South-South competition: Asia versus Latin America? ERNST HILLEBRAND What does the rise of the East Asian coun­tries, and China in particular, mean for the countries of Latin America? Will China, build­ing on its hard-to-beat mix of wage advan­tage, labour supply, foreign investments, and technological capacity, crowd the emerging Latin American markets out of the world markets for industrial goods? 1 The development of a unified system of world trade accompanied by a structural reorientation of the economic strategies of most countries to export-driven world-market integration is not only giving rise to new constellations in North­South economic relations. The process is at the same time leading to intensified competition bet­ween countries of the South. These countries, and their products, are not only entering into competition in the export markets of the industrialized countries, they are also faced with growing competition in their own domestic mar­kets. While Asian countries – led by China – have been capturing larger and larger shares of foreign investments, export markets, but also of Latin American national markets, Latin American countries have – despite their break with import substitution and their adoption of an export­1 This was the topic of a Friedrich Ebert Foundation conference in Mexico City:"South vs. South: The transpacific race to the bottom?" Mexico City, Octo­ber 30-31, 2003; aside from Mexican experts, the conference was attended by experts from Korea, Brazil, China, and Germany. For the conference pro­gram and the papers presented, see: http://www.fes­alca.cl/archivos/Program%20South%20vs%20South .doc. The present paper sums up the main results of the conference. oriented growth stra tegy – been increasingly faced with a situation marked by a diminishing presence in the world market and losses of shares of their own domestic markets. It appears to be mainly Mexico, with its low-wage maquila industry, that has felt the brunt of China's rise. In recent years hundreds of maquila factories in Mexico have been closed and reloca­ted in Asia. And while East Asia has been develo­ping at a breathtaking pace into the world's work bench, Latin America has, during the past 25 years, continuously lost larger and larger sha ­res of its industrial output. The Cono Sur, with its relatively developed economies, appears to be in the grip of an accelerating process of deindustrialization: if in 1970 manufactured goods accounted for 30% of the GNP of the countries of southern Latin America, the figure had declined to 17.3% by the year 2000. By compa rison, in Korea and Taiwan, but also in China, the corresponding figure rose in the same period(UNCTAD 2003: 96). Foreign investments One possible interpretation of this development is that the opening of the Chinese market and the relaxation of the investment restrictions originally in force in the first-generation newly industri­alizing countries(Korea, Taiwan, Singapore) had the effect of redirecting flows of foreign invest­ment. This, however, was not the case: indeed, in the 1990s Latin America continued to receive substantial foreign investments – though nowhere near the amount that went to China, which, in the