The US and Europe are facing a growing challenge in countering China’s Belt and Road Initiative (BRI), a massive investment and infrastructure program. While Beijing’s financial resources and politicization of investments pose obstacles, Washington and Brussels have opportunities to promote open and fair dealing with developing countries. By emphasizing assistance, trade, and adherence to transparent rules, the US and Europe can present a compelling alternative to China’s approach.
Financial Tools and Initiatives:
To match China’s investment offerings, the US established the International Development Finance Corporation (DFC) in 2018, and President Joe Biden launched the Build Back Better World initiative at the G7 meeting in 2021. Similarly, the EU launched its Global Gateway in 2021, aiming to fund €300bn of connectivity projects over six years. While financial firepower is essential, the challenge lies in countering Beijing’s tendency to politicize investments and link them to security alliances.
China’s flaws in its Belt and Road Initiative are becoming evident. It faces issues with failed loans, messy debt restructurings in countries like Zambia and Sri Lanka, and growing disillusionment among recipient nations. Some European countries have disengaged from China’s initiatives due to poor returns. China’s geopolitical alliances with Russia and Pakistan come with their own risks, such as political alignment with an increasingly weak Russian regime and dependence on an endlessly dependent money sink.
Promoting Fair and Open Trade:
Instead of coercion or bribery, Europe and the US should focus on offering assistance and trade on fair and open terms. While some Asia-Pacific countries seek security alliances, Europe lacks a centralized military capacity. However, it can contribute through aid and investment based on rules and openness. The Partnership for Global Infrastructure and Investment (PGII) and the Global Gateway are promising initiatives, but skepticism is required, as both the US and EU struggle with effective coordination among their agencies and making realistic estimates of private capital mobilization.
Expanding Traditional Channels and Market Access:
In addition to bilateral efforts, the US and EU should work towards expanding and depoliticizing traditional channels of assistance, such as the International Monetary Fund (IMF) and the World Bank. They hold significant voting power on these institutions’ executive boards, which can be leveraged to increase resources and openness to reform. Moreover, the US market remains attractive to non-China East Asian economies, while the EU can signal its commitment by finalizing trade agreements like the one with South America’s Mercosur bloc.
Leveraging Comparative Advantages:
While China’s financial capabilities may outmatch those of the US and Europe, democracies have their own strengths. Openness and consistency in investment and trade are the rich world’s comparative advantages. By focusing on transparent rules and multilateral systems, the US and Europe can offer a more reliable and sustainable approach.
To effectively counter China’s Belt and Road Initiative, the US and Europe must emphasize open and fair dealing in their engagements with developing countries. By leveraging their comparative advantages, such as financial assistance, transparent rules, and access to their markets, they can present a compelling alternative to China’s investment model. Promoting collaboration through traditional channels and reforming existing institutions will be crucial in overcoming skepticism and gaining trust. Ultimately, the US and Europe should prioritize assisting developing nations and engaging in trade on fair and open terms.