analisislatino.com | cadal.org.uy | foroslatinos.org | institutohavel.org | procubalibre.org | puentedemocratico.org
Seguinos en Facebook Seguinos en Twitter Seguinos en Youtube Seguinos en Google +
May 28, 2017
Articles
A Too Big Reward for China
December 13, 2016
The perception that China rewards loyalty is wrong. Not only is it doubtful that kowtowing to China will bring short-term benefits but, on the contrary, it is rather quite possible that we’ll end up paying a high price for such policy in the future. If today’s decisions are shaping our future, then granting China with market economy status will surely be a nail in the coffin for Argentina.
By Juan Pablo Cardenal
Imprimir

Argentina has several reasons for not granting China market economy status. To start with, the issue is as simple as saying that China’s economy doesn’t meet the requirements to be granted such status. China’s State commonly intervenes various areas of the economy, distorting it without restrictions. This argument should be enough. But there is more: hidden subsidies, cheap financing (due to the fact that Chinese savers are financially repressed) and the monopoly that China’s State-owned companies enjoy at home, helps them to compete unfairly in the global markets.

The lack of reciprocity is another reason for not awarding China with market economy status. In China, market access is full with barriers for foreign companies, who also face discrimination, while Chinese companies receive a more equal treatment when competing in other markets. Furthermore, China’s State-owned companies, public banks and sovereign funds, the main actors behind China’s internationalization, do not have precisely a spotless reputation in terms of good business practices and transparency.

Beyond the economic sphere, China’s appalling human rights record and undemocratic sensibility do not contribute to grant China with such status. Therefore, if Macri’s government would ever make such a move, it could only be argued through economic interest. But it is precisely in realpolitik where the problem lies. The idea that China has to play a fundamental role in our future wellbeing is deeply rooted in these times of economic uncertainty. And so, it is somehow perceived that improving relations with China requires making concessions, which will then be rewarded with multibillion investments, lifesaving loans or infrastructure projects.

A majority of countries, headed by the most industrialized ones, are therefore trying to accommodate China by offering a unique investment environment. And not only that: they also avoid political discrepancies, drop human rights off the agenda, or recognize China as a market economy. However, the perception that China rewards loyalty is wrong. Not only is it doubtful that kowtowing to China will bring short-term benefits but, on the contrary, it is rather quite possible that we’ll end up paying a high price for such policy in the future. If today’s decisions are shaping our future, then granting China with market economy status will surely be a nail in the coffin for Argentina.

This statement is true because awarding such status to China implies giving in the most effective tool to prove China’s unfair competition in the WTO. Without this tool, China will continue to do dumping with the certainty that proving its unfair practices in an investigation would be almost impossible. It is not difficult to imagine the consequences of such scenario. Eventually, China would enrich itself unfairly at the expense of its trade partners, as a result of the declining of certain industries, the shutting down of companies and mass unemployment.

It is not the first time that China takes advantage in this way. When China accessed WTO, customs duties plummeted sharply and foreign investors were attracted to China thanks to a number of incentives: cheap labour force, an undervalued currency, a lax environmental legislation and tax exemptions. This triggered an exodus of companies to China who were seeking to reduce costs. Consequently, China developed a gigantic trade surplus and accumulated huge foreign currency reserves. These reserves are now being used by China to buy technology and strategic assets. In other words: we served China becoming the globalization winner on a silver platter.

Nobody can escape the reality that China is of vital importance for Argentina’s economic future. Nonetheless, partners in Latin America, the United States and Europe are not less important, given that the bilateral relation with China has not been as fruitful as anticipated. Many investments are still pending while other so called investments are merely loans. In trade terms Argentina also runs a deficit with China, despite the Asian giant being an importer of food and natural resources

China is somehow presented as the crucial country for Argentina's economy in times of a presumed decline of the United States and Europe. However, this assessment is not exactly backed by evidence. It is true that there are several beneficial projects at the moment and, in the future, China might even become a key economic partner. Nevertheless, there is still a long way to go at this point. Confusing reality with fiction is a wrong approach, mainly because getting too close to China involves substantial risks, which is why caution should be exercised when granting China the status of a market economy.

By Juan Pablo Cardenal. Spanish writer, co-author of the book ‘La Imparable Conquista China’ (2015), associated researcher of CADAL.

Source: Clarín (Buenos Aires, Argentina)