B3W: An Western Alternative to the BRI? - An Interview with Maria Adele Carrai
January 28, 2022
About the author:
Maria Adele Carrai, Assistant Professor, Global China Studies, NYU Shanghai
Background: The Belt and Road Initiative, the massive global infrastructure project launched by China in 2013, is a project which has attracted great interest, debate and controversy. Whilst some have praised the need to help the development of the Global South, others have criticized it as a symbol of China’s geopolitical expansion and ambitions through the notion of the “debt trap,” leading Western nations such as the U.S. to try and build their own alternatives to it. But where does the truth lie? Will efforts to counter it succeed?
TIO: Thank you, Dr. Carrai, for granting this interview with TIO. The topic for today’s discussion is America’s infrastructure agenda. The Build Back Better World (B3W) agenda, or the American infrastructure initiative, was first proposed by President Biden at the G7 summit in 2021. Can you, first of all, tell us a little bit about this initiative? What is it all about? How should we understand it?
Carrai: Sure. First of all, thanks for having me here. Let me talk about the Build Back Better initiative. It is an international economic initiative that is led by the United States. It is about building infrastructure, and it was launched, as you said, in 2021 by the G7 countries and is expected to set new standards that better reflect the values of Western democracy, and most importantly, balance against the Belt and Road Initiative (BRI) and China's global reach.
“The U.S. hopes to promote an upward competition of standards
that will force Chinese companies to accept the Western rule of law
and governance standards and help extend US influence
in the Indo- Pacific region and beyond.”
The aim of the initiative is to catalyze funds from the private sector and build better quality infrastructure. The idea is to create a high standard certification process as part of this Build Back Better World initiative, which leverages a wide range of private capital, especially pensions and insurance funds, to invest in infrastructure and obtain long-term returns.
The U.S. hopes to promote an upward competition of standards that will force Chinese companies to accept the Western rule of law and governance standards and help extend US influence in the Indo-Pacific region and beyond.
I want to tell a bit more about previous initiatives that preceded this framework. The initiative builds on the International Development Finance Corporation (IDFC) and the Blue Dot Network (BDN) of the Trump administration.
According to the Better Utilization of Investments Leading to Development Act (the BUILD Act) of 2018, the Trump administration integrated and upgraded the US Overseas Private Investment Corporation (OPIC) before merging it with the Development Credit Authority (DCA) and the United States Agency for International Development (USAID). And then the agency that emerged from the restructuring was known as the International Development Finance Corporation, which has an investment cap of $60 billion.
Another initiative that helps understand the B3W initiative is the BDN promoted by the Trump administration. It was established, once again, to promote the private sector and civil society participation in infrastructure construction. This also should have reflected principles of good governance, environmental management, and transparency. The higher standards, in theory, would have attracted private capital to invest in infrastructure.
The BDN was launched in 2019 with a coalition that comprised the Japan Bank for International Cooperation, the Australian Department of Foreign Affairs, and the United States International Development Finance Corporation.
So this is the context. Historically, there were these previous initiatives from the Trump administration. The B3W has a similar focus as the BDN. It aims to promote good governance, high transparency, and again, attract the private sector. The initiative was also motivated by the US foreign policy that is dictated by its obsession with China. The U.S. is using this initiative to balance against China. Rather than targeting a domestic audience, it serves as a geopolitical and international strategy that aims to counter the BRI.
TIO: Going off what you’ve just said, this agenda of infrastructure-building is not just a political innovation of Joe Biden. Obviously, it started, as you said, from the BDN during the Trump administration. But from Trump to Biden, where does the B3W agenda depart from the BDN? How are they different?
Carrai: I think the B3W reflects Biden’s willingness to approach China by collaborating with US allies. It's a G7 initiative. Before, it was just Japan and Australia. But now the U.S. really tries to foster its relationship with other G7 countries, its allies. This is a key aspect. Trump alienated the US allies while Biden is trying to leverage these existing relationships against China. Now, it is not the U.S. alone, but the U.S. with its allies that can contain China.
TIO: If we think about the domestic situation in the U.S., Biden’s emphasis during his administration, another very important point, is to really focus on infrastructure-building in the United States. Obviously, Biden wants to build infrastructure. Trump wanted to do that, and Obama also wanted to do that. The agenda has been there for a long time. So, one question is: what is blocking this policy implementation process? Why is the infrastructure-building plan so inefficiently carried out in the U.S.?
