By the deadline of March 31, 2015, nearly 50 countries had joined or applied to become prospective founding members (PFMs) of the Asian Infrastructure Investment Bank (AIIB).
Unlike its adversaries and allies, the United States had expressed no immediate intention to participate.
That is a serious, but not entirely unexpected mistake. It is a reflection, not the cause, of a deeper challenge – that of adjusting American exceptionalism into the era of multipolar world economy.
Chinese AIIB, American opposition
Put forward by Chinese leaders in October 2013, the proposal for the Asian Infrastructure Investment Bank (AIIB) originated from frustration. For years, China, along with other large emerging economies, had grown exasperated with the slow pace of reforms in the international multilateral financial institutions, such as the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank (ADB).
In the advanced economies, these institutions are seen as international. In the emerging world, they are perceived as dominated by American, European and Japanese interests, as reflected by their voting quotas, investment allocations and the nationality of their leaders.
In June 2014, China proposed doubling the registered capital of the bank from $50 billion to $100 billion, with half from Beijing and the rest from the other founding members. In an important strategic move, China invited India to participate in the founding of the bank.
Despite pressure, U.S. allies in Southeast Asia, including Vietnam and the Philippines, joined the AIIB. Following India’s footprints, so did the rest of the South Asian economies, even Australia and New Zealand. In East Asia, South Korea joined in but Japan remains split between its security alliance with the U.S. and trade with China. These moves, though frustrating in Washington, were not entirely unexpected.
What changed the game was the UK’s participation, as the “first major Western country.” Obviously, London expects the AIIB membership to facilitate the City’s aspiration to become the base for the first clearinghouse for the yuan outside Asia. In the U.S., the UK announcement triggered a riled response from the Obama Administration. After Britain, other EU core economies – Germany, France, and Italy – followed in the footprints, along with the Nordics, even Washington’s prime ally, Israel.
But why did Washington object to the AIIB, in the first place?
Recently, former Secretary of State Madeleine Albright said that the U.S. decision not to seek AIIB membership was a “miscalculation.” In this scenario, Washington has nothing against supporting other Chinese economic initiatives internationally. But that has not always been the case.
When the BRICS nations began to launch their development bank, the White House saw it as potential threat to the existing multilateral organizations. Also, through the Obama era, the administration has pushed for the Trans-Pacific Partnership (TPP), which excludes China, while rejecting regional free trade plan, which was introduced in Washington and includes both the U.S. and China. Finally, as momentum has been building for Chinese yuan to gain reserve-currency status, the Obama administration has threatened to upend Beijing’s efforts.
When the UK announced its AIIB membership, a U.S. administration official said: “We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.” That creates an impression that the administration’s preferred strategy is containment (which it has denied). Be that as it may, the Obama administration is remarkably alone in its endeavor, not unlike President George W. Bush amid the U.S.-led invasion of Iraq in March 2003.
Unlike the U.S., America’s closest allies have no ability or willingness for global primacy, however. After all, U.S. security doctrines tend to contend that no Eurasian challengers should emerge capable of dominating Eurasia. As Zbigniew Brzezinski argued in The Grand Chessboard (1997), “a non-Eurasian power is preeminent in Eurasia – and America’s global primacy is directly dependent on how long and how effectively its preponderance on the Eurasian continent is sustained.”
In this view, the world has room for only one ‘hegemon.’
No infrastructure, no Asian Century
In Asia, the AIIB debate is mainly about compelling economic needs. Elsewhere, it is about the opportunity of other nations to participate in Asia’s growth momentum. In Washington, the debate is about threats.
In the U.S., the AIIB has been criticized as a deliberate attempt to rival the World Bank and the ADB, even though neither of the two has the funds to support the desperately needed real infrastructure progress in Asia. Yet, the ADB has less than $80 billion in capital, while the World Bank’s member states have subscribed to $223 billion of subscribed capital. In practice, the latter can loan some $50 billion per year.
According to ADB, what Asia needs is about $8 trillion in 2010 — 2020.
Second, the AIIB has been portrayed as Beijing’s geopolitical instrument to attract Asia closer to China’s “sphere of influence.” Certainly, economic power goes hand in hand with strategic power, as evidenced by the role of the U.S. in the postwar world, especially the Marshall Plan and the North Atlantic Treaty Organization (NATO).
But participating in the AIIB is not predicated on joining the Shanghai Cooperation Organization (SCO). Rather, China is offering to share the benefits of its development with the rest of Asia as Japan once did with Singapore, Hong Kong, South Korea and Taiwan.
Finally, the AIIB critics have argued that the bank would not meet environmental standards, procurement requirements and other safeguards embraced by the World Bank and the ADB. That is a rosy view of these organizations, which emerging nations have criticized for years for lending, policy and staffing bias; and their advanced host economies which cause 4-5 times more pollution than the emerging Asian nations on a per capita basis.
The promise of the Asian century is critically dependent on the need for infrastructure. And yet, while President Obama has spoken for more investment in Asia, his administration has opposed increasing ADB’s capital base. Nor has the administration sought to persuade Congress to adopt legislation that would provide enhanced roles for China and other emerging economies in the IMF – as agreed by other countries.
While each country may have its own sense of manifest destiny, American exceptionalism holds that the U.S. has an obligation to spread its values to every part of the world. In this sense, it is “missionary,” as Dr. Henry Kissinger likes to put it. But it also rests on bygone foundations.
In 1945, as Europe lay devastated and Japan in ruins, the U.S. emerged as the engine of the world economy. So the idea of American exceptionalism was still congruent with everyday realities. Today, the U.S. accounts for barely 20 percent of the world economy. It is no longer either the largest trader or the biggest producer but reliant on foreign investment and the world’s largest debtor.
In military expenditures, however, America remains the world’s absolute hegemon. As a result, American exceptionalism continues to be affected by security interests. But that’s a very narrow view of American exceptionalism.
In one way or another, Washington may well join the AIIB in the future. But the idea that lobbying forcefully against it was a mere miscalculation is naïve. American exceptionalism will not easily adjust to the multipolar world.
The aspiration for global primacy may be irreconcilable with American values of democracy, egalitarianism and freedom, which are better reflected by multipolarity. But old habits die hard.
Transformative times require executive leadership.