1705783717 Enrique Dussel Trade relations between China Mexico and the United

Enrique Dussel: “Trade relations between China, Mexico and the United States dismantle the idea of ​​the new Cold War”

Enrique Dussel Trade relations between China Mexico and the United

When Enrique Dussel (Paris, 1965) decided to make China the focus of his work, few showed interest. As a professor and postgraduate researcher in economics at the National Autonomous University of Mexico (UNAM), Dussel was ahead of his time and, together with a group of his colleagues, founded the China-Mexico Studies Center (Cechimex). Today, given the confrontation between the United States and the Asian country, Mexico has become an attractive alternative for Chinese companies that want to continue selling to North America. Suddenly Dussel is at the center of the conversation.

“Fifteen years ago we started looking at Chinese investment in Latin America and half the world told us, 'Who cares?' And now that it's a world power, everyone's like, 'Hey, logical, how didn't they think of that before?'” the scientist shares lightly in a video call. A new paper written by him and Latin American scholars summarizes data on trade between countries in the region and China.

“For better or worse, Latin America is a capital exporter to China. “I’m not sure it’s something that should be encouraged, but it’s happening and it’s a surprisingly unknown topic,” he says. Companies such as Bimbo, Camposol, Codelco, Embraer, Herfalife and Interceramic are among those that have shifted their sales to Asia. In the case of his native Mexico, the situation is more delicate as the country is the United States' main trading partner.

Q Why focus on Mexican investment in China?

R. Recently, we have observed that almost half of the total investments entering the country are leaving the country. Where is he going? It is a quantitatively and qualitatively important topic, moreover, for me personally and from the industrial organization, it is a fascinating topic in terms of the learning processes of the companies themselves. 20 years ago Bimbo (the Mexican baking company) was told: “Invest in China?” When the Chinese don't even eat bread. Today it is the second largest seller in its class in the country. If they hadn't taken part, they would have been behind the competition today.

Q Your book notes that the share of Mexico's total trade with China increased from 1% in 2000 to 11% in 2022, while it fell from 81% to 62% with the United States over the same period. Is there a connection between these changes? ?

R. The USA is Mexico's first trading partner with a downward trend, China is the second with an upward trend. What is happening in Mexico is also happening in Argentina, Brazil, Peru and Chile: the production apparatus has historically replaced American imports with Chinese ones. These include electronics, auto parts, telecommunications and automotive. It is not a one-to-one correspondence, but there is a strong association with import substitution.

Q It talks about a triangular relationship between Mexico, the USA and China within the framework of the USMCA free trade agreement. What impact does this have?

R. This concept we use is in contrast to other concepts such as the Cold War or the “new” Cold War. If we think that this is a war between the USA and the USSR, then the USSR no longer exists. This concept is no longer useful in describing this new historical reality. The fact is that since 2018 we have been witnessing a very deep confrontation at all levels between the United States and China. It ranges from the closure of Confucius Institutes and research centers in the US due to fear of Chinese spies, to restrictions on semiconductors, military and economic issues, etc. This confrontation will outlive us all, it is very long-term and leaves the big question unanswered: How will third countries react? When you think about the global chain of Mexican auto parts, a new triangular relationship emerges: importing parts from China and exporting them to the United States. Until when is this possible? China is a heavyweight adversary in all areas and in countries like Mexico, the United States' backyard, the line of what is allowed or not allowed in trade is very thin. Mexico's relationship with China is a triangular one and takes place in the context of the USMCA.

Q The USA is striving for economic decoupling from China. Does that mean Mexico will do it too?

R. Janet Yellen's visit to Mexico makes the point that U.S. national security vis-à-vis China will take precedence over all other issues, namely trade, investment, innovation or technology. This also applies to the European Union. What the US is promising is that if third countries or regions comply with US security interests in their supply chains, they are likely to reap some benefits. What we know as nearshoring or allyshoring or frienshoring is a strategy in the fight against China. An example is the Tesla factory. If you decide to open it in Santa Catarina, Nuevo León and it does not contain Chinese components, you will benefit from the federal funding of $7,500 per unit because it complies with safety regulations. Many in Mexico believe they can bring investment from many quarters and win many friends, but the State Department will say: “You don't understand, I don't want China to participate in these integrated processes.” Mexico will have to see how it continues, because China's proposal is to close the import deficit with Mexico through investments. They want to build automobile, shoe and telecommunications factories. We'll see how long this works.

Q What is the current panorama of Chinese investments in Latin America and vice versa?

R. There is an impressive dynamic. China is doing in 20 years of the 21st century what Europe, Japan, etc. did in 200 years. It is displacing third countries that previously acted as investors in the region. It's not about whether China will displace the USA. The key word here is diversification: in the first decade of the 20th century, Chinese investments were mainly devoted to the purchase of raw materials such as oil, gas, fishmeal, minerals. In countries such as Brazil and Argentina, we are seeing diversification by country in the last five years. Mexico has become a major recipient, as have Chile and Peru. They have also diversified sectors and are investing much more in manufacturing across the region. There was also a learning process for Chinese companies, where it turned out that some countries that thought they were easy countries, like Uruguay and Venezuela, were not easy countries. Who have their limits. In terms of investment outflow, it is a relatively new process when multilatinas start investing in China. In 20 years, China has transformed from a country with cheap labor to one of the most attractive markets, and Latin American companies that have invested there have learned this.

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