The New York Times has a fascinating article about the birth of the China-led Asia Infrastructure Investment Bank (AIIB), and how Washington’s lack of leadership and bad judgment resulted in its humiliating defeat.
Apparently, China first lobbied the U. S. to join the AIIB in 2014 when the bank was still a concept. But a skeptical Washington worried “that China will use the bank to set the global economic agenda on its own terms.”
The Treasury secretary, Jacob J. Lew, the person who would normally be in charge of a matter like this, did not even call for a meeting to discuss whether the United States should consider joining or not. In addition, the administration sought to discourage its allies from joining, and advised G-7 countries that “the United States wanted a united front.”
However, America’s most steadfast ally, the United Kingdom, ignored the American request. The British government only gave Washington 24 hours’ notice after deciding to join the bank this March. Other US allies rushed in. This was an embarrassing diplomatic defeat for the United States.
Mr. Jin Liqun, the head of AIIB, refers to the lines in Shakespeare’s play “Cymbeline” to describe British defiance:
For China, British membership in the bank was a defining moment. Back in Beijing, Mr. Jin reached for his copy of Shakespeare’s drama “Cymbeline.”
The play takes place in Roman-occupied Britain and part of the action revolves around the British refusal to pay tribute. Mr. Jin read two lines by the character Cloten, who tells the Roman ambassador: “Britain’s a world by itself. We will nothing pay for wearing our own noses.”
Mr. Jin realized that just as ancient Britain had refused to pay Rome in an earlier age, contemporary Britain had defied the United States and joined the Chinese bank.
By this June, the AIIB had 57 founding members with a total capital of $100 billion, double the amount originally envisioned.
In an effort to show that China is not challenging the existing international institutions, the AIIB is jointly financing projects with the Asian Development Bank as well as the World Bank. It also adopts different working protocols:
The bank adopted an Australian idea that procurement should not be limited to member countries, a pledge that would distinguish the bank from the existing institutions. That means companies in the United States and Japan can compete for contracts.
Staff members could also be hired from nonparticipant countries. Two American veterans of the World Bank are working with the new bank: Stephen F. Lintner, a former senior adviser on quality assurance, and Natalie Lichtenstein, who recently retired as assistant general counsel.
As the host of the workshop, Mr. Jin said he wanted the bank to be part of an orchestra working with other development banks, not a solo player. To allay fears that China would dominate, he sat at the end of the head table, letting delegates from other countries take the limelight.
The Obama administration’s lack of leadership in this matter is appalling. This lets China to take the high road. As Mr. Jin said, “We have a standing invitation for the United States to join the bank. Anytime you think you are ready, pick up the phone, give me a ring.”
In my previous article, Can the U.S. and China Transcend Their Differences, I argued that the U.S. needs to take steps to incorporate the AIIB into existing institutions. It is time for the United States to swallow its ego and join the bank. Only so will the U.S. be able to continue to exercise its leadership.