At its most basic level, it consists of two or more companies from different countries engaging in an agreement to exchange products or services for compensation. Logistics companies then move the products to their final destination. These transactions occur every minute of the day around the world.
At a more macro level, trade is a geopolitical tool that is used as part of a government’s diplomatic strategy to further its interests in strategic locations.
Such is the case with Russia. Reports have surfaced that during the first two months of 2017, this country’s trade with international pariah North Korea has ballooned by more than 73 percent, compared to the same period in 2016. This increase is comprised mostly of Russian exports of coal to North Korea, and Russian participation in North Korean infrastructure projects such as railway upgrades and ocean ferries. Russia also has agreed to allow an additional 400,000 North Korean workers to work in Russian forestry and construction industries, which will result in more money flowing back to the Kim Jong Un administration in North Korea.
Russia’s moves are not coincidental. In fact, they are an opportunistic reaction to the pressure that North Korea is receiving for its aggressive behavior with its neighbors in the region. Leading the pushback on North Korea through sanctions have been the U.S. and China, with the latter curbing its coal exports to the country as punishment for the instability it is causing in the region. By choosing to fill the void in North Korea being left by countries such as China, Russia is not only generating foreign revenues, it is flexing its muscles to block U.S. and Chinese influence in a strategic part of the world, virtually at its borders.
Another example of trade as a geopolitical tool is the increasing presence of China in Latin America and its growing influence throughout Asia. Chinese leaders and diplomats are a constant presence throughout Latin America, as they test the waters left churning by the uncertain stance on trade that the U.S. has developed under President Donald Trump. On June 13, longtime U.S. ally Panama announced that it was cutting ties with Taiwan and establishing ties with China under the “One China” policy, long advocated by this Asian nation. This is a major win for China.
Throughout Latin America, U.S. allies and trading partners, who are attempting to interpret where they will stand in the future as pertains to trade with their giant northern neighbor, are using China as a bargaining chip and are openly discussing increased trade and diplomatic relations with that country. Mexican officials, having been accused by Trump of benefiting unfairly under the North American Free Trade Agreement, have publicly stated the country’s willingness to increase ties to China.
Now that the U.S. has announced that it is pulling out of the Trans Pacific Partnership, China can forge a trade agreement with Asian and Latin American partners that will allow it to take the lead in shaping future trade policy in the region. By developing stronger trade ties in Asia and Latin America, China’s political influence in both regions will grow in the future.
After last month’s G-7 meeting, which took place in Italy, German Chancellor Angela Merkel, a traditionally staunch U.S. ally, stated in reaction to Trump’s viewpoints at the meeting, that Europe “really must take our fate into our own hands,” and, “The times in which we could rely fully on others, they are somewhat over. This is what I experienced in the last few days.”
The U.S. has not seen such a turn to isolationism since the period after World War I, which eventually helped precipitate World War II. China and Russia are historic adversaries of the U.S., and both will fill the void left by the U.S. if it chooses to restrict trade in places such as Latin America, Asia and Europe. The U.S. has played the trade-geopolitical game against these two rivals for the better part of 60 years. However, it is especially disconcerting that our own traditional allies, such as Germany, are viewing the U.S. as an unsteady ally that has quickly abandoned old friends.
Whatever trade relationship the U.S. chooses to abandon, the void will be filled by another country or adversary willing to step in. In this sense, moving towards isolationism does not put “America first”; rather, it endangers our ability to conduct foreign policy in the future, thus compromising our global interests.
Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit trade counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or at firstname.lastname@example.org.