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AIIB Membership: The U.S.’s Best Bet

When one doesn’t come to terms with reality, he or she is often told to wake up and smell the coffee. Similarly, the U.S. needs to join China’s Asian Infrastructure Investment Bank (AIIB). China created the AIIB in 2015 to finance infrastructure projects in developing, emerging market countries. Martin A. Weiss, a specialist in international trade and finance, raises the debate of whether the U.S. should join the AIIB. Anti-AIIB’s worry about China’s history of largely ignoring environmental and social standards in global infrastructure projects. They also worry about China’s 30% voting share in the AIIB. This means China has the potential to threaten U.S. hegemony using economic linkage of AIIB-funded countries to Beijing. I take the pro-AIIB stance. The AIIB is not disappearing anytime soon. Therefore, America should become a member of the AIIB in order to bolster the Western voice against the dominant Chinese one and to help U.S. companies by providing information current member states’ companies already have.

If the U.S. becomes a member of the AIIB, it would bolster the Western voice against the dominant Chinese one. The U.S. would join allies including the UK, Germany, France and Italy. It would strengthen allied members’ promotion of environmental and social standards in AIIB investments. It could for example push the AIIB into capping greenhouse gas emissions on projects. Collective bargaining has worked in the past. For example, the AIIB added a board of directors due to bargaining from the UK. Rather than sit on the sidelines, the U.S. would shape the AIIB just like the UK did. Furthermore, China has adhered to U.S. environmental and social standards in the past. It is clearly receptive to U.S. input. Given the already strong coalition of Western powers in the AIIB, their bargaining success, and the U.S.’s past success getting China to up its environmental and social standards, U.S. membership would clearly strengthen Western bargaining power from within.

The U.S. should also join the AIIB to benefit American companies. Companies such as GE, Honeywell and Caterpillar face increased demand today in developing countries. GE has ten times as many orders in Pakistan today than it did ten years ago. AIIB projects only heighten demand for infrastructure. Membership in the AIIB would give the U.S. notice of large infrastructure projects in AIIB-funded countries and allow it to connect its companies with these projects. The U.S. stands to benefit from Caterpillar building AIIB’s next construction project over a Chinese competitor like LiuGong. The U.S. should join the AIIB to help its companies.

The anti-AIIB camp worries about China’s previous neglect of environmental and social standards which could lead to environmental and political disaster. They also worry about China’s potential to use the bank to further regional interests. China has previously funded infrastructure projects worldwide with ignorance for environmental and social standards. This has undermined U.S. efforts to promote these standards. In terms of China’s potential to use the AIIB to promote its own interests, the threat seems real. It has a lopsided 30% voting share in the AIIB and could manipulate the AIIB into funding projects in concordance with its agenda. The anti-AIIB camp has legitimate worries over environmental standards, social standards and China’s possible motives.

However, the U.S. needs AIIB projects to instill environmental and social standards in the first place. The AIIB targets infrastructure like roads, airports, and railways that previous investment projects have failed to focus on. Scholar Christian Conroy of Georgetown University says AIIB-funded countries will have the “fundamental capacity” to deal with issues ranging from “gender equality to universal education.” If the U.S. joined, it would bargain for the AIIB to adopt projects setting the foundation for its standards in particular. For example, a project to build new roads and airports in a country would make it easier for its people to move around and thus engage in politics. They would also much more easily mobilize their environmental concerns. Without AIIB projects in developing countries to start off with, the U.S. cannot instill environmental and social standards.
Additionally, while China does have a large voting share, a history of other members holding it accountable in many ways shows its potential to use of the bank to further its regional interests is not a concern. The Founding Members used bargaining power to change the Articles of Agreement. They also forced China to adopt certain standards in its investments. Clearly, other member countries can whip China into shape when necessary. If China tried to use the bank to further interests, the U.S. would successfully bargain with like-minded countries against China’s position.

The U.S. must wake up, smell the coffee, and join the AIIB which is here to stay. If the U.S. did join, it would bolster the Western voice in the AIIB by participating in collective bargaining. It would also help its own companies by getting notice of AIIB projects and connecting its companies with the opportunities they provide. While the anti-AIIB side points out that China’s infrastructure projects have a bad track of record of environmental and social regulation, they fail to recognize that the AIIB’s unique investments are necessary for high standards in the first place. The U.S. can promote investments that set the foundation for its standards from within. Furthermore, while the anti-AIIB camp worries about China’s potential to use the bank to further its interests, U.S. membership means the U.S. can team up with like-minded countries and bargain against China. The U.S. should stop whining about the potential harm of AIIB and join it for all the good it will do.

BIBLIOGRAPHY

Asian Infrastructure Investment Bank. 2015. Articles of Agreement.

Conroy, Christian. 2016. Sino-U.S. Cooperation: Benefitting the Global Community through Infrastructure Development. Washington, D.C.: Walsh School of Foreign Service, Georgetown University.

European Commission. 2015. European Political Strategy Centre. The Asian Infrastructure Investment Bank: A New Multilateral Financial Institution on a Vehicle for China’s Geostrategic Goals. 24 April.

Grossman, Marc. 2017. Two Visions, One Collaboration? Part of a Future for US-China Relations? The Asia-Pacific Journal 15 (2): 1-6.

Lazarus, Leland. 2016. Why the U.S. Should Embrace the AIIB: There are compelling reasons for the U.S. to join China’s new development bank. Available from . Accessed 12 April 2017.

LiuGong. 2011. Available from . Accessed 19 April 2017.

Moore, Greg. 2015. No Escape: America Should Join China’s New Bank. Available from . Accessed 12 April 2017.

Orr, Robert M. 2016. The Asia Development Bank and the Asian Infrastructure Investment Bank: Conditional Collaboration? Council of American Ambassadors 33: 39-43.

U.S. Congress. 2017. Congressional Research Service. Asian Infrastructure and Investment Bank (AIIB). 3 February.