Carmody, P., Rosengren, A.. 2014. ECDPM talks to Professor Pádraig Carmody on the BRICS and how they are changing the global balance of power, helping create a new global geopolitical space and region. GREAT Insights, Volume 3, Issue 4. April 2014.
Carmody: The BRICS are changing the nature of globalisation in a number of ways. One of the primary ways that China is changing the nature of globalisation is through the central role placed on state-owned enterprises (SOE) in the promotion of outward foreign direct investment (FDI). As part of their go-out policy, Chinese investment in Africa and other developing countries is primarily led by state-owned enterprises – which to some degree represents an expansion of Chinese state power rather than an expansion of market power. This differs from the old model of globalisation promoted by the US and Europe, which largely was one of private sector globalisation. Some of the other BRICS countries have important state-owned companies as well. For example, of the Indian companies included in the Forbes’s list of the biggest 500 companies in the world (the Global500), most appear to be state-owned.
One central area where China differs from the other BRICS is its capacity to bring a whole variety of power resources to the table (2) that the other BRICS cannot marshal.
The second way that the BRICS are changing the nature of globalisation is through the concept of horizontal cooperation, referring to development strategies that aim to foster cooperation without strong power hierarchies. For example, since the Brazilian development support is provided on a non-conditional and demand-driven basis, and consequently there is more limited space for Brazil to use aid as a means to serve Brazilian interests. This might however only address power structures on a superficial level and there are ample debates on the actual implications and impact this can have, and whether this really represents a reconfiguration of the nature of aid relationships and globalisation patterns.
A third way that the BRICS are reconfiguring globalisation relates to their use of aid, trade and investments as a coherent and combined framework for external relations. During the period from 1999 to 2003, Chinese trade with developing countries grew 90% faster compared to their trade with developed countries. Through this it is becoming more deeply integrated with developing countries economically. China is now Africa’s largest trading partner (1) as well as, perhaps, the biggest single source of new foreign investment. This has led to a reversal in the terms of trade where primary commodity prices tend to go down due to low income and price elasticities, while prices of manufactured goods go up. The incredible demand from China (and to a lesser extent also the other BRICS) for natural resources has been one of the key factors driving up global commodity prices. As an example, 40% of the world’s copper is consumed in China. The creation of this global commodity super-cycle is changing the nature of economic globalisation, and is one of the main reasons why Africa currently is the world’s fastest growing continental economy.
The incredible demand from China for natural resources has been one of the key factors driving up global commodity prices
Carmody: One of the things that all of the BRIC countries share is the rhetoric of non-interference and respect for state sovereignty, which can be seen for example in Russia’s approach to the Syrian conflict or in President Lula’s promotion of the idea of non-indifference, coined by his foreign minister Amorin. This policy could arguably be said to serve a very useful commercial and strategic economic function. Since the rhetoric and ideology of non-interference is very attractive to incumbent African political elites it means that Brazilian and Chinese companies are able to do business more easily in places like Zimbabwe or Sudan compared to perhaps European or American companies.
One central area where China differs from the other BRICS is its capacity to bring a whole variety of power resources2 to the table that the other BRICS cannot marshal. Therefore, the Chinese government is able to adopt a “full spectrum”approach in their relations with African countries, compared to many other partners. In addition to the promise of non-interference, China can for example offers tariff free early harvest agreements (there are about 550 products that enter the Chinese market duty-free from low-income countries), provide debt relief to African countries, and build presidential palaces or sports stadiums. These factors, when combined, often prove a very attractive package for the different countries China engages with.
India is however very advanced in the area of land investments; according to the Land Matrix database (3), the Indian government is the biggest single foreign investor in African land. Yet, Indian investments, generally, in Africa are private sector led and lack the power resources and integrated spectrum approach of China. With this in mind, India has tended to focus more on trying to influence and build strong political and economic relations with the political elites.
Carmody: Similar to Joseph Nye’s description of hard and soft power (4) we see that the Europeans and Americans have significant power resources, but that they also face competitive disadvantages in relation to China. Key ‘soft power’ factors are the negative connotations associated with both the history of colonialism and the highly criticised structural adjustment programmes implemented in the 1980s and 1990s. Western donors are also at times perceived as patronising and overtly interfering with regards to, for example, the promotion of a Western vision of human rights. Some stakeholders therefore feel that China’s policy of non-interference is more attractive; this is particularly so for incumbent African political elites as it reduces the pressure to undertake reforms.
