Moves and Countermoves in Increasingly Subtle US-China Geopolitical Game

The United States and China each have their own foreign policy designs, but what China wants is for the U.S. to have a greater appreciation for the ways in which new institutions can complement existing ones and to give more thought to the benefits of cooperation and shared interests rather than the perils of vicious regional competition.

Reports indicate that as of March 31, 2015, the cutoff date for applications to become a founding member of the Asian Infrastructure Investment Bank, 44 nations had submitted official applications, including several economic heavyweights from across Eurasia. Notably, however, the U.S. did not count among their number.

Judging from the Obama administration’s recent stance toward the AIIB, the U.S. is clearly still unprepared to swallow a larger dose of rationality in managing its relationship with China, the world’s largest emerging economy. Instead, the administration remains focused upon its own regional economic positioning, quietly greasing the wheels of its “two-ocean strategy” that hinges upon the success of the Trans-Atlantic Trade and Investment Partnership and Trans-Pacific Partnership.

A victory on that front would aid in minimizing trade and investment disputes between the U.S. and its allies among developed nations, allowing Western nations, collectively, to retain their seats at the head of the global economic system. If the TTIP is formed, tariffs will be cut on trade between the U.S. and the European Union, activity that covers one-third of the world’s aggregate trade volume and one-half of global GDP. It would also provide a template for setting higher standards for economic regulations as pertains to emerging economies. The success of this two-ocean strategy would spell disaster for those nations that are presently benefiting from the catch-up effect and advantages of later development through existing frameworks such as the World Trade Organization. And until China passes muster according to said standards, it would find itself facing higher barriers to trade and investment.

In contrast, China’s foreign policy initiatives, whether they be “one belt, one road,” the Silk Road Fund, or the AIIB, all revolve around constructing an interconnected infrastructural network. In strengthening relations with its neighbors, it is building a “community of common destiny” that can include a broad swath of economies, interconnecting Eurasia and even Africa and Latin America. The international political and economic order built upon petrodollars will no longer be just a “one-man show.”

Meanwhile, China’s diplomatic “sideshow” is the spreading influence of economic strength. As it seeks to soften the blow from China’s economic rise, the Obama administration has considered a variety of options such as increasing China’s voice in current financial institutions such as the IMF and World Bank, but any suggestion of relinquishing U.S. economic clout and leadership is not likely to be codified through a congressional vote. Lacking a sufficiently juicy carrot to bring China into the fold, the only option remaining was to warn U.S. allies away with the stick. So as those allies were wooed over one by one by the AIIB, the phrase “tactical diplomatic failure” is not quite enough to describe the Obama administration’s chagrin.

In the last two days, President Obama’s special representative and Secretary of the Treasury Jacob Lew completed a visit to China full of incisive questions, questions with the clear intent of taking China to task about its “right” to be an economic rule setter. Starting from the top down and seeking strategic results may hold psychological value in weakening the confidence and resolve of AIIB member states toward the new institution. Of course, probing China’s true intentions for taking the initiative with the AIIB was undoubtedly another of Lew’s objectives. What China wants the U.S. to have is a greater appreciation for the ways in which new institutions can complement, rather than compete with, existing ones, as well as more thought given to the benefits of cooperation and shared interests instead of the perils of vicious regional competition.

On the issue of the AIIB, the next step for the Obama administration will be not only to revise its previous strategic assessments, but also to seek grounds for a “reasonable” explanation that will satisfy the opposition party.