Why Britain is right to join China’s new development bank
In a rare open disagreement between London and Washington, aligned on virtually any major foreign policy issue over the past decades, Britain has become the first major Western government to apply for membership in the Chinese-led Asian Infrastructure Investment Bank (AIIB), an initiative bitterly opposed by US foreign policy makers. By announcing Britain's intention to be part of the Chinese-led bank, David Cameron has made a bold move that is proof of a far more sophisticated understanding of global affairs than on the other side of the Atlantic. Other major economies such as Germany, France and Brazil should follow Britain's lead.
At the AIIB's signing ceremony last year, twenty-one countries signed the founding document, including all major actors in South-, Central- and South-East Asia, aside from Kuwait, Oman and Qatar. China plans to contribute $50 billion US-dollars, hinting that it may double the amount.
There is an undeniable demand for fresh capital to modernize Asia's infrastructure. In a much-cited study, the Asian Development Bank (ADB) said that the region needed $8 trillion US-dollars of investments in infrastructure in the current decade to put Asia on a sustainable growth trajectory. Yet particularly countries such as Myanmar lack the means to do so, and existing institutions such as the Asian Development Bank cannot satisfy existing demand. The ADB lends little more than US$10 billion a year for infrastructure development. Its president is traditionally named by Japan, even though China is by far the region's largest economy.
Over the past year, the United States and Japan have undertaken a regional diplomatic offensive to convince Indonesia, South Korea and Australia -- among others -- to reject China's invitation to join the AIIB, thus reducing the new institution's respectability and making it look more than a sinocentric institution - precisely what Beijing seeks to avoid to not be seen as a regional bully. US motivations are clear: A potent AIIB with broad regional support would reduce the influence of both the World Bank and the Asian Development Bank, dominated by Washington and Tokyo respectively. Indeed, despite the risks, the rise of a China-led development bank would increase both China's influence and its soft power in the region, a trend that could dramatically limit Washington's capacity to build alliances in Asia based on the common aversion to Beijing.
The arguments used by US-policy makers are largely unconvincing, and it was only after severe diplomatic pressure that Indonesia, Australia and South Korea have decided not to join the AIIB - for now. However, in all three countries, powerful voices are beginning to argue that rejecting China's invitation deprives them of influencing the way a key regional institution will be run. In the medium-term, Japan may become the only country not to become part of the new institution.
Yet Washington's opposition to the AIIB is not only likely to be futile, it also hurts US national interest: Citizens across Asia will recognize that the United States seeks to maintain influence in the region, while caring little for the well-being of Asia's poor, who are in dire need of better infrastructure. The argument that the AIIB does not recognize the environmental and governance standards the World Bank or the Asian Development Bank adhere to may have some truth to them, but rejecting the institution for that reason is inadequate.
A more coherent response would have been to embrace the new initiative and incentivize member countries (many of which are US allies) to push more rigorous standards. Paradoxically, by pressuring Seoul and Canberra to stay out of the new institution, Washington lost two actors through which it could have indirectly influenced the AIIB. Now, Britain, in a shrewd reading of the situation, has correctly decided that joining the bank is the best way to go forward. Rather than denying China's its rightful place as a major power (and hence, sponsor of major institutions), Britain has decided to engage in one of them and seek to exercise its influence from within.
US policy makers are right to recognize the AIIB as yet another step by Beijing to create a regional that can complement existing Western-led institutions. Other China-led institutions are the Shanghai Cooperation Organisation (SCO) and the Conference on Interaction and Confidence Building Measures in Asia (Cica). Whether China-led institutions will succeed does not depend on the United States, but on Beijing's capacity to convince its neighbors that China's rise is good (and not dangerous) for the entire region. While the outcome of China's bid to regional hegemony is far from clear, the United States active opposition to projects that could benefit the region are likely to play into China's hands.
Most problematically, Washington's opposition underlines how insincere US foreign policy makers' calls on rising powers to become "responsible stakeholders" is -- after all, there are few better examples of China "stepping up to the plate" than providing $50 billion for regional infrastructure development. While surprising to some in Washington, it is obvious that rising powers want to assume responsibility on their own terms rather than accepting the rules and norms established by US-led institutions.
The United States' unwillingness to accept anything but its own leadership or that of its allies points to a complex transition to actual multipolarity in which other powers, such as China, reduce US room for maneuvre in some parts of the world. This stance implies a deep sense of insecurity by US policy makers that is both exaggerated and unnecessary. Britain may play a crucial role in reducing the tensions during the transition into a more multipolar order.
The Economist correctly points out why Britain may be better-positioned to understand how to deal with a rising China:
An anonymous American official quoted by the Financial Times says America is “wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.” Cynical Britons might point out the strategy worked well enough a century ago when Britain was the incumbent power and America on the rise. But that is not an analogy that will go down well in Washington.
Photo credit: Reuters/Ju Peng/XINHUA