The emergence of the so-called 'Rising Powers' - including but not limited to China, India, Brazil and Russia - represents one of the key drivers of global economic and social change. The Rising Powers and Interdependent Futures network funded by the Economic and Social Research Council includes 12 research projects at ten universities across the UK that explore these ongoing changes.
In a recent article published in the European Journal of International Management, the authors explore the effects of international outsourcing without legally binding contracts on knowledge transfer and upgrading of suppliers.
This paper is written in the context of a special form of international outsourcing relationship in which suppliers in the Bangladeshi garment industry make recurrent discrete transactions with the same buyers over a long period of time without the existence of any original legally binding written agreement. In this study, we find that the suppliers firms only had access to buyers’ explicit knowledge that they needed to smoothly perform the production function such as, design instructions and published quality and labour standards. The absence of legal contract seems to have discouraged the buyers to share their core knowledge and thus reduce unintended spill-overs to a minimum level.
Nevertheless, the supplier firms had to develop relevant technological and marketing knowledge to maintain economic and other performance-oriented dimensions, which was a precursor to continue the relationship with the buyers and survive in the business. The suppliers had acquired a part of this knowledge from their firm-level experiences of managing buyers’ repetitive purchases. They had also used a range of external sources to acquire technological knowledge, such as, attending training by trade associations, hiring external consultants, recruiting experienced workers and following competitors. Social networks, personal overseas visits, existing buyers’ references, web sources and trade association meeting had been the major sources of information on new buyers. Nevertheless, with their limited resources, the suppliers could only access information-oriented or publicly available explicit knowledge, which only enabled them to improve technocratic or output-oriented dimensions of process upgrading rather than in labour/skill-oriented ones.
The paper highlights that the absence of a legally binding contract enhances the level of uncertainty in buyer-supplier relationship, which in turn limits the possibility of tacit knowledge transfer from buyers to their suppliers. This lack of access, thereof, restrains the likelihood of economic upgrading of higher level by the suppliers. This clearly reinforces the need for legal commitment from buyers’ end in order to stimulate supplier upgrading. The government of Bangladesh can play an important role in pressurising buyers to make legally enforceable contract in order to enhance the level of certainty in buyer-supplier relationship.
Many in Western countries think of emerging economies such as China and India as places with weak labour standards where workers are being exploited. This ignores changes on the ground in many ‘rising powers’ countries, such as China, India, South Africa and Brazil, which have seen systematic reforms in labour laws and codes as well as an emergence of voluntary corporate social responsibility (CSR) standards over the past decade.
A workshop held in Cambridge at 5-6 September 2016 brought together researchers from two projects under the ‘Rising Powers and Interdependent Futures’ programme with practitioners and experts to discuss these trends. Stimulating discussions over the two days not only drew on diverse perspectives across academic disciplines but also allowed policy-oriented exchange between academia and practice.
To investigate the complex changes in labour regulation and CSR in the rising powers, the two projects combine very different disciplinary and methodological approaches. From a law and economics perspective, researchers on the ‘Law Development and Finance’ project at the University of Cambridge explore trends in public labour regulation based on the Centre for Business Research (CBR) Labour Regulation Index, a unique quantitative dataset that documents labour laws in 117 countries over the period 1970 to 2013. The data first of all shows that labour regulation in rising powers is becoming increasingly strict. Another finding that may be surprising for some is that stronger regulation does not necessarily lead to losses in employment and productivity, but can improve economic performance.
Coinciding with these reforms in public regulation, the project on ‘Labour Standards and Global Production Networks’ at the University of Manchester finds an emergence of voluntary standards and local norms around CSR in China, India, South Africa and Brazil. Researchers from Manchester draw on qualitative methods and case study analysis to understand how these local CSR standards interact with state regulation and with global labour standards set by international organisations and Western multinational companies. Discussions during the workshop highlighted the very different understandings of CSR across rising power countries. They also underlined the need to take into account the different ways in which CSR interacts with public regulation in these countries.
Following from the lively exchange around labour reforms, academic researchers and practitioners arrived at the question: How can we bridge the gap between academia and practice better and more often? One key lesson was that closer academia-policy interaction could result in better ‘co-production’ of research, and in ways that might have greater impact. Discussions revealed, however, some challenges around the current debate on the wider impact of academic research. For instance, often practical impact is difficult to measure for a single researcher or piece of work, but becomes clearer for an entire body of literature that changes thinking and policy-making. Another challenge is that communication channels may not be conducive to academic research informing policy, e.g. if academic papers only draw conclusions for the literature, or if media interviews are cut too short to allow a researcher to communicate a differentiated idea. Some of the ideas for moving forward were to highlight policy conclusions also in academic journals and to foster links between media and academics that have become weaker over the past years.
