Global Development Policy Center

China has become an increasingly important financier of energy infrastructure development in the Global South, especially hydropower projects. Despite an increase in investigations on Chinese models of infrastructure financing in these regions, there is a lack of empirical research on the impacts of the China-financed infrastructure. Using data from Johns Hopkins SAIS CARI China-Africa Loan Database and the Demographic and Health Survey (DHS) Program Database, we estimate the impacts of the China-financed Bui Dam in Ghana. We use two difference-in-differences models to identify change of the likelihood to have access to electricity, and to own several electric appliances among over 29,000 local households receiving electricity transmitted from Bui Dam. We found that after the Bui Dam's completion, the likelihood for households living in the treatment regions having access to electricity increased by about 4 percent. However, our models also show that urban households witness a much higher increase in their ownership of various electric appliances, suggesting that the Bui Dam's improvement of electrification may be predominant in the urban and rich households.

This paper compares how Ethiopia and Vietnam, two rising stars actively employing industrial policies as catalysts of structural change, have learned from East Asian countries’ experiences in developing their own special economic zones (SEZs). Based on an extensive literature review, a comparative case study of four SEZs, and interviews with key stakeholders involved in early SEZ development in the two countries, I found that SEZ policy learning was largely driven by each nation’s domestic economic reform. Policymakers in Ethiopia and Vietnam actively visited successful SEZs around the world, particularly those in East Asia. A Chinese and a Taiwanese overseas SEZ were the first SEZs developed respectively in Ethiopia and in Vietnam, which provided eye-opening lessons for domestic policymakers on how to better improve the legal and institutional framework, infrastructure, and administrative services needed for SEZ development. Overall, however, one of the biggest obstacles facing Ethiopia and Vietnam in learning from China’s experiences is the lack of local autonomy given to SEZs in their own administration.

There are over 5,000 Special Economic Zones (SEZs) in the world. About 75 percent of developing economies and almost all transition economies use SEZs in their early stages of industrialization. Why have SEZs traveled so far and fast globally? How does this policy vary when it enters different national contexts? I develop an SEZ policy adoption framework for developing or transitioning countries. I then apply the framework to compare how Ethiopia and Vietnam have learned from mainland China and Taiwan's SEZ policies. Drawing on field interviews with 53 key stakeholders, I argue that the recent wave of SEZ adoption among late industrializers is rooted in their desires to catch up, just as China and other Newly Industrialized Economies (NIEs) did. A coalition between the NIEs' governments, private investors, and state-owned companies actively promoting their model become the key policy ambassadors in the globalization of SEZ while expanding NIE capital to emerging markets. The localization of SEZs in national contexts, however, is constrained by their extant institutional settings. My case studies demonstrate the importance of policy transfer as a driver of SEZ policy and highlight the critical role that emulation plays in late industrialization.

This report assesses the environmental, social and governance (ESG) practices of Chinese-financed infrastructure projects in Africa, within the context of substantial investment needs for African nations to achieve the United Nations 2030 Sustainable Development Goals (SDGs). China plays a crucial role in potential achievement of these goals, providing finance and infrastructure development capacity through aid, loans, foreign direct investment, dedicated funds and contracting services. In the larger picture, Chinese financing has been empirically demonstrated as beneficial, contributing to economic growth and local livelihood improvements, but also presents notable risks, including environmental degradation and social and governance concerns.

Overseas development finance plays a pivotal role in China's expanding global engagement. Existing scholarship often underestimates the commercial astuteness of Chinese capital, portraying it as "patient" due to its higher tolerance of risk compared to Western capital, which prioritizes short-term gains. However, we demonstrate that this narrative overlooks the calculated decisions behind much Chinese overseas lending. Our empirical analysis of Chinese overseas loans committed between 2000-2021 shows that far from being patient, Chinese capital employs hard-nosed risk-mitigation strategies. In risky countries, China routinely demands collateral in the form of future natural resources revenues for its loans, while also requiring loan insurance for projects, and charging higher interest rates on these loans. More specifically, our models demonstrate that loans to countries with higher credit risk levels are more likely to be resource-backed, as are loans that are insured. We also demonstrate that, surprisingly, resource-backed loans carry higher interest rates than their nonresource-backed counterparts, as do insured loans. To explain this surprising finding, we draw on qualitative case studies based on field interviews in the Democratic Republic of Congo, Ecuador and Ghana, and propose three potential mechanisms: political corruption and political business cycles in terms of political risks, and the security of the resource used as collateral in terms of financial risk. These findings suggest that Chinese state lending remains motivated by returns, even though it can also advance broader economic and political aims. This calculated finance, combined with the moral hazard posed by risk-seeking Chinese state-owned enterprises, can heighten sovereign default risk in the Global South. Recognizing the underlying pragmatism of Chinese global finance is critical for understanding the risk perceptions and priorities of emerging sovereign lenders.