Carrai: Yes. So, one other initiative or framework that needs to be mentioned is the Build Back Better initiative. That is a domestic initiative, unlike the B3W, which is more tailored to an international audience.
This package of Build Back Better has a bipartisan consensus. Again, it's more domestic. Basically, in the past decade, the U.S. has cut back its spending on infrastructure. And already in the 1980s, there was this great book by Pat Choate and Susan Walter titled America in Ruins that was published by Duke University Press. It shows that spending on public work projects was already decreasing in the 1980s, and that the nation's infrastructure was crumbling and needed to be repaired.
Today, the situation that dates back to the 1980s has perhaps worsened. In 2021, the American society civil engineers gave the U.S. a C minus grade for the state of infrastructure across the nation. It also warned that 43% of the US roads and highways were in poor to mediocre condition and that more than 46,000 of the nation's bridges were in such a bad shape that it would take over 50 years just to complete all the currently needed repairs. What caused it? I think that one of the major limitations is political. There is not a strong incentive for politicians who face reelection to spend money on maintenance and renovation of existing infrastructure, rather, they start new and shiny projects that will impress their voters.
“In America, the China question is
probably a topic with most bipartisan agreement...
both Democrats and Republicans are very harsh on China.”
The reason for this is that in America, as in many other countries, money for maintenance and renovation mostly comes from taxpayers. It will be unpopular to increase taxes, a very sensitive issue in the United States. Moreover, many of the most important infrastructure projects are invisible, like sewage and waterline. But when it starts to fall apart, people or voters start to notice them, as we can see from the case of the Flint water crisis.
That was a public health crisis that started in 2014 and lasted well until 2019. The water in the city of Flint, Michigan, was contaminated with lead and Legionella bacteria. It was a bad situation that revealed a bit about the state of infrastructure in the U.S. It is also evident by the amount of time it took to solve the issue. It took five years to solve the issue, from 2014 to 2019. Moreover, the cost for building infrastructure or maintaining the existing one is very high in America.
I encourage everybody to read an article by the New York Times, titled “The Most Expensive Mile of Subway Track on Earth,” which is the New York City subway. It discusses how excessive staffing, very little competition among contractors, and very generous contract as well as archaic rules inflated the cost of transit in New York and made it one of the most expensive subways in the world. Political factors and high costs of infrastructure created this gridlock, but I think the major issue is really political.
TIO: As you said, the Build Back Better plan is bipartisan within the United States. What about the B3W? Is it also bipartisan? Have both parties reached a consensus on countering China through building infrastructure but by different approaches? For example, Biden wants to do it with the US allies, but then in 2024, if the U.S. elects a Republican president who wants to do it the Trump way. Is it possible?
Carrai: In America, the China question is probably a topic with most bipartisan agreement. Although the methods might be different, both Democrats and Republicans are very harsh on China. They think China is a problem. China needs to be contained. The U.S. needs to be tougher on China. And in terms of the method, which we will perhaps have the chance to discuss later, the B3W is a very preliminary initiative. The document that was released is basically one page. It has very general goals with not much meat or substance. There are all these intents and there is a need to compete with China. But first of all, there are no clear details on how this is going to happen. And also, if it's going to happen, it's difficult to coordinate among the G7 members and successfully build infrastructure in the world.
That's why I also started by talking about previous initiatives made by the Trump administration that align very much with this new initiative of Biden, with the difference that Biden probably tries to leverage more its allies, like other countries, rallying a group of democracies against an authoritarian China.
So, this is a major difference. And probably in terms of the ways on how to do “Build Back Better World,” there will be transformation. But I don't see a future where if Trump gets reelected, he will dismiss the Build Back Better World. Maybe he will try to do it alone or with other partners, but I think it will probably stay.
TIO: Their similarities are that both are against China and that both focused a lot on infrastructure. But as you summarized, Biden prefers a multilateral framework, whereas Trump prefers an “isolationist” approach. Then, if there is this kind of zigzagging or jumping around, how would countries in the middle feel about this?
Carrai: There is a lot of money or at least commitment to investments in infrastructure in the developing world. It is a golden age for developing countries to take advantage of the competition between the U.S. and China to get money, choose what works best for them, whoever gives them money. It fits their own national interests and values.
