The Global Zeitenwende
How to Avoid a New Cold War in a Multipolar Era
For nearly a decade, U.S. policymakers have been wringing their hands about the Belt and Road Initiative, the massive infrastructure investment project through which China has financed and built bridges, ports, power plants, railways, tunnels, and 5G wireless networks around the world. The initiative has not only expanded China’s footprint but also indebted more global leaders to Beijing, in a literal sense: Chinese banks provide the finances to pay for this infrastructure. In June 2021, at the G-7 meeting held in the United Kingdom, U.S. President Joe Biden unveiled the West’s response to the program: the Build Back Better World initiative, also known as B3W. Biden promised that it would help “meet the enormous infrastructure needs of low- and middle-income countries,” with a particular focus on addressing climate, digital infrastructure, gender-equality, and health issues. The president offered few details about what exactly B3W would encompass, but the initiative was clearly pitched as a Western alternative to the Belt and Road Initiative.
Since then, however, B3W has languished. Even the name has been scrapped, a casualty of legislative demise of the Build Back Better bill, the U.S. domestic legislative proposal that encompassed priorities as varied as environmental protection, reducing prescription drug prices, and universal preschool. A rebrand to “Partnership for Global Infrastructure” is underway.
Still, some B3W projects were announced in the spring of 2022. The Digital Connectivity and Cybersecurity Partnership will provide $3.45 million this year in U.S. government funding for digital finance and Internet service providers; a $2.3 million set of grants has been made available to small solar energy providers; and the Biden administration will provide up to $50 million over five years to a World Bank trust fund trying to expand childcare—if Congress allocates the resources. Surely these are worthy expenditures, but what they mean is that about a year after Biden announced B3W, his administration’s commitments to the cause of global infrastructure renewal add up to a paltry $6 million. Even if Congress allocates the additional $50 million, that’s a far cry from the billions Biden promised in his original announcement.
This poor showing is no great loss, however, because B3W is the wrong approach to competing with China in the developing world. The United States is notoriously bad at investing in and maintaining its own physical infrastructure, so it never made sense for it to try to build infrastructure projects abroad. Those activities are best left to the multilateral economic institutions in which the United States plays a leading role, namely the World Bank and regional multilateral banks such as the African Development Bank. In a bilateral competition with China, Washington should play to its strengths, including leveraging its unparalleled system of higher education. The good news is that schooling the next generation of global leaders, rather than playing catch-up with Chinese construction firms, would be a win not just for the United States’ global standing but for the U.S. economy, as well.
When the Biden administration launched B3W, officials were careful not to describe it as a bid for a head-to-head matchup with China, no doubt worried that the showcase global initiative would be seen as a purely defensive move. Yet as one official put it at B3W’s unveiling in the United Kingdom, “Until now we have not offered a positive alternative that reflects our values, our standards and our way of doing business.” That alternative would stand in contrast to a Chinese model that advantages Chinese firms by linking loans to contracts.
The idea that the United States hasn’t offered a “positive alternative” in the past is odd. In the last decade alone, the United States has launched Power Africa, a program aimed at providing electricity to millions of households in the region; the Blue Dot Network, in which Australia, Japan, and the United States collaboratively promote global sustainable infrastructure development; and Enhancing Development and Growth Through Energy, an initiative that helps governments in the Indo-Pacific region expand energy access. These projects differed from Belt and Road in that the United States committed very little money, and most of the funds that were allocated were invested in private companies. Sadly, the current iteration of B3W wouldn’t change that dynamic at all.
It’s not just scale that places the United States at a comparative disadvantage in infrastructure construction. China is better at building, not just domestically but across the globe. Chinese firms dominate the competitive procurement of leading infrastructure lenders such as the World Bank. They won $2.3 billion worth of World Bank–financed infrastructure contracts outside China in 2020, compared to the United States’ $27 million worth of contracts. Of the 20 largest construction contractors, 14 are in China, six are in Europe, and none are in the United States. China owes its dominance partly to government subsidies, but on balance, that’s a good deal for developing countries who are effectively receiving handouts from Chinese taxpayers. U.S. policymakers may claim that Chinese subsidies are unfair, but those complaints will fall on deaf ears in the countries that benefit from China’s largess.
