AIIB, allies, Asian Infrastructure Investment Bank, China, escalation dominance, Financial Crisis, Global Imbalances, Ingternational Monetary Fund, Japan, Korea, NATO, North Korea, Our So-Called Foreign Policy, Russia, TPP, Trade, Trans-Pacific Partnership, World Bank
So now what? That’s the question a Twitter follower asked me after reading my posts and tweets criticizing China’s establishment of a new Asian infrastructure financing bank, and the ineffective U.S. response to its’ allies rush to join an institution that challenges an international economic order that they themselves built. I’ve now started to think this through, and here are my preliminary thoughts – which focus on the golden opportunity these events create to rethink an American alliance policy that was obsolete even before the Cold War ended.
China’s move spells trouble for the United States on any number of levels, but especially for its efforts to preserve the approach to foreign policy and the global economy it’s clung to under Democratic and Republican presidents alike since the end of World War II. This strategy has ultimately aimed at eliminating the conditions responsible for great power war in the first place by binding like-minded countries (generally, but not always, democracies) into cooperative economic networks that could promote global stability and prosperity, and by expanding this system whenever practicable. Challengers from outside this free world camp would be dealt with through various global alliances.
Also crucial: In all of these endeavors, the United States provided the lion’s share of the so-called public goods – the resources for defense and liquidity for promoting growth (which included wide open trade markets for countries that kept theirs substantially closed). In turn, the United States was generally recognized as first among equals for the systemic, existential decisions.
These arrangements, which extended to the free world camp’s consequential institutions (NATO and the other security relationships, the World Bank and the International Monetary Fund) were far from America’s only viable strategy during the early post-World War II decades, as I’ve explained here. But they were a sensible choice and deserve credit for fostering successful postwar reconstruction, as well as peace and record prosperity throughout the developed world.
Yet it made much less strategic sense for the United States once the Soviet Union caught up in nuclear armaments, and thereby gained the power to turn America’s defense of its allies into an exercise in suicide. And it made much less economic sense for the United States once its allies began catching up economically, and its role as liquidity provider became less affordable.
It’s no surprise, then, that the early postwar monetary system – the heart of that period’s international economic system – fell apart in 1971, and has never been adequately replaced, even though its institutions survived in shriveled forms. The alliance system outlived its Soviet adversary, and China’s weakness following the Cultural Revolution and growing tensions with Moscow pushed it to the military and ideological competition’s sidelines for many years. But by the same token, the remaining American costs and risks required to maintain Cold War security structures lost much of their rationale.
Now new versions of these problems and dilemmas are now being forced into the open – including those involving nuclear threats – by China’s Asian Infrastructure Investment Bank (AIIB) gambit as well as by the return of Russian revanchism. In fact, because so many of America’s NATO allies have applied to join the bank, these two developments intersect. These allies are facing Russian challenges throughout Europe that for the first time in decades raise the possibility of spheres of influence being redrawn by force – primarily in the Baltics. As I’ve written, I believe that America’s ill-considered decision to expand NATO’s frontiers right up to Russia’s borders is largely responsible. But the allies clearly went along, and the shrunken states of their conventional military forces mean that they have no prospect of responding effectively – but not catastrophically (i.e., without nuclear weapons) – without American help.
At the same time, these allies have ignored American objections and joined a Chinese creation that can only be legitimately viewed as a rival of a U.S. and Western-fostered blueprint to ensure that growth and development worldwide proceed according to market-based principles and associated political values. Anyone familiar with Asia in particular knows that this goal often has been honored in the breach – one main reason for the global economic imbalances that nearly blew up the world economy just over six short years ago. It’s entirely understandable that low-income countries complain that even the rapid growth they’ve achieved under the Western-dominated global economy hasn’t been fast enough. But imagine how excessive and unbalanced their growth would be, and how dangerously distorted the world economy would become once again, if the current restraints were removed – if China was allowed to write the rules of doing business in Asia, as President Obama says he fears. Moreover, the entirety of East Asia itself could look as bloated and filthy and corrupt as China itself.
