The U.S. walks back opposition to Beijing’s new infrastructure bank after calls to shun it were ignored by the rest of the world.
- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
After having failed to convince allies to reject Beijing’s invitation to join a new multilateral development bank to build roads and bridges, U.S. officials now say they want to work with the new institution.
“The U.S. would welcome new multilateral institutions that strengthen the international financial architecture,” U.S. Treasury Undersecretary for International Affairs Nathan Sheets told the Wall Street Journal. Sheets said the new bank, the Asian Infrastructure Investment Bank (AIIB), should work together with the World Bank.
The turnabout comes after allies like Britain and Germany bucked U.S. opposition and joined a parade of European countries signing on with the $50 billion bank. Because of concerns over the new bank’s oversight, transparency, and environmental standards, the United States sought to discourage other allies, especially Asian countries like Korea and Australia, from joining it. But it became clear this month that those efforts were fruitless.
Amid worries that the Beijing-led initiative will compete with the World Bank and undercut its strict lending standards, some economists argued that countries should join the AIIB at the outset and try to wield influence from the inside.
Fred Bergsten, a former Treasury Department official and a senior fellow at the Peterson Institute for International Economics, said last week that he thought the United States would find a face-saving way to join the bank after some time has passed.
Despite originally taking a harder line, Washington now seems to be more conciliatory.
“How much longer can you say that countries shouldn’t join this new institution when they keep doing it anyway?” asked Scott Morris, an expert on international financial institutions at the Center for Global Development.
Morris said the more welcoming message isn’t new; it just wasn’t what the United States initially wanted.
“It certainly was crowded out by the much stronger, more negative comments that came out of the White House,” Morris said. “These have been competing messages coming out of the administration.”
On March 12, after Britain said it would join the bank, an Obama administration official hit back in the Financial Times, criticizing London’s “constant accommodation” of China.
Now that Australia, New Zealand, India, and Indonesia are also considering joining the bank, the United States is clearly tempering its opposition. In fact, Washington ultimately may be left out since the Republican-dominated Congress is unlikely to allow the United States to join the new bank.
While Washington has walked back its resistance to the bank, Bergsten and others worry that the dustup damages the Obama administration’s standing in global economic policymaking.
“It’s in trade, on the IMF, on this new bank, it’s just every one of these international economic issues they’ve really mishandled,” Bergsten said. “I don’t know if they have the credibility to recoup at this point.”