South
China Morning Post
Lessons
for China in failed US Silk Road initiative
Washington’s plan was
underfunded and under-resourced compared with Beijing’s ‘Belt and Road’ scheme
PUBLISHED : Monday, 08
May, 2017, 9:33pm
UPDATED : Tuesday, 09
May, 2017, 10:14am
496SHARE
12 May 2017
The contrast between
Beijing’s and Washington’s support for a revitalised Silk Road could not be
clearer.
This month’s Belt and Road Forum for
International Cooperation, a gathering of existing and potential stakeholders
in China’s trade development initiative, will welcome national leaders
including Russia’s Vladimir Putin, Myanmar’s Aung San Suu Kyi and Indonesia’s
Joko Widodo to Beijing.
Meanwhile, US President Donald Trump, already
in office for more than 100 days, has yet to appoint an ambassador to
Afghanistan, which sits at the centre of a Silk Road initiative the US
Department of State began promoting in 2011.
Compared with China’s “Belt and Road
Initiative”, Washington’s plan was underfunded and under-resourced after then
secretary of state Hillary Clinton formally proposed it in 2011, observers say.
The US initiative also lacked the
Pacific-to-Atlantic scope that would have made it more appealing to
stakeholders across the world’s biggest land mass and that might have attracted
more international support.
The United States’ New Silk Road initiative
was “basically a collection of interesting, somewhat promising but cash-poor
ideas about regional connectivity”, said George Gavrilis, author of the 2008
book Dynamics of Interstate Boundaries, a study on border control
in Central Asia since the 19th century. Beijing’s plan had “a lot more money
behind it in the form of loans, grants, soft loans, low-conditionality and
no-conditionality loans”.
There were two strategic objectives behind the
US plan.
The first was that Washington wanted some kind
of long-term, net-positive offset for the economic hole that would be left when
the US military drew down its forces in Afghanistan following a decade-long war
that was increasingly unpopular among US voters.
The second part of the US strategy aligned
with one of the Chinese initiative’s objectives: to provide alternatives to
trade routes that had, throughout the history of the Soviet Union, pulled most
trans-Central Asia trade through Russia. That reality helped to keep much of
the region tied to Russia economically even after the collapse of the Soviet
Union.
In a 2015 policy memo written for the Ponars
Eurasia think tank, Alexander Cooley, director of Columbia University’s
Harriman Institute, noted a “close compatibility” between the Chinese and American
initiatives that “emphasises regional connectivity in Central Asia (and, by
implication, diversification away from Russia)”.
But whereas China is building, funding, or
otherwise supporting a multiplicity of routes south of Russia, the US stuck with
a much more limited “southern corridor” that pairs growing consumer and energy
demand in Pakistan and India with Central Asian oil, natural gas, hydropower,
and agricultural commodities.
The Chinese were “trying to create as many
roads and access points as possible”, including roads through Kazakhstan,
Kyrgyzstan, Afghanistan, Pakistan, Iran and Russia, Gavrilis said. That
approach “helps to provide wiggle room if they have relations and
infrastructure into all of these neighbouring states and it gives them much
more access to markets in a variety of ways”.
The US plan might not have been as
multifaceted, but it was at least grounded in a couple of key projects,
including a US$10 billion pipeline project bringing natural gas from
Turkmenistan to South Asia and a US$1 billion transmission line connecting
hydropower resources in Kyrgyzstan and Tajikistan to electricity markets in
Pakistan.
In September 2014, more than three years after
Clinton kicked off Washington’s Silk Road initiative in a speech delivered in
Chennai, India, then deputy secretary of state William Burns continued to express
US support for the plan.
“Our shared objective is not to supplant the
region’s vibrant East-West connections, but to supplement and complement them
with equally vibrant North-South connections,” Burns said. “We believe that a
more interconnected region can serve as a driver of economic development and as
an anchor of peace and security.”
Both projects are now progressing, but US
support and involvement in them has all but vanished.
Other supporting trade initiatives, including
the implementation of “cross-border free economic zones” and other measures
that would have sped up customs procedures never got started, at least partly
because the US government did not follow through.
“Never once was Hillary Clinton’s New Silk
Road initiative mentioned, let alone publicly endorsed or supported either by
the [National Security Council] or [then US president Barack Obama]“, Frederick
Starr, who has authored numerous policy papers and articles on the US plan,
said in an interview.
