When most of the nation’s closest allies are deserting the United States on a matter of global economic importance, US politicians of both parties should listen to the underlying message.
Earlier this month, the British government defied the United States and announced it will join a new international development bank created and led by China. Germany, France, and Italy followed within days. And as the initial enrollment deadline for the new Asian Infrastructure Investment Bank approaches at the end of the month, Australia and South Korea are poised to sign up as well. Without doubt, the new bank exemplifies China’s efforts to elbow its way into a global financial system long dominated by the United States, and to convert its economic muscle into diplomatic strength around the world.
But with its growing GDP and vast financial reserves, China is bound to claim a larger role in one way or another. The United States should seek to accommodate that shift in a productive way, by enmeshing the world’s second-largest economy more deeply in multilateral bodies such as the World Bank, International Monetary Fund, and Asian Development Bank — three institutions over which the United States has long exercised outsize influence. Instead, Republicans in Congress have stalled even modest reforms that would give China and other major emerging economies more influence over the IMF.
The new Asian Infrastructure Investment Bank, to be headquartered in Shanghai, is plainly a rival to older global financial institutions. While the US-led institutions have made a show of tying aid to transparency and political reforms, China has gained a reputation globally for giving money to repressive governments without strings attached. The European powers joining Beijing’s bank argue that they can best promote good governance for the institution by working inside it.
Still, it’s obvious that Britain, Germany, and others are eager to get into a rising power’s good graces. The Obama administration lobbied US allies not to join, while passive-aggressively insisting that the United States is worried only about the new bank’s governance and not about any potential blow to American prestige. In doing so, the administration unnecessarily turned the issue into a US-China diplomatic battle — which the United States has now lost.
All multilateral deals — trade treaties, international development banks, security arrangements — require sacrifices from all parties. Yet the end of the Cold War encouraged Americans of all ideological stripes to believe, for a generation, that the United States can and should dictate the terms of international relations. For the GOP leadership, delaying reforms at the IMF is a convenient way to inflict more political pain on Obama. For the Tea Party right, insisting upon the American way of doing everything is a matter of conviction. But Washington’s inability to settle even straightforward matters is undermining the nation’s ability to exercise leadership in the world.
Making some room for China on the global scene wouldn’t just be a magnanimous gesture by the United States. It will also help avoid future diplomatic fiascoes. The more China is integrated into existing institutions, the less the imperative to start its own.