President Biden announced Build Back Better World, a program in which the United States and other G-7 nations help developing countries develop infrastructure. The plan is seen as the first time that Western democracies, of which the United States is a major partner, have offered an alternative to Chinese President Xi Jinping’s “Belt and Road” plan. Experts say the plan must identify additional funding sources or it will be difficult to compete with the Belt and Road Initiative. However, experts also caution that the U.S. should focus its infrastructure investments on areas where it has an advantage, rather than comparing whether it spends as much money and does as many projects as China.
A White House fact sheet released June 12 notes, “This is a values-driven, high-standard and transparent infrastructure partnership led by leading democracies to help shrink the more than $40 trillion in infrastructure needs of developing countries. The New Crown pandemic has exacerbated such needs in developing countries.”
The plan comes in the context of the global battle between democracy and tyranny that President Biden has proposed. President Biden said, “The effort to develop the ‘Rebuild a Better World’ partnership is designed to mobilize democracies around the world to meet the challenges facing the world and to help our people, and frankly, people everywhere.”
The White House said the Rebuilding a Better World program is being implemented in four main areas, climate change, health and health security, digital technology, and gender equity and equality.
The White House fact sheet lays out five guiding principles for the implementation of this plan: value-driven, good governance and rigorous standards, climate first, strong strategic partnerships, mobilizing private sector capital through financial development, and strengthening the influence of multilateral public financial institutions.
Sachs: Developing countries have an alternative to China
“The positive thing about the ‘Build a Better World’ plan is that it’s the first time the United States has actually proposed a response to the ‘One Belt, One Road’.” said David Sacks, a fellow at the Institute of Foreign Relations. “The response from the previous U.S. administration for a long time was ‘don’t take China’s money,’ and ‘it would be bad to take China’s money.’ But they didn’t have any alternative plan.”
Sachs is one of two authors of an independent special working paper, “China’s Belt and Road: Implications for the United States,” by the Institute for Foreign Relations.
In many cases, he said, China is the only country willing to finance developing countries with huge infrastructure needs. “There is a major infrastructure gap around the world, and they [the G-7] are committed to cooperating to fill that gap.”
But where the plan falls short, according to Sachs, is that additional sources of funding have not been identified. “I believe the administration has indicated that it will seek additional funding from Congress for this effort. That’s something to keep an eye on. But I have a hard time seeing how this is really going to be a strong response to the Belt and Road Initiative unless there are more resources behind it.”
The 2,600 projects associated with the Belt and Road Initiative were worth $3.7 trillion as of the middle of last year, according to a report by Refinitive, cited by Al Jazeera, although China’s foreign ministry said last June that about 20 percent of the projects had been severely affected by the new crown epidemic.
The White House said the U.S. will seek to use the full potential of development financing instruments, including the Development Finance Corporation, the U.S. Agency for International Development, the Export-Import Bank, the Millennium Challenge Corporation and the U.S. Trade and Development Agency, and complementary agencies such as these. In addition, “We will also work with Congress to expand our development finance tools, and hope to work with the private sector, other U.S. stakeholders, and our G-7 partners to bring ‘Rebuilding a Better World’ together to provide hundreds of billions of dollars in infrastructure to low- and middle-income countries in the coming years investments.”
The White House said the G-7 will establish a task force and work with others to coordinate efforts and expand impact.
“Rebuilding a better world” should focus on projects where the West has an advantage
An opinion piece by Dnyanesh Kamat in the June 14 issue of The Asia Times asks, “Rebuilding a Better World funds will be attached to conditions on human rights, climate change, corruption and the rule of law. This raises the question of why developing countries would choose to cooperate with financing schemes that combine intrusive conditions rather than continue to seek simplified and untied Belt and Road financing from China. “
Eric Farnsworth, vice president of the Inter-American Institute/Association for the Advancement of the Americas, said in an interview with the Voice of America English Group, “It’s not just about financing and debt repayment now and so forth, but about strategic narratives and whether the West can respond or whether China has actually become the ultimate lender to countries in the future.”
According to Sachs of the Institute of Foreign Relations, some developing countries already have a lot of complaints about China’s lending practices, and Belt and Road has been criticized as “debt-trap diplomacy. He said, “All the workers for the construction projects are brought in by China itself, and they don’t pass on their skills to local companies and local workers. Some are not even able to provide loans that are usually offered at commercial rates. In addition, there have been many corruption scandals in the ‘One Belt, One Road’ projects.”
Sachs said: “For years there have been people saying that we just want to have options, and now China is the only option.” “What the U.S. will offer is a transparent alternative that has higher standards and hopefully will also train local workers and transfer skills.”
Sachs said: “We’re not going to offer the exact same thing as China because that’s not what we should be doing.” He argues that “the U.S. plan is to really invest in places where there is a comparative advantage. For example, renewable infrastructure (renewable infrastructure), high quality projects like that, and projects that are able to transfer skills to local workers, some projects that have that qualification.” He said the U.S. should not see the reaction to Belt and Road “as are we spending the same amount of money as China? Are we having the same number of projects as China has? He believes that’s not the direction the U.S. should be acting.”
Do European countries and the U.S. have the strength or will they focus their attention on large global infrastructure projects when they are fully engaged in dealing with the new crown epidemic on the one hand and both have their own domestic infrastructure plans on the other?
Sachs believes that the “Rebuilding a Better World” plan agreed to by the G-7 is a measure to restart the global economy after the new pandemic and help rebuild the epidemic-hit economy. “They don’t see ‘building a better world’ as competing with their domestic agenda, they see the two as complementary. Because if economies around the world grow, it’s better for stability and for U.S. companies because they’ll have more export markets and more trade with the United States. So they see the two as not competing but complementing each other.”
Sachs believes the key to the “Build a Better World” plan is for the United States to work with its allies. “Frankly, there are a lot of things that China can provide that the U.S. can’t. For example, the U.S. doesn’t have a competitive company in 5G, and the only alternatives that can compete with China are Samsung, Ericsson and Nokia. So creative ways need to be found to work with its allies to provide an alternative to Huawei. And it looks like we’re starting to do that. So that’s a good sign. And also, for example, China is exporting high-speed rail along the Belt and Road, and the U.S. doesn’t have any high-speed rail products. So it needs to consider how it can work with Japan to provide an alternative to China’s high-speed rail. That said, the U.S. doesn’t have all the alternatives that it could offer to China, so that’s why working with our allies is so important.
In addition, Sachs said, to compete with the Belt and Road and with China, measures are needed in other areas besides the “Build a Better World” program.
“For example, in the field of international standard-setting, China has invested a lot of money in developing international standards, like in the International Telecommunication Union. For example, in the development of 5G standards, there is a real concern that 5G standards will favor Huawei, which in turn will have an impact on 6G. As a result, he argued, “the U.S. should reassert its leadership role in the standards development process with its allies and partners.”
“The Biden administration doesn’t have a real Asian trade agenda yet,” Sachs said. “The U.S. has not joined the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).”