China’s trade deals shake US
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South America continues to “drift away from US economic hegemony”, says Martin Hutchinson on Breakingviews. com. Co-operation between China and South America is deepening.
Chile has signed a free trade agreement with China, its second-biggest trading partner after America, confirming that the Bush administration’s attempt to establish a Free Trade Area of the Americas is “going nowhere”.
China has reached a series of agreements with Venezuela, including an alliance between Chinese oil major CNPC and Venezuela’s state oil firm PDVSA to develop a local oil field. President Hugo Chavez plans to raise Venezuela’s oil exports to China from today’s 150,000 barrels a day to more than a million in ten years.
The deals should be interpreted as a political, rather than economic move, says Kevin Kerr of Outstanding Investments. It makes little sense to shift oil across the world when America is so much closer, while Chinese refineries are not equipped to refine the sour crude that Venezuela produces.
The deal has “sent a shot over the bows of the Bush administration” and will threaten Venezuelan exports to the US (which account for 15% of the latter’s imports). The Chile deal, by contrast, reflects China’s hunger for commodities, according to Hutchinson. But with China – which “doesn’t play by free trade rules” – now digging for minerals in America’s back yard, Washington should be worried.
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