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1. Leveraging Lives: Serbia and Illegal Tunisian Migration to Europe

Author:
Hamza Meddeb
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
In 2020–2022, Tunisian illegal migrants traveled through Serbia to reach Western Europe, as an alternative to the hazardous, more monitored Mediterranean route. This was driven by push factors in Tunisia, including deteriorating economic conditions and government acquiescence, and pull factors in Europe, namely smuggling networks and Serbian authorities looking the other way. While the route was sealed for Tunisians in November 2022, as long as transit states can use illegal migration to secure geopolitical leverage, such actions will continue.
Topic:
Migration, European Union, Economy, and Smuggling
Political Geography:
Europe, Serbia, North Africa, and Tunisia

2. Retain, Restructure, or Divest? Policy Options for Egypt’s Military Economy

Author:
Yezid Sayigh
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The Egyptian military has been on a dramatic expansionary trajectory since seizing power in July 2013. Having previously been an economic backwater, the Egyptian Armed Forces (EAF) and other military agencies have spearheaded the enormous state-led investment strategy that President Abdel Fattah el-Sisi has pursued since he came to office in 2014. The military controls a vast economic portfolio. It manages a significant share of the overall volume of publicly contracted infrastructure and housing. It builds industrial zones and produces capital goods, consumer durables, transport and heavy goods vehicles and parts, and information technology equipment. It undertakes associated retail, owns commercial media companies and hotels, and is rapidly increasing its stake in agriculture, fisheries, and mineral extraction. As of September 2021, the military even has a monopoly on the production of school meals. The Ministry of Defense (MOD) has formally controlled the use of state land by any civilian individual or entity, whether private or public, since 2001. The Ministry of Military Production (MOMP) is now one of two bodies that approves the import of foreign goods or services by government agencies. Military representatives sit on national boards, including for planning and sustainable development; feed into policy direction in several sectors, including the manufacturing industry, telecommunications, digital transformation, market development for electric vehicles, and rural development; and head major presidential initiatives, including the Long Live Egypt (Tahya Misr) development fund and the company responsible for constructing Egypt’s new administrative capital. Plans are underway to increase the capitalization of military companies by inviting private investment through the Egyptian sovereign wealth fund. What I have called an “officers’ republic”—comprising thousands of senior EAF retirees embedded in government ministries and agencies, regulatory and operational economic authorities, local government, and state-owned enterprises—complements the formal military economy. Military agencies and companies provide significant economic benefits. Military-managed public investment in transport infrastructure, for example, facilitates the movement of people and goods and expands access to external markets and investment opportunities. The construction of social housing for low-income groups addresses a serious shortage and assists government efforts to regenerate the informal settlements and slums where approximately one in seven Egyptians live. New industrial zones and extensive agricultural greenhouse projects attract investors, both domestic and foreign, contributing to economic growth and employment. And lower middle–class customers benefit from the expanding range of locally made consumer goods at affordable prices, alongside cheap meat and poultry imports, subsidized health services, and free food baskets for the poor. Why, then, should Egypt reconsider the military’s role in the economy?
Topic:
Armed Forces, Economy, Business, and Military
Political Geography:
Middle East, North Africa, and Egypt