The economic competition from China has to a certain degree encouraged European countries and the US to reform their aid policies by integrating it more closely with their trade, investment and private sector strategies. President Obama for example is hosting the first US-Africa Governmental Summit in Washington in a few months, which according to some mirrors the Chinese Forum for China-Africa Cooperation (FOCAC), which hosts African heads of state every couple of years in Beijing or Africa. At the same time, China is growing progressively dependent on a steady and increasing commodity supply from Africa, in particular oil, which might reduce their independence and negotiation power.
Carmody: Yes, I think that you can see that progression. The initial imperative of the Chinese go-out policy was to create national state-owned champions, which through oversees investments could source natural resources and raw materials to fuel the Chinese economy. A consequence of this policy was that the outward labour migration to countries such as Angola for instance increased rapidly. Initially most Chinese migrants moved on a short-term basis for a specific project employment, but some stayed after the completion of their contract to start up small businesses and engage in trading activities. However, some argue that the migration flows from China to Africa are less related to the large state-driven investment of the previous decades and more motivated by factors such as a skewed gender balance and still high unemployment rates in parts of the country.
Moreover, the private sector in China is finding the African market increasingly attractive for investment in sectors such as small to medium scale manufacturing. For example, as bicycles have become a less popular mode of transport in China, Chinese bicycles manufacturers are searching for emerging overseas markets in places such as Ghana. Thus, the restructuring and reforms of the Chinese economy are also drivers for enhanced private sector investment. However, the relatively poor state of infrastructure and low efficiency of production means that we won’t see a massive influx of private sector investment, at least not in manufacturing.
Carmody: One of the things I say in my book is that there are huge power disparities, but also that power is not uni-linear. There are different aspects to power and in many ways the interdependence between China and the African continent has increased. An article in the New York Times (5) described how the government of Chad stopped a Chinese oil company since they were dumping waste. It might seem surprising that the Chadian government felt sufficiently confident to go against this Chinese company, but we have to take into account the Chinese dependence on Chad for its oil supply. Another example is the negotiation between Angola and China on an oil-for-loan contract, where Angola managed to negotiate that their repayments of the loan would be based on the spot price for oil. So rather than getting a contracted lower, long-term price for oil, the Angolan government would get the daily market price.(6) This again shows that even if China has a lot of power resources, the ownership of high-in-demand natural resources and the negotiating skills of the African political elites creates a sometimes advantageous power position for the African partners.
Carmody: The BRICS power relations with traditional donors and partners are marked by both cooperation and competition. The increasing use of triangular cooperation indicates that this does not have to be a zero sum game and emphasises the opportunities for collaboration between emerging donors and more traditional partners.
The issue of non-interference will potentially be a key factor in future triangular collaborations. Yet, it all depends on how you define non-interference. Some people would argue that even though the BRICS have a stated policy of non-interference, certain acts do interfere by their nature. Under certain circumstances, activities such as engaging in arms trade can be a form of interference, if the main beneficiary is a party to a conflict or existing regimes are bolstered. Beyond this, the Chinese talk about non- interference but also non-indifference, the idea that they will engage and try to influence national politics but not interfere and try to enforce particular outcomes. This can however also be driven by some degree of self-interest, where engagement in for instance the reconciliation process in South Sudan (China has tasked its special representative for Africa to mediate the conflict) also provides a way to protect large oil investments in the country.
Carmody: There are a few things. First, some people have argued that the push for donor harmonisation in the Development Assistance Committee was partly a response to the rise of China and the sense that Western donors are losing influence in Africa. The pooling of resources, power and sovereignty was thus an attempt to offset the growing power of China and some of the other emerging economies.
Some European officials have also argued that, in order to “level the playing field” for European companies, there is a need to copy some of the ways in which the Chinese government and Chinese companies have engaged with the continent. This also relates to the growing perception within Europe of Africa as an increasingly attractive market opportunity. This encourages shifts in the national development strategies away from things like direct budget support towards areas such as trade facilitation and the promotion of European private investments and trade with Africa. Personally I think this is a healthier and more positive perspective compared to the traditional aid relationship characterised by a charitable impulse.
This interview was conducted by Anna Rosengren, Policy Officer at ECDPM.
Dr. Pádraig Carmody is Associate Professor in Human Geography at Trinity College Dublin, Ireland
This article was published in GREAT Insights Volume 3, Issue 4 (April 2014).