Build Back Better World
Confrontation rather than cooperation, bellicosity rather than peaceful coexistence, ideological alliance-building rather than international collaboration to tackle issues of global concerns are going to dominate the international political, economic and security landscape. With every passing day, the capacity of the rules-based international order to resolve conflicts in an unbiased and non-partisan manner is being eroded by the geostrategic rivalries, geopolitical competitions, and geo-economic differences. The main thrust for the rapidly-fraying fabric of the post-liberal world order is the intensifying scrambling between the United States and China for seeking dominance in the realms of regional security, global trade and finance, and multilateral diplomacy.
In the wake of former Chinese President Deng Xiaoping’s decision of opening Chinese markets to foreign investors and adoption of free-market economy with Chinese characteristics, the US government decided to help China gain membership of global economic and trade institutions. The US policymakers hoped that China would eventually become a democracy, shun mercantilist trade tools and a communist, planned economy, but China remained committed to its socialist market economy and continued to practice the unique combination of capitalist and socialist economic models. So, it has emerged instead as the most serious rival to the West-propagated economic and political order. The Chinese leadership does not shy of projecting the socialist market economy as the exclusive way forward to purge the world of the capitalism-led problems, like inequality, brutal monopoly of multinational corporations (MNCs), and rampant poverty. China has undertaken various initiatives to convince the world about the effectiveness of its economic model, and mobilized vast resources to help meet the infrastructure needs of developing countries. Belt and Road Initiative (BRI) is one such project that has tremendously increased the Chinese influence across the world, raising alarm bells in the capitals of Western countries. Consequently, the US has started reaching out to its allies and mobilizing its resources to counterbalance the BRI. The Build Back Better World (B3W) is a part of the larger strategy being pursued by the United States to contain the relentless rising power of China.
The hope that Joe Biden, the most experienced president in the recent history of the United States, would prove instrumental in bridging the gulf between the United States and China, created during the tumultuous period of Trump administration, has shattered. Though Biden has softened the tone and rhetoric against China, the substance of the strategic communication remains the same. The communiqués issued after the summits of G-7 and NATO in June this year have heightened the tension to an unprecedented level, and Biden’s efforts to revitalize the transatlantic alliance against China have convinced the EU countries to condemn China, though half-heartedly.
It is for the first time in years that the EU has directly addressed China and its ‘violations of human rights’ in Hong Kong, Taiwan and, most importantly, of Uyghur Muslims. In G-7 Summit held at Cornwall, the United Kingdom, the world’s most advanced democracies expressed their concern over the HR situation in Xinjiang and demanded greater autonomy for Hong Kong. They also sought investigation to determine the origin of Covid-19.
In the NATO summit, Biden termed the Sino-US competition as the rivalry between democracies and autocracies, and labelled China as a “security threat” and “systematic challenge to rules-based international order”. Apart from these unprecedented condemnations, the most important outcome of these summits is the announcement of a $40 trillion infrastructure-building initiative, dubbed as Build Back Better World (B3W), to rival the China-led Belt and Road Initiative and counteract the political and diplomatic influence of China.
As per a statement released by the White House, B3W is a bold new global infrastructure initiative that will help narrow the $40 trillion infrastructure needs in low- and middle-income countries by 2035. The statement further added that G-7 and other like-minded countries will coordinate to mobilize the private and public capital, and the main areas of focus will be climate, health and health security, digital technology, and gender equity and equality. The values of transparency and accountability will be accorded paramount importance, and rules of Blue Dot Network – a joint initiative launched by the US, Japan, and Australia on November 4, 2019, at the Indo-Pacific Business Forum in Bangkok, Thailand – would ensure financial transparency, environmental sustainability and socioeconomic development. The United States has also decided to ask G-7 to ensure catalytic investments from their development finance institutions to complement the investment from private sectors. Catalytic investment is more risk-taking and it can accept concessionary return as compared to conventional investment. The statement has vowed to make infrastructure-building under the B3W platform consistent with Paris Climate Agreement. Furthermore, the initiative would be global in scope and members of G-7 would be given different geographic orientations.
