Week 9- Japan and China (1)

8/7/2019 Week 9- Japan and China (1)

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International Relations and

Latin America

Week 9

Latin American relations withJapan and China



Key Points to be Covered

� Latin America has traditionally looked toJapan as their major Asian economic andtrade partner. Is China usurping Japan¶s

place?� China- a new and hungry market for Latin

American raw materials

� An examination of Asian-Latin Americanrelation through APEC



Japanese Migration

� Japanese-Latin American migration links can betraced back to the 1900s and even before.

� Japanese migration flowed mainly to Brazil.

� The first ship arrived in 1908 carrying 790 bondedworkers who were placed in the coffee plantations.

� Japanese workers eventually moved on to other types of agricultural work and into other fields suchas commerce and education.

� By the 2000s the number of Nikkeijin in Brazil isestimated to be around 2mn.



Migration to Japan

� Although a large number of Japanese migrated

to Brazil after WWII, the post-war economicrecovery of Japan was swift.

� Soon flows of migrants to Brazil decreased andflows of investment increased.

� The flow of Japanese back to Japan alsoincreased.

� By 2004, 18% of foreigners living in Japan wereSouth Americans.

� Peruvians and Brazilians make up the largestnumber of S. Americans living in Japan.

� The Japanese have historically used migrationas an economic policy and continue to do so.



Migration to Japan

� In the 1990s when Japan faced a growing industrial labor shortage, the gov¶t issued thousands of special work visasto descendants of the Nikkeijin.

� By 2009, an estimated 366K Brazilians and Peruvianslived in Japan- mostly as blue collar workers doing the

³hard, dirty and dangerous´ jobs.� But 2009 also saw an economic recession and rising

unemployment in Japan.

� The gov¶t therefore devised a repatriation plan: Nikkeijin

guest workers were offered $3K toward air fare, plus $2Kfor each dependent to return home. Those taking up thisoffer cannot reapply for worker visas.

� Tourist visas and Professional visas are still available tothose who qualify.



Japan and Latin America

� Maybe as result of strong migratory links, or maybebecause Japan has always actively sought outwardeconomic expansion: Asian-Latin American economicrelations, have been monopolized by Japan over thelast few decades.

� LA was an important trade and investment site for

private Japanese companies before the debt crisis of the 1980s.

� Trade decreased but Japan continued to be a major source of Official Development Assistance (ODA) to

LA. The share of Japan's ODA to LA, increased from6% in 1980 to 8% in1990 to 12% in 1996.

� Faced with a stronger, more prosperous LA in the2000s: Trade and investment between LA and Japan

have increased while ODA has decreased.



Japan vs. China

� Trade relations between Japan and LA havecontinued to expand throughout the 2000s. However,trade relations between China and LA are expandingmore rapidly.

� In 2008, LA-Japan trade totaled some $60bn. Tradewith China, however, totaled $140bn.

� Over the last decade, the increase in Chinese FDI inthe region, has exceeded Japan¶s in many countries.

� China has become the second-largest global investor (after the U.S).

� LA and Africa are particularly important for Chinabecause the regions are rich in raw materials.

� China is proving to be a more aggressive investor inLA than Japan ever was.



Chinese Investment in Latin America� Dec 2009: Venezuela and China signed a ³strategic

alliance´ whereby Vnz. began sending 600K barrels of oil per day to China. In return, China will begin investingin Vnz. mining and energy production.

� 2010: China made investments of $12bn in Brazil - tentimes more than all foreign direct investment to date byChina in Brazil.

� China has lent Ecuador $1bn to build a hydroelectricplant.

� China has also made $10bn available to Argentina, tohelp it pay for Chinese imports.

� In 2010, through a series of investments in such sectorsas oil, energy, steel, telecommunications and autos,China¶s investments in LA (esp. in Argentina, Brazil,

Peru, Chile and Mexico) exceeded $30bn.



Chinese Trade with Latin America

� On one hand, China-LAC trade relations can be

viewed as a stellar example of South-South relationsworking well.

� The World Bank happily proclaims that LA exports toChina grew by 370% between 2000 and the dawn of

the financial crisis in 2007, while overall LA exportsgrew 62% during the same period.