“This was supposed to be a big legacy project
in Afghanistan, but after giving the speech the cut-and-run mentality was so
strong that there was never any indication that the White House had ever
endorsed this.”
By contrast, China has recently funded and
established a number of new dedicated regional banks to promote its vision,
including a US$40 billion Silk Road Fund under the auspices of the People’s
Bank of China, the Shanghai-based New Development Bank, and the Asian
Infrastructure Investment Bank (AIIB).
Observers say the highly polarised American
political environment helped to undercut momentum behind the US initiative.
“The United States is simply not set up to
sustain interest in any one project for more than two years,” said A.J.
Goulding, a principal at London Economics International, an energy and
infrastructure consulting firm that has advised governments in the Middle East
and Asia on large power projects.
“The US would be better off not making these
kinds of announcements because it really can’t commit to something that has a
10-year gestation period.”
Some of the difference between the Chinese and
American involvement in reopening and expanding trade routes may just be a
matter of perception, or good marketing skills.
China has included in its “Belt and Road” map
some projects already completed and paid for without Chinese involvement. For
example, a recent China Daily report headlined “Azerbaijan
forms a key link in the Silk Road chain” touted two oil pipelines between
Azerbaijan’s Caspian port city of Baku and Turkey’s Mediterranean coast.
The Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Erzurum
pipeline were built by a consortium of oil and gas companies led by BP and
Azerbaijan’s state oil firm AzBTC.
Some problems with the belt and road plan are
the direct result of China’s decision to forge ahead with projects by
channelling huge financial resources into them, despite cultural and security
challenges the US government had not wanted to take on.
“Beijing planners will need to recognise that
such funds, despite Chinese intentions to the contrary, create local
perceptions about winners and losers that inevitably graft onto local rivalries
and concerns,” Cooley said in his policy memo.
For example, the proposed
China-Kyrgyzstan-Uzbekistan railroad project had met “resistance among Kyrgyz
government officials and analysts precisely because it furthers perceptions
that China invests only for its own economic purposes and cares little if it
stokes rivalries between ethnic Kyrgyz and Uzbeks in southern Kyrgyzstan (the
site of deadly ethnic clashes in 2010) over the region’s political and economic
alignment”.
But whatever problems exist with China’s belt
and road plan, it’s already achieved more in terms of trans-Eurasian trade than
the US has, and that’s likely to be the case for the foreseeable future.
Trump, facing tough assessments of his first
100 days in office, has gone all out with an “America First” policy that will
leave little in the way of resources for overseas projects that do not align
directly with his administration’s efforts to fuel job growth.
A tax reform plan Trump unveiled last month
could reduce federal revenues by US$9.5 trillion over its first decade before
accounting for possible “economic feedback effects” and other theoretical
benefits, according to an analysis by the Urban-Brookings Tax Policy Centre, a
Washington-based think tank.
Such a comprehensive tax cut would require
“very large spending cuts” in order to avoid a sharp increase in the US’s
national debt, the analysis said.
That fiscal reality will make projects like
the New Silk Road initiative even more difficult to fund.
This article appeared
in the South China Morning Post print edition as:
The Silk Road less travelled
My Comments:
The United States should swallow its pride, and have to acknowledge the failure of its TPP - which was then set up, deliberately excluding China! It should join hands with China and be a full partner of the "B&R Initiative" which can only enhance further multilateral and international trading and other relationships.
Singapore:
In the case of Singapore, it too has refused to join China in this latest "B&R Initiative" now running in Beijing!
Singapore exported US$42.8 billion to China in 2016 - representing 13% of total Singapore exports for that year.
At the same time, signifying the strong business sector interaction with China, a fact not too well known to many is that Singapore has become China's largest investor country.
For the second consecutive year Singapore was China's largest foreign investor with investments amounting to US$5.8 billion in over 700 projects last year. At the same time, Singapore is China's largest investment destination in Asia, and one of the top investment destinations for Chinese companies investing abroad.
In a landmark development, Singapore became China's largest investor country for the first time in 2013 when its investments in China hit US$7.23 billion, according to data from International Enterprise Singapore, the government agency that drives Singapore's external economy.
Since establishing diplomatic relations in 1990, Singapore and China have developed strong links in the areas of trade, finance and investments. Trade and investment ties between Singapore and China in particular have been growing steadily over the years.