The Biden administration’s strategy for competing with China involves subsidies to American companies.
But the gravest flaw of B3W is that it appears to be based on the very model of self-dealing capitalism for which the U.S. government has condemned China. The main components of the Biden administration’s strategy for competing economically with China involve subsidies to American companies. USAID spends most of its resources buying goods and services from U.S. firms. The Bipartisan Innovation Act would also provide billions in industry subsidies to ramp up U.S. semiconductor production. Worse, the U.S. response is being copied by its ally the United Kingdom. British Prime Minister Boris Johnson is redirecting aid spending toward programs that use “world-class British expertise,” as the British Foreign Office generously described the approach as part of its aid strategy this past May. Perhaps other G-7 members will follow in their wake: certainly the European Union is looking for ways to disburse billions in subsidies to European firms planning to invest in developing countries.
The situation recalls the beginning of the Cold War, when Soviet leader Joseph Stalin launched the Council for Mutual Economic Assistance as an answer to American-led economic programs such as the Marshall Plan, the Organization for Economic Cooperation and Development, the International Monetary Fund, and the World Bank. Sold as a way to foster economic cooperation among the countries of the Eastern bloc, Comecon actually reduced overall trade flows of member countries by putting up barriers to exports and imports with the rest of the world. This time around, in response to a far more robust version offered by China, it is the United States that is providing a Potemkin model of international cooperation. Adding to the irony, the institutions created at the Bretton Woods Conference that Stalin was attempting to counter are what make B3W’s infrastructure push unnecessary. The administration should work through those organizations to attempt to achieve its aims.
The obvious actor to lead on delivering sustainable infrastructure at scale in the developing world is not the White House but an entity that sits just three blocks away: the World Bank. The bank has long championed market-driven approaches to development and supports billions of dollars of infrastructure investments in low- and middle-income countries each year. It enforces procurement rules that encourage transparency and international competition (the so-called “level playing field”), and it leverages as much as $46 of private-sector-backed financing for each dollar of public funding supplied by governments. Instead of pursuing a bilateral infrastructure agenda deal by deal across the developing world, the Biden administration should focus on channeling more of its aid money through these multilateral institutions.
If the administration really wants a bilateral global development competition with China, the United States should play to its strengths: not Amtrak but Ann Arbor, not Newark but Notre Dame. The higher education system in the United States is the envy of the world, one that has schooled business and political leaders from almost every country on the planet. China is trying to copy the model, but the United States still has a two-to-one lead in foreign student enrollees, including many students from China itself.
In recent years, of course, the U.S. government has neglected public research budgets and diminished the flow of foreign students into American schools. That process began under President Donald Trump, but President Biden hasn’t done enough to change course. This is a devastating error, but one that the Biden administration could address by cutting wait times for appointments to apply for a student visa, which can stretch a year or longer; supporting the Fulbright program, which provides scholarships and fellowships both for Americans to study and research abroad as well as for foreign scholars to come to the United States; and providing non-Americans access to federal student loan programs. To demonstrate support for international competition, the United States could also add to its financing for companies that provide loans to students from low- and middle-income countries to study abroad in the country of their choice. One such company, Prodigy Finance, is already backed by the U.S. Development Finance Corporation. The great advantage of strategic competition based on human capital is that it will benefit the United States: along with demonstrating openness and building a network of sympathetic global leaders, students who choose to come to the United States sometimes stay, becoming a vital part of the country’s research and entrepreneurial capacity.
Rather than trying to beat China at its own game, the United States needs to recommit to a vision of planetary prosperity through global cooperation, openness, transparency, and equal opportunity. When it comes to physical capital, the World Bank and regional development banks are best suited to accomplish those goals. When it comes to human capital, the United States can and should take the lead, reopening its doors to students and scholars. This agenda is truly values-driven in a way that B3W could only ever hope to be.
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