Tightrope

Oct 19, 2023

UPDATE: As the World Bank and IMF meetings wrap up in Morocco, hopes for an imminent revolution in multilateral finance look forlorn. A dollar of capital can support five dollars of lending at the IBRD and the costs of subsidized finance for the poorest countries through IDA are shared amongst more than fifty donors. But it would still take annual expenditure amounting to about 0.03 percent of US GDP for America to help scale the multilateral development banks and actually deliver on repeated promises of many hundreds of billions in development and climate finance.

Backing for the Israeli assault on Gaza angers the Global South, after US and EU sought to build consensus against Russia. Western support for Israel’s assault on Gaza has poisoned efforts to build consensus with significant developing countries on condemning Russia’s war against Ukraine, officials and diplomats have warned.

This year marks the 10th anniversary of the Belt and Road Initiative (BRI) I proposed. The BRI, drawing inspiration from the ancient Silk Road and focusing on enhancing connectivity, aims to enhance policy, infrastructure, trade, financial and people-to-people connectivity, inject new impetus into the global economy, create new opportunities for global development, and build a new platform for international economic cooperation.

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The US Failed the World in Morocco

By As the World Bank and IMF meetings wrap up in Morocco, hopes for an imminent revolution in multilateral finance look forlorn. A dollar of capital can support five dollars of lending at the IBRD and the costs of subsidized finance for the poorest countries through IDA are shared amongst more than fifty donors. But it would still take annual expenditure amounting to about 0.03 percent of US GDP for America to help scale the multilateral development banks and actually deliver on repeated promises of many hundreds of billions in development and climate finance. And, apparently, that’s too much. Even as a number of European countries signaled support for a World Bank capital increase, the US stonewalled. Instead, the $2 billion and change in US support that may get delivered this year is typical of the White House approach to international finance so far: trumpet mountains, deliver molehills.

The US rebuff won’t have come as too much of a shock to the countries who might have benefited. The last few years have provided sufficient lessons in broken promises and hypocrisy from rich countries. During the COVID-19 pandemic, we were all in it together until, of course, we weren’t: donor countries hoarded multiples of the vaccines they would need to immunize their whole populations, eventually dumping the surplus stock as it headed towards expiration, with the temerity to celebrate that last act as a sign of generosity counting towards international targets for foreign assistance.

Or look at climate: the ad nauseam repetition from rich country officials at climate summits that this is a global problem requiring global solidarity lasts until they are asked to open their checkbooks: high-income countries who largely created the problem have done what rounds to nothing in terms of supporting poorer countries to survive it. They declared success on delivering $100 billion in climate finance despite the fact we hadn’t yet, even using the cooked accountskept by the OECD club of wealthy countries. The finance was meant to be ‘new and additional,’ but it is pretty clear little of it met that bar under any reasonable definition. In an attempt to cover their derogation, they claim ‘no tradeoffs’ in climate mitigation and development funding, despite the fact there is an obvious tradeoff between financing bed nets in Liberia and a solar power plant in Brazil if you are a child in Liberia.

Meanwhile, rich countries said they wouldn’t support finance for any fossil-fueled power plants in low- and middle-income countries while they re-opened coal pits and rediverted the world’s supply of natural gas to power their energy systems—systems which belch out multiples of the emissions of the electricity networks in poorer countries. Then they added proposals that multilateral development banks impose conditionality on developing countries to meet Paris climate commitments even as they blew through their own Paris commitments. Now they are proposing carbon border tariffs which will penalize exporters from poorer economies which emit a fraction of the greenhouse gasses per person of the rich world. And the new international financing mechanism for climate championed by the European Union, a tax on shipping emissions, is one that will put a disproportionate burden on poor countries. Marginally reducing greenhouse gas emissions in countries that produce a tiny proportion of those emissions won’t stop climate change even as it further hobbles development. But that is beside the point when the virtue signal of environmental purity is sufficient reward.

If that wasn’t enough, Russia’s attack on Ukraine made very clear how much the Western national security strategies proclaiming new threats to the global commons had equal status with old security concerns were blowing smoke. A spigot dry for climate or pandemic preparedness suddenly poured forth more than $100 billion for Ukraine. It was immediately off again when it came to other countries dealing with the shock of rising fuel and fertilizer prices because of the war. Surely Ukraine deserves the support, but it isn’t the only deserving case.

