementary, non-trade policies will be vital to determining the extent and
the secondary effects of these trade deficits in each country, from labour
markets to foreign policy.
Trade Balance with China as a Percent of GDP, Scenario:
Balancing Act
What
to expect for intra-LAC trade in 2035?
As the pandemic disrupted global supply chains, calls
from LAC for reshoring or nearshoring and for greater regional integration have
again come to the fore. However, assuming a continuation of existing trends, the
future does not look promising for intra-LAC trade. While in other
parts of the world, particularly Asia, intraregional trade has expanded faster
than global trade in recent years, the same dynamism has not been seen in LAC.
In the absence of a major new impetus for regional
integration, significant reduction of intra-LAC trade costs or major
productivity gains, LAC could remain unable to further develop its value chains
and benefit from the regional market. In fact, our projections show that over
the next 15 years, intra-LAC trade could account for less than 15% of the
region’s total trade, down for a 20% peak before 2010.
Image: LAC’s Main Trade Partners through 2035 (Percent
Participation, Goods and Services), Scenario: Current Path
Looking
back from the future: What to do today?
Over the next twenty years, China will become an
increasingly important determinant of LAC’s economic outlook. LAC’s trade tends
to turn even more China-oriented - affecting other trade partners and
intra-regional trade itself. We recommend:
Scenario Planning
Building scenarios is not about predicting the future,
but it helps stakeholders prepare for different possibilities. Planning for
changing circumstances is particularly urgent when there is likely to be
turbulence ahead: For example, LAC countries and companies that might be
affected by potential changes in the composition of LAC exports to China. The
challenge of making export sectors more competitive in the Chinese market just
became more apparent for LAC. The same is true regarding the need to develop
new, alternative markets for traditional LAC exports, such as agriculture and,
increasingly, materials.
Productivity and Competitiveness
LAC stakeholders—and policy-makers and businesses in
particular —should be clear-eyed about the trade implications of low
productivity affecting the manufacturing sector. Without tackling issues
undermining industrial competitiveness in the region, LAC exports to the US, to
the region itself and other traditional markets will continue to suffer. At the
same time, stakeholders in the US would do well to take measures to
reinvigorate hemispherical trade, if retaining US participation in LAC trade is
considered an objective worth pursuing.
*We thank David Bohl and the University of Denver’s
Pardee Center for International Futures for their support in this Agenda blog
post and the report.