is engaged economically and politically in Latin America,
and this engagement should enhance -- not impair -- U.S.
ties to the region, says Charles Shapiro, principal deputy
assistant secretary of state for Western Hemisphere affairs.
In September 20 testimony before the U.S.
Senate Subcommittee on the Western Hemisphere, Shapiro outlined
the role of China in Latin America and the likely diplomatic,
political and economic consequences.
The United States sees two major trends
in China's engagement with Latin America, Shapiro said.
These trends are increased trade and investment in the region
to fuel China's domestic development, and efforts to match
this growing economic engagement with political influence.
CHINA’S ECONOMIC ENGAGEMENT
Shapiro pointed out that China increasingly
has engaged the rest of the world, including Latin America,
to fuel its rapid economic development. As part of its efforts
to secure inputs and markets, Chinese imports from Latin
America reached $22 billion in 2004 and are up 16 percent
in the first half of 2005. Similarly, China's exports to
the region reached $18 billion in 2004 and are up 32 percent
in the first half of 2005.
Another important element of China's economic
engagement in the region is China's efforts to secure reliable
access to petroleum products, Shapiro told legislators.
However, even though China has expanded
commercial ties with Latin America and is an important new
investor in the region, U.S. trade and investment in the
Americas continues to dwarf that of China.
U.S. trade with the region exceeded $445
billion in 2004, 10 times China's level, Shapiro said. He
noted that Latin America's exports to the United States
are up 10 percent and imports from the U.S. are up 15 percent
in the first half of 2005 compared to 2004 levels. And whereas
Chinese investment in the region is approximately $8.3 billion,
U.S. investment in Latin America is more than $300 billion,
the State Department official said.
Apart from the significant difference in
scale, Shapiro explained, the United States' economic engagement
in Latin America fundamentally differs from that of China.
Chinese exports, particularly in the areas of textiles and
apparel, provide stiff competition for some Latin American
and Caribbean producers but the United States provides high-tech
and knowledge-based goods and services, he said.
"The region needs and values our market
and our expertise for its continued development," Shapiro
CHINA’S POLITICAL ENGAGEMENT IN LATIN
Along with its increased economic engagement
in Latin America, China is trying to enhance its political
influence, according to Shapiro.
"China is also interested in matching
its economic power with political influence in the region,"
he said. "China's desire to compete with and ultimately
isolate Taiwan diplomatically is a key factor in Latin America,
home to 12 of the 26 countries that have diplomatic relations
Apart from its efforts to isolate Taiwan,
China has employed "visit diplomacy," with many
Chinese officials making numerous visits to the region,
As China's engagement in the region expands,
the United States hopes this will produce positive benefits
and not detract from the U.S. hemispheric agenda.
"We support China's engagement in the
region in ways that create prosperity and promote transparency,
good governance, and respect for human rights," Shapiro
said. "We need to work with China and with our friends
and allies to ensure that every effort is taken to promote
polices that converge with our interests."
He said the United States will continue
to monitor China's presence in the Latin America to ensure
that it does not detract from the U.S. goals of prosperity,
democracy and respect for human right in the region.
Shapiro concluded that China's increased
engagement in Latin America should lead to increased cooperation
between the United States, China and Latin American and
Caribbean governments, while not diminishing U.S. capabilities
and influence in the region.
"Our allies throughout Latin America
believe good U.S.-China relations are important to global
peace, prosperity and stability," he said. "Our
efforts to work with China should enhance, not impair, our
Following is the text of Shapiro's prepared
statement before the Senate Foreign Relations Committee's
Subcommittee on the Western Hemisphere:
U.S. Department of State
"The Role of China in Latin America:
Diplomatic, Political, and Economic Consequences"
Statement by Charles S. Shapiro,
Principal Deputy Assistant Secretary of State for Western
Before the Senate Subcommittee on the Western Hemisphere,
Peace Corps, and Narcotic Affairs
September 20, 2005
Mr. Chairman, members of the Subcommittee
on Western Hemisphere, Peace Corps and Narcotic Affairs,
I am pleased to appear before you this afternoon to discuss
the diplomatic, political and economic implications of China's
engagement in Latin America and the Caribbean. China's emergence
- its economic and political development, its engagement
in a rules-based international world, its evolution as an
interlocutor on security issues in Asia and beyond - will
be an important opportunity and a key challenge for the
United States over the next quarter of a century and beyond.
To the extent that China's engagement promotes policies
that contribute to the fundamental interests of the American
People, we welcome that engagement.
The United States in the Western
U.S. policy in Latin America has been built
upon a positive and constructive vision designed to advance
freedom and prosperity in the region. We have promoted democracy
and the rule of law so that every citizen can decide what
is best for him- or herself, and is guaranteed the right
to claim his fair share of political freedom and economic
opportunity. We promote free enterprise as a perpetual engine
of growth. We are committed to working together with our
neighbors to make things better for the poorest among us
so that things can be better for all of us.