Given G7 leaders have convincingly demonstrated they are not to be trusted when it comes to their repeated invocation of financing volumes in the hundreds of billions, hopefully advocacy groups will at least fight to preserve flatlining aid funding for activities actually in developing economies, with a focus on the poorest, rather than subsidizing ineffective climate projects in richer countries like Brazil and Malaysia or (even more obscenely) refugee hotel costs in donor countries. But for any additional finance, low- and middle-income countries may have to look elsewhere. For all the issues with Chinese debt, you can use it to build things. Unmet promises from the West don’t buy cement.

The good news is that development finance has never been the most important driving force for development progress. The people and governments of developing countries themselves have that role. And for all the US has been trying to hobble the World Trade Organization, there is still some life left in global trade, bolstered by new regional initiatives including the Africa Continental Free Trade Agreement. Again, as the labor force starts shrinking in the aging countries of Europe, they will need to import more services or the labor to provide them locally—and that is already providing new opportunities across the Global South. Meanwhile, the US Inflation Reduction Act may be larded with inefficient subsidies for domestic manufacturers, but on the margin, at least, it should reduce the costs of zero-carbon technologies with planet-wide impacts. And technological advance will continue more broadly—malaria vaccines alone could save many millions of lives.

But progress could be considerably faster—on climate, on pandemics, on the fight against poverty and insecurity—if rich countries met their obligations to the rest of the world. Led by the US, the skinflint G7 are displaying an utter lack of international leadership, to the detriment of the whole planet.

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organisation and does not take institutional positions.

Xi Jinping speech to BRI Opener

Chinese President Xi Jinping on Wednesday delivered a keynote speech at the opening ceremony of the third Belt and Road Forum for International Cooperation (excerpts).

Building an Open, Inclusive and Interconnected World For Common Development

Today, we are meeting here for the opening ceremony of the Third Belt and Road Forum for International Cooperation (BRF). On behalf of the Chinese government and Chinese people and in my own name, I wish to extend a very warm welcome to you all!

Over these 10 years, we have stayed committed to this founding mission. Thanks to our joint efforts, Belt and Road international cooperation has gotten off the ground, grown rapidly and produced fruitful outcomes.

Belt and Road cooperation has extended from the Eurasian continent to Africa and Latin America. More than 150 countries and over 30 international organisations have signed Belt and Road cooperation documents. We have held two sessions of the BRF before, and have established over 20 specialised multilateral cooperation platforms under the BRI.

Belt and Road cooperation is based on the principle of “planning together, building together, and benefiting together.” It transcends differences between civilizations, cultures, social systems, and stages of development. It has opened up a new path for exchanges among countries, and established a new framework for international cooperation. Indeed, the BRI represents humanity’s joint pursuit of development for all.

Ladies and Gentlemen,

Friends,

Our achievements in the past decade are truly remarkable, and there is so much we can draw from them.

We have learned that humankind is a community with a shared future. China can only do well when the world is doing well. When China does well, the world will get even better. Through Belt and Road cooperation, China is opening its door even wider to the world, with its inland regions turning from “fullbacks” into “forwards,” and coastal regions scaling new heights in their opening-up. China’s market has become even more closely integrated with the global market. China has become a main trading partner of more than 140 countries and territories and a primary source of investment for more countries. Both Chinese investment overseas and foreign investment in China have boosted friendship, cooperation, confidence and hope.

We have learned that win-win cooperation is the sure way to success in launching major initiatives that benefit all. When countries embrace cooperation and act in concert, a deep chasm can be turned into a thoroughfare, land-locked countries can become land-linked, and a place of underdevelopment can be transformed into a land of prosperity. Countries taking the lead in economic development should give a hand to their partners who are yet to catch up. We should all treat each other as friends and partners, respect and support each other, and help each other succeed. As the saying goes, when you give roses to others, their fragrance lingers on your hand. In other words, helping others is also helping oneself. Viewing others’ development as a threat or taking economic interdependence as a risk will not make one’s own life better or speed up one’s development.

