June 28, 2005

June 28, 2005 | WebMemo on Trade, Economic Freedom

CAFTA's Covert Opponent: China

In the Multi Fiber Arrangement world of quota-free trade in yarns, fabrics, and finished textiles, the Central American Free Trade Agreement (CAFTA) represents a direct threat to China's growing power-indeed, its near-monopoly-in world textile production. If passed, CAFTA would enhance the competitiveness of Central American factories that pay higher wages than China and predominantly use U.S. cotton. But if CAFTA fails, U.S. cotton exports to Central America will come to an end, while U.S. imports of Chinese textiles-with little or no U.S. content-soar.


The debate over CAFTA encompasses geopolitical as well as trade considerations. Washington's understandable focus on the War on Terror and Iraq has led to the impression in Central America that the U.S. has no time to attend the challenges that the region faces. CAFTA's uncertain passage deepens these worries.


U.S. Assistant Secretary of State for Western Hemisphere Affairs Roger F. Noriega warned last March that China has been translating its economic success-and its search for resources to fuel its economic growth-into greater influence in Latin America and the Caribbean. The real danger that enhanced Chinese influence in Central America poses is not economic, but political and strategic. For decades, the United States has encouraged and supported forces of freedom and democracy in Central America-with considerable success. Meanwhile, China has reassured the world's despots and tyrants that "each country has the right to choose its own path to development," whether democratic, totalitarian, or-as in the case of Cambodia in the 1970s and Sudan today-genocidal. China's support is the main reason that the tyrannical regimes in North Korea and Burma have not collapsed from their sheer economic incompetence. If anti-democratic juntas were ever to launch coups in the Western Hemisphere again, CAFTA would greatly enhance the power of the United States' opposition to them, counterbalancing China's growing influence in the region.


U.S. disengagement from Central America leaves a very real political and economic vacuum that China appears more than happy to fill. China has already elbowed its way into an observer's chair at the Organization of American States (OAS)-despite the OAS's stated goal of advancing democracy. Moreover, China successfully lobbied to keep Taiwan out of an OAS observer position despite the fact that it is one of the world's most dynamic democracies. Chinese diplomatic advances in the Caribbean rim include massive trade agreements and military cooperation with Venezuela. (As one retired Venezuelan admiral recently put it, "You have to see this from a geopolitical point of view. We're no longer a country allied to the Western Hemisphere. We're going to be allied to China or Russia.") China has sent about 140 Chinese policemen to join U.N. peacekeepers in Haiti and is pressuring Haiti to break ties with Taiwan to maintain the U.N. presence. China plans to add 125 new police to the peacekeeping contingent for Haiti's presidential, legislative, and municipal elections.


It is perhaps a minor footnote in the congressional debate over CAFTA that all the countries involved maintain diplomatic ties with Taiwan and not with China. But this fact is remarkably important to China and partly explains China's efforts in recent years to make inroads in Central America. China has launched a major diplomatic offensive in Central America and the Caribbean to stamp out Taiwan's diplomatic legitimacy in the region and supplant Taiwan's influence among these young democracies with its own.


CAFTA's defeat, therefore, would be a double victory for China. Central America would be left with the message that the United States is simply not interested in its fledgling democracies. And Congress would do China the favor of taking out one of its few remaining competitors in the U.S. textile market.

John Tkacik, Jr., is Senior Research Fellow in China Policy in the Asian Studies Center at The Heritage Foundation.

About the Author

John J. Tkacik, Jr. Senior Research Fellow
Asian Studies Center

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