Friday, May 12, 2017

U.S. Can Take a Lane on China's New Silk Road Bloomberg

U.S. Can Take a Lane on China's New Silk Road

For once, Beijing can do the heavy lifting and Americans can reap the rewards.
While Washington is preoccupied with talk of a potential trade war with China and real war on the Korean Peninsula, Beijing is preparing for a different conversation about the future of Asia.
Banners draping highway overpasses across the city herald the arrival Sunday of more than 100 national delegations -- including at least 28 heads of state -- to discuss the so-called Belt and Road Initiative, President Xi Jinping’s campaign to better link East and West with new sea- and airports, pipelines and broadband internet, railways and paved highways along the old Silk Road.
Some analysts here have dubbed Belt and Road -- which refers to the ancient land corridor to Europe and sea lanes to Africa, respectively -- China’s Marshall Plan, and the surest sign of its emerging global leadership.
Others point to the lack of clarity and transparency and the dubious commercial value of potential projects to argue that it is merely the latest Chinese attempt to advance its own interests through bullying economic mercantilism.
Both views likely overstate the case. Certainly there is a great deal of Chinese self-interest involved, but there is also much to gain for the nations along the initiative's ambitious path.
Then there is the question of how the U.S. should handle Belt and Road. During my visit to Beijing this week, conversations increasingly focused on whether Washington will finally signal support for the initiative by dispatching a senior official on Sunday.  
For the U.S.-China relationship, Belt and Road offers an important test for whether tired platitudes about a “new model” for international relations, and the importance of avoiding a zero-sum rivalry, can be more than rhetoric. Finding a common way forward -- or at least avoiding a clash -- would require both sides to take uncomfortable steps.  
China will need to provide more details about what exactly Belt and Road means -- other than a mere repackaging under one banner of projects already in the pipeline -- and how precisely the dozens of target countries and companies around the world can benefit from it.
The U.S. will need to resist the knee-jerk impulse to oppose any Chinese assertiveness, which has previously led it to pick fights it could not win, as with its futile opposition to the Asia Infrastructure Investment Bank, a regional development institution launched last year.
“Whether or not Beijing and Washington can turn [Belt and Road] into an area for constructive cooperation where we share common interests will be an important litmus test for the relationship,” said Paul Haenle, who runs the Carnegie-Tsinghua Center for Global Policy, the Beijing branch of a global think tank.
President Donald Trump, who touts his burgeoning relationship with Xi, has staked out (and often reversed) strong positions on a host of issues -- Taiwan, currency manipulation, China’s role in reining in North Korea, trade imbalances. But he has been conspicuously silent on what is considered to be the Chinese president’s highest priority initiative.
U.S. administrations of both parties have long encouraged China to play a greater role in reinforcing the international system that enabled its extraordinary rise. That has meant, among other things, urging Beijing to eschew a foreign policy that uses economic might to tilt the playing field in its favor and dictate terms to smaller countries.
Instead, the theory goes, China should work with other major powers to solve global problems through multilateral institutions that have brought peace and prosperity to Asia and the world since the end of World War II.
Beijing clearly harbors suspicions that all of the happy talk about shared responsibility masks a Western desire to constrain its rightful rise. But with glaring exceptions such as its rejection of The Hague Tribunal’s recent ruling against it on the South China Sea, China has shown some signs of buying into this approach.
As a result, recent U.S.-China cooperation on global issues has benefited the entire world, including through China’s essential roles in the Iran nuclear deal, the Paris climate accord, the fight against Ebola and the expansion of United Nations peacekeeping operations.
Development assistance has long been considered another area ripe for potential cooperation. But unlike the other issues, on which Washington was uniquely positioned to lead the way, here China is in the driver’s seat.   
The crisis of primitive or crumbling global infrastructure -- which, according to the McKinsey Global Institute requires $3.3 trillion in annual investment, most of it in the developing world -- is tailor-made for China’s unparalleled ability to marshal capital and construction capacity. And that has often made Washington wary.
