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China
in the Caribbean Region: Some observations
(II)
By
Kathy M Higgins Senior Governance Adviser DFID Caribbean
The
US is, so far, the single most important bilateral player in the
LAC region. US-China relations and the growth of China as a global
superpower, and maybe eventually, the global superpower, is perhaps
the single most critical strategic issue facing the global community
over the next two or three decades. The recent visit of George
Bush to PRC, and the careful rhetoric around this indicates the
wariness and the continual re-adjustment of US policy towards
an emerging rival.
China
in LAC
It
is fairly easy to track the growing presence of the PRC in the
Caribbean region. Chinese delegations and reciprocal trips to
China are featured frequently in the regional newspapers. It seems
there are two immediate drivers for this: Taiwan and access to
raw materials as noted above:
a.
In the first place, PRC foreign policy is to isolate Taiwan anywhere
in the world. In 2005, Grenada, informed by the support it received
from both countries (Taiwan is its single biggest official creditor),
and in the aftermath of Hurricane Ivan, switched its support from
Taiwan to the PRC, raising concerns about Taiwan's willingness
to reschedule Grenada's debt. Taiwan has in fact raised a law
suit against Dominica to recover debt owed after that tiny country
switched allegiance to the PRC last year. In the Caribbean, now
only Belize, St. Kitts and Nevis, St. Vincent and the Grenadines,
Haiti and the Dominican Republic still recognise Taiwan. These
countries plus those in Central America Panama; Costa Rica; Nicaragua;
El Salvador; Honduras; Guatemala and Paraguay are a critical bloc
of diplomatic recognition giving legitimacy to its status - they
represent nearly half of the 25 remaining countries around the
world that still recognise Taiwan. It appears however that the
PRC will pay more than Taiwan can afford to sway this particular
game of regional chess.
b.
The PRC scours the world for raw materials to fuel its industry,
especially for oil. In this region it has invested over $1 billion
in Venezuela petroleum projects, and is looking to invest more
in oil and gas wells in eastern Venezuela. China's needs are reciprocated
as Venezuela looks to reduce its own dependency on the US as its
chief consumer. Clearly, political considerations enter the commercial
equation here. There are ongoing discussions with China about
Venezuela's aspirations to expand its fleet of oil tankers, and
construct pipelines to the Pacific. In December 2004, Hugo Chavez
said to a group of visiting Chinese business executives: "We
have been producing and exporting oil for more than 100 years.
But these have been years of domination by the United States.
Now we are free, and place this oil at the disposal of the great
Chinese fatherland."
The
US' unease about Venezuela's policies and actions continues and
the Senate Foreign Relations Committee has mandated contingency
plans in case Venezuela does stop its oil exports to the US.
In
terms of the Caribbean, we don't know that Trinidad and Tobago's
gas is not attractive to the PRC, and there is already a signed
MOU between Guyana and China on oil exploration. China may see
building goodwill in the Caribbean community generally as a meta-strategy
within its hemispheric interest, itself part of a global consolidation
of power.
Long
term Economic impact?
In
February 2005, eleven Caribbean countries signed the Action Program
for Economic and Trade Cooperation with the PRC. A delegation
led by Vice President, Zeng Qinghong travelled to Kingston, Jamaica
for this. The trade volume in 2004 totalled US$2 billion, a 42
per cent year on year increase over the previous few years. This
may seem not only benign, but a positive effect of China's growth
and globalised trade. However, a recent detailed analysis of the
competitive threat and trade relations between LAC and the PRC
reached the depressing conclusion that:
'Our
analysis of bilateral trade between LAC and PRC reveals a striking
tendency towards a pattern of specialisation with LAC a net exporter
of primary products and a net importer of manufactures .What is
surprising is that LAC is the richer region, with a longer history
of modern industrialisation, higher human resources, more FDI
per capita and with more liberal trade and investment regimes.
The result is arguably a massive downgrading of comparative advantage
in a dynamic sense, surprising for such a relatively industrialised
region The non-threatened LAC countries - which have such different
specialisations that they do not face Chinese competition in the
US or elsewhere - may nonetheless face a serious threat to their
long term development. A heavy reliance on primary and resource-based
products is not conducive to a dynamic comparative advantage or
technological upgrading, yet any such upgrading many well face
a strong competitive threat from the PRC because the kinds of
products they may feasibility move into are already 'taken' by
PRC. The issue is then much less about current competition, but
more about the future 'spaces' open for the development of industrial
exports in a liberalised word in which PRC is pre-empting many
markets for products that developing countries can export' People's
Republic of China's Competitive Threat to Latin America: An analysis
for 1992 - 2002. Sanjaya Lall, Oxford University; John Weiss Asian
Development Bank Institute. Latin America and Asia/Pacific Economics
and Business Association (LAEBA). Working Paper no.22 December
2004.
An
interest in shipping in LAC?
Aligned
to the obvious and legitimate trade threats to the region, there
is an interesting unease in the US about strategic intentions
of China's growing ownership of shipping and port facilities.
