China and the Andean Community: Opportunities and Risks out of the Decoupling Process

Abstract

Even if China and the United States (US) are not heading toward a redux of classic military, Cold war logic, they are locked in an economic confrontation that has quickly turned into a dispute over prospective economic supremacy and heavily driven by technological advances. While the first area of intervention was international trade, progressively, the protectionist policies both nations began to implement were directed toward a broader plan to secure a leading edge in the future of technological development. Then, technological decoupling might be a more accurate term to describe the key courses of action to be followed in the forthcoming hegemonic struggle. In this setting, the question arises, what are the risks and opportunities for China in its relation with the Andean Community (CAN)? The departing argument is that the economic tensions between the world’s largest economies will cause growing competition. On the one hand, this will provide CAN an opportunity to improve their participation in the global economy, but on the other hand, risks for China for securing resources. The results show that Andean Community (CAN) trade relations with both the US and China follow a typical centre-periphery model. Still, it is noteworthy that China’s imports from CAN are almost entirely basic goods, while the US purchases significant amounts of goods that make part of the region’s productive diversification efforts since the 1990s. Regarding the opportunities for CAN, through a novel methodology, it was found that there are effectively some added-value manufactures that can substitute trade between China and the US. They represent a huge opportunity for the Andean nations to shift away from primary export dependency to manufactured goods. Regarding risks for China, on the one hand, the largest competition is expected in minerals such as molybdenum and tungsten; and agricultural products such as buckwheat and fish fats. On the other hand, the US has the lead in current LAC exports, given that it exceeds China’s current purchases