Foreign Direct Influence? Trade and investment on the Red Sea’s African shores

October 1, 2021

Rising geopolitical tensions have led to a resurgence in attention to the political aspects of trade and investment policy. Examples of intersecting interests in areas such as dual-use technology and Artificial Intelligence (AI) raise the risks for companies active in those sectors, in terms of ethical considerations, issues of compliance, and potential human rights violations.

These examples capture only a fraction of a broader issue. Trade policy, foreign direct investment, and domestic economic regulations have always been highly politicized tools that are closely intertwined with foreign policy objectives and domestic concerns.

Even between the most amicable governments, trade policy is never neutral. Therefore, it is not feasible to expect neutrality when geopolitical tensions are high. Attempts to support development or to invest beg the question: “Who benefits?”

Impact and risks analyses often focus on apolitical outcomes and symptomatic risks rather than the political root causes that drive impact.[3] By studying the intertwining of trade and investment patterns of the Horn of Africa with geopolitical trends and local political dynamics, this article seeks to highlight the entry points for conceptualizing political risks in trade policy and foreign direct investment (FDI).