The country still has no cross-border pipeline for getting home
the resources it tracks down and secures and its concerns about
access to oil carrying shipping lanes in the Indian Ocean and
the Malacca Strait particularly, are well known, but it is possible
to speculate about the country's interest in shipping routes through
the Caribbean. In 1999, Panama granted concessions to Hutchinson
Whampoa Ltd for port operations at both ends of the Panama Canal,
effectively controlling this strategic waterway. Following this,
and the Bahamas' recognition of the PRC, Hutchinson made a massive
investment there, creating the largest shipping terminal in the
world.
Hutchinson
Whampoa is one of the largest companies on the Hong Kong stock
exchange, owned by Li Ka Shing, a tycoon with allegedly strong
links to Beijing. The US Centre for Security Policy has noted
that the company '' is currently hard at work acquiring a presence
for China at other strategic 'choke points' around the world,
including the Caribbean's Bahamas At a moment inconvenient to
the United States, such access could translate into physical or
other obstacles to our use of such waterways'' Declassified intelligence
reports note that Li's interest in the Panama Canal is not only
strategic, but as a means for outside financial opportunities
for the Chinese government.
China
and Development Assistance
What
does all this mean in the long-term? Is the establishment of shipping
facilities a simple commercial venture with no connections whosoever
to geo-politics, or is it a far sighted positioning of Chinese
interest in America's backyard? If it is seen as the latter, it
is puzzling that 'western' interest seems to be waning in the
region.
The
implications of drastic changes to global trading rules on small
countries with limited possibilities of diversification and growth
are a slide into unsustainable debt, facing each hurricane season
with the possibility of human and economic disaster, and more
reliance on whatever donor is available.
Traditional
donors are perceived as withdrawing, leaving both practical and
emotional spaces for Chinese assistance. There is even a small
Chinese military contingent in Haiti - the first such in the western
hemisphere. Kuwait, Japan and Libya are examples of non-regional
'non-traditional' donors showing an interest in the Caribbean;
South Korea has just joined the Inter-American Development Bank
with a very large Trust Fund. Emerging regional 'powers' (financial/commercial)
such as Brazil, Venezuela, and Trinidad and Tobago, are also poised
to change the dynamics of international relations in the region.
The investment of Colombian money in Caribbean economies will
cause more concern.
From
the Caribbean perspective, the bonds of history do not seem to
count for much other than attempts to stem the import to Europe
and the US of drugs and associated criminality. In this scenario,
is it surprising that Caribbean nations embrace a large and generous
new donor on the block, and in turn offer trading opportunities,
support and recognition where it is required? What, if any, should
be the response from the region's other partners to this relationship?
Will Europe, through the EC, still be the biggest grant donor
to the Caribbean a decade from now?
The
PRC does have a development strategy: at the September 05 Development
Committee of the IMF and WB, the Chinese Minister of Finance,
referring to the WTO Hong Kong meeting, made a number of development
commitments including:
-
according zero tariff to the majority of products from 39 LDCs
to China;
-
expanding its aid programmes and debt forgiveness;
-
providing $10 billion in concessional loans for infrastructure
projects;
-
increases in medical support to Africa;
-
and offers of training 30,000 personnel in various professions.
Set against the expansion of PRC exports into the world's markets
and the concomitant destruction of domestic industries, this may
perhaps seem small beer, but it can meet short-term needs and
is being gratefully accepted in the Caribbean.
Conclusion
So
what should LAC and the region's partners make of China's role
in this part of the world? This paper does not attempt to answer
this question as there are a number of relevant issues not covered.
For example, information on the scale of China's engagement in
comparison to that of the US and the EC, and the balance between
grants and loans; and there is no analysis of the relevance to
the Caribbean of China's calls for Special and Differential Treatment
at the WTO.
We
have no concrete evidence that the PRC is attempting to influence
the policies of Caribbean countries other than towards Taiwan.
But it is clear that we should examine the implications of a major
communist country moving its presence into a part of the world
where some countries are feeling increasingly vulnerable, marginalised
from global trends, and there is at least a perception that traditional
partnerships are no longer valued and anti-American politicians
are more vocal and more open in forming their strategic alliances.
As a potential counterweight to the US, the PRC does not carry
any of the baggage of the last 50 years of American policy in
LAC.
China
has a strategy and reasons for expanding its presence and influence
in the Caribbean and Latin America. They will be for the benefit
of the people in the PRC. At the same time, the countries of the
Caribbean appear to have little choice to whom they turn as friends
these days.
Kathy
M Higgins is Senior Governance Adviser DFID
Caribbean. Petroleumworld not necessarily share these views.
Editor's Note: The above paperis the second and final part of
an edited version of a paper prepared by Kathy M. Higgins that
examines: the growth of China's interest and trade relations in
the Caribbean generally and then asks why this interest? It attempts
to answer this question by looking at some aspects of the global
context of China's growth and China-US relations, given that the
Caribbean has been referred to as the US' third border.
This
version was originally published by The Trinidad Express,Wednesday,
March 7th 2007. Petroleumworld reprint this article in the interest
of our readers.
http://www.trinidadexpress.com/index.pl/article_business_mag?id=161112833
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Petroleumworld
News 03/18/07
Copyright
© 2006 Kathy M Higgins.
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