China between the EU and the Latin America European Parliament
EU China trade deficit

China may become Latin America’s second largest trade partner by 2016, surpassing the EU, according to the statistics that the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has provided in its recent trade analysis.

In the scope of the Latin American bilateral trade with the biggest global markets, China will take second place, only after the United States. During 2013, friendly relations between China and Mexico, Brazil and Costa Rica were established.

US State Secretary, John Kerry, has commented on the ongoing bilateral trade development, stating that “China is gaining influence in its hemispheric "backyard”.”

The tendency to replace the US and the EU with China within the Latin American countries has a political significance. The latter aims at developing its trade relations with China in order to avoid any political dependency. Nevertheless, some political leaders have expressed their concern over the fear of becoming the next “Africa” for China, to which current Chinese president Xi Jinping responded in 2009, stating: “China does not export revolution. China exports neither hunger nor poverty. We do not cause problems. What more can be said of us?

During the past decade China has been steadily strengthening its role and its stable influence in the Latin American region by gaining benefits from the resources that the Asian region lacks and by compensating with its growing influence in the global economy. This period has witnessed a surprising increase in bilateral trade between China and Latin America. Latin exports to other Asian countries have increased from $3.9 billion in 2000 to $86 billion in 2011. Statistics demonstrate the leading position of China in its exports to Latin America with 14% versus 13% exports from the EU.

In its bilateral trade relations with some of the Latin American countries China has even surpassed the US, as is the case with Brazil, which is further evidence of the growing position of China in BRICS bloc. Trade between these two emerging markets has jumped from $6.5 billion in 2003 to $77 billion by the end of 2011 and $75 billion in 2012. In 2009 China became the biggest export target for the Brazilian economy and in 2010 was its main source of imports, as well as direct foreign investor. Chinese investments in Brazilian assets surprisingly surpassed $20 billion in 2010 from an inconsiderable sum of $292 million only one year before. The formula of the bilateral trade between China and Brazil represents Chinese imports of raw materials and export of manufacturing (cheap products and basic technology). This formula has been absorbed by most of the Latin American countries.

Sergio Amaral, director of the Armando Álvares Penteado Foundation in São Paulo expressed his anxiety in this concern to the Spanish newspaper El País: “The intra-continental trade represents 53 percent of Asia’s total commercial exchanges. The growth of Chinese Economy might even mean that trade between Latin American countries will decrease. China exposes Latin America’s deficit in competitiveness.”

What was the mistake that the EU did not prevent regarding its bilateral relations with the Latin American region and what are the steps that the EU has to undertake in order to restore its role in this zone?

There are a number of factors that have deteriorated the EU-Latin American trade relations, such as the financial and military crisis that captures much more efforts from the EU. The EU has devoted almost a decade to its struggle against the financial crisis. In the path of restoring its economy, the EU has developed increasingly close relations with Asia where China had a strategic importance. Meanwhile, it has been developing tools to fight against instability in the Middle East and has been providing more attention to security issues than its bilateral trade relations.

Trade between these two areas has been decreased due to the lack of attention that is demonstrated in the institutional partnership between the EU and Latin America where trade covers the third pillar.

Another factor has been the absence of a Latin American lobbying in Brussels and in EU member states. In order to boost bilateral relations, a unified interest representation is necessary in both sides.

Finally, a fact argued in both areas, the equal attitude within the Member States towards the foreign policy. Both in the EU and Latin American countries lack a unified voice with regard to their strategic partnership with the third world. The enlargement process in the EU has worsened the unanimity vis-à-vis certain issues and relations further, particularly in the framework of its bilateral trade partnerships.