That America’s allies (Japan is still sitting on the fence) should ignore these considerations in a clear rush to win whatever contracts the AIIB winds up handing out raises the most profound questions about their commitment to longstanding free world foreign policy goals. Their actions are particularly stunning in light of renewed security threats that, due to enduring facts of geography, endanger them much more than they endanger America. The idea that the United States should continue assuming any risks of nuclear confrontation on behalf of such countries looks particularly dubious.
Nor should it be forgotten that China itself has been a major beneficiary of the current American-inspired order. Peace and stability in Asia has been by far the most important contributor to its breakneck growth and dramatically improved living standards. So it’s at least jaw-droppingly ironic to read reports of Chinese warnings that North Korea’s nuclear arsenal could be much larger than so far estimated, and could grow much faster. After all, Beijing not only still serves as the North’s economic lifeline, and has been more aggressively pressing its claims to seas and islands in East and Southeast Asia, on top of its campaign of undermining America’s regional influence.
Even worse, Korea looks like an ever more dangerous tar baby for the United States. Yes, the ongoing large U.S. troop deployment in South Korea no doubt helps to deter destabilizing provocations and even aggression by the North. At the same time, it threatens to draw the United States into any conflict on the peninsula – which could well go nuclear. Further, as I’ve written, the North’s nuclear forces could soon become strong enough to deter deeper U.S. involvement in a new Korean War – and doom the troops already in harm’s way. Most important, America is exposed to these possible disasters even though it’s located thousands of miles away from Korea, and Northeast Asia looks endowed with more than enough big powers (not only China, but Russia and Japan as well as South Korea) to deal with the North itself. Oh – and did I mention? South Korea is all in with the AIIB, too.
To me, therefore, one obvious U.S. response to China’s creation of the AIIB should be to deliver an ultimatum to those new members that are also negotiating to conclude the Trans-Pacific Partnership (TPP) trade deal with America: If you’re that keen on the AIIB, you can kiss good-bye the TPP and the greater access to America’s market you’re seeking. In fact, Washington should feel free to increase and erect new trade barriers to their products. Nor should the main culprit escape unscathed; China’s access to American customers should be restricted, too. And South Korea should be told that it’s new free trade agreement will be torn up if Seoul doesn’t leave the Chinese-led institution.
The new European members of the AIIB present a more complicated problem. One possible solution would be for Washington to make clear that any Asian products created with the help of new AIIB-financed infrastructure projects (ranging from ports, roads, and bridges to power and water systems) will face new U.S. trade barriers – and Washington would be judge, jury, and court of appeals for identifying these goods. Without the ability to sell to America, those infrastructure contracts sought by the Europeans (and others) become a lot less valuable.
And although the AIIB doesn’t pose any security threats to America per se, its creation carries major security implications because a main rationale for the risks Washington has assumed via its East Asian military presence is economic. In other words, if remaining aloof from the AIIB winds up discriminating against American domestic businesses (as opposed to the foreign factories of U.S. multinational companies), the American military is out of South Korea, its bases in Japan will be cut way back, and the Asians will be more than welcome to deal with North Korea’s nukes on their own. Ditto for those Asian countries worried about the expansionism of China itself. If they want U.S. military help, they’d better not be playing footsie with the threat. I’d also support American leaders reminding the Europeans that it remains an ocean away from Vladimir Putin’s designs, and that the allies would be well advised to take seriously their talk of working inside the AIIB to make sure it acts quasi-responsibly.
U.S. leaders trapped in 20th century ways of thought will (nervously) laugh off these proposals because they’re still convinced that America needs its allies more than vice versa. Leaders who understand geopolitics and the full range of thoroughly viable strategic options it creates – not to mention America’s unmatched market power and potential for much greater economic self-sufficiency – will start to act like a superpower rather than settling for (increasingly) hollow rhetoric. I just hope Washington doesn’t need a completely unnecessary war to come to its sense.