Mexico is ground zero as China takes Global South battle to US backyard
- Since
its free trade agreement with the US, Mexico has seen more crime and
obesity but little economic growth. Now, it is seeing a surge in Chinese
investment
The US has imposed
tariffs on Chinese electric vehicles and the European Union is
expected to do the same, but most countries in the Global South have not followed suit. In particular, Mexico has become China’s
second-largest car importer and has seen a recent surge in Chinese investment.
China,
the main trading partner of many Southeast Asian and African states, is
becoming an important trading country for South America, long seen as
America’s backyard.
Given
that the Global South represents 88 per cent of the world’s population
and 52 per cent of the gross domestic product in purchasing power parity
terms, protectionist measures from the West risk isolating their
industries – without necessarily ensuring their long-term
competitiveness.
Historically,
Western polices have triggered China’s engagement with what is now
termed the Global South. In the 19th century, Western powers made China
doubt its place in the world by treating it like one of their colonies
and setting up
treaty ports.
Chinese migrants seeking fortunes abroad found themselves rejected by
xenophobia in Western countries and moved instead to the Global South.
By the early 20th century, with the
Chinese Exclusion Act
in force in the United States, some 60,000 Chinese migrants ended up in
Mexico. Yet, despite this racism at home and abroad, some Chinese elite
still hoped to emulate the West to show that China belonged to the
North.
In
the 1960s, isolated by the West and the Soviet Union, that thinking
changed radically. For the first time, China started to claim to belong
to the Global South. Through the reform era of the 1980s, China again
looked on the US as an economic model. But, in the past decade, partly
due to
trade tensions,
China has pivoted south once more. Like most developing nations, it
often sees itself as a past victim of foreign exploitation.
09:30
China’s ‘gold rush’ in Mexico: why are Chinese companies investing south of the Rio Grande?
With its
Belt and Road Initiative,
Chinese infrastructure projects have exceeded Western ones in many
countries in the Global South. Yet those investments, beyond a
developmental agenda, are only a means to an end; Beijing seeks to open
new markets for its products, recycle its trade surpluses and fill a
vacuum left by Western investors. Smaller risk appetites and a narrower
agenda have often priced out Western infrastructure firms from projects
such as the
Vietnam to China high-speed rail connection.
But
the belt and road is not only about government policies. It is also
about migrants and entrepreneurs seeking economic opportunities. While
countries in the Organisation for Economic Cooperation and Development
remain their preferred destinations, millions of Chinese have travelled
to Africa, the Middle East and South America. In Mexico for example,
just like a century ago, they are
rapidly becoming the second-largest migrant group.
Indeed,
back in the 16th century, China was already a dominant transpacific
player, exchanging its silk and porcelain for up to a third of the
silver mined annually in South America. Historians regard the Spanish
colony of Mexico as among the first examples of globalisation, when
products from three continents were exchanged for the first time in an
emerging world order where London and New York were still on the
periphery.
Today,
China and the West are vying for influence in the Global South. With
its soft power, the West enjoys a clear dominance. But the endless wars,
some seen as encouraged by the West, and increasingly xenophobic
Western politicians could tilt that balance.
14:45
An unwinnable conflict? The US-China trade war, 5 years on
On
the economic front, it is worth emphasising that products made in
China, from mobile phones to electric vehicles, seem better suited to
the mass markets of the Global South, giving China a distinct advantage.
Instances
when developing nations have established trade partnerships with
Western blocs show different economic outcomes. Since the EU included
Eastern European countries like Poland in 2004, Warsaw’s economy has
grown 4.2 per cent every year on average. But, since the 1994 North
American Free Trade Agreement with the US and Canada – and the
2020 revamped trade pact that replaced it – Mexico’s economy has grown by an average of just 2 per cent annually.
While
creating industrial jobs (some taken from the US), the trade agreement
also displaced millions of poor Mexican farmers unable to compete
against subsidised US agricultural imports, causing the Mexican
population in the US to surge. Imports of US processed foods and having
one of the world’s highest soda consumption rates have more than doubled
Mexico’s obesity rate, adding pressure to an inadequate health system.
Fuelled
by poverty and US firearms, Mexico’s organised crime grew and its
homicide rate soared by 60 per cent, overtaking Brazil as one of South
America’s most violent nations, while worsening the US drug crisis. In
2022, the Mexican government felt compelled to sue American gun
manufacturers. This may explain why Mexico just
re-elected by a landslide an anti-neoliberal and populist government.
Western
and Chinese experiences in the Global South offer important lessons.
Nations will not easily forget the close interplay between
environmental, trade, migration and development policies. They will mark
the importance of an equitable trade and investment system, and of
balancing the economic benefits of globalisation with fair social
policies for those displaced by it.
Simply
imposing trade barriers, tariffs, walls and sanctions is not the best
long-term solution for our planet. Promoting social justice at home is.
Hugo
Wong, a long-time investor in China and Mexico, is the author of
“America’s Lost Chinese”, a historical memoir about the rise and fall of
his Chinese Mexican family in past centuries