Combatively, both BRI and B3W, have some advantages and disadvantages. In terms of disadvantages, BRI-led projects are causing debt unsustainability. As per a report, eight recipients of BRI-led investment and concessionary and commercial loans – Ethiopia, Egypt, Yemen, Ukraine, Syria, Iraq, Jordan and Afghanistan – are at greater risk of being unable to pay back the loans. The fact that BRI is exclusively funded by China is also a source of concern. This one-sided flow of investment causes dependency among recipient countries in terms of capital goods and services. Any disruption in the bilateral ties or economic situation in China could create adverse political, economic and security impacts, and provide potential grounds for diplomatic manipulation in case of non-compliance. For instance, the Covid-19 impacted 20 percent of BRI projects with delays and financial constraints that speak volumes about the vulnerability of the recipient countries. Another reservation is the alleged export of Chinese labour to the recipient countries that translates in the much lower level of employment-generation than that anticipated or promised.
Similarly, B3W also suffers from some shortcomings. First and foremost, it lacks clarity and does not provide any detail as to how the EU and the US will manage to mobilize a whopping $40 trillion financing. Secondly, it is a multilateral initiative, involving members of the G-7 group which would make B3W slower and riddled with red-tapism. Thirdly, mobilization of private capital would be a major headache as private sector would be reluctant to share any risk and, if they somehow agree, they would demand higher returns.
Advantageously, BRI was not launched to contain the influence of the US; it was more or less an economic outreach plan, designed to plug the gap of infrastructure development. That makes BRI an inclusive project without any geopolitical strings attached. The BRI is not a slogan; it is an umbrella of 2600 projects with a combined value of $3.7 trillion scattered across 140 countries. The investment under BRI is being made in strategic infrastructure like ports and telecommunication (e.g. 5G.) that would help improve inter- and intra-regional connectivity. In addition, state-led investment and continuation of state policies due to a one-party system would make it easier and quicker for China to ensure the uninterruptible flow of resources for decades to come.
Apart from the above-mentioned structural deficiencies, the implementation of B3W would face formidable hurdles due to geopolitical and geoeconomic restraints. First, the West has not undertaken any major infrastructure project since 1948 when the US Secretary of State announced the $13 billion Marshal Plan to help rebuild war-battered Europe. In other words, the West has a poor track record on infrastructure development. The direction and scale of aid that Europe and the United States provide are heavily influenced by geopolitical and economic considerations. The Guardian terms the US and European aid as fraud and maintains that the aid does nothing to ameliorate inequality. In Doha Debates, it has been revealed that $2 trillion flows from global North to global South each year in terms of aid, loan and foreign investment, but worryingly, $5 trillion flows in opposite direction, i.e. from global South to global North, in the form of shady financial activities, tax evasion, illicit money transfer involving MNCs, and payment on the debts. This situation indicates the predatory and exploitative relations that the West has with the East and it boomerangs the allegations levelled by the US that China systematically engages in predatory trade practices. Furthermore, it creates doubt over the willingness of the West to reverse this flow of money.
Through investments in countries which face extreme difficulties in attracting foreign direct investment (FDI), China has entrenched its influence and diplomatic and political sway over the BRI countries that would pose another serious roadblock to B3W. The significance of BRI can be gauged from the fact that China hosted Asia and Pacific High Level Conference on BRI Cooperation on June 23, in which 29 countries, as well as representatives of six international organizations, participated. But, not only the developing countries but also the developed ones will offer stiff resistance and avoid being entangled in the Cold War-like scenario. Even the G-7 countries, the Biden Administration is counting on for financial resources to materialize B3W, are sceptical about the confrontational policies. Germany, Italy and the UK would find it harder to project B3W as an alternative to BRI. China has emerged as a top export market for Germany and has been its largest trading partner for five consecutive years. It is no wonder that German Chancellor, Angela Merkel, has noted with great concern that “EU and US interests on China are not identical.” Italy, which is also a part of BRI, vehemently opposed the anti-China stance during G-7 Summit and its prime minister, Mario Draghi, has suggested that such actions against China should be avoided. The United Kingdom, which is struggling to craft its independent role in international affairs in the wake of Brexit, would also avoid alienating the world’s most powerful economic state. British premier, Boris Johnson, remarked on the sideline of the NATO summit: “When it comes to China, nobody wants to descend into Cold War.” EU enjoys comprehensive trade ties with China which was its top trading partner in 2020, surpassing the United States.
