U.S. must counter China’s trade inroads in Latin America by making these moves — right now | Opinion
Latin American and Caribbean analysts often criticize the Biden administration and previous leaders for lacking a comprehensive trade and investment strategy for the region. Republican U.S. Reps. Maria Elvira Salazar, of Miami, and Bill Cassidy have proposed their own trade strategy to outcompete China.
But all the fuss about a grand strategy obscures the fact that getting the small things right is just as important. The United States can make small trade policy tweaks right now that can both boost the region’s development and preserve U.S. advantage throughout what the president called this “decisive decade.”
One of the reasons some Latin American and Caribbean countries find doing business with China so appealing is the sheer speed with which Chinese state-owned enterprises (SOE) and private companies make deals — legally or otherwise. The United States could compete by offering new free-trade agreements, but unfortunately, such an idea has become taboo on both sides of the political aisle, leaving policymakers with the question, if free-trade agreements (FTA) are off the table, what else can we bring to bear?
Currently the Biden administration’s answer is the Americas Partnership for Economic Prosperity (APEP), which was agreed upon during last year’s Summit of the Americas in Los Angeles. APEP can provide a useful framework for the current 11 members to convene around issues that regional governments need to solve right now, like improving digital trade, securing supply chains, establishing customs standards and generating clean energy jobs. But APEP received a lukewarm reception from regional leaders — especially Ecuador, which just finalized an FTA with China, and Uruguay, which is currently negotiating an FTA with China. Yet, it is the most politically viable tool currently available, and it must be maximized to its fullest.
Mining and critical minerals are top priorities for the United States and several countries in the hemisphere. One immediate win for Washington would be for the Senate to ratify the U.S.-Chile bilateral tax treaty, which would allow U.S. mining firms to compete on more equal footing with Chinese state-owned enterprises in a country with one of the most well-developed mining sectors in the region.
Beyond this, the Biden administration should also consider bringing Argentina, Brazil, Bolivia, Chile and Peru into the existing Minerals Security Partnership (MSP). That Latin America was not included in the original MSP was a major oversight given its rich mineral deposits. By joining, these countries will commit to ensuring that all companies operating within their territories mine, process and recycle critical minerals while maintaining high environmental and social governance standards. Those requirements would apply to every mining company — Western ones like Albemarle and Lithium Americas as well as Chinese ones like Ganfeng and Tianqi.
The administration could also consider modifying the Inflation Reduction Act to allow for critical minerals mined for EV batteries originating from certain non-FTA countries, such as Argentina, to receive tax credits. Currently, only companies that have extracted critical minerals in FTA countries are eligible for the tax credit. This could potentially discourage U.S. and partner private-sector companies from mining in two of the three Lithium Triangle countries, Argentina and Bolivia. Chile is the only Lithium Triangle country with an FTA with the United States.
Additionally, the United States can extend the semiconductor supply chain mapping project announced at the North American Leaders’ Summit to go beyond Mexico, Canada and the United States to look at other countries in the region with potential to build more resilience in this sector. Costa Rica’s already existing assembly plant and Brazil’s progress on research and development efforts point to potential for a whole-of-hemisphere view on semiconductor manufacturing.
The U.S. Department of Commerce, in coordination with regional embassies, should increase trade missions to bring relevant U.S. private-sector actors to the region to identify opportunities and encourage more companies to bid, especially on infrastructure projects where the United States is losing significant ground to Chinese companies. In September 2021, a U.S. delegation led by Daleep Singh, deputy national security advisor for international economics, visited Panama, Colombia and Ecuador to explore such investment opportunities, but there has been little follow up. The Commerce Department could revive such trips this year, especially targeting countries that share our values for “friend-shoring.”
Many of these recommendations don’t require congressional approval, unwieldy working groups or a task force full of geniuses. In this strategic competition around the world — but especially in the Western Hemisphere — sometimes the small things can yield big results. While Washington continues debating on a grand trade strategy, let’s move out on those small things that can bring tangible benefits to Latin American and Caribbean people — right here, right now.
Dr. Ryan Berg is director of the Americas Program of the Center for Strategic & International Studies, where he also heads the Future of Venezuela Initiative.
Leland Lazarus is associate director of research at Florida International University’s Jack D. Gordon Institute of Public Policy. He is also the nonresident fellow of the Atlantic Council’s Global China Hub.
