Foreign aid and influence : paradoxical power dynamics in Japan's official development assistance to China

To what degree does aid-giving give a donor leverage over a recipient? The conventional wisdom is that when a donor provides a large sum of aid to a recipient, the donor is likely to have influence over that recipient. Since aid is a one-way transfer of money, recipients who are asymmetrically dependent on a large donor would seem particularly subject to this type of aid leverage. But do donors in fact gain (and use) aid leverage in this way? What factors make donors more or less likely to employ aid sanctions? This dissertation elucidates how ''paradoxical power dynamics" often prevent donors from imposing aid sanctions on a recipient exactly at that point when recipients are most vulnerable.

Based upon a close examination of Japan's aid policy toward China from 1979 to 2006, this dissertation argues that the pattern of aid sanctions a donor adopts vis-à-vis a recipient depends on two factors: a recipient's level of vulnerability to an aid cut from a donor; and the donor's level of expectations about the returns it expects from continuing to aid the recipient. The higher a recipient's vulnerability and the more positive a donor's expectations, the more likely it is that the donor will hesitate to use aid sanctions as a means of pressuring the recipient. This reluctance follows from donor concerns that an aid freeze might trigger economic turmoil, a political crisis in the recipient state, or bilateral frictions affecting trade and investment, any of which can result in negative externalities for the donor.

This dissertation enriches our understanding of the use of aid sanctions by identifying specific circumstances under which donors are likely or unlikely to use aid as a way to exercise its political leverage, not just in the Japan-China case but in other aid relationships as well. It also identifies important lessons for major powers that are considering making offers of foreign assistance to former or potential adversaries. A donor should not allow its aid to become vital to a recipient if the donor intends to use the aid as leverage to influence its behavior.

Note: Abstract extracted from PDF file via OCR.