And I think there is a tendency in the U.S. to frame the current U.S.-China competition as a new Cold War. China opposes that and tries to avoid this ideological competition. The same is true for host countries. If we look at Africa, African countries try to avoid getting trapped into this Cold War narrative, as they did in the past. There is a historical context that explains why African countries oppose this dichotomic vision of the world that dates back to Bandung Conference and the Non-Aligned Movement. They try to avoid taking sides. I think, again, they should make the most of the money that is there, at least in terms of commitment, and take advantage of this competition and get the money and try to find, again, synergies between the U.S. and China and get infrastructure done in their countries.
TIO: Given the current geopolitical landscape of the U.S.-China competition, given that they are competing on almost every front, what would you suggest these two countries do in the future?
Carrai: I think that they should continue the dialogue. What saddens me the most is, especially now during the COVID-19 pandemic, a lack of dialogue and people-to-people exchanges. It is important to have dialogues between the top leaders, but I think the dialogue should take place at every level.
I think the two countries should continue the exchange rather than reduce everything to an ideological division. It is also important to look at facts. And that's why I think it is important to rely on scholars who study facts and are detached from more ideological position. China is a competitor of the U.S. It is posing a challenge to the hegemonic position that the U.S. has occupied all these years. This is true. But at the same time, there are ways in which the U.S. and China can collaborate. And they should. They have to collaborate. They have the duty to collaborate because the future of the entire world depends on their relationship. This relationship determines how future norms will be written and whether there will be peace or war. So, it's very important that they cultivate the relationship given that they are competitors, but there are still ways that they can collaborate and coexist peacefully.
For instance, if China builds infrastructure in a country, the U.S. can come in with its software. There may also be better ways for the U.S. to assert its soft power. There may also be better ways to leverage Chinese constructions of basic infrastructure around the developing world. Just to give you an example, the U.S. can rely on its advantages in service sector, education, health, and foster education, or diplomatic ties instead of building infrastructure.
The U.S. cannot compete with China in terms of infrastructure-building in the developing world. To China, the U.S. represents an essential partner for dealing with global challenges from the environment to global health. So, there are many aspects for the U.S. to be an important partner of China. Given the differences of their political and development models, both the U.S. and China should try to find synergies.
TIO: On a related note, let’s now talk a bit about China’s Belt and Road Initiative. Ever since the BRI's launching, it has been criticized by the Western press as China's “debt-trap diplomacy.” Some people even describe it as neocolonial, depicting China as a neocolonialist power. So, based on your study, what is the reality of how the BRI initiative functions in the developing world like Africa?
“...there are ways in which
the U.S. and China can collaborate.
And they should. They have to collaborate.
They have the duty to collaborate
because the future of the entire world
depends on their relationship.”
Carrai: The BRI is a huge initiative, a huge enterprise. It has been having mixed effects. As some critics complained, some of its projects are white elephant projects, projects that didn't really generate the economic return that they had hoped for and that were done superficially without enough investigation of the host country’s situation. These projects mostly were, if not all, requested by the host countries. So it was not China imposing a certain project, but China saying okay to these requests. For countries like Sri Lanka or Pakistan, for instance, they went to China and asked: can you help us finance this infrastructure project? China, out of friendship and to increase its soft power, said yes, although this approach has been changing more recently.
And in Africa, again, there's been a mixed series of projects, some successful, some less so. I have done work in Kenya and Ethiopia, looking at how China built and financed railroads. I can tell that the Ethiopian project was not as good as the Kenyan one in terms of economic returns and operations.
I’ve written a lot about this, and it is not just me but also many other authors. Based on facts and data, we don't think China is trying to put these countries in a debt trap. It is not in China’s interest to do so.
That said, there are some projects that have been problematic. And we can also see efforts from China, from the Chinese central government to improve its operations abroad. But again, one should understand that actors that operate abroad are both private and public. There are also private actors that contribute to the Belt and Road Initiative, some of which are not completely accountable. So, it's hard for the central government to have a direct and complete control over these actors. There is always something that gets out of Chinese government’s hand.
So, we see a gradual amelioration of BRI. We also see a decrease in investments from China to Africa and a much more rigorous selection of projects that China takes on and decides to finance and build. So, there has been an improvement both in terms of regulations and the principles China follows when it builds abroad and stricter rules. These, however, need to be followed on the ground, and it is not always the case.
TIO: Just like you said, in some partner countries, the initiative is working well, but in some other ones, the outcome is not very good. Looking ahead in 2022 and beyond, how would you project the BRI to facilitate China's economic growth in the future, if there is any?
