New Era in US-China Global Competition: B3W

26.07.2021

If Donald Trump has fought trade wars, his successor, US President Joe Biden, is pushing for Build Back Better World (B3W). The goal of both is to fight China and gain influence in as many countries as possible, using the hard and/or soft powers of diplomacy, in the way Beijing uses it. Compared to the post-World War II global dominance achieved by the United States, China may seem relatively new to the game. But Beijing has already made great strides in making friends and penetrating countries.

It should be noted that Beijing’s Belt and Road Initiative (BRI) project is a big global game, but it learned about it from the United States. Marshall Aid, which the United States framed with the Truman Doctrine, supported Europe’s economic development on the basis of U.S.-based globalization. Countries supported by about $13 billion and military munitions have also contributed to the consolidation of the U.S. position of global power.

But Beijing has done well, and there is talk of a $4.2 trillion budget for BRI so far. Loans, grants, investments… Since its launch in 2013, China’s Belt and Road Initiative has covered infrastructure projects in nearly 140 countries around the world, including G7 member Italy.

Just before the G7 summit, Biden expressed displeasure with the relationship of his European friends with China and stressed to the EU that China should implement a project such as the BRI project. At the G7 summit in Britain, the Biden-led initiative was accepted.

Pledging to “collectively mobilize” hundreds of billions of dollars in infrastructure investments for low- and middle-income countries, the G7 leaders said they offered a “value-oriented, high-standard and transparent” partnership. The B3W projects in this context aim to compete with the Belt and Road Initiative, which has been criticised directly for flooding small countries with unmanageable debts. While European leaders naively perceive this as a new attempt to support poor countries (or try to portray it that way), the U.S. administration is clearer about its intention to break China’s global influence at the heart of this project.

Diversity in Policies On China

In general, there is no uniform China policy within the EU. Many European countries, including their leading economies, have their own reasons for not wanting to turn China against it. Germany, for example, continues to see China as a critical market for high-tech manufacturing products and automobiles. He clearly doesn’t want to seem too enthusiastic about B3W support so as not to anger Beijing. Germany, which is generally wary of confronting China, has been reluctant to specify the monetary amount of any infrastructure fund. German Chancellor Angela Merkel, who is instrumental in backing the EU-China Comprehensive Investment Agreement (CAI), is in favour of continuing her market and joint initiative rather than supporting political and economic initiatives against China. French President Emmanuel Macron sees joining an anti-China bloc as an erosion of strategic autonomy. According to Macron, such a bloc would re-motivate Europe under the Transatlantic decision-making mechanism. European countries with relatively small economy have stepped up their long-awaited infrastructure work with investments from China. China, which conducts strong public diplomacy in these countries, is also very popular with the public. Italy, which is also a member of the G7, announced its departure from the BRI just before the G7 Summit in the UK in June 2021. The decision has been interpreted as pressure from Amarikan politics, but Prime Minister Mario Draghi’s discomfort with the sale of strategic investments in his country to foreigners is known to have been hampered by the government’s blocking of the sale to China of a large stake in a chipmaker in Italy.

As President Biden moved from the G7 meeting in Britain to the NATO meeting in Brussels: he said he had an extraordinary, collaborative and productive meeting at the G7, understanding the challenges facing everyone at the table and their proud democracy and the responsibility of serving the rest of the world. But NATO did not respond harshly to China. NATO Secretary General Stoltenber said China poses a security threat, but stressed that “he is not our enemy.” A day after the declaration was issued, French President Macron said the group was not hostile to China, saying China and NATO were not related, adding that “it is very important that we do not distract ourselves and do not see our relations with China as biased.” Angela Merkel also said china should not be overestimated. Thus, although China was included as the new threat in the NATO documents, it was seen that a logic basis for concrete measures was not embodied.

The World Looking for An Alternative to “Belt and Road”

In announcing the B3W initiative, President Joe Biden said the program would help reduce the need for as much as $US40 trillion for infrastructure projects in the developing world. The language of the Biden administration’s rhetoric on other key criteria, such as the construction of flexible supply chains that reduce China’s sovereignty, in which it announced it would take a series of actions against Chinese state-sponsored capitalism, is unclear. How roads can be used for these goals and the capacity of these routes are still not disclosed.

When it comes to China’s regional strength, the availability and size of BRI projects in Pakistan, Bangladesh, Nepal, Afghanistan, Sri Lanka and the Maldives are known in the neighboring region. That is, all countries in the region except India and Bhutan. India was invited to this year’s G7, where the leaders were last present as guests when they met in France in 2019. The growing symophagen between China and India means New Delhi and Washington are closer than ever to keeping China in check. Hosting the summit, UK Prime Minister Boris Johnson expanded that circle by inviting the leaders of his allies in Asia and the Pacific region (India, Australia and South Korea) to talks in Cornwall.