3. Throwing Down the Gauntlet: What the IMF Can Do About Egypt’s Military Companies

Author:
Yezid Sayigh
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Until recently, both the International Monetary Fund (IMF) and the World Bank were wholly reticent to say anything about the involvement of the Egyptian Armed Forces (EAF) and other military agencies in Egypt’s civilian economy. This is a longstanding problem. By turning a blind eye to the diversion of resources to the military sector and to the increasingly significant impacts on the economy and public finances, these international financial institutions (IFIs) have undermined the effectiveness of their own programs and allowed their resources to be invested in support of suboptimal policies by the Egyptian government. There is a question of propriety when international assistance allows distorted policy incentives to continue or even intensify and disregards the fact that much of the hype about global growth in the Egyptian economy obscures the very real constraints imposed on private sector development. It is high time to throw down the gauntlet: IFIs and their governmental sponsors should tackle the reality of military involvement systematically in their programs and policy recommendations, and they should confront the issue head on in their dealings with Egypt’s authorities. Reticence persists but is starting to dissipate. A report released by the World Bank in December 2020 noted that military agencies account for an appreciable proportion of all state-owned enterprises producing capital goods; consumer durables and apparel; materials; food, beverages, and tobacco; automobiles and components; retailing; media and entertainment; semiconductors and intelligent transportation system equipment; and technology hardware and equipment.1 The IMF went further in a July 2021 review of its loan agreement with Egypt, in which it referred to the presence and role of Egyptian military companies for the first time ever.2 Significantly, it included them explicitly in its assessment of state-owned enterprises in general—many of which, the report noted, are “registering weak financial performance while some are benefiting from an uneven playing field”—and implied that military companies should come under the same broad reform policies that the IMF proposes for the public sector as a whole. Now that the IMF, in particular, has broken its former silence, it should refine its approach so as to tackle the Egyptian military’s economic role in a more targeted and consistent manner—hence making its approach more effective and sustainable. This requires a mix of measures. The first set involves bringing military agencies and companies within the scope of recommendations proposed by the IMF for Egypt’s civilian public sector and state-owned enterprises as a whole. These first measures therefore engage with IMF recommendations and Egyptian government policy initiatives relating to broad questions of ownership, regulation, and financing strategy. The second set of measures tackles the specific aspects of the legal, regulatory, and judicial frameworks that enable the military’s activities in the civilian domain. Unless they are revised, these enabling frameworks will impede wider reforms, but the Egyptian government and IMF have, for the most part, neither reviewed nor addressed them to date.
Topic:
Regulation, Economy, Business, IMF, Civil-Military Relations, and Military
Political Geography:
Middle East, North America, and Egypt

4. U.S. Strategy and Economic Statecraft: Understanding the Tradeoffs

Author:
Christopher S. Chivvis and Ethan Kapstein
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Few would dispute that U.S. economic policy has enormous consequences for America’s national security and role in the world. But economic policy is too often made without a clear picture of the strategic tradeoffs it entails. The purpose of this paper is to help clarify some of these tradeoffs by considering three alternative models of U.S. economic statecraft. The first model examined here, America First, has several national security and economic disadvantages. It would not only antagonize some of Washington’s key military allies but probably also undermine U.S. international competitiveness. It might even induce countries to turn their economic attention toward China, reducing the United States’ global influence accordingly. A better approach would be a blend of two other models, namely alliance economics and globalization 2.0. Together these approaches could help orient the United States for the geopolitical challenges of the next decade. By emphasizing commercial relations with U.S. military allies, such a blend would recall Article 2 of the North Atlantic Treaty, which calls for international economic cooperation among NATO member states. And by leading a reformed multilateral system, the United States would again put itself at the center of the rules-based global economic order that brought prosperity to millions.
Topic:
Foreign Policy, NATO, Geopolitics, Economy, Economic Cooperation, and Strategy
Political Geography:
North America and United States of America

5. U.S.-China Technological “Decoupling”: A Strategy and Policy Framework

Author:
Jon Bateman
Publication Date:
04-2022
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
A partial “decoupling”2 of U.S. and Chinese technology ecosystems is well underway. Beijing plays an active role in this process, as do other governments and private actors around the world. But the U.S. government has been a primary driver in recent years with its increased use of technology restrictions: export controls, divestment orders, licensing denials, visa bans, sanctions, tariffs, and the like. There is bipartisan support for at least some bolstering of U.S. tech controls, particularly for so-called strategic technologies, where Chinese advancement or influence could most threaten America’s national security and economic interests. But what exactly are these strategic technologies, and how hard should the U.S. government push to control them? Where is the responsible stopping point—the line beyond which technology restrictions aimed at China do more harm than good to America? These are vexing questions with few, if any, clear answers. Yet the United States cannot afford simply to muddle through technological decoupling, one of the most consequential global trends of the early twenty-first century. The U.S. technology base—foundational to national well-being and power—is thoroughly enmeshed with China in a larger, globe-spanning technological web. Cutting many strands of this web to reweave them into new patterns will be daunting and dangerous. Without a clear strategy, the U.S. government risks doing too little or—more likely—too much to curb technological interdependence with China. In particular, Washington may accidentally set in motion a chaotic, runaway decoupling that it cannot predict or control. Sharper thinking and more informed debates are needed to develop a coherent, durable strategy. Today, disparate U.S. objectives are frequently lumped together into amorphous constructs like “technology competition.” Familiar terms like “supply chain security” often fail to clarify such basic matters as which U.S. interests must be secured and why. Important decisions are siloed within opaque forums (like the Committee on Foreign Investment in the United States [CFIUS]), narrow specialties (like export control law), or individual industries (like semiconductors), concealing the bigger picture. The traditional concerns of “tech policy” and “China policy” receive outsized attention, while second-order implications in other areas (such as climate policy) get short shrift. And as China discourse in the United States becomes more politically charged, arguments for preserving technology ties are increasingly muted or not voiced at all. This report aims to address these gaps and show how American leaders can navigate the vast, perilous, largely unmapped terrain of technological decoupling. First, it gives an overview of U.S. thinking and policy—describing how U.S. views on Chinese technology have evolved in recent years and explaining the many tools that Washington uses to curb U.S.- China technological interdependence. Second, it frames the major strategic choices facing U.S. leaders—summarizing three proposed strategies for technological decoupling and advocating a middle path that preserves and expands America’s options. Third, it translates this strategy into implementable policies and processes—proposing specific objectives for U.S. federal agencies and identifying the technology areas where government controls are (or are not) warranted. The report also highlights many domestic investments and other self-improvement measures that must go hand in hand with restrictive action.
Topic:
National Security, Science and Technology, Intellectual Property/Copyright, Authoritarianism, Economy, Espionage, Military, and Interdependence
Political Geography:
China, Asia, North America, and United States of America