� In 2009 exports to the US and the European Unionfell by 26% and 28%, respectively, those to Asia

fell by only 5%, while those to China increased by5%.

� ECLAC¶s 2020 projections suggest that China willovertake the EU by 2014, to become the 2nd largest

market for LA¶s exports.



Chinese Trade with Latin America

�

In the case of imports, China is projected to surpassthe EU as a source of LA imports by 2015. This trendcould be slowed, however, by the dynamics of bilateral trade agreements created between the EUand CA, and possibly MERCOSUR.

� Increases in imports from China would mainly occur in capital goods, especially electronics, componentsand parts, and machinery and equipment, as well as

textiles and apparel. These are Chinese products thatalready have a strong presence in the region.

� Increasing imports from China, however, could meantrouble for the Latin American manufacturing sector.



Trade in Commodities

� LA could simply be replacing one hegemon for another.

� Relying primarily on natural resource trade will not besustainable nor will it lead to significant development.

� LA raw material exports are in low-employment,environmentally sensitive sectors that can cause

macroeconomic vulnerabilities as a country¶s mainexport. Nations that are overly dependent oncommodities/ raw materials have been shown to notdevelop strongly as victims of the ³resource curse´.

� China, however, can import raw materials from other parts of the developing world and can diversify itseconomy toward higher value added manufacturedgoods that out-compete their LA counterparts in world

markets.



Trade in Commodities� China¶s exports are reducing LA¶s markets for

manufactured goods and global markets where LA

manufacturing companies face their Chinese competitors.� LA is an important market for regionally produced

manufactured goods. Between 2000 and 2007 the LAmanufacturing import market grew 73%. China out-

competed the Latin Americans and left the region with anet trade deficit.

� LA¶s manufacturer exporters are continually threatened bytheir Chinese counterparts in world markets.

� Chinese products are increasing market share while theLA share for the same product is decreasing.

� According to one set of calculations, 94% of all LAmanufacturing exports and 40% of all LAC exports in 2007

were under threat from China.



LA Response to China

� LA, for the most part, is happy to have secured

another major market for their exports. China will helpreduce their dependency on the US and fill in gapsthat the EU cannot.

� China can most certainly provide aid and assistancethat no one else can afford to (if it stands to benefit).

� However, many Latin Americans are aware of thedangers of aligning their countries to closely toanother world power.

� China¶s dominance and unchecked influence in Africais enough warning.

� Venezuela has already deeply entangled itself withthe Asian giant.

� However, Colombia, Brazil and Chile are alreadyshowing concern. Many are weary of China¶s scant

regard for labour and environmental policies.



Critics and the Trade Deficit

� The most vociferous critics of Sino-LA relations

point to the ever increasing trade deficit as an e.g.of the perils of trade with China.

� During this decade, Latin America and theCaribbean as a whole, have certainly, recorded a

trade deficit with China.� However, this is mainly due to Mexico and Central

America¶s increasingly negative trade balance. InMexico and Central America, China has become amajor source of imports, but has not provided asignificant export market.

� In contrast, the South American¶s trade balance

has been fairly balanced in the last ten years.



The Trade Deficit*

Graphs taken from: ECLAC¶s The People¶s Republic of

C hina and Latin America and t he Caribbean: towards astrategic relationship



The Trade Deficit



The Trade Deficit



APECHistory and Membership

� The idea of APEC was suggested by former Australian PM,

Bob Hawke, in Korea, in January 1989. Later that year, 12Asia-Pacific economies met in Australia to establish APEC.

� The founding members were: Australia, Brunei Darussalam,Canada, Indonesia, Japan, Korea, Malaysia, New Zealand,the Philippines, Singapore, Thailand and the US.

� China, Hong Kong, and Chinese Taipei joined in 1991.

� Mexico and Papua New Guinea followed in 1993.

� Chile in 1994.

� 1998: Peru, Russia and Viet Nam joined, taking the fullmembership to 21.

� Between 1989 and 1992, APEC met at an informal senior official and Ministerial level. In 1993, former US President,Bill Clinton, established the practice of an annual APEC

Economic Leaders' Meeting.



