Riding a 'friendly elephant'? How African nations can make the best of economic partnership with China.

• Author: Campbell, Austin
• Position: Abstract through III. Downsides to Chinese Involvement in Nigeria and South Africa B. 'Ruinous' Competition and Other Economic Concerns, p. 499-523

ABSTRACT

Modern China is a major trading partner with and investor in Africa. This Note examines its relationships with Nigeria and South Africa to evaluate whether the benefits they receive from Chinese involvement, like infrastructure or access to consumer goods, are outweighed by costs such as worsened corruption. It next discusses legal measures these countries have taken to mitigate any costs of Chinese involvement. At least in Nigeria and South Africa, the concrete benefits of Chinese trade and investment appear to outweigh the uncertain costs. However, legal protections adopted to reduce these costs are likely still inadequate. Given significant barriers to effective governance, especially in Nigeria, it is in the interests of all parties to renegotiate their bilateral investment treaties to promote host government rule of law. This would allow both African nations to better manage any costs associated with Chinese activities, while also assuring China of more stable economic relationships.

TABLE OF CONTENTS I. INTRODUCTION II. AN OVERVIEW OF CHINA'S RELATIONSHIP WITH AFRICA A. Relations Prior to the New Millennium B. Modern Developments in China-South Africa and China--Nigeria Relations C. China's Influence in Africa: Benign or Malign? III. DOWNSIDES TO CHINESE INVOLVEMENT IN NIGERIA AND SOUTH AFRICA A. Potential Human Rights Violations 1. Environmental Damage in Nigeria 2. Labor Rights Violations B. "Ruinous" Competition and Other Economic Concerns C. Promoting Corruption and Hampering the Rule of Law IV. LEGAL CONSTRAINTS ON CHINESE INVOLVEMENT IN NIGERIA AND SOUTH AFRICA A. Environmental Regulation in Nigeria B. Labor and Other Rights Protections C. Anti-Corruption Efforts and Accountability D. International Treaties V. CHINA: THE PROBLEM OR THE SOLUTION? A. The Potential for BITs to Mitigate Government Failures B. Feasibility: What About China's Interests? VI. CONCLUSION I. INTRODUCTION

In November 2014, China Railway Construction Corporation, a large state-owned enterprise (SOE) in the People's Republic of China ("the PRC" or "China"), announced a twelve billion dollar plan to build over 1,400 kilometers of new rail lines. (1) However, the planned route is not in China at all; rather, it will connect the Nigerian cities of Lagos and Calabar on either end of that country's coastline. (2) In a press release, the corporation claimed that its deal with the Nigerian government would create "up to 200,000 local jobs." (3) This proposed railway is one example of how China has become Africa's key partner in economic development in the new millennium. (4) In particular, investment and trade between China and the nations of sub-Saharan Africa offer a chance to lift much of the continent's one-billion strong workforce out of poverty. (5) This Note focuses on two international economic relationships, between: (i) China and South Africa, and (ii) China and Nigeria. This Note contributes to scholarship on China's growing involvement in Africa that, so far, has mainly emphasized continent-wide generalities and trends. (6) No prior works have attempted to comprehensively analyze the contours of China's involvement in specific African countries, or to evaluate the costs or benefits resulting from such involvement.

South Africa and Nigeria serve as viable cases through which to examine the effects of Chinese investment in and trade with Africa and how African nations have responded to such involvement. First, China has extensive economic relations with both countries. South Africa is the top destination of Chinese Foreign Direct Investment (FDI) in Africa, followed immediately by Nigeria. (7) South Africa is also China's largest trading partner on the continent by percentage of total imports and exports, though several African countries have more significant trading relationships with China than Nigeria. (8) Both African nations possess large reserves of primary resources that China requires--various mineral commodities for South Africa, and petroleum and natural gas in Nigeria. (9) They have dynamic and (especially in Nigeria's case) growing economies, and thus are better situated than most other sub-Saharan African nations to reap the benefits of FDI from, and trade with, China. (10) A more utilitarian reason to select these nations as subjects is that, since Nigeria and South Africa are among the most prominent African nations, the literature on their domestic policies and relationship with China should be more developed. Another is that South Africa and Nigeria are both democracies. (11) Intuitively, their governments should be more likely to treat Chinese involvement as an opportunity to improve the welfare of the electorate--or at least some subset thereof.

In examining the benefits and costs of Chinese involvement from the perspectives of Nigeria and South Africa, this Note will primarily explore the costs. The benefits, after all, are largely monetary and more easily quantifiable. This Note will evaluate the extent to which these nations' relationships with China have created a net benefit for them. It will also evaluate how these nations have responded to any problems caused by China, and explore how to maximize the benefits of Chinese trade and investment. Part II lays out the parameters of China's relationship with Africa, and in particular Nigeria and South Africa. It then presents two competing narratives of China's overall impact on the African continent. Part III examines the circumstances in which South Africa and Nigeria have possibly faced negative consequences from Chinese trade and investment in the form of human rights abuses due to environmental or labor abuse, competition or dumping by Chinese firms, and corruption or the degradation of the rule of law. (12) Part IV explores the adequacy of legal measures South Africa and Nigeria have taken to curtail some of the problems described in Part III. It touches on the potential for bilateral investment treaties (BITs) to mitigate some these issues, but notes that at present China's African BITs may be worsening some of these problems. Part V starts by suggesting that, despite the issues discussed in Part IV, on balance South Africa and Nigeria have benefitted from their relationships with China. To the uncertain extent these countries are harmed by China's actions, however, this Part proposes that the re-negotiation of their BITs would be in the best interests of both China and its African partners. BITs are a more viable method of managing any downsides of Chinese trade and investment because they subject nations hosting investment ("host nations") to pressures and concerns beyond that of their domestic political processes. (13) In...