Overseas development finance plays a pivotal role in China's expanding global engagement. Existing scholarship often underestimates the commercial astuteness of Chinese capital, portraying it as "patient" due to its higher tolerance of risk compared to Western capital, which prioritizes short-term gains. However, we demonstrate that this narrative overlooks the calculated decisions behind much Chinese overseas lending. Our empirical analysis of Chinese overseas loans committed between 2000-2021 shows that far from being patient, Chinese capital employs hard-nosed risk-mitigation strategies. In risky countries, China routinely demands collateral in the form of future natural resources revenues for its loans, while also requiring loan insurance for projects, and charging higher interest rates on these loans. More specifically, our models demonstrate that loans to countries with higher credit risk levels are more likely to be resource-backed, as are loans that are insured. We also demonstrate that, surprisingly, resource-backed loans carry higher interest rates than their nonresource-backed counterparts, as do insured loans. To explain this surprising finding, we draw on qualitative case studies based on field interviews in the Democratic Republic of Congo, Ecuador and Ghana, and propose three potential mechanisms: political corruption and political business cycles in terms of political risks, and the security of the resource used as collateral in terms of financial risk. These findings suggest that Chinese state lending remains motivated by returns, even though it can also advance broader economic and political aims. This calculated finance, combined with the moral hazard posed by risk-seeking Chinese state-owned enterprises, can heighten sovereign default risk in the Global South. Recognizing the underlying pragmatism of Chinese global finance is critical for understanding the risk perceptions and priorities of emerging sovereign lenders.

This paper reviews the erosion of labor and social protections for U.S. workers and households over recent decades. It discusses the causes and the relative weight of different elements of the erosion in order to bring clarity to the discussion of needed reforms. It proposes a framework of policy objectives and principles to guide choices for reform among policy alternatives in the specific U.S. context. The paper also explores the relative merits of some alternative proposals to address these challenges. The prospects for political and legislative action to create a viable modern social and labor protection system are discussed. The paper concludes that updating and strengthening existing elements of the U.S. system provides a firm foundation for creating an adequate U.S. labor and social protection floor for the 21st century, if critical additional rights and programs are built on and integrated into this foundation.

Calls to renegotiate the North American Free Trade Agreement (NAFTA) resonated with many Americans and political leaders as numerous studies have documented the negative effects of NAFTA on certain groups, regions, and the environment in the US, Mexico and Canada. President Trump renegotiated NAFTA, yet according to the evidence reviewed in this policy brief, the resulting United States-Mexico-Canada Agreement (USMCA) will not restore innovation, industrial jobs, worker rights and living wages; nor will it provide the protections for affordable health care and the environment that have been on the decline since the original NAFTA went into force.  The paper discusses the shortcomings of the pact and proposes alternative policies to achieve a more positive trade policy for North America.

This essay provides an analytical introduction to the policy and practice of including labor rights provisions in trade agreements. It surveys the main existing trade agreements that address labor issues, and deconstructs the labor rights provisions into their main component elements to give the reader a comparative analysis of the approaches taken in different agreements. The essay then discusses several policy considerations that are likely to determine the success or failure of labor- trade linkages, and offers advice to policy makers and negotiators on how to achieve optimal results.

An innovative policy experiment in Cambodia links improvement of workers’ rights with increased orders and market access for the products of the country’s garment factories. The policy originated with the US-Cambodia Textile Agreement, which awarded Cambodia higher garment export quotas into the lucrative US market in return for improved working conditions and labor regulations. Private sector firms that buy Cambodia’s garments also found value in the improved labor practices, as a form of reputation insurance. Policy makers opted to continue this approach even after the expiration of the global garment quota system at the end of 2004. The agreement’s effectiveness has depended on the role of the International Labor Organization, a specialized agency of the United Nations, acting as compliance monitor, bringing unique credibility to this role and generating unprecedented transparency about conditions in factories. Government intervention has been crucial to prevent some apparel producers from free-riding on others’ improvements.

The study explores the impact of several proposals debated in the Doha round of WTO negotiations on participant countries, with a particular focus on developing countries.  Using a CGE model commissioned for the report which included realistic assumptions about labor markets the study identifies winning and losing sectors and countries.

Trade was not such a controversial topic not so long ago. For most of the postwar era trade worked well for the US and for many other countries. A bipartisan consensus supported continuing trade liberalization as long as it was accompanied by full employment. However trade always had winners and losers as economies adjust to different costs of production among trading partners and over the last few decades the number of US workers losing from trade mounted and the losses spread across hard hit communities. For these and other reasons, trade has become so controversial that it is now a key pivot point in politics and elections in the US. What changed the equation? Among many factors perhaps the most fundamental was that the US trade model itself changed, beginning in the 1980s. Instead of the gradual reduction of tariffs that had characterized trade policy it became instead an instrument to project specific economic and regulatory policies into trading partner countries through behind the border measures. And the choice of which policies the US chose to project was increasingly dominated by the interests of its global corporations and the financial sector. Trade became a determinant of winners and losers within the US not only because of the comparative advantage of trading partners but because US trade policies privileged US investors and firms over US and other workers. Measures like stringent protections for offshore investors contrast with weak protections for labor and the environment and failure to enforce even those protections. At a time when the integration of the global economy brought a surge of workers into the global labor force and tilted bargaining power in favor of investors and firms, US trade policy augmented the rights and power of capital rather than seeking to rebalance it toward working people, communities, and the environment. Moreover, globalization has been a major contributor to climate change, as intermediate and finished products repeatedly cross oceans and continents. It is now paramount that the nation and world shift away from fossil fuels while accelerating major investments in green

