Critics of the Obama Administration are currently preoccupied with a handful of issues where they claim Obama is ceding international leadership to other entities: the Iran talks, Ukraine, and Syria. However, whatever criticisms might be levied on those issues pale in comparison to a major scandal that has unfurled over the past two weeks, one that has largely avoided the glare of the mainstream media.
In question is European membership to the Asian Infrastructure Investment Bank, an alternative to the World Bank that China has spearheaded as a way to increase its clout in developing countries. China had been courting perennial US allies South Korea and Australia to join the bank, and Secretary of State John Kerry spent a lot of political capital and personal effort in convincing them not to join. His logic, and the logic of the US government, has been that the Chinese-led investment bank would not maintain the high labor and environmental standards that the World Bank maintains. As convenient for the administration as that rationale may be, the fact remains that America doesn’t want China superseding western-dominated financial institutions in the Asia-Pacific region. Either way, Secretary Kerry’s pressure worked; South Korea and China announced that they would not be joining the bank.
However, within the past two weeks, the United Kingdom, perhaps the United States’ closest ally, announced that it would be joining the bank. Germany and France announced that they would soon follow. They all claim that membership in the bank is crucial to expanding future trade with China and, in response to questions about the AIIB’s lax labor and environmental standards; they would have a better chance of improving those standards from within the bank itself, rather than as outsiders. The American reaction has been muted. An anonymous US official told the Financial Times that, “We are wary about a trend toward constant accommodation of China, which is not the best way to engage arising power.”
The administration needs to be careful here; joining the AIIB could be the best way to ensure that it maintains sufficient environmental standards, but it would also mean diminishing the influence of the World Bank, one of the most potent power-projecting tools in America’s arsenal.