The Barack Obama Administration’s opposition to the Asian infrastructure bank came across as both petty and weak, as its less-than-subtle efforts to curb other countries’ enthusiasm were overwhelmed by a stampede of early adopters, including U.S. allies such as Australia and South Korea. Both the U.S. and China would benefit from avoiding that precedent on Belt and Road.
For China, an American endorsement could markedly improve the perception of an initiative critics caricature as an attempt to buy up other countries’ strategic assets, provide jobs for imported Chinese workers, or dump Chinese industrial overcapacity in developing markets. An American imprimatur would also help China’s state-owned enterprises defray the risk associated with big projects in dicey parts of the world.
For now, justified suspicion hangs over China’s purported commitment to mutually beneficial outcomes -- what Xi has called a “chorus comprising all countries along the routes, not a solo for China itself.”
The branding problem has China’s state-run media working overtime. The newspaper China Daily produced English-language videos dubbed “Belt and Road Bedtime Stories.” One shows a father teaching his daughter about the initiative by maneuvering a toy camel across a brightly colored map to illustrate trade. “Like countries sharing?” a young blond girl asks. “Yeah,” her father replies.
But efforts to make the initiative seem like a win-win for all will collide with reality across some of the most complex and conflict-ridden regions of the world -- Central and South Asia, the Middle East and East Africa.
While Beijing says it intends to focus entirely on the economics of the deals while floating above the political, ethnic, religious and other fault lines, that is already proving easier said than done.
A port development in Sri Lanka has led to large protests. Indian officials have raised concerns that a new Pakistan economic corridor impinges on territorial disputes and will improve its rival’s ability to project military power.
For a taste of what else could come, consider how China will navigate Gulf countries keeping score as to Beijing’s investment in Iran, and vice versa. Or imagine Israeli resistance to Belt and Road projects with the Palestinian Authority, as both sides court Chinese investment.
Such objections will only gain steam if Washington is spreading skepticism of the project.
For the U.S., finding ways to work with Belt and Road would ease mounting concerns that  it is ceding the international playing field to China, especially in the absence of an American alternative proposal.
Trump’s  “America first” messaging and the abandonment of a hard-won Trans-Pacific Partnership trade agreement that comprised 40 percent of the global economy have raised doubts about America’s international ambitions, just as Xi projects greater global leadership in advance of this fall’s 19th Communist Party Congress, where he will seek to further consolidate his power.
A change in the U.S. attitude need not mean blindly embracing an initiative whose details and true motivations remain hazy at best. While reports suggest anywhere from $500 billion to more than $1 trillion in Chinese-financed projects could be in the offing, conversations with multinational executives in Beijing this week suggest many will need to see a lot more fine print before making any commitments.
But Washington would be wise to welcome the initiative, at least in principle, even while pressing the Chinese for more specifics and working with other countries to hold it to certain international standards, for example on labor practices and environmental impact.
A good place to start would be by sending a credible delegation from Washington to Sunday’s Belt and Road Forum (which some U.S. officials derisively refer to by the unfortunate acronym “BARF”), to join notables like Russian President Vladimir Putin and Burma’s de facto leader Aung San Suu Kyi.
Trump, who clearly prides himself on his deal-making and construction prowess, should also ask his State and Commerce Departments to identify projects that advance American interests and designate a seasoned diplomat to help steer Beijing toward them (and to promote U.S. companies interested in doing the work). 
Finally, with the Trump Administration seemingly inclined to deepen its military involvement across the Belt and Road region, working with China could help break the recent pattern whereby Washington spends blood and treasure on security and China reaps the economic rewards.
Perhaps the greatest irony of America’s devastating conflict in Iraq, often caricatured as a “war for oil,” is that China, which opposed the invasion, has been the far greater beneficiary of Iraqi energy production.
The U.S. and China are still defining the contours of a relationship commonly considered the world’s most consequential. Cooperating where they can and colliding only when they must remains as good a formula as any. While it is too soon to know which category Belt and Road will fall into, there is the prospect of a mutually beneficial way forward, if both sides have the wisdom to seize it.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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