For more details, please refer to the publications from the two projects:
In a recent article in Geoforum, Matthew Alford explains how the concept of trans-scalar embeddedness helps to understand the governance deficit around working conditions in the South African fruit sector.
On face value, the South African workers who harvest fruit for UK supermarkets should be happy with their jobs: They enjoy a local minimum wage and their employers adhere to the Ethical Trading Initiative that sets out comprehensive rules to ensure good working conditions. Yet, in 2012 workers took to the streets demanding higher wages. Actions of largely unorganised casual workers on a handful of farms escalated across the whole Western Cape region. Why did this happen even though workers were apparently protected by both national and global labour regimes?
The issue of working conditions in global production arrangements led by large multinational brands has received increasing public attention over the past decades, for example in debates around sweat shops in developing countries. The literature on global production networks grasps this from an academic perspective and highlights the influence of multinational lead firms on working conditions in their supplier firms around the world. For example, commercial pressure to reduce costs can have a negative effect on wages and working conditions. Research on initiatives to improve working conditions in global production networks (GPNs) has mostly focused on codes of conduct adopted by multinationals, the roles of NGOs or on multi-stakeholder initiatives. In contrast the role of state regulation, e.g. through labour laws in producing countries, has received only little attention by GPN scholars. This is surprising given that an emerging ‘regulatory renaissance’ literature highlights a renewed role for governments in regulating labour in global production, often complementing private codes of conduct.
I argue that the concept of trans-scalar embeddedness is helpful to understand the interactions of different kinds of labour standards within global production networks and their impact on workers. In the context of global production, initiatives to improve working conditions at local, national and global scales often influence each other. This means that national labour laws in a producing country need to be seen in the context of multinationals’ sourcing practices and codes of conduct and of global standards such as the Ethical Trading Initiative or ILO standards. In addition, the role of civil society at local, national and global levels needs to be taken into account. Similarly, the effectiveness of global initiatives is likely to depend on the kind of labour regulation in place in a producing country.
The South African fruit sector illustrates how important it is to consider the ways in which sourcing practices and private standards demanded by multinational buyers interact with national labour regulation. Looking at the trans-scalar embeddedness of labour governance in the sector helps to understand why the most vulnerable workers are losing out. In order to remain competitive under commercial pressures, many South African farms producing fruit for UK supermarkets rely heavily on seasonal workers. These seasonal workers are usually paid the legal minimum wage, which should in theory ensure fair remuneration. However, many workers report that the minimum wage is set so low that they are not able to make a living. Trade unions contribute little to addressing the issue because participation in unions is generally low among farm workers due to historical reasons, with seasonal workers facing additional challenges to organise due to the unsteady nature of their work. Overall, even though a legal minimum wage is in place and is widely implemented, the most precarious seasonal workers are insufficiently protected by national labour regulation.
But what about efforts by UK supermarkets, who claim to be protecting workers’ rights in their supply chain by participating in the Ethical Trading Initiative? The ETI includes a comprehensive set of requirements around working conditions, but does not manage to address the issue of low pay for seasonal workers either. This is because ETI principles state that a supplier needs to comply with national legislation on wages and supermarkets argue that they do not have the legitimacy to interfere with how wages are set in foreign countries. As a result, neither national laws nor private standards by buyers in the global production network served to protect the most vulnerable seasonal workers who went on strike in 2012/13.
Summing up, the South African case shows that trans-scalar interactions between labour regimes are crucial to understand governance deficits in global production networks. For instance, international buyers’ efforts to ensure workers are paid according to local legislation were of little benefit for workers as long as the local minimum wage was set too low. Hence, even though farms were compliant with both the South African minimum wage and the requirements of the Ethical Trading Initiative, seasonal workers felt left behind. Beyond South Africa, such interactions between different kinds of labour regimes at local, national and global scales need to receive more attention by researchers aiming to understand the situation of workers in global production.
For further details, see:
Alford, M. (2016) Trans-scalar embeddedness and governance deficits in global production networks: Crisis in South African fruit, Geoforum, 75, October 2016, pp. 52–63. doi:10.1016/j.geoforum.2016.07.005
by Global Development Institute (GDI), University of Manchester Professor John Knight, The University of Oxford, recently spoke at the GDI on ‘the principal-agent problem, the developmental state, subjective well-being and social instability: China’s effective but flawed economic governance.’ Listen to the talk in full below: This blog post was originally published on 21 June 2016 on development@manchester. Read the original post.