China was Singapore's largest trading partner in 2014, with bilateral trade in goods increasing by 5.4 per cent to S$121.5 billion, while Singapore is China's third largest trading partner in Asean. In 2013, total trade between China and Singapore amounted to S$115.2 billion.
"Bilateral trade in services has also been growing significantly, with Singapore currently being China's third largest foreign trading partner for services after the US and Japan," Yew Sung Pei, assistant chief executive officer of IE Singapore, told The Business Times.
So, Singapore stands to lose a lot more, if it keeps following U.S. policy - and be seen as a lapdog of the U.S. China is most unhappy at Singapore's strong U.S. stance - its full-steam ahead to develop a multi-billion $ deep-sea trading port in Malacca in Malaysia, is China's way of showing its annoyance of Singapore - and, if successful, will take away a huge chunk of Singapore's maritime trade.
Australia:
In the case of Australia, the U.S. lapdog situation mirrors that of Singapore: Australia too, refuses to attend this latest Beijing, now on, "B&R Initiative".
In both countries, they are represented by lower government officials, not the Prime Minister or the Trade Minister, for example.
China is Australia's largest two-way trading partner in goods and services (valued at $150.0 billion in 2015-16, up 4.4 per cent on the previous year). China is our largest export market ($85.9 billion in 2015-16) and our largest source of imports ($64.1 billion in 2015-16). The Government is pursuing a number of initiatives to strengthen and diversify this relationship.
The China-Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015. The Agreement will enhance the growing trade and investment relationship between our highly complementary economies. It will ensure the competitiveness of Australia's agricultural and manufacturing industries, protect and ensure the competitiveness of our services providers and attract greater investment in Australia. Over 86 per cent of the value of Australia's goods exports to China enter duty free following ChAFTA's entry into force, rising to 96 per cent when ChAFTA is fully implemented. Australian services providers benefit from new access to China's significant and growing services sector.
The Government has been promoting its open investment regime and Foreign Investment Review Board process, which continues to attract Chinese investors. The stock of Chinese direct investment in Australia has grown in recent years reaching $35.2 billion in 2015 (our fifth largest direct investor). The majority of investment has been in resources but is now moving into agriculture, tourism and infrastructure.
In November 2014 during President Xi Jinping's visit to Australia, the Bank of China (Sydney branch) was designated as Australia's official RMB clearing bank and was subsequently launched in February 2015. It was also announced during the President's visit that Australia would receive a RMB 50 billion RMB Qualified Foreign Institutional Investor (RQFII) allocation for Australia's financial institutions to be able to invest in Chinese portfolio assets. In April 2015, the People's Bank of China and the Reserve Bank of Australia's renewed their bilateral swap agreement, which can be activated by either party, and allows for the exchange of local currencies between the two central banks of up to A$40 billion or RMB 200 billion. Each of these announcements should help support trade and investment and continue to enhance financial cooperation between our two countries.
Australia is one of the most popular destinations for Chinese students wishing to study overseas. China is Australia's largest source of overseas students. In 2015 more than 136,000 Chinese students studied in Australia, with the number of enrolments by Chinese students growing more than 10 per cent over last year.
China is Australia's highest spending inbound tourism market and our second largest market by arrivals after New Zealand. In 2015-16, there were around 1.1 million visits to Australia from Chinese nationals, both contributing to the Australian economy and increasing understanding about Australia in China.
So, from the above, we can see that everything is La-de-la land for Australia, vis-a-vis its trading educational, and other relationships with China. It can only get better for Australia!
It does behoves Australia to act more decently towards China - and not seen as just a lapdog following U.S. ways of doing things with China.
Look at Australia's exports in 2015 - 2016 (the latest I seem to be able to find), where China was its main export market, taking A$85.9 billion, or 27.5% of all Aussie exports!
To
1. Ores, slag, ash: $35.2 billion
2. Mineral fuels including oil: $6.2 billionp 10 Australian Exports to China
Australia's exports to China amounted to
$61.8 billion or 32.6% of its overall exports.
3. Gems, precious metals: $4.1 billion
4. Wool: $1.6 billion
5. Copper: $1.2 billion
6. Wood: $912 million
7. Meat: $717.3 million
8. Other food preparations: $582.1 million
9. Raw hides excluding furskins:$579.9 million
10. Pharmaceuticals: $559 million
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