We pursue our many goals on a daily basis
with our partners in the region. For example, we work multilaterally
with the U.N. in places like Haiti and with the OAS throughout
the hemisphere to further the interests shared by all the
nations of the hemisphere. With the strong support of President
Bush at the Fort Lauderdale meeting of the OAS General Assembly
in June, we joined with our neighbors in the region to issue
the "Declaration of Florida," which among other
things advances our agenda of delivering the benefits of
democracy to ordinary citizens by making governments more
effective, transparent and accountable. We have also contributed
significant resources to support the exercise of democracy
in 13 countries that are holding elections in the year ahead.
In November, Argentina will host the Fourth
Summit of the Americas, where the focus will be on creating
jobs. We are developing, in concert with the other 33 democratically
elected governments in the hemisphere, a Summit Plan of
Action that will meet this objective head on. We are striving
for a Plan of Action that has meaningful initiatives, with
measurable outcomes, designed to ensure that the Summit
has real meaning in advancing the welfare of the hemisphere's
citizens. The role of governments is to help establish a
framework in which the private sector can thrive; one that
promotes more competitive economies attracts investment
and fosters private enterprise -- small and medium-sized
enterprises in particular. In 2004, at the Special Summit
of the Americas in Monterrey, the hemisphere's leaders committed
themselves to practical steps to boost economic growth and
open economic opportunity to all. They agreed to strengthen
and enforce property rights, lower barriers to remittances,
remove obstacles to starting small businesses, and increase
access to capital for small business owners. And we have
already seen results. For example, in the 22 Western Hemisphere
countries (excluding the U.S. and Canada), the average time
of starting a business has been reduced from 71 days in
2004 to 63 days in 2005. A good start, but we hope to do
much better. We will strive for similar, measurable outcomes
in the upcoming Summit.
Our economic and trade links with countries
in the region foster prosperity and promote democracy and
the rule of law. The ties between economic opportunity and
political empowerment are clear. Our economic relations
are about breaking down entrenched interests, stigmatizing
corruption, rewarding reforms that bolster competitiveness,
and ensuring that the very poor have the tools they need
to claim their fair share of economic opportunity.
Our economic engagement in the region is
extensive and broad-based. We have comprehensive trade and
investment relationships with Mexico and Chile through existing
free trade agreements; CAFTA-DR was just approved and we
hope to conclude an Andean free trade agreement, as well
as one with Panama, in the near future. The Millennium Challenge
Account offers great promise to assist countries in making
the reforms necessary for long-term growth, and we are pleased
to note that two of the first four countries to have MCA
compacts -- Honduras and Nicaragua -- lie within our hemisphere.
Of course, the heavy lifting in the region, as it should
be, is done by the U.S. private sector. An estimated 30%
of foreign direct investment flows into the region are from
the U.S., and the U.S. accounts for more than 50% of multinational
firms doing business in the region.
While we are not so bold as to claim all
of our goals have been met -- and there is still a lot to
do -- there has been progress in many areas. Today every
country in the hemisphere but one has a democratically elected
government. We improved the basis for security cooperation
in the Hemisphere through a broad range of military-to-military
engagement and security assistance programs. And the percentage
of the hemisphere's population -- about 15 percent -- living
in extreme poverty is decreasing, although the numbers of
poor are increasing due to population growth and persistent
income inequalities. Reducing poverty and increasing regional
prosperity remain key objectives.
China in the Western Hemisphere
We see two major trends in China's engagement
with Latin America and the Caribbean: first and foremost,
growing trade and investment are necessary to fuel China's
own rapid domestic development. Second, China wants to match
its growing economic strength with political influence in
order to advance its own national agenda.
China's Economic Influence
China is the world's seventh-largest economy
(with an economy about the same size as Italy's), the world's
third-largest trading nation, and a major destination for
foreign-direct investment from around the world. Its economy
has grown at over 9.5% per year for the past twenty-five
Rapid growth and development are significant
sources of legitimacy for the Chinese Communist Party. To
sustain that growth, China has increasingly engaged with
the rest of the world, including with Latin America, to
secure inputs it needs and markets for its surging exports.
China's demand for Latin American goods
has helped fuel economic growth in many countries. At the
same time, however, China's exports, especially in textiles,
apparel, and shoes, pose stiff competition for some Latin
American and Caribbean producers, primarily in third-country
-- China's imports from Latin America reached
$22 billion in 2004 and are up 16% in the first half of
this year. Primary imports from Latin America include metal
ores, soybeans, and copper.