Until we get to B3W, several competing initiatives have also emerged in the region and around the world that will reduce the BRI alternative, or at least its impact. Japan, which hosted the G20 summit in 2019, has been approved by G20 leaders (including Xi Jinping) for a set of principles for quality infrastructure investment. In the same year, Japan and the European Union declared a “Partnership on Sustainable Connectivity and Quality Infrastructure”. In January 2021, the European Parliament adopted a resolution calling for the creation of a global EU Connectivity Strategy as an extension of the existing EU-Asia Connectivity Strategy. So far, the EU and Japan have signed a co-operation agreement in 2019, the EU-ASEAN declaration on connectivity in December 2020, and more recently a potential global infrastructure partnership between the EU and India as part of the EU’s attempts to mobilise a rising global “connectivity strategy” for democracies around the world. Looking beyond the European focus, India, which attended this year’s G7 summit as an observer, showed a different initiative by announcing the Asia-Africa Growth Corridor with Japan in 2017.

The United States has also slowly recognized the importance of offering positive alternatives. In late 2019, the United States, Japan and Australia announced the “Blue Dot Network – BDN” to help make G20 principles operational. This effort has received encouraging attention from the private sector and civil society, but criteria are still being developed to identify projects that meet high standards. According to the G7 statement, investments related to B3W will be shaped by high standards, such as those promoted by the updated “Blue Dot Network”. Announced in November 2019, BDN envisages infrastructure projects for environmental sustainability, financial transparency and economic impact. B3W can add urgency to announce pilot projects and work to expand Asia-based BDN to include European partners.

B3W as New Globalization Focus

The financing of BRI projects consists mainly of bank loans directed through the equation of government and private institutions. According to a brief survey, as of September 2020, 59% of BRI projects are owned by government agencies and 26% are privately owned. The remaining projects are defined as public-private initiatives. For B3W financing needs, G7 and its partners are adopting the coordination of the movements of private sector capital through methods such as financial institutions and accelerating investments.

The United States stressed that it would be a “leading partner” and that B3W would launch multiple institutions to meet development financing needs. In this way, the Washington administration will both complete local infrastructure investments and create new opportunities to demonstrate U.S. competitiveness abroad and open up jobs at home.

The B3W initiative is based on six basic principles. The main issues that stand out under these principles published by the White House are usually on the standards that have been developed. With this initiative, it is envisaged that countries will be offered a positive vision and sustainable, transparent financial resources. G7 leaders are committed to acting on high standards and principles, and envision implementing the standard known as the “Blue Dot Network” in the areas of the environment, climate change, business and social security measures, transparency, financial resources, construction, anti-corruption and so on. The initiative also promises infrastructure investment, including responsible, market-oriented, high standard and transparency of private equity in G7 countries. In project planning, implementation, it is aimed to mobilize capital for both the private and public sectors with this principle, which envisages taking advantage of the standards developed by multi-stakeholder development banks and other international financial institutions in terms of social and environmental measures and analytical capacity.

The White House’s use of the phrase “partners who agree” on B3W in its statement suggests that funding can only flow to democracies. Here, B3W stands at odds with the (BRI), which does not set any preconditions and includes democratic nations, as well as countries that allegedly adopt autocratic and other government styles.

B3W funding will be linked to conditions related to human rights, climate change, corruption and the rule of law. This can be seen as a fairly normal step by the policy-making standards of the western alliance. But on the other hand, it raises the question of why developing countries would choose to work with a series of financing initiatives that depend on challenging conditions, rather than continuing to use China’s simplified and unconditional BRI financing.

B3W Preventing Competition

In summary, the three main problem areas seem large enough to discuss the existence of B3W:

First, the G7 will not be able to keep up with the credit requirements offered by China. Although Belt and Road investments have been criticized for creating an unsustainable debt burden on countries, the political risk and credit ratings of some countries that use these loans may not meet the requirements of B3W in order to borrow money. On top of that, B3W projects may face an additional hurdle in complying with stricter environmental standards, which can lead to greater costs.

Second, assuming that the money will come from countries that provide funds together with private institutions, they will not be willing to lend in high-risk situations. Countries were not willing to participate in risky projects, even considering what was happening within Europe itself. For example, while there was little interest in investing in the Greek port of Piraeus from Europe, it was chinese shipping company COSCO that finally stepped in. This was after Greece, struggling to find western investors in the wake of the economic crisis, officially announced that it was part of the Belt and Road. The fact is that Belt and Road countries are often risky investment places. It is no coincidence that China currently plays an important role in United Nations peacekeeping missions, given its desire to protect overseas investments.

Third, policymakers in Washington are open about their willingness to be strategically competitive with Beijing, while other G7 countries are not too keen to label it “anti-China.”

The B3W is ambitious, but does not show a well-defined structure. Beyond saying it would mobilize “private sector capital,” which is odd given its scale, it lacks clarity on logistics or financing, and it’s not clear why countries that are supposed to benefit will rely on a range of programs that have not been fully defined by America and its allies, rather than a single and efficient source of financing and execution.

B3W is a method of assistance that America has used before and has benefited a lot. But today it is unpredictable in terms of competing standards. Unlike infrastructure investments or loans within the BRI framework, a rapid transformation in the focus of globalization will be inevitable if the US-led G7 countries and their partners foresee projects that will support production and contribute to the creation of a new capacity in the eyes of possible countries that will benefit from the initiative. Although it is too late for this type of alternative in the global system, it will be referred to as an important initiative for competition and balance after today.

This article has been published in Turkish at Anadolu Agency on July 14, 2021. https://www.aa.com.tr/tr/analiz/abd-cin-kuresel-rekabetinde-yeni-donem-b3w/2303973 

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