Carrai: The BRI also has a domestic component, to build infrastructure domestically. And that is what China has done in the past. For the financial crisis in 2008, China decided to give a huge stimulus internally for infrastructure development. And then there is an international aspect of BRI in terms of resources, access to resources. The policy banks that financed the BRI, when I interviewed some of the EXIM bank officials in Ethiopia and Kenya, one of their goals is to profit. But then some of these projects are not profitable. There is a huge debt problem for the host country, especially now after COVID-19, debt was partly suspended.
But then the money must be paid eventually. It's very rare that China completely forgives the debt to these countries. In terms of the economic development of China, the BRI internally can help foster China’s economic development more directly and you see the effects more directly.
Internationally, the effects are a bit more mixed, because the environment is a bit riskier. And I think it’s more about securing China internationally. Now we have Djibouti, where the first Chinese overseas military base was built. China is striving to expand its military presence abroad very gradually and its soft power, creating a good image of China. For instance, the BRI during the pandemic was transformed into a “medical BRI” so that China could export masks and medical equipment. Therefore, to be honest, I don’t know whether there was an economic return for China. Even now with the vaccines, it is more about China’s image and its soft power. So, I think the BRI should be understood more broadly, not just in terms of economic return, but also soft power, security, and access to resources. There are many different aspects of it.
“When China goes abroad, there are risks involved,
risks of doing business in a country
that is not your own where you have even less control
over all these economic actors, changes in regulations, and wars.”
TIO: It seems rather difficult because while China’s doing all this, then at the other side of the world, somebody is sabotaging all the efforts, saying what China is doing is essentially a debt trap…
Carrai: When China goes abroad, there are risks involved, risks of doing business in a country that is not your own where you have even less control over all these economic actors, changes in regulations, and wars.
This is complicated by the current geopolitical situation and the current rhetoric. Very toxic rhetoric, like ideological clashes, China's debt trap, Chinese this, Chinese that. It is very challenging for China, but I also feel that, for instance, in Africa, China has won the trust of many governments. China has become the key trading partner of most of African nations, and a key source of investments.
As to the U.S. and the G7 countries with the B3W, I don't know how effective they will be. For instance, in Africa. Africa is one of the regions that they particularly tried to target with this initiative, because they feel Africa has been lost to China. But Africa has been long neglected by Western countries, while China has fostered its close ties, sending top officials to Africa to foster the diplomatic relationship.
And so, I think China can leverage these deeper ties, whether they are political or economic, vis-à-vis other countries. So even if other countries launch a campaign against China, then there are the facts: who's building the roads here, who's building infrastructure, who’s giving us options that would otherwise not be there?
TIO: How do you gauge whether the BRI is a success or not? Oftentimes, we hear about judgments that the BRI was not a success and China lost a lot of money along the way and people in the partner countries are not happy with it. Some also claim that with all the money that has been invested, there’s no economic return at all. Do you think it's still too early for us to jump to conclusions of this sort?
Carrai: First, I think it's difficult to assess the BRI both now and, in the future, because the BRI, for its very nature and the way it was framed, is a bit ambivalent and ambiguous. Still, now, there isn't a clear list of countries or projects that are part of an official BRI list. There are some that were incorporated into the BRI but it's a bit of everything. So it is difficult to really define what is BRI and what is not. If you cannot define what a BRI project is, it is hard to tell whether it's successful or not.
I think that the BRI has been successful in some ways. For instance, if one of the objectives of President Xi launching the BRI was to make China more prominent, I think he was successful in that regard because everybody is talking about the BRI and I don't think it is going to disappear anytime soon. He launched this massive idea. In terms of ideas, it was successful because it created new imaginaries of China’s global power. All countries now start to talk about infrastructure, connectivity, China, China as a great power, etc.
But at the same time, there are negative effects, because while before, China was hiding its strength, it is now very exposed as a great power. And I think this is freaking out the United States and European countries that are taking preventative measures to contain China even more. In that sense, the BRI created a bit of a backlash. It shows China’s power and global reach, and many countries recognize it, which is why the United States tries to contain the initiative and the B3W agenda is an example.
Then in terms of actual projects, we see that, as I said before, some projects were white elephants that didn't generate the economic return that they hoped for. But we also see an improvement, a very steep learning curve from China. It is increasing its regulations, its guidelines for state-owned enterprises and private companies operating abroad. China has also become more selective in terms of the projects that it finances.