Simone Corsi, Research Fellow, Dept. of Entrepreneurship, Strategy & Innovation, Lancaster University Management School and Programme Manager, Lancaster China Catalyst programme, was interviewed after presenting at a seminar hosted by the Manchester Institute of Innovation Research (MIOIR) on 29 February 2016. Listen to his conversation with Dr. Yanchao Li here.
Stepping aside from the International Product Life Cycle Theory (Vernon, 1966) that considered advanced economies as the only loci of innovation, scholars are now looking at the growing role of emerging economies as potential sources of global innovation. Simone Corsi draws on the concept of reverse innovation (Immelt et al, 2009; Govindarajan & Ramamurti, 2011) in its common market-based definition and expands it by adding an R&D perspective, highlighting the importance of where the innovation was ideated (R) and developed (D) as determinants for a reverse innovation. A new typology of reverse innovation is then described, identifying multiple patterns of innovation where emerging economies play an important role and framing the new concept within a global innovation setting.
Recognizing China as one of the most prominent emerging economies, the seminar at MIOIR looked at how the Chinese market can influence the innovative activities of foreign MNCs and become a source for global innovation. Four case studies of foreign MNCs and R&D activities in China were presented and analyzed. These confirm an evolutionary path of foreign R&D activities in China from an exploitative to an explorative nature, although we move away from a framework where host countries affect MNCs’ subsidiaries innovation activity based on their technological richness and diversity (Almeida & Phene, 2004; Frost, 2001) stepping into a context where Chinese subsidiaries can be considered as interpreters of local market characteristics, whose inputs configure unique innovation sources. The results show how the Chinese competitive context can trigger global innovation if stimuli are properly received at both local and corporate levels.
In December 2015, Chinese President Xi Jinping flew into South Africa for the Forum on China-Africa Co-operation with great fanfare. There were lots of announcements about prospective investments across Africa. Agriculture featured prominently. But what is the real story of China in Africa on the ground, beyond the hype?
As Deborah Brautigam’s investigative research has so effectively shown, the assumptions about China’s role in Africa are often not borne out in reality. The level of investment and linked aid flows are much lower than the high numbers sometimes touted; the numbers of imported Chinese workers are much lower than often suggested; the areas of land “grabbed” for investment are small compared to the vast areas identified by some.
And, as Brautigam’s recent book shows, Africa will not be feeding China or China feeding Africa anytime soon.
Reality on the ground
We set about finding out what was happening on the ground. Working with African, Chinese and European colleagues, our team investigated Chinese engagements in agriculture in four countries – Ethiopia, Ghana, Mozambique and Zimbabwe. All have featured prominently as priorities for Chinese investment and aid.
Our just-completed project is reported in a new open access special issue of the journal World Development. So what exactly has been going on?
This proved surprisingly difficult to find out. The data on land acquisition, investment flows and aid projects is limited and confusing. It often doesn’t add up. Ghost projects are listed that never happened, and others are missed out.
Our original idea of doing a simple geomapping exercise based on available data was quickly abandoned. Instead, we had to triangulate between multiple sources to find out what was happening where.
Certainly there is a great deal going on, and the Chinese presence in Africa is important. The Chinese role in agriculture – in terms of business investment, technology transfer, demonstration efforts, training and more – is growing, and shaping perceptions.
We chose cases across the four countries to investigate in more detail. The studies aimed to explore the detail of investments, technology projects, training and development encounters more generally.
The central question we asked was: is China reshaping African agriculture?
No singular ‘Chinese model’
The Chinese Agricultural Technology Development Centres are flagship investments. There are now 23 across Africa, funded in their first phase by the Chinese Ministry of Commerce under their aid program. They are run mostly by companies, and are linked to a commercial model for training and technology demonstration and sale.
As Xiuli Xu and colleagues show, the centres’ performance very much depends on who is running them. Different provincial companies have very different characteristics, demonstrating that there is no singular “Chinese model” of development, or state-business partnership.
We also explored a number of cases of business investments in agriculture, primarily led by Chinese state-owned enterprises. Chinese development efforts mix aid with commerce, linking both provincial and central state involvement with different businesses.
For example, as Jing Gu and colleagues explain, in Xai Xai in Mozambique, the Wanbao agricultural development company from Hubei province took over 20,000 hectares on a state farm to farm rice, and develop a contract farming arrangement with surrounding farms.
It has not been easy. There have been a number of changes in company leads, disputes with local communities, and shifting alliances with local elites, as Kojo Amanor and Sergio Chichava set out.
The training of government officials is an important aspect of the Chinese engagement in Africa. More than 10,000 are trained in numerous courses in China each year, many in agriculture. This far exceeds any training initiative of any western aid programme.