6. Reckless Abandon: Why Tunisia Can No Longer Delay a Border Free Trade Zone

Author:
Hamza Meddeb
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
In 2012, Tunisia announced the establishment of a free trade and logistics zone (FTZ) in Ben Guerdane, near the Libyan border. The aim is to develop marginalized southeastern border regions and formalize informal economic actors. However, the plan has stalled due to institutional resistance, political divisions, and an incapacity to exploit international geopolitical rivalries. If this persists, the project may become irrelevant because of emerging FTZs in Libya, denying Tunisia revenues its ailing economy needs.
Topic:
Geopolitics, Economy, Borders, and Free Trade
Political Geography:
Libya, North Africa, and Tunisia

7. The Pitfalls of Saudi Arabia’s Security-Centric Strategy in Yemen

Author:
Ahmed Nagi
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Saudi Arabia’s security-oriented approach to Yemen has foundered. The Saudi-led coalition has failed to defeat the Houthis militarily or to restore the government the group toppled. Moreover, Saudi militarization of the border with Yemen has damaged the Yemeni economy—with negative consequences for Saudi Arabia. Crucially, Saudi Arabia’s security is contingent on Yemen’s stability and economic prosperity. As such, Riyadh should contribute to reviving Yemen’s moribund economy, both in the borderlands and in the inland agricultural sector.
Topic:
Security, Agriculture, Economy, Conflict, and Instability
Political Geography:
Middle East, Yemen, and Saudi Arabia

8. Why Brazil Sought Chinese Investments to Diversify Its Manufacturing Economy

Author:
Celo Hiratuka
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Since the beginning of the twenty-first century, economic relations between Brazil and China have grown significantly. The main driver of this process has been China’s enormous demand for agricultural, energy, and mineral commodities. On the one hand, Brazil’s strong competitiveness in these products has helped the country consolidate its role as an important supplier to China, increasing exports and turning China into the main destination for Brazilian exports since 2009.1 On the other hand, China, by virtue of its status as the “factory of the world,” has established itself as the main supplier of manufactured products to Brazil.2 Nonetheless, Brazilian scholars, think tanks, and private manufacturing firms have raised concerns. They have done so despite the great boost in bilateral trade flows; the favorable trade balance for Brazil; and the leveraging of businesses in several Brazilian sectors such as soybeans, iron ore, and oil. These concerns are related to the excessive concentration of Brazilian exports in a few products, the environmental impacts of these exporting activities, and the effects of strong Chinese manufacturing competition on Brazil’s domestic market. These worries have become more significant when one considers the growing importance of manufacturing changes with the diffusion of Fourth Industrial Revolution technologies and the search for new renewable energy sources and environmental sustainability. For Brazil, this matter reflects a need to advance bilateral relations beyond existing export trade volumes and toward new drivers of more diversified economic growth that will help the country escape a specialization in commodities. The fortunes of the Chinese company BYD in Brazil are highly relevant to these trends. BYD is a company that has diversified from the production of batteries into different innovative industrial sectors, such as renewable energy and electric vehicles. BYD has also been expanding rapidly in international markets, and in that process it chose Brazil as an important market, where it has built factories to produce electric bus chassis, photovoltaic panels, and batteries for electric buses. BYD’s trajectory in Brazil certainly has not been smooth. On the contrary, the firm has had to adapt to market fluctuations and, above all, to changes in the Brazilian government’s economic policies, which have made the company’s experience in the country quite turbulent. Despite this, BYD survived its first years in Brazil and more recently has been showing signs of continuing to invest in the Brazilian market. Analysis of BYD’s experience in Brazil shows, on the one hand, that there are important possibilities for new economic relations with China that go beyond trade in commodities, with productive investments that can potentially help Brazil simultaneously incorporate more knowledge-intensive activities and drive positive environmental impacts by generating renewable energy and reducing carbon emissions. On the other hand, the story of BYD also shows that the transformation of these possibilities into effective benefits requires coordinated actions on the part of Brazilian policymakers to offer a long-term horizon for Chinese investments. In that spirit, Brazil must craft a long-term strategy for its economic relationship with China to increase the odds that bilateral engagement can advance in a new and more sustainable, mutually beneficial direction.
Topic:
Bilateral Relations, Economy, Investment, Manufacturing, and Engagement
Political Geography:
China, Asia, Brazil, and South America