The global chess game of trade negotiations reflects the more fundamental reality of how different economies are structured and how the world’s population makes a living. In rich countries, most people work in service industries or manufacturing. Very few make their living through agriculture. In France, for example, less than 3 percent of the population is engaged in farming; in the United States, the figure is less than 2 percent. By contrast, in poor countries agriculture is typically the largest employer. In low-income countries, an average of 68 percent of the population makes its living through farming. Even in middle- income countries, 25 percent of the population is engaged in agriculture. In India, farmers make up about 60 percent of the total workforce. These very different patterns of employment between developed and developing countries explain the broad context for the decision by developing countries to insist that their concerns about agriculture must be satisfied before they will commit to concessions in manufacturing and service sectors in the trade talks.

• Official estimates of the impact of the U.S. Mexico Canada Trade Agreement (USMCA) suggest that its overall effects on GDP, employment and wages will be negligible. Based on experience with NAFTA and other trade agreements the main effect of USMCA is likely to be redistribution rather than growth. Given increasing inequality, stagnant wages and the highly uneven impacts of trade on different U.S. regions, localities and types of workers, the agreement should be evaluated with a view to its redistributive effects. • When the original NAFTA was negotiated it was recognized that low wages in Mexico were likely to encourage U.S. factories to relocate to Mexico and to push down wages for U.S. workers. A labor side agreement was negotiated that was claimed to support upward convergence of labor standards and wages in Mexico. That has not happened, in part because of active wage repression in Mexico. The new agreement requires reform of Mexican labor law and institutions. • While the USMCA appears to strengthen labor obligations in general and Mexico's commitments in particular, is perpetuates the weak and ineffective enforcement mechanisms of NAFTA and all subsequent U.S. free trade agreements. The inadequacy of the current approach was forcefully demonstrated when the U.S. lost the only case it had ever taken to dispute settlement. More generally, existing labor chapters have had at best marginal effects on wages and labor rights. Because they are not enforced effectively they do not create deterrent effects. • The USMCA must be amended to correct the failings of the existing enforcement mechanism. Several avenues for improvement are explored in this statement, with a particularly promising approach that builds on a proposal from Senators Sherrod Brown and Ron Wyden. Congress should create an ongoing role for itself in ensuring compliance

The WTO is in crisis by any measure. It's two most important functions-negotiating new trade rules and resolving disputes over existing rules-are both in disarray. Attempts to update and rebalance global trade rules failed in the Doha round. The dispute settlement mechanism is in limbo because of the refusal of the US to allow new appointments to the appellate body that rules on challenged panel decisions. Meanwhile global trade disputes escalate, with the strong taking matters in their own hands, often provoking tit-for-tat retaliation by the victims. Against this backdrop there have been widespread calls to reform the WTO. What are the prospects for WTO reform and for the WTO more broadly? The current global pandemic will undoubtedly direct attention away from the more chronic problems that had infected global governance. However when the world emerges from the pandemic attention will return to those institutions that had been underperforming, including the WTO. Then and for the foreseeable future there are three possible scenarios for the WTO. First, and probably most likely, it may limp along with the existing limitations and no serious reform. The organization still provides the basic rules of trade for most bilateral trading relationships and countries will be reluctant to let go of this fixed reference point, particularly in a slow global economic recovery and continuing trade uncertainties. As for disputes, the incapacitation of the appellate body may leave many trade disputes suspended without the possibility of final resolution. Countries that are willing could make bilateral or group arrangements to resolve disputes or may simply tolerate the status quo. In a second plausible scenario, the organization may be buffeted by growing strategic rivalry in ways that undermine even the current suboptimal equilibrium. The US administration has been pressing allies to align with it against China and the WTO is bound to feel the strains, at least to some degree. For example, a proposal announced in January by the US, EU and Japan would target China's subsidies and other state-led economic practices. It would establish a plurilateral agreement that would be a de facto reflection of a world dividing into economic blocs, even if it occurs within the shell of the WTO. On the other hand, the recent discourse in Europe of building national champion firms and the pandemic-induced announcements of huge increases in state aid and even government equity stakes in private businesses could lead the bloc to have second thoughts on tightening rules regarding subsidies, state aid and state-owned enterprises. In a third scenario, perhaps least likely on the current geopolitics but best in terms of future global stability and growth, the WTO could be the locus for a negotiation to update the trading regime for the realities of the 21 st century economy and politics. A new negotiation would have to take into account the dramatic shift in economic weights since the organization was founded in 1995. The WTO was born at a time when the cold war had just

Trade policy reforms which lead to changes in world prices of agricultural commodities or domestic policies aimed at affecting agricultural prices are often seen as causing a policy dilemma: a fall in agricultural prices benefits poor urban consumers but hurts poor rural producers, while ...