So, there's been improvement, but the world is complex and operating in these different countries is also very complex and risky. There are still issues. I think the major issues that the countries complain about in relation to the BRI are environmental issues, some human rights issues, and labor issues. But this can be the case also for other companies operating abroad. I think what is important is China’s improvement in the past years and its willingness to improve. A case in place is President Xi Jinping saying that China will stop building coal plants as part of the BRI in order to reflect China’s commitment to environmental sustainability. It is one of China’s attempts to ameliorate its impact of operating abroad.
“But we also see an improvement,
a very steep learning curve from China.
It is increasing its regulations,
its guidelines for state-owned enterprises
and private companies operating abroad.”
TIO: Building or developing infrastructure is something that all states and governments care about. With greater infrastructure comes greater connectivity, which then brings economic development, and this further helps transcend misunderstanding and delusion. It is arguably true that the developing world hopes to advance their economy and further integrate with the world more than anyone else. Given this dynamic between China and the U.S., is there a way for the two countries to constructively work together to accomplish the shared goals of advancing infrastructure in the developing world?
Carrai: As I said, I think the initiatives are also different. The B3W of the U.S. aims to counter the BRI but it is conducted in a fundamentally different way. There are possible synergies. As China builds infrastructure in a country, the U.S. can focus more on its own software, education, medical health, and so forth, so they could collaborate. But I feel that we are in a gridlock right now with U.S.-China relations, in which everything has become ideological and divisive. And there is real competition, both from the U.S. and China. China lamented the fact that the U.S. has been dictating China on what to do.
Now China wants to become a great leader, a great power, so it doesn't want to have that anymore. And the U.S. sees its leading position in the world completely challenged by China, whose system is different and doesn't follow the political principles set up by the U.S.
So, I think that there are definitely ways in which the two countries can collaborate and find synergies because these two projects are different. But then I feel that they are blocked by this political and ideological attention that is here to stay in the longer run.
TIO: Certainly. Everything seems to eventually come down to a power game. Maybe both governments want to do something good for the world, but then in this context where all is about competing against each other, nothing will be achieved in an effective and constructive way.
Carrai: This is very detrimental to both countries. I think with this kind of mentality, both risk to make very bad decisions based on ideology. But the countries in between, instead of taking sides, can take advantage of all this committed money that is out there and take advantage of whatever is there without taking either side. It's a pity that we are currently in this very tense moment between China and the U.S. And again, very poor decisions are made based on ideologies, not facts.
TIO: With regards to this competition, the BRI and the infrastructure plan in the U.S., is there going to be a winner?
Carrai: I think that there are lot of challenges for the B3W as well as for the BRI, but the difference is that the BRI has been around for longer since 2013 and it has caught the imagination of many countries. So, it is going to stay, develop, and improve. Its standards have become more selective, which hopefully will lead to better projects.
For the B3W, I think it's more declarative and there's much fanfare, but it remains very preliminary. In terms of who will win, in terms of their respective infrastructure initiative, I can say that probably will be China.
I want to just mention a few challenges that the B3W will face. The first challenge is securing long-term funding. Struggling with the cost of the pandemic in developed countries, investors are unwilling to take on risky projects such as building infrastructure. Even if there are investors that are willing to invest in such risky projects, it is quite doubtful that the G7 countries will guarantee lending conditions as competitive as China. It is also challenging to coordinate among the G7 countries that have different positions towards China and limited fiscal and institutional capacity overall for large-scale investments. Even if they've managed to find public funding, it is difficult to approve, especially given that now the U.S. has a national debt of over 130%. So, it is difficult to imagine where to find public funding.
Another aspect is that given the high environmental and governance standards that the B3W and the BDN initiatives promote, the investment will incur even higher costs for the developing countries. In addition, the U.S. is not the leader, as we discussed before, in infrastructure development. It is unlikely that it will become a global leader in infrastructure construction overnight.
So, I think there are serious limitations in the American B3W plan. In terms of standards, it has positive impact because it pushes China to pursue even better standards. But in terms of substance, I think it is not comparable to the BRI because the BRI offers a unique package where you have banks, investors insurance, cheap constructors, and very high efficiency. Chinese constructors usually finish projects even before the deadline. So it's very hard to compete.
TIO: Very interesting. Thank you, Dr. Carrai, for sharing your views. This has truly been fascinating and we look forward to reading more into this topic along its development. With that, there is no further questions on our side. Thank you again for granting this interview with us.
Carrai: It is my pleasure to be here. Thank you.
This article is from the January issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the January issue, please click here:
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