Should America join China’s Belt and Road Initiative? A trade war alternative.

China is spending trillions to build up a world that prefers American leadership. Is this an opportunity for Trump?

THE PEOPLE’S REPUBLIC OF CHINA has embarked on an unprecedented global construction project. The Belt and Road Initiative (or BRI, also known as One Belt, One Road) is a massive development strategy that China is pursuing in 152 countries across five continents. A new silk road, connecting China to the infrastructure and economies of nations everywhere, that America should eagerly and enthusiastically help build.

China’s proposed one belt, one road route map. Credit: Shutterstock

The creation of new land and sea routes that links commerce in a global network is inevitable and, by not joining, the US is ceding soft-power of an unprecedented scale to the Chinese Communist Party. The 21st century is often called the Asian century or the Chinese century and for very good reason, hundreds of millions of Chinese are joining the global middle class and their consumer desires will drive the direction of our world economy. And funnel trillions of dollars into Chinese government coffers. The Chinese Communist Party (CCP), functionally the Chinese government, is using the unprecedented income to improve the lives of 1.3 billion Chinese citizens but also bringing infrastructure and investment to multiple billions across the planet.

Meanwhile, America is headed by a president determined to contain China. In 2018, America began instituting punitive tariffs on an increasing number of Chinese products. President Trump is trying to change what he calls unfair trade practices in China; forced technology transfer, currency manipulation, and the theft of intellectual property are all deterrents to honest American competition in China – Trump’s trade war is supposed to open the world’s largest single market to American companies in a fair way. But what if there were another market? Not a single one, but also not one dominated by an authoritarian single party prone to obfuscating its financial status and with legal control over their technology companies, companies that are now industry leaders. The BRI is trying to tap that market and dominate the emerging world with their own companies, technologies, and cultural preferences.

But Donald Trump has an edge that China can possibly erode through the BRI: the world still prefers us to China. All across the world, by large margins, countries on every continent would rather follow the American lead, not China’s. Perhaps, instead of escalating a trade war that is already hurting American businesses, he could exploit the tendency of the world to choose free trade over state control and democratic values over one-party domination.

It’s an argument he should start making immediately because on the face of it China has a pretty good record of good government and good investment. And they’re bringing that message to billions all around the world.

CHINESE CHARACTERISTICS – Hundreds of millions of Chinese citizens have escaped poverty this century, hundreds of millions more will do so in the next two decades. The Chinese middle class is larger than the entire population of Canada and the US combined and there are more Chinese millionaires practically every day. The CCP has invested heavily in making cultural and political inroads in every country on Earth. China’s state-backed Confucius Institutes can be found in nearly every major American university, throughout Australia and New Zealand, and all across Europe.

Whatever deficits the CCP has, they have plans, long-term plans, and a pretty impressive record of success. The Belt and Road Initiative is ambitious and expensive and has a good chance of being successful, if nothing else, in engendering long-term economic, cultural, political, and military alliances.

The Chinese are committing over $1 trillion into building bridges and ports, providing loans to governments, and opening routes of easy Chinese credit all over the world. Over 150 countries will be developing roads, shipping lanes, telecommunications links; joint projects that will ensure multi-national partnership over the long-term. They’re allowing African businesses to compete and African governments to build viable, well-built infrastructure. Already the second largest trading partner in Latin America, and third largest investor, China is dangling the promise of near endless capital in front of nations in sore need of upgraded roads, power plants, bridges, and more. China is literally launching a rival to America’s GPS with their Beidou navigation system which they’ve been putting in orbit over the last five years and already covers thirty of their BRI partners.

Beijing argues that the BRI is a validation of China’s contentious claims to many islands in the South China Sea. BRI African partner nation Djibouti has also provided the People’s Liberation Army their first overseas military base. China is locking up lucrative and, especially given the US trade war, increasingly important mineral resource rights all over the world through BRI. More than a quarter of Kazakhstan’s oil production are owned by Chinese companies now, while neighboring Uzbekistan has contracts with China for over $15 billion worth of oil, gas and uranium deals.