We have learned that the Silk Road spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit is the most important source of strength for Belt and Road cooperation. I once said that the pioneers of the ancient silk routes won their place in history not as conquerors with warships, guns, horses or swords. Rather, they are remembered as friendly emissaries leading camel caravans and sailing ships loaded with goods. Belt and Road cooperation is based on the belief that flame runs high when everyone adds wood to the fire and that mutual support can get us far. Such cooperation seeks to deliver a good life not only to people of just one country, but to people in other countries as well. It promotes connectivity, mutual benefit, common development, cooperation and win-win outcomes. Ideological confrontation, geopolitical rivalry and bloc politics are not a choice for us. What we stand against are unilateral sanctions, economic coercion and decoupling and supply chain disruption.

What has been achieved in the past 10 years demonstrates that Belt and Road cooperation is on the right side of history. It represents the advancing of our times, and it is the right path forward. We need to remain clear-eyed and undisturbed in a volatile world, and we need to be keenly aware of our responsibility for history, for the people and for the world. We should jointly address various global risks and challenges, and deliver a bright future of peace, development, cooperation and mutual benefit for future generations.

Ladies and Gentlemen,

Friends,

Changes of the world, of our times, and of historical significance are unfolding like never before. China is endeavoring to build itself into a stronger country and rejuvenate the Chinese nation on all fronts by pursuing Chinese modernization. The modernization we are pursuing is not for China alone, but for all developing countries through our joint efforts. Global modernization should be pursued to enhance peaceful development and mutually beneficial cooperation and bring prosperity to all. On our way forward, we will encounter both headwinds and tailwinds. We need to stay focused on our goal, take results-oriented actions, persevere, and keep moving forward until our goal is met. China will work with all parties involved to deepen Belt and Road partnerships of cooperation, usher this cooperation into a new stage of high-quality development, and make relentless efforts to achieve modernization for all countries.

Now, I wish to announce eight major steps China will take to support our joint pursuit of high-quality Belt and Road cooperation.

First, building a multidimensional Belt and Road connectivity network.China will speed up high-quality development of the China-Europe Railway Express, participate in the trans-Caspian international transportation corridor, host the China-Europe Railway Express Cooperation Forum, and make joint efforts to build a new logistics corridor across the Eurasian continent linked by direct railway and road transportation. We will vigorously integrate ports, shipping and trading services under the “Silk Road Maritime,” and accelerate the building of the New International Land-Sea Trade Corridor and the Air Silk Road.

Second, supporting an open world economy. China will establish pilot zones for Silk Road e-commerce cooperation, enter into free trade agreements and investment protection treaties with more countries. We will remove all restrictions on foreign investment access in the manufacturing sector. In light of international high-standard economic and trade rules, we will further advance high-standard opening up in cross-border service trade and investment, expand market access for digital and other products, and deepen reform in areas including the state-owned enterprises, digital economy, intellectual property and government procurement. China will hold the Global Digital Trade Expo annually. In the next five years (2024-2028), China’s total trade in goods and services is expected to exceed USD 32 trillion and USD 5 trillion respectively.

Third, carrying out practical cooperation. China will promote both signature projects and “small yet smart” livelihood programs. The China Development Bank and the Export-Import Bank of China will each set up a RMB 350 billion financing window. An additional RMB 80 billion will be injected into the Silk Road Fund. Together, they will support BRI projects on the basis of market and business operation. Cooperation agreements worth USD 97.2 billion have been concluded at the CEO Conference held during this Forum. China will carry out 1,000 small-scale livelihood assistance projects, and enhance vocational education cooperation through Luban Workshops and other initiatives. We will also step up joint efforts to ensure the safety of BRI projects and personnel.

Fourth, promoting green development. China will continue to deepen cooperation in areas such as green infrastructure, green energy and green transportation, and step up support for the BRI International Green Development Coalition. China will continue to hold the BRI Green Innovation Conference, and establish dialogue and exchange mechanisms for the solar industry and a network of experts on green and low-carbon development. China will implement the Green Investment Principles for the Belt and Road, and provide 100,000 training opportunities for partner countries by 2030.

