Yet another important U.S. ally is signing up for Beijing’s newest geopolitical tool, the $50 billion Asian Infrastructure Investment Bank. This time, it’s South Korea, which on Thursday announced it is signing on with the AIIB, citing concerns that existing institutions don’t do enough.
South Korea joins the UK, India, Germany, France, Italy, and New Zealand in joining up. Australia is reportedly still considering participating, and even Japan has been cautiously accepting of the new institution. The Obama Administration initially had a minor public conniption fit when the UK announced its intentions, but has since been walking back its remarks. Earlier this week, it sounded as accommodating as it had accused London of being two weeks earlier. The Wall Street Journal reports:
The Obama administration wants to use existing development banks to co-finance projects with Beijing’s new organization. Indirect support would help the U.S. address another long-standing goal: ensuring the new institution’s standards are designed to prevent unhealthy debt buildups, human-rights abuses and environmental risks. U.S. support could also pave the way for American companies to bid on the new bank’s projects.
“The U.S. would welcome new multilateral institutions that strengthen the international financial architecture,” said Nathan Sheets, U.S. Treasury Under Secretary for International Affairs. “Co-financing projects with existing institutions like the World Bank or the Asian Development Bank will help ensure that high quality, time-tested standards are maintained.”
Opposing China’s new bank quietly would always have been a losing battle, and doing so publicly was an unforced error that just added a diplomatic black eye to the pain.
The key to the success of the American-led global capitalist world order is how strong the incentives are to participate and cooperate in it, and simultaneously how it incentivizes economic partners behave well toward one another. Working with the AIIB is the sort of thing that allows the U.S. to bring it into the fold, while shunning it would give China the space and the incentive to try to set up a separate system of its very own. The White House’s volte-face is a good move—if a little late.