APEC

Mission Statement

� APEC is the premier Asia-Pacific economic forum. Our primary goal is to support sustainable economicgrowth and prosperity in the Asia-Pacific region. Weare united in our drive to build a dynamic and

harmonious Asia-Pacific community by championingfree and open trade and investment, promoting andaccelerating regional economic integration,encouraging economic and technical cooperation,

enhancing human security, and facilitating a favorableand sustainable business environment. Our initiativesturn policy goals into concrete results and agreementsinto tangible benefits.



APEC and Latin America

� Current LA members of APEC: Mexico, Chile and Peru.

� APEC Member hopefuls from LA: Colombia, Ecuador andPanama.

� LA¶s links with and interest in Asia-Pacific countries havebeen encouraged by their trade links with China.

� Further, while there has been dynamic expansion of exports by more South American countries to China inrecent years, APEC suddenly emerges as a new frontier of trade policy and regime for an increasing number of LAcountries.

� The dynamic aggregate demand of the countries of theAsia-Pacific region, especially China, offers LACunprecedented production and export opportunities, both

in commodities and in manufactures and services.




� The interest is there but little action evident.

� Although a number of important events have beenorganized in recent years to address the nature andscope of cooperation between the two regions, theyhave not successfully implemented plans and

programs aimed at strengthening economic, politicaland cultural ties.

� There is a lack of awareness about the importance

of biregional trade and investment, and there havebeen few coordinated strategies between countriesor regional groupings for seeking closer trade andinvestment links with the Asia-Pacific region.




� On the other hand, the conclusion and negotiation

of bilateral free trade agreements have beensuccessful.

� The promoting countries include Chile, Mexico,

Peru, some Central American countries andPanama to engage themselves with the Republic of Korea, Japan, China, Chinese Taipei, India, Brunei,Singapore, Malaysia, Thailand, Australia and New

Zealand.� Through these Free Trade Agreement initiatives, a

new awareness of linkage with the Asia-Pacific hasgrown.



FTAs Between LA and Asia-PacificSource: CEPAL, 2008



Latin America & Asia Pacific- Way Forward

� The UN-ECLAC has made some recommendations for

the strengthening of LA-Asia-Pacific relations, with aview to improving development in LA:

� LAC must, as a matter of urgency, reorient and realign itsrelations with the Asia-Pacific region in order to sustain itscommodity exports while producing more value added and

more technologically complex manufactures for that market.� UN-ECLAC suggests that the strategy in this regard should

be to:± (i) promote the LAC's participation in Asian supply chains

to boost the value added and technology/ knowledge

content of its exports (including its exports of resource-based products; and

± (ii) forge closer trade relations through joint exportpromotion campaigns, trade alliances among enterprisesin the 2 regions and FTAs in order to address market-

access problems.



Latin America & APEC- Way Forward

�

LAC companies should endeavour to build ties withsuccessful Asia-Pacific firms and to form part of thesupply chains for their production and distributionunits, including those of the natural resource-based

manufactures that are currently being exported tothe Asia-Pacific Region.

� UN-ECLAC also suggests that Chile, Mexico andPeru, the existing regional members of APEC,

should play a key role in coordinating positions andworking together on different fronts, not only withinAPEC-related forums but also within and betweenthe intra-regional integration schemes.



Lesson ReviewJapan-Latin American Links

Migration

Trade and Investment

Japan vs. China in Latin America

Chinese Trade and Investment in Latin AmericaRole of Commodities

Fate of Manufactured GoodsThe Latin American ResponseThe Trade Deficit

APEC

History,M

embership and PurposeLatin American MembersLatin American Links with Asia-Pacific Countries

FTAs Between Latin America & Asia-Pacific Countries

WayF

orward for Latin America & the Asia-Pacific



Week 10

The Latin American Debt Crisis and the Lost

Decade (1980-1990)

� An explanation of the WashingtonConsensus

� The origins of the Debt Crisis

� The effects of the Debt Crisis on Latin

American economies and social programs� The role of the IMF and Neoliberalism in

Latin America during the crisis



Homework

Quiz Corrections

Please re-do the following questions:

3, 4, 7, 9,10, 14, 15,

16, 17, 18,

20, 21, 22.

Documents

Week 9- Japan and China (1)