Henry Tugendhat and Dawit Alemu explored the impacts of these courses, participating in training in China, and interviewing officials who had returned home to Ghana and Zimbabwe. While there have not been many immediate impacts, the longer-term building of relationships and the exertion of “soft power” diplomacy is important.
The role of informal Chinese migrants
Chinese migrants supply specialist Chinese foods to burgeoning expatriate populations.Reuters/Noor Khamis
Perhaps the most far-reaching but least understood dimension of Chinese involvement in African agriculture is the growing number of informal migrants getting involved in the agri-food sector, from farming to processing to retail to restaurants.
Seth Cook and colleagues investigated this in Ethiopia and Ghana. They discovered a range of activities: relatively few farmers, but growing investment in supplying specialist Chinese foods to burgeoning expatriate Chinese populations.
Those involved are very often migrants who came as part of Chinese government contracts, and have since established business connections and stayed, encouraging others to join them from China.
Through our work, we were able to gain a snapshot of the early stages of Chinese engagement in African agriculture. Our results show successes as well as failures. But Chinese engagement is certainly not yet at the scale sometimes assumed.
In the longer term, activities may accelerate as more opportunities open up. But China is also changing. As its economy restructures to a “new normal”, there are different demands. Food will certainly remain one, but this is not likely to come from Africa.
As a new global power, China will want to maintain business, aid and diplomatic relations with Africa, and sustaining relationships will be important. China plays the long game, and our studies were observing just the opening stages.
A new Open Access Special Issue in World Development based on our work on the changing role of China and Brazil in Africa’s agriculture is now available (links to individual articles are below, and also via here).
The work was developed under the ‘China and Brazil in African Agriculture’ project of the Future Agricultures Consortium. The project was supported by the UK Economic and Social Research Council (grant: ES/J013420/1) under the Rising Powers and Interdependent Futures programme.
The research involved studies in Ghana, Ethiopia, Mozambique and Zimbabwe, as well as China and Brazil. There were over 20 research collaborators involved, from Africa, China, Brazil and Europe, and it was a massively rich, if sometimes challenging, experience. Our research looked at 16 different case studies, involving a mix of agricultural investments by private and state owned enterprises, tri-lateral development cooperation efforts, technology demonstration initiatives, training programmes, as well as ‘under-the-radar’ involvement in agriculture by Chinese migrants.
There was no single story emerging, but a complex set of engagements, which contrast in important ways with existing patterns of western-led development and investment, and offer important opportunities for reflection and learning. These 8 papers (along with over 20 other Working Papers on the project website) are the result. Do download, read and send us feedback! It’s been a lot of work putting them together!
The papers examine how agricultural technologies, practices and policies travel across the world as part of investment and development cooperation. Technologies and policies always have histories, and emerge in particular social and political contexts. Yet China and Brazil both argue that theirs are perhaps especially relevant to Africa, given common agroecological conditions, and similar histories of agricultural development. We were interested in finding out how things travelled, and what happened during the journey.
Of course the transfer of technologies and policies, as we’ve long known, is not simple or linear. Assumptions are often deeply embedded (such as what a farmer is, what scale is appropriate, and how different sorts of technology are important), but they do not always translate into new contexts. Not surprisingly, despite the claims, not everything generated in Brazil and China has landed easily in Africa. There have been rejections, resistances, and so revisions and recastings; all of which highlight the importance of ‘development encounters’ and the negotiations about knowledge (and technology, practice, policy) that must go on during development cooperation – whether with a western aid agency or with Brazilian and Chinese actors.
Together, the papers show how historical experiences in Brazil and China, as well as domestic political and economic debates, affect how interventions are framed, and by whom, and so influence what technologies are chosen, which investments are funded, and who gets trained. The papers argue for a focus on the encounters on the ground, moving beyond the broader rhetoric and generic policy statements about South-South cooperation. For example, a key feature of Brazilian and Chinese engagements in African agriculture is the role of state-business relations in shaping and steering development; something that other agencies such as DFID interested in the role of the private sector, and public-private partnerships, might usefully learn from.
The special issue asks if a new paradigm for development cooperation is emerging, and argues that we must move beyond the simplistic narratives of either mutual benefit and ‘South-South’ collaboration or ‘neo-imperial’ expansion of ‘rising powers’. As the introductory paper argues, we need a more sophisticated account than this simplistic binary, and to “look at the dynamic and contested politics of engagement, as new forms of capital and technology enter African contexts”.
Do read, share and comment on the papers. We hope they will generate a debate about the role of the ‘rising powers’ in African development, and help us move towards a more nuanced appreciation and away from the rather simplistic frames that have dominated the debate to date. This post was written by Ian Scoones and first appeared on Zimbabweland