-- China's exports to Latin America reached
$18 billion in 2004 and were up an additional 32% in the
first half of this year. China's top exports to Latin America
include machinery, electronics and apparel.
-- While it is difficult to attribute what
portion of overall economic growth in Latin America is attributable
to particular factors, it is clear that China's boom has
expanded markets for Latin exports, and thus contributes
to economic growth. For example, the value of Chile's net
exports to China more than doubled in 2004, increasing by
about $1 billion in a $94 billion economy.
-- China is an important new investor in
the region as it searches for resources. Still, Chinese
investment is rather small, at approximately $8.3 billion
at the end of 2004, according to Chinese data. And the lion's
share of that sum consists of investments in tax haven countries,
such as the Cayman Islands and British Virgin Islands. However,
deals for future investments, primarily in infrastructure
and extractive sectors, could be a significant boost to
the region if realized.
-- China is now the world's second-largest
consumer of petroleum, and has become a net importer of
oil. We believe that securing reliable access to petroleum
products from Hemisphere is an important element of China's
engagement in the region, especially with Venezuela, Colombia,
In comparison, U.S. trade with and investment
in the region dwarf China's, and is distinct from what China
has to offer. We provide high-tech and knowledge-based goods
and services. U.S. trade with the region exceeded $445 billion
in 2004, ten times China's level; Latin America's exports
to the U.S. are up 10 percent and imports from the U.S.
are up 15 percent in the first half of this year. U.S. investment
in Latin America is over $300 billion. The region needs
and values our market and our expertise for its continued
China's Political Influence
China is also interested in matching its
economic power with political influence in the region. China's
desire to compete with and ultimately isolate Taiwan diplomatically
is a key factor in Latin America, home to twelve of the
26 countries that have diplomatic relations with Taiwan.
China will continue to offer assistance to countries like
Dominica and Grenada, which switched their recognition from
Taipei to Beijing in March 2004 and January 2005 respectively.
The Chinese are also skillfully employing
"visit diplomacy." On the margins of the APEC
Summit in Santiago in November 2004, where President Bush
and President Hu Jintao met, President Hu Jintao also visited
Argentina, Brazil, Chile, and Cuba. Hu promised tens of
billions of dollars for improving infrastructure -- again,
mainly to improve access to, and transport of, raw materials.
In December 2004, Venezuelan President Hugo
Chavez visited Beijing, signing agreements that would increase
China's investment in Venezuela's oil sector and boost bilateral
trade, which, as Chavez stated, could reach $3 billion in
2005, more than double the total for 2004.
In January and February 2005, Vice President
Zeng Qinghong visited Mexico, Venezuela, and Peru, and attended
the opening ceremony of the first ministerial-level meeting
of the China-Caribbean Economy and Trade Co-operation Forum
2005 in Kingston.
In route to the United Nations General Assembly
in New York, President Hu Jintao recently visit Canada and
Mexico, and on September 12 signed several trade agreements
on such areas as tourism, taxes, and agriculture. President
Hu Jintao also promised to take action against illicit Chinese
commerce arriving in Mexico.
Apart from its diplomatic competition with
Taiwan, we believe China should step up to global responsibilities
commensurate with the benefits that it derives from being
both a member and a stakeholder in international systems
and organizations. For our part, one of the most important
foreign policy goals of seven American Presidents -- over
30 years -- has been to engage China in a way that helps
it peacefully and responsibly integrate into the international
system. As Secretary Rice said in her March 19 speech in
Tokyo, the U.S. "welcomes the rise of a confident,
peaceful and prosperous China ... [and wants] China as a
global partner," but one that is "able and willing
to match its growing capabilities to its international responsibilities."
We also seek a China that is moving toward greater openness
and rule of law at home, though it clearly has a long way
China's integration into the global economic
and political community is now largely complete. It has
a permanent seat on the UN Security Council, is a WTO member,
is active in the World Bank and IMF, interacts with the
G7 and G8, plays a strong role in a number of regional bodies
such as APEC and ASEAN, has contributed significantly to
Asian security through the Six Party Talks, and has permanent
observer status in the OAS.
We support China's engagement in the region
in ways that create prosperity and promote transparency,
good governance, and respect for human rights. We also want
to ensure vital natural resources, such as fisheries and
forests are used in a sustainable way. China's determination
to achieve energy security is an important aspect of its
global outreach, and it is critical that China understand
the fundamentals of global energy markets. But equally important,
we need to work with China and with our friends and allies
to ensure that every effort is taken to promote polices
that converge with our interests. We will continue to monitor
China's presence in the region to ensure this is the case
-- that its presence does not detract from our goals of
prosperity, democracy and respect for human rights.
