Rhetoric and reality

The recently concluded G-7 meet (comprising US, Canada, Britain, Germany, Italy, France and Japan — with Australia, South Korea, South Africa and India as observers) sends out significant signals. The Biden administration, like its predecessor, is bent upon containing China’s clout. It wants to go beyond erecting trade and investment barriers to expanding its infrastructure footprint worldwide to rival China’s Belt and Road Initiative (BRI). Predictably, the US-led push has been packaged in ideological terms — as a group of nations upholding democracy and human rights vis-a-vis an authoritarian force. Called Build Back a Better World (B3W), the plan talks of a $40 trillion outlay, but there is no clarity on where exactly this infra will come up and how it may be financed. A White House Fact Sheet says “B3W will be global in scope, from Latin America and the Caribbean to Africa to the Indo-Pacific”...mobilising private-sector capital in four areas of focus — climate, health and health security, digital technology, and gender equity and equality”. This is viewed as a spillover of the American Jobs Plan “to demonstrate US competitiveness abroad”. But as the BRI experience demonstrates, countries and companies can fall into a debt trap. B3W can fuel runaway inflation — already ruling high in the US — in the rest of the world.

Above all, it seems the US has woken up to the BRI threat rather late in the day. According to the think tank, American Enterprise Institute, BRI, in force since 2013, has created investment of about $450 billion in over 140 member countries. BRI has allowed China to diversify its investments beyond the US and EU to West Asia and Africa; this is in addition to its presence in the ASEAN region. While US, Australia, Britain, Brazil, Switzerland, Canada and Germany (many of them in the G-7) have been the top recipients of Chinese investments since 2005, BRI has channelled funds into Pakistan, Iran, Saudi Arabia, Ethiopia, Nigeria, Algeria, Bangladesh and the UAE, among others. Thanks to BRI, China emerged as the EU’s leading trade partner in 2020, replacing the US. The EU and China inked a ‘Comprehensive Agreement on Investment’ in December. Clearly, rhetoric and realpolitik are at variance. Yet, there can be no denying that a hegemonic, non-transparent China needs to be checked.

With Covid, the need to reduce dependence on China’s supply chains has gained ground. In this context, the B3W assumes significance. India can leverage this move by seeking to channelise investments in building a road and rail link that links South Asia with ASEAN. It needs to think beyond the Quad grouping, while recognising that its trade ties with China cannot be wished away. The G-7 has historically been a self-serving group. Its empty rhetoric on Covid vaccines as well as climate finance bears this out. Yet, India can work a deal on its terms.

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