Washington Should Join AIIB, Taipei Can Hardly Remain Outside
China Times Editorial (Taipei, Taiwan, ROC)
March 23, 2015
Executive Summary: US attempts to prevent its allies from joining the Asia Infrastructure Investment Bank, or AIIB, have clearly failed. Britain recently announced that it has just joined the AIIB. Germany, France, Italy, and others have declared their support. Australia, South Korea, and others are expected to follow suit. How will the AIIB work? That has yet to be specified. Washington has suffered a diplomatic setback. Beijing has scored a victory in Sino-US strategic wrangling.
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US attempts to prevent its allies from joining the Asia Infrastructure Investment Bank, or AIIB, have clearly failed. Britain recently announced that it has just joined the AIIB. Germany, France, Italy, and others have declared their support. Australia, South Korea, and others are expected to follow suit. How will the AIIB work? That has yet to be specified. Washington has suffered a diplomatic setback. Beijing has scored a victory in Sino-US strategic wrangling.
British support for the AIIB is not about choosing between the United States and Mainland China. It is about national interests. It seeks opportunities for economic growth and investment in Asia. The US has criticized Britain for "accommodating" Mainland China. Instead, it merely demonstrated its own narrow-mindedness. It merely demonstrated that it lacked the generosity of spirit befitting a great nation. Washington cast aspersions on AIIB governance and operating standards. It implied that a Beijing led AIIB would disregard international lending principles and eventually become Mainland China's diplomatic and political tool.
Actually, the United States is worried that the AIIB will weaken the monopoly over international financial organizations the US has enjoyed since the end of World War II, and its unrestricted ability to print money. Takehiko Nakao, president of the Japanese Asian Development Bank (ADB), opposed the AIIB, on grounds that the US-led postwar norms of international finance must remain unchanged.
US attempts to prevent other nations from joining the AIIB were a serious strategic miscalculation. The AIIB is designed to meet Asian countries' need for large investments in energy, electricity, transportation, telecommunications, and other infrastructure. It will promote regional interoperability, and accelerate regional economic growth. The statutory requirement for AIIB capital is 100 billion USD. The founding members have decided that member nation rights and shares will be apportioned according to GDP. As the world's second largest economy, Mainland China plans to invest 50 billion USD. Naturally it will have the largest number of shares. But that does not mean Beijing can do whatever it wants.
Washington's resistance to the AIIB confirms that its Asian-Pacific rebalancing strategy was aimed at containing Mainland China. Its alleged desire for “Asian regional peace, stability and prosperity" was mere lip service. The result of obdurate US unilateralism, will probably only further alienate Asian countries.
Beijing has repeatedly stressed that the AIIB is an open, inclusive, accountable, transparent, and equitable multilateral development institution. Its governance structure and operating policies will draw on existing international financial organizations, and strive to reduce costs and improve operational efficiency. Mainland China welcomes countries outside Asia as founding members of the AIIB. It wants broad outside AIIB representation, to create a win-win situation in both Asia and Europe.
Mainland China's GDP accounts for 16% of total global GDP. But in the World Bank, it has only 4.87% of the voting rights, far less than the United States, with 16.28% of the voting rights. It has 3.81% of the voting rights in the IMF, while the United States has a disproportionate 16.75%. In 2010, Obama began promoting international financial organization reform. But so far it has not received Congressional support. This has led to a major loss of trust among US allies.
The United States is unable to raise the status of emerging economies in international financial organizations. It also objects to increases in ADB capital. So why not join the AIIB? On the one hand, it could encourage existing international financial organizations to work closely with the AIIB. On the other hand, it could invite Mainland China to join the Trans-Pacific Partnership Agreement, and jointly establish new norms for international finance.
Britain will urge the AIIB to set high standards for its operational procedures. Britain has repeatedly urged the United States not to boycott the AIIB. It reminded the US of its hope that Mainland China would become a responsible major power. If Washington is worried about its waning political and economic influence, it would be wise to join the AIIB. US Treasury Secretary Jack Lew recently warned that when the Mainland China led AIIB gains general support from US allies, it means America's international influence has declined. Lew's intention was to persuade Republicans to support international financial organization reform. But it also highlighted repeated US attempts to silence Mainland China and other emerging economies. This will eventually weaken the ability of the US to shape international economic standards. This is something the United States must consider.
Fighting for the right to lead global economic and financial regulation during this century, has apparently become one of America's core issues. Mainland China has promoted the AIIB. Last year it led the establishment of the BRICS Development Bank, and invested over 40 billion USD in the Silk Road. America is going to find it difficult to stop the Mainland Chinese from building a new generation international financial order. Washington is worried that Beijing will use AIIB loans to gain political and military strategic advantage. It may conclude that "If you can't beat 'em, join 'em."
The British joined the AIIB in a dramatic fashion. It realized that the rise of China has led to a reshuffling of the global order. The establishment of the AIIB and "one belt, one road" grand strategy, (Eurasian Economic silk belt and the Maritime Silk Road of the 21st century) will accelerate the economic integration of Eurasia. The global economy is about to be overtur turned on its head. Washington must join. Taipei can hardly remain outside.