These above-mentioned facts make it abundantly clear that the US would find it very hard to convince its transatlantic partners to resist China through investing in rival projects.
Having discussed the bottlenecks in the way of implementation of B3W, it would be pertinent here to analyze China’s response to the initiative. After the issuance of the communiqué of the G-7 Summit, Chinese embassy in London responded with a strongly-worded statement whereby it advised the West to avoid unilateralism and a spokesman for the embassy remarked: “The days when global decisions were dictated by a small group of countries are long gone.” China also termed the NATO communiqué as the continuation of the Cold War mentality.
On a positive note, the emphasis of B3W on investment in adaption to and mitigation of climate change and improvement in human capital has inspired China to add a pro-environment dimension to the BRI. In an article, Nong Rong (Chinese ambassador to Pakistan), suggested that BRI should focus on green infrastructure, green energy, green transport and green finance. He even offered undertaking another pilot project, Green CPEC, to convince the world about the instant dividends that could be reaped by both BRI and non-BRI countries should the project under BRI are implemented smoothly and utilized as per their potential. It is welcome to note that China is willing to accommodate reservations and is contemplating to undertake remedial measures.
B3W could have impacts on Pakistan as well. Pakistan enjoys “strategic cooperative partnership” with China and CPEC, as the flagship project of BRI, is being implemented here with bipartisan consensus. China has invested considerable diplomatic and financial capital to make CPEC a case study for countries sitting on the fence. The success or failure of CPEC would be the ultimate litmus test to gauge the efficacy of BRI-led investment to resolve recipient countries’ socio-economic issues. The centrality of CPEC has been the underlying motivation behind US and international financial institutions’ sustained efforts to pressure Pakistan into rethinking its approach vis-à-vis CPEC. Although the US has unambiguously termed B3W as a democratic alternative to BRI, the participation of Pakistan in B3W is almost a non-starter. Nonetheless, Pakistan could face arm-twisting from its bilateral and multilateral lenders and thus, creating hurdles in the westward expansion of CPEC and turning CPEC into a trilateral or quadrilateral venture. But there is no likelihood that Pakistan would scale back CPEC-related projects. Ambassador Nong Rong has revealed in his article that as many as 46 projects have either been completed or are under construction. These projects have a combined value of $25.4 billion and have generated 75,000 jobs. So, China-led investment is too extensive to ignore, and consequently, Pakistan would continue to resist any attempt to halt or scale back the progress on CPEC projects.
The world — developing countries, in particular — is in a dire need of infrastructure. McKinsey Global Institute reported in 2016 that $3.3 trillion worth of investment needed to plug the gap in the infrastructure needs on the annual basis, but developing countries could not meet that cost and there remained a gap of $350 billion annually which is expected to widen to $5.3 trillion by 2030. If we add financial requirements to meet climate adaption and socio-economic investment to meet SDGs, the gap will be more than $15.9 trillion by that time. High-quality infrastructure is crucially required and it is indeed a welcome development that the West has begun to realize the importance of connectivity and integration. Inclusiveness and non-political nature of the B3W could provide it some momentum to take off, but unfortunately, the US is hell bent on projecting B3W as a new arena to wage the ideological battle. The Spanish Civil War (1936-1939) was also termed as the battle between democracies and autocracies, which eventually proved a precursor to the Second World War. This us-versus-them approach should be avoided because it carries the seeds of a full-fledged war. Unnecessary dragging of ideological dimension to the economic affairs would not serve the world. It seems that after Red Scare (1947-1957), the US is now experiencing Dragon Scare that is pushing successive US administrations to mobilize resources to contain China. Thucydides’s trap seems to be the only justification for rapidly-deteriorating Sino-US ties and the resultant emergence of rudimentary contours of alliance-building along ideological lines. Amidst the multifaceted global challenges – climate change, the trail of destruction left by Covid-19, nuclear armament, and poor progress over SDGs, to name a few – the confrontational path bodes ill for the future of the world. Any prospect of the resurrection of the Cold War in any sphere is bound to have crippling consequences for international peace, stability and development.
The writer is a graduate of the University of Agriculture, Faisalabad. He writes on national and international affairs.