Britain and the AIIB: Is the US right to criticise?

Alex Dismore

Special relationship under strain? Pete Souza/The White House via Wikimedia Commons

Special relationship under strain? Pete Souza/The White House via Wikimedia Commons

On the 12th March 2015 Britain announced, to the surprise of many, that it would become a founding member of China’s Asian Infrastructure Investment Bank (AIIB). It was a move that has exposed cracks in the so-called ‘special relationship’ between the US and the UK, prompting an unnamed US official to publicly air its grievances: “We are wary about a trend of toward constant accommodation of China, which is not the best way to engage a rising power”. These comments illustrate an ever-increasing divergence on how to respond to China’s rise. The causes of this divergence are twofold: a difference of world view, and a difference in the capabilities of the two countries. US treatment of China’s rise can be characterised as a blend of engagement and containment, often taking place in parallel. The term ‘congagement’ has been coined to describe this mixed approach, which has been much criticised for being fundamentally contradictory and ultimately ineffective. The case of the AIIB, as an example of the containment part of this mix, illuminates this. Britain’s foreign policy ‘outlook’, arguably more pragmatic than that of the US anyway, is increasingly informed by its capabilities, or lack thereof. Its ability to affect China’s behaviour is negligible; a strong degree of accommodation is the best option from a severely limited range.

The AIIB ‘s raison d’être is to satisfy Asia’s enormous need for infrastructure investment in the coming years. One estimate by the Asian Development Bank (ADB) puts the funding gap at a staggering $8 trillion from 2010 and 2020. The AIIB clearly has an important role to play in funding projects that the region badly needs. However, more troublingly for the United States, these projects represent an opportunity for China to increase its presence and soft power reach. President Obama warns darkly of a China that wants to “write the rules of the world’s fastest-growing region”, but it is no wonder that China has followed this path when the actions and the language of the United States confirms what China already thinks about the Bretton Woods institutions: that they are nothing more than the tools of American hegemony. US Congress is still to ratify reforms of the International Monetary Fund (IMF) that would give emerging markets, including China, greater voting power. As it currently stands, the IMF simply fails to recognise the new global economic situation. The World Bank too remains dominated by the US, and the ADB is controlled by a Japan who shares the American commitment to containment. In this respect, America’s refusal to accommodate has seriously backfired.

A high-speed Maglev train speeds out of Pudong airport: the kind of infrastructure Asia might expect, Alex Needham via Wikimedia Commons

A high-speed Maglev train speeds out of Pudong airport: the kind of infrastructure Asia might expect, Alex Needham via Wikimedia Commons

Having arguably pushed China to pursue its interests elsewhere, US hostility toward the AIIB is hypocritical, but perhaps more importantly, it has allowed it to become an unnecessary foreign policy embarrassment. It has lost the argument. Despite its warnings, several of its allies have signed up; even Japan has sent signals that it is warming to the idea. This suggests that key partners do not share America’s pessimistic, “zero-sum game” analysis of China’s economic rise, but instead see an opportunity to help shape an organisation that will be of mutual benefit to those involved, that gives due recognition to China’s economic power and ambitions whilst, crucially, ensuring it adheres to international standards of accountability, transparency and governance – something that can be achieved more effectively from within.

Britain’s decision to sign up to the AIIB may have come as a surprise to many, but it is very much in keeping with the mercantilist foreign policy pursued by David Cameron. Heading a government whose very reason for existence was to improve the UK economy, Cameron pledged to place UK business at the heart of his foreign policy. Policy toward China must be seen in this context. This narrow focus has led to a perception that the government is willing to stay silent on China’s human rights violations in favour of the interests of ‘UK plc’. It is a criticism with some justification and, in light of recent events in Hong Kong, it has a renewed resonance. The government’s response consisted of some initial stern words from Mr Cameron that it failed to back up with anything more tangible . The then Foreign Office minister in charge of relations with Asia, Hugo Swire, met widespread criticism for his refusal to summon China’s UK Ambassador when a group of MPs were refused permission to visit Hong Kong. Despite his cautious approach, Mr Swire was still snubbed by Hong Kong’s leaders. This episode has reinforced a suspicion that the British government lacks interest and self-confidence when it comes to these kind of challenges. In this respect, Americas complaints look more justified.

But what does the US expect from its old ally? It is not a player in the South China Sea, it cannot apply pressure via regional military and geopolitical means. That leaves economics and organisations like the AIIB as Britain’s only real opportunity to have a meaningful relationship with China. Britain was right to take this opportunity. To listen to the US and ignore this chance would not have helped to “contain” China, a dubious aim anyway, and it would have been a missed chance to work toward something of mutual benefit at a time when moments to strengthen the world economy must be grasped. The West will continue to look to American leadership on China’s rise. It must hope that in the future, it will pick its fights a little better.

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