Fifth, advancing scientific and technological innovation. China will continue to implement the Belt and Road Science, Technology and Innovation Cooperation Action Plan, hold the first Belt and Road Conference on Science and Technology Exchange, increase the number of joint laboratories built with other parties to 100 in the next five years, and support young scientists from other countries to work on short-term programs in China. At this Forum, China will put forward the Global Initiative for Artificial Intelligence (AI) Governance. We stand ready to increase exchanges and dialogue with other countries and jointly promote the sound, orderly and secure AI development in the world.

Sixth, supporting people-to-people exchanges. China will host the Liangzhu Forum to enhance dialogue on civilizations with BRI partner countries. In addition to the Silk Road International League of Theaters, the Silk Road International Arts Festival, the International Alliance of Museums of the Silk Road, the Silk Road International Alliance of Art Museums, and the Silk Road International Library Alliance that have been set up, China has also launched the International Tourism Alliance of Silk Road Cities. And we will continue with the Chinese government scholarship Silk Road Program.

Seventh, promoting integrity-based Belt and Road cooperation. Together with its cooperation partners, China will release the Achievements and Prospects of Belt and Road Integrity Building and the High-Level Principles on Belt and Road Integrity Building, and establish the Integrity and Compliance Evaluation System for Companies Involved in Belt and Road Cooperation. We will also work with international organizations to carry out research and training on promoting integrity in Belt and Road cooperation.

Eighth, strengthening institutional building for international Belt and Road cooperation. China will work with its BRI partner countries to strengthen the building of multilateral cooperation platforms covering energy, taxation, finance, green development, disaster reduction, anti-corruption, think tank, media, culture and other fields. China will continue to host the BRF and establish a secretariat for the Forum.

Ladies and Gentlemen,

Friends,

The past decade has been a journey of dedicated cooperation and fruitful outcomes. Belt and Road cooperation was proposed by China, but its benefits and opportunities are for the world to share. Let us meet the expectations of the people, assume responsibilities entrusted on us by history, closely follow the trend of the times, and press ahead with energy and enterprise. Let us deepen Belt and Road international cooperation, and bring Belt and Road cooperation to a new stage of higher-quality and higher-level development. Let us advance modernization of all countries, build an open, inclusive and interconnected world for common development, and jointly build a community with a shared future for mankind.

I wish the Third Belt and Road Forum for International Cooperation a full success!

Thank you.

The rush to support Israel reveals the West’s hypocrisy

By FT.com

The reaction to the October 7 attack on Israel by Islamist militant group Hamas and to Israel’s vow to hit back against Gaza has undone months of work to paint Moscow as a global pariah for breaching international law, they said, exposing the United States, the EU and their allies to charges of hypocrisy.

In the flurry of emergency diplomatic visits, video conferences and calls, Western officials have been accused of failing to defend the interests of 2.3 million Palestinians in their rush to condemn the Hamas attack and support Israel.

In the first days after Hamas’ assault, some Western diplomats worried that the US was giving carte blanche to Israel to attack Gaza with full force.

That had eroded efforts since Russia’s 2022 invasion of Ukraine to build consensus with leading states in the so-called Global South – such as India, Brazil and South Africa – on the need to uphold a global rules-based order, more than a dozen Western officials said.

The backlash had solidified entrenched positions in the developing world on the Israeli-Palestinian conflict. They warned that this could derail future diplomatic efforts on Ukraine.

“We have definitely lost the battle in the Global South,” said one senior G7 diplomat. “All the work we have done with the Global South [over Ukraine] has been lost … Forget about rules, forget about world order. They won’t ever listen to us again.”

Many developing countries have traditionally supported the Palestinian cause, seeing it through the prism of self-determination and a push against the global dominance of the US – Israel’s most important backer.

Some American diplomats are privately concerned that the Biden administration’s response has failed to acknowledge how its broad support of Israel can alienate much of the Global South.

In the Middle East, many Arabs feel that the US and other Western powers have never held Israel to account over its treatment of Palestinians, or paid enough attention to brutal conflicts in Syria, Yemen and Libya.

Russia and its ally China have cultivated warm ties with the Palestinians. Russian President Vladimir Putin this week met with Chinese leader Xi Jinping in Beijing.

“What we said about Ukraine has to apply to Gaza, otherwise we lose all our credibility,” the senior G7 diplomat added.