The Port of Piraeus. Photo Source: Municipality of Piraeus

The US has predictably not greeted the Belt and Road with enthusiasm, an attitude reinforced by President Trump’s trade war with China. US officials and business leaders have echoed accusations from around the world that China is leading many of their BRI partners into a debt trap, creating a sort of modern economic colonialism. The European Union is also concerned; already seven member states have signed memorandums of understanding (MOU) with China for BRI-related projects and investments. In 2016, the giant Chinese COSCO Holdings Company acquired a 67% interest in Greece’s Port of Piraeus, the largest passenger port in Europe. The Port of Piraeus is now China’s gateway into Europe. EU states with MOUs have signaled a deferential position to Beijing on many issues, even splitting from other EU countries on matters such as Human Rights violations in China.

Earlier this year, another member state also signed an MOU with China. In March Italy became the first G-7 country to formally approve Beijing’s plans to expand the BRI into the Mediterranean. This is just good business strategy. The primary route for Chinese goods into Europe is through the Mediterranean and Italy has yet to fully recover from the Euro-zone crisis. Strengthening their partnership with what is soon likely to be the world’s largest economy will help boost growth, generate much-needed tax revenue, spur employment, and increase investment in infrastructure development and renovation. China’s business in Europe is growing and Italy wants to reap the benefits.

AMERICAN ENGAGEMENT – George Bush is the most popular US president in Africa by far. His administration launched a health initiative, largely to counter the continent’s horrific AIDS epidemic, in over 50 countries, spending $80 billion to date, and it has been largely successful, saving upwards of 50 million lives. But the Obama administration cut some of the funding for the program, the Trump administration has proposed cutting a further 20%. At a time the nation is nearly $22 trillion in debt we cannot reasonably expect a state-backed engagement with Africa the way China is but we can join the BRI and undercut Chinese investment with American.

US involvement or competition with the BRI could help tackle the still globally pressing, but much less difficult issue to fix, of poverty. Almost one billion people still face food insecurity, over one billion people around the world don’t have access to reliable electricity, and almost four billion don’t have Internet. All of this hampers economic growth in multiple sectors but it is a massive opportunity. Especially given the censorious and innovation-unfriendly nature of the Chinese Internet, this is the chance for America to literally bestow intellectual and economic freedom and opportunity to poor people all around the world.

Investing in infrastructure in Central and South Asia and Africa can give US companies greater access to hundreds of millions of currently hard to reach customers. Instead of ceding the market to China, this is a chance for American companies to compete for new customers in areas of the world we’ve historically neglected to engage.

China’s economic and infrastructure growth over the last four decades is unprecedented. Miyeon Oh, a senior fellow at the Atlantic Council’s Asia Security Initiative, suggests that the BRI “is an answer to China’s overcapacity problems,” and is an attempt to “move from manufacturing and export-driven growth to high domestic consumption.” Hitching onto the One Belt bandwagon would deny China easy access to relatively untapped markets and manufacturing partners; it could be another, less aggressive yet more productive, weapon in the likely to last a long time US-China trade war.

China still has hundreds of millions of people living in poverty, tens of millions without access to plumbing, electricity, and economic opportunity. China spends 20% more on domestic security than it does on national defense, a number which has grown in recent years and will continue to grow. It isn’t well-known, not surprising for a country that censors the Internet to the point that even Wikipedia is illegal to use and requires Chinese journalists to be Communist Party members, but there are constant protests, riots, and civil disturbances in the People’s Republic. Numbers are difficult to come by but as recently as 2010 there were an average of 500 protests every day in China. These numbers have been dropping as the economy has gotten better which is why it is so imperative for their economy to keep growing.

This is their Achilles’ Heel, the necessity for constant growth. It is why they spend so much on internal security and why the only people the Chinese Army has shot in the last thirty years have been Chinese citizens. It’s why they’ve been lying to the world about their economic growth. China needs friends, they need partners, they need economic growth around the world to satisfy an increasingly expanding and fickle middle class. Because they rely on central authority for economic planning China loses a lot of money on unnecessary and poorly planned projects as well as on corruption and graft. There is evidence that this is already the case in many BRI countries. One of the central rationales of the BRI was to enhance the prestige of and attitudes towards China around the world so it isn’t surprising, from a country known for building fast but shoddy, that most of the partner nations haven’t actually seen any economic benefits from it.

America could easily take advantage of this situation. For now, at least, the world would welcome more American leadership.

Thomas Brown is a recovering political consultant hiding out in the American South. He is managing editor of The Swamp and has been published in The Bipartisan PressAlaska Native NewsGENHuman EventsTimes of IsraelDialogue & Discourse. Follow him at his Medium page and argue with him on Twitter: @reallythistoo.

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Categories: China, Economics, The Swamp, trump

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