You get a bonus to diplomatic relations when dealing with other kingdoms(as a kingdom). However it's just one point. For instance, him having a stronger army than you is minus two points(minus four or minus eight as he gets stronger and stronger than you). Make sure your army is at least as strong as his, otherwise your diplomatic relations will deteriorate until he eventually declares war.

I always thought that much of traditional fantasy (not all of it) has racist overtones -- not that Fantasy in general, is or holds a racist stance, but that it uses a mindset that in any other context but fantasy, would be considered racist.  Some Science Fiction does the same thing.  I strongly recommend "The Iron Dream" by Norman Spinrad for a satire of this common trope (aka "Lord of the Swastika" by 'Adolph Hitler').

Sometimes 'race' and 'species' are used interchangably.  Sometimes race or species, and not culture or upbringing or environment, determines your values, your temperment, and so on.  Most of this is absurd, if you analyze it, because many racial traits, if they were truly universal to a race or species, would be seriously detrimental to forming a thriving culture, much less a civilization.