The stated goal of Treasury Secretary Jack Lew’s trip to China today is to discuss technology policy. Washington has, after all, complained that proposed Chinese anti-terrorism laws, which would require encryption keys be handed over to the Beijing government, are an undue burden and an opening for government-sponsored corporate espionage, and thus represent a threat to international trade.
But those laws are just drafts, and they’ve been on the table for a while now. Lew’s trip, according to reports, was hastily arranged and falls, it turns out, just one day before the deadline for countries to join the Asian Infrastructure Investment Bank (AIIB), and just days after South Korea joined most other Asian nations and many European powers in signing on to the bank. In fact, of the countries considered U.S. allies, the only major economies that have yet to join the AIIB are Canada and Japan.
The AIIB is designed as another complementary fund to the World Bank, akin to the Japanese-led Asian Development Bank, that could help patch the massive infrastructure gaps in rapidly growing Asia. The World Bank cannot come close to providing the estimated $700 billion the continent will require annually to build roads, expand water supply and wire vast swaths of land for Internet access. Hundreds of billions more would be needed to remedy poverty and meet ambitious emissions-reduction goals.
But the AIIB is also seen as the further devolution of the U.S.-centric economic order organized under the Bretton Woods agreement in 1944, and an attempt by China to work its soft power in the face of growing dissatisfaction and distrust of western-led lending institutions, namely, the World Bank and International Monetary Fund.
Earlier this month, Lew warned Congress “new players were challenging U.S. leadership in the multilateral system,” adding, in his prepared testimony, that U.S. “credibility and influence are being threatened.”
But has Lew come to China to bury the AIIB or to praise it?
Yes, the U.S. position is, at least publicly, that the new bank poses a threat. “I think there’s a lot of concern on the U.S. side that this institution would become an instrument of Chinese foreign policy," said Robert Kahn, a fellow at the Council on Foreign Relations, in an interview with American Public Media’s Marketplace. And there is much talk that the AIIB might not pay enough attention to environmental concerns in the developing nations it seeks to aid.
But, given that the U.S. is at the same time negotiating a massive trade deal with China — the Trans-Pacific Partnership — that many expect will offer contractual advantages and environmental indulgences to China, could it be that Washington doth protest too much?
Maybe so, according to some analysts.
“The timing of Secretary Lew’s visit to coincide with the deadline for countries applying for founding membership of the AIIB may signal that the US has decided to join,” said Tim Condon, chief economist and head of Research at ING Asia, to the South China Morning Post.
And the deficit-hawking marketeers at the Peterson Institute for International Economics said the “United States should bless” its allies who have joined the AIIB, and should jump on board, too, to counterbalance Chinese influence, according to a column posted in the Financial Times. Not that Peterson’s C. Fred Bergsten, who penned that Op-Ed, thinks there is all that much to worry about. "Because the Chinese have been suspect on these issues, they will lean over backwards to follow international best practices," said Bergsten to Marketplace. "My guess is, they’re going to be holier than the Pope."
Given the current pontiff’s positions on the evils of the capitalist system, maybe not. But potentially more influential than the austerity-obsessed existing order? Perhaps.