“The Brazilians, the South Africans, the Indonesians: why should they ever believe what we say about human rights?”

Just four weeks before the Hamas assault on Israel, leaders from the US, EU and Western allies attended the G20 summit in New Delhi and asked developing nations to condemn Russia’s attacks on Ukrainian civilians to uphold respect for the UN charter and international law.

Since last Sunday, many of those officials told the Financial Times they had had the same argument read back at them in demands for condemnation of Israel’s retaliatory assault on Gaza, and of its decision to restrict water, electricity and gas supplies there.

In recent days, Russia has sought to pass a UN Security Council resolution condemning violence against civilians in the Israeli-Palestinian conflict, without specifically mentioning Hamas. The council rejected its resolution on Monday.

“I mean, let’s be frank – this is a gift from heaven for Russia,” said a senior EU official. “I think it’s damaging what’s happening … because Russia is exploiting the crisis and saying, ‘look, the global order that has been built after the Second World War is not working for you’, and addressing 1 billion inhabitants in the Middle East or in the Arab world.”

Arab states, particularly Jordan and Egypt, have pressed Western officials to harden their tone on protecting Gaza’s civilians. “If you describe cutting off water, food and electricity in Ukraine as a war crime, then you should say the same thing about Gaza,” said one Arab official.

They noted a shift in tone from some Western governments. Since Sunday, the EU and UK have announced an increase in aid shipments to Gaza.

US President Joe Biden was due to visit Israel on Wednesday before meeting the leaders of Jordan, Egypt and the Palestinian Authority in Amman. The second leg of that trip has been cancelled after a deadly explosion at a Gaza hospital on Tuesday evening (Wednesday AEDT).

The White House said he would “reiterate that Hamas does not stand for the Palestinian people’s right to dignity and self-determination, and discuss the humanitarian needs of civilians in Gaza”.

In a sign of concerted efforts to maintain contact with developing countries, UK Foreign Secretary James Cleverly said on Tuesday he had spoken with the foreign ministers of Brazil, Indonesia, the Philippines, Morocco and Saudi Arabia.

At an emergency video summit of EU leaders on Tuesday, several leaders warned that failing to uphold the rights of Palestinians in Gaza risked exposing Western states to the charge of hypocrisy.

That discussion was prompted by irritation across EU capitals over European Commission president Ursula von der Leyen’s decision to travel to Israel last week without a mandate from the bloc’s 27 member states or an agreed common position.

Dublin, Madrid and Luxembourg were upset at her lack of reference to international humanitarian law when she spoke in Tel Aviv.

“What New Delhi, Jakarta and Brasília want to see is a common position on these issues, and consistency. And if they don’t see that … then on the major global issues, there’s a certain danger EU, G7, NATO will not be taken seriously,” said Jaap de Hoop Scheffer, former NATO secretary-general and now chairman of the Clingendael Institute, a Dutch think tank.

“We, the West, do not call the shots any more, and the Global South says: ‘please, we have a voice as well which you have neglected for some time’.”

Russia’s proposed UN Security Council resolution garnered support from only four countries – China, the United Arab Emirates, Mozambique and Gabon – but many Western diplomats worry that an amended Russian resolution could gain the nine votes required to pass. The US, UK or France might then veto it, handing Moscow a propaganda victory.

“We have to prevent Russia … supported by the Chinese … taking the initiative to use this against us,” said a senior Western diplomat. “There’s a risk that at the next vote in the [UN] General Assembly on supporting Ukraine, we’ll see a big explosion in the number of abstentions.”

France, in particular, is concerned about the risk of escalation in the Hamas-Israel conflict. It believes Russia is no longer playing the traditional “great power” role of restraining its allies in the region, but instead sees an opportunity to consume US resources and distract from Ukraine.

“Russia has a huge stake in prolonging this conflict, given the distraction value … and the use in shifting the global narrative,” said one Western foreign minister.

EU and US diplomats will also use Friday’s summit at the White House between Biden, von der Leyen and EU council president Charles Michel, who represents the EU’s 27 national leaders, to forge a common position.

“Europe has to hold the line here,” the minister said. “We were a bit of a mess to begin with, but I think we’re better co-ordinated now in terms of defending fundamental rights and making sure we see both sides.”

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