We expect that China's increasing engagement
in the region will lead to increased cooperation between
China, the United States, and other Latin American and Caribbean
governments on matters affecting regional stability, especially
terrorism, transnational crime, and counternarcotics. We
view positively China's participation in the U.N. peacekeeping
mission in Haiti in a way that contributes to the mission.
China's Role in Narcotics Control
Given this subcommittee's interest in narcotics,
let me elaborate on China's role in narcotics control in
the region. China has a large and developed chemical industry,
and, like the U.S., it is one of the world's largest producers
of precursor chemicals, which have legitimate uses but are
also used in the production of cocaine and synthetic drugs.
In particular, China is the world's leading exporter of
bulk ephedrine (used in cold medicines and weight-loss tablets)
and a source country for much of the ephedrine and pseudoephedrine
imported into Mexico.
China notifies the DEA of shipments of precursor
chemicals to the U.S. and Mexico so that tracking may be
done to prevent diversion of these chemicals for illicit
purposes. Nevertheless, some precursor chemicals are diverted
from legal use to manufacture methamphetamine destined for
the United States.
To regulate its chemical industry, China
is a party to the 1988 U.N. Drug Convention and has regulations
for record keeping and import/export controls on all chemicals
included in the Convention. Several provinces have more
stringent controls than called for in the Convention. In
the State Department's International Narcotics Control Strategy
Report we have noted, however, that China needs to improve
its infrastructure to adequately monitor its large chemical
production capacity and international trade in chemicals.
U.S. and Chinese cooperation in chemical
control and counternarcotics is good and has been steadily
improving. This was highlighted by a joint operation involving
the DEA and several PRC law enforcement agencies in October
2004, leading to the world's largest seizure of the synthetic
drug Mandrax (18 metric tons), and the seizure of 10 tons
of pseudoephedine tablets (a key precursor for methamphetamine)
in Los Angles in September 2004. While China is a transit
country for heroin produced in Southeast Asia to international
markets, the DEA's Heroin Signature Program indicates less
than one percent of heroin seized in the U.S. comes from
China's Military Influence
We have noted, and are following closely,
what appear to be expanding military-to-military contacts
between China and countries in the region. You may recall
that in previous testimony before Congress, General Bantz
Craddock of the United States Southern Command noted that
national-level defense officials from China made 20 visits
to Latin America and the Caribbean, while defense ministers
and chiefs of defense from nine regional countries have
visited China. In addition, we are watching closely increased
educational exchanges between China and several Latin American
and Caribbean countries, and seek to ensure that they do
not undermine the commitment of Latin American militaries
to democracy and civilian control. As China considers arms
sales to the region, we will apply our general policy of
seeking transparency and accountability in these sales and
are concerned about the risk of diversion of weapons to
illegal armed groups, which threaten the peace and security
of the hemisphere.
We do not have reliable figures for China's
military assistance in the Western Hemisphere. However,
we note that U.S. military assistance is preconditioned
on adherence to basic principles of good governance and
transparency, and we encourage China to adopt similar principles.
In comparison, U.S. military assistance, incorporating Article
98 restrictions, dwarfs China's security assistance to the
There is much that is complementary with
China in our approach to the region and much on which we
look forward to cooperating with them. As the president
said on May 31, our relationship with China is complex,
but at least in recent years we have been able to communicate
often - in remarkably candid and direct fashion, when necessary
- and to address common challenges -- regional and global,
economic and political. Of course, we do have differences
with China on a variety of important issues, including human
rights, non-proliferation, Taiwan, and some aspects of trade
and finance, among others. Let me say again that we intend
for our relationship with China to be based both on a realistic
appraisal of our common interests and equally important,
a frank exploration of differences through dialogue.
China's growth and development have naturally
brought growing relationships with traditional U.S. allies
in the region. This does not diminish U.S. influence or
capabilities. U.S. policy toward Latin America is anchored
in our strong and enduring alliances, which continue to
provide unprecedented stability and prosperity in the region.
Our allies throughout Latin America believe good U.S.-China
relations are important to global peace, prosperity and
stability. Our efforts to work with China should enhance,
not impair, our regional alliances.
Some Final Observations
Let me conclude with a couple of observations.
First, our relationships with our neighbors
in the Western Hemisphere are strong and stable, based on
our shared values, economic ties and defense relationships
with the countries of the region. A strong, secure United
States in a strong, secure, prosperous and stable Western
Hemisphere remains our goal, and a continuing reality.
Second, we must continue to work with China,
and with our partners around the world, to ensure that China's
development takes place within strong regional and global
security, economic and political arrangements. This is the
policy articulated by President Bush and Secretary Rice,
and is a key objective of the U.S.-China Senior Dialogue
led by Deputy Secretary Zoellick. I assure you that in pursuing
this goal, our guiding principle remains to advance the
interests and values of the United States.
Thank you for this opportunity to testify.
We would be pleased to take your questions.