Yves here. The lead story at the Financial Times, Europeans defy US to join China-led bank, updates this post. Key sections:
France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution…
The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank…
The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades…
Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant. One suggested that the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”
By George Washington. Cross-posted from Washington’s Blog.
UK, Australia, New Zealand, Singapore and India All Sign On … South Korea Next?
This week, 2 major U.S. allies – 2 of the “Five Eyes” – have disregarded American please and joined China’s development bank … a new alternative to the US-dominated IMF and World Bank lending order. (A third member of the Five Eyes – New Zealand – previously signed onto the Chinese bank.)
Specifically, the UK and Australia signed on this week.
The Financial Times reports, quoting a senior US Official:
[The decision of the UK to join the Chinese development bank was made with] virtually no consultation with the US.
We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.
The New York Times reported last week:
Fundamentally, Washington views the Chinese venture as a deliberate challenge to those postwar institutions, which are led by the United States and, to a lesser extent, Japan, and the Obama administration has put pressure on allies not to participate…
South Korea and Australia, both of which count China as their largest trading partner, have seriously considered membership but have held back, largely because of forceful warnings from Washington, including a specific appeal to Australia by President Obama.
Zero Hedge predicted last week:
In short order Australia and South Korea will likely be on board and at that point, the stigma the US has created around membership will have completely disappeared (if it hasn’t already), opening the door for other US “allies” to join ….
An Op-Ed in The Australian argues:
The decision by the Abbott government to sign on for negotiations to join China’s regional bank … represents another defeat for Barack Obama’s diplomacy in Asia.
Canberra’s move follows similar decisions by Britain, Singapore, India and New Zealand.
Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted diplomacy in Asia.
Since then, the Abbott government has felt absolutely zero subjective good will for Obama.
This is an outlook shared by many American allies.
The Obama administration has neither the continuous presence, nor the tactical wherewithal nor the store of goodwill or personal relationships to carry Canberra, or other allies, on non-essential matters.
Such prestige as the US enjoys in Asia these days rests disproportionately on the shoulders of the US military.
Obama has neglected and mistreated allies and as a result Washington has much less influence than previously.
The saga of the China Bank is almost a textbook case of the failure of Obama’s foreign policy.
Obama treats allies shabbily and as a result he loses influence with them and then seems perpetually surprised at this outcome.
The consensus is that the Obama White House is insular, isolated, inward-looking, focused on the President’s personal image and ineffective in foreign policy.