9. Hard Cash and Soft Power: When Chinese Firms Win EU Contracts

Author:
Allison Carragher
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The European Union is a committed defender of open markets. This extends to its public procurement mechanisms, which remain open to all bidders. EU policymakers have developed tools intended to defend the bloc’s interests in the face of increased economic and strategic competition from the People’s Republic of China (PRC), but few policymakers understand how the European public views the debate. As the first major EU-funded, China-built infrastructure project, the Pelješac Bridge in Croatia provides a unique opportunity to conduct a thorough analysis of European public opinion toward EU tendering policy and Chinese companies. Brussels has labelled the PRC a partner for cooperation and negotiation, an economic competitor, and a systemic rival,1 but the nuances of this policy remain difficult to ascertain. Projects and policies presented by China as “cooperation” often contain elements of economic competition or are leveraged by the PRC for strategic gain. However, this dichotomy has not filtered down to citizens. Extensive polling reveals that Croatians share very few of the concerns of EU policymakers. Furthermore, the PRC state-owned construction firm enjoys more visibility than the EU, which provided hundreds of millions of euros for the project. In terms of soft power, which is here defined as the ability of a country to shape the narrative, the Pelješac Bridge has been a resounding success for the PRC. The Croatian public has largely embraced the PRC’s preferred image of itself as a reliable and trustworthy economic partner and a benign power that does not interfere in domestic affairs. This opinion diverges from official EU policy and glosses over evidence of the PRC’s unfair economic practices, environmental and labor shortcomings, and interference in European democracies. Notably, the PRC’s soft-power gains were achieved on the EU’s own dime. It is not in the EU’s interest to bankroll the economic and soft-power ambitions of its systemic rival. As a democratic institution, the EU has a responsibility to both respond to public opinion and educate its citizenry when EU interests are at stake. In this case, the EU should recalibrate its tendering policy to be fairer and better aligned with its own economic and strategic interests. This process is currently underway, but it should also be extended to co-financing arrangements like the Team Europe approach, which combines traditional EU assistance with support from individual EU member states and international financial institutions. These policies must also be paired with renewed efforts at visibility and branding. Lastly, there is a need to collect and publish better data on the end users of EU funds in order to evaluate successes and identify future issues.
Topic:
Infrastructure, European Union, Economy, Business, Soft Power, and Strategic Competition
Political Geography:
China and Asia

10. Russia in the Arctic—A Critical Examination

Author:
Eugene Rumer, Richard Sokolsky, and Paul Stronski
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Russia has big Arctic plans, but how they will be realized is uncertain. For the United States this will likely mean the return to a Cold War–like environment rather than a new chapter in great-power competition in the Arctic. Russia’s Arctic ambitions have attracted increasing attention in the West over the past decade as climate change opens up new opportunities in the region for navigation and exploration of its riches. For its part, Moscow casts a wary eye on what it sees as a challenge from the United States and the North Atlantic Treaty Organization (NATO) to its position and ambitions there. The Kremlin’s rhetoric about Western encroachment has become more strident, in sync with its enhanced military posture and ambitious economic and infrastructure projects.
Topic:
NATO, Cold War, Infrastructure, Geopolitics, and Economy
Political Geography:
Russia, Eurasia, North America, Arctic, and United States of America