South African Foreign Policy Review: Volume 1

CHAPTER 6. South Africa’s economic diplomacy in a changing global order

112 CHAPTER 6 South Africa’s economic diplomacy in a changing global order Brendan Vickers INTRODUCTION T his chapter reviews the performance of South Africa’s economic diplomacy as an instrument of the country’s foreign policy since the advent of democracy in April 1994. Economic diplomacy is about how states conduct their international economic relations, how they take decisions domestically, how they negotiate with each other internationally, and how these processes interact.1 In this sense, economic diplomacy is a policy means for domestic power and wealth aggregation. Conceptually, it is also possible to distinguish between ‘economic’ and ‘commercial’ diplomacy or, in another sense, the ‘high’ and ‘low’ politics of a country’s international economic relations. In this chapter, economic diplomacy refers to the ways and means by which the South African government formally negotiates South Africa’s place in the world economy at bilateral, regional and multilateral levels. Economic diplomacy has clear political economy objectives such as increasing the country’s relative power or influence in international bargains; improving the country’s (or an industry’s) competitive advantage relative to others; and using political tools to achieve economic ends, and vice versa. Economic diplomacy thus encapsulates global policy-making processes, for example, in the United Nations Conference on Trade and Development (UNCTAD), the World Trade Organization (WTO), the World Intellectual Property Organization (WIPO); as well as regional economic policymaking in the African Union (AU), the Southern African Development Community (SADC) and the Southern African Customs Union (SACU).2 South Africa’s economic diplomacy agenda comprises four core policy imperatives: to expand trade and investment links in Africa and advance regional integration in Southern and Eastern Africa; to consolidate links with traditional trade and investment partners in the North; to build 113 SOUTH AFRICA’S ECONOMIC DIPLOMACY IN A CHANGING GLOBAL ORDER industrial complementarities with the dynamic emerging economies of the South; and to rebalance global trade rules in favour of developing countries through the WTO’s Doha Round negotiations.3 By contrast, commercial diplomacy entails a narrower set of activities that include export development and export promotion, facilitating inward and outward foreign direct investment (FDI), promoting technology sharing and cooperation, positioning South Africa as a preferred tourism destination , and marketing South Africa more widely abroad. The objective of commercial diplomacy is to support South African business to gain tangibly from the opportunities created by broader economic diplomacy processes.4 Since South Africa’s economic diplomacy does not operate in a vacuum, this chapter first outlines the shifting global and regional contexts for economic diplomacy, which is followed by an analysis of the domestic drivers of the country’s economic diplomacy. We then assess the key achievements and highlights of South Africa’s economic diplomacy in relation to the developed world, still mired in economic crisis, and the South. Since multilateralism is a cornerstone of South Africa’s foreign policy, the chapter also explores Pretoria’s role in promoting a fairer and a more equitable world trading system. The chapter concludes with five challenges for South Africa’s future economic diplomacy. THE SHIFTING GLOBAL AND REGIONAL CONTEXTS FOR SOUTH AFRICA’S ECONOMIC DIPLOMACY The world economy is undergoing a profound structural shift in economic power, broadly from North to South and from West to East. The emerging economies, led by investment bank Goldman Sachs’s BRIC quartet (Brazil, Russia, India and China), are the new sources of global economic growth, trade and investment flows. Economies of the South have become key players and the main drivers of recovery from the 2008/2009 ‘Great Recession’. While the global economic crisis has left most developed regions with high levels of debt and weakened competitiveness, the rising economies have emerged stronger from the crisis, with stable, sustainable debt levels and enhanced competitive positions. Underpinned by strong growth, rapid capital accumulation and an expanding middle class, China is projected to become the world’s largest economy before 2030, while India could surpass the United States by 2050. Collectively, by 2032 the BRIC economies could exceed output in the Group of 7 (G7) industrialised countries.5 The renewed dominance by 2050 of China and India reflects the rebalancing of the world economy to where it was in earlier centuries, before the Industrial Revolution. 114 CHAPTER 6 Of all the BRICs, the pace of China’s expansion has been the most spectacular . China has rapidly become the new ‘workshop of the world’: a...