The world is likely to witness a boom in physical infrastructure development activity as the Blue Dot Network (BDN), a multi-stakeholder initiative formed by the United States, Japan and Australia in 2019 gets into top gear soon rivalling specifically China's $1.3 trillion worth Belt and Road Initiative launched in 2015.
The BDN was formally announced at the Indo-Pacific Business Forum in Bangkok, Thailand, on the sidelines of the 35th ASEAN Summit. It is led by the US International Development Finance Corporation, Japan Bank for International Cooperation, and Department of Foreign Affairs and Trade of Australia.
The Blue Dot Network is expected to serve as a global evaluation and certification system for roads, ports and bridges with a focus on the Indo-Pacific region.
The Network claims to promote quality infrastructure investment that is open and inclusive, transparent, economically viable, financially, environmentally and socially sustainable, and compliant with international standards, laws, and regulations. It is expected also to bring together governments, the private sector, and civil society under shared standards for global infrastructure development.
According to Richard Javad Hedarian (Biden's Blue Dot seeks to derail China's Belt and Road, published in Asia Times on June 9, 2021), the US-driven infrastructure initiative is one plank of a wider strategy to challenge China's perceived as 'predatory trade practices'.
"Amid an escalating new Cold War, the Biden administration is mobilizing allies and partners to slow China's technological strides and arrest its rising global influence," revealed Hedarian.
Aside from major Western governments and Japan, leading academics, civil society leaders and as many as 150 global executives boasting a US$12 trillion in their combined portfolio were said to be in attendance at the consultation group's inaugural meeting in Paris early June, underscoring the breadth and ambition behind the initiative.
Contrary to China's largely state-driven BRI, the BDN also relies on public-private partnership schemes, especially major insurance and pension funds, to raise capital and necessary expertise for cutting-edge soft and hard infrastructure projects in strategic emerging markets.
During the inaugural consultative meeting in Paris, representatives from major financial institutions such as Citi and JP Morgan as well as sovereign wealth fund managers such as Thailand's Government Pension Fund were said to be in attendance.
In parallel, the US has also been pushing for collaboration on counter-BRI initiatives with key allies, most notably the US-Japan $4.5 billion digital infrastructure initiative following Prime Minister Yoshihide Suga's April visit to the White House.
The Biden administration aims to also enlist support from other major Indo-Pacific partners, most especially India, which is opposed to the BRI and boasts its own robust tech industry, as well as South Korea, which has been expanding its overseas infrastructure footprint under its "New Southern Policy."
The ultimate aim here is said to be eventually establish a "G10" - G7 industrial nations plus Australia, India and South Korea - infrastructure development counterpart to China's BRI, with heavy participation from the private sector.
The escalating rivalry between the two, the US and China over global trade is also expected to boost world trade, as the two enter into competition for markets and try to improve their respective supply and value chains.
To bolster its trade initiative, the US Commerce Department is said to be planning to invoke investigations into the national security implications of America's reliance on Chinese rare earths imports, especially neodymium magnet.
In his State of the Union address in April, President Joe Biden had warned of an existential showdown against China for economic and technological primacy in the 21st century. "China and other countries are closing in fast. We have to develop and dominate the products and technologies of the future," a rattled Biden warned.
During his testimony before the US Congress earlier this year, Google co-founder and former CEO Eric Schmidt warned of China's rapid development of next-generation technologies and called on the US government to expedite investments in crucial areas such as artificial intelligence (AI) and face recognition.
United States Trade Representative Katherine Tai is expected to oversee the "strike force," which will identify unfair Chinese trade practices "that have eroded critical supply chains" and recommend punitive "trade actions" accordingly.
In another major move, the Biden administration is said to have gone so far as to contemplate an unprecedented trade and investment framework with Taiwan, a global hub of semiconductor production.
Given the sensitivity of the issue, with China openly warning against closer Washington-Taipei ties, the Biden administration is said to have declined to provide greater details. Last year, the US imported $20 billion in computer and telecommunications equipment as well as $7 billion in chips and semiconductors from Taiwan, which China views as a renegade province.
Meanwhile, the Biden administration has issued a 250-page report outlining ideas for strengthening "supply-chain resilience and domestic competitiveness" in a number of industries, including rare-earth materials, vaccines and large-capacity batteries.
The intent, again, is said to be lessening America's reliance on China, says Urban C. Lehner (American 'decoupling' from China, deconstructed, published in WSJ on June 23, 2021).
"How far decoupling, as opposed to talk of decoupling, will go remains to be seen. But the talk, along with some actual decoupling, is likely to continue for a while. Being dependent on an adversary is never comfortable, and that's how China is increasingly seen."
The worries are said to center on imports. No one's talking about decoupling for exporters.
One of the biggest exporters, American agriculture, is said to be recoupling with China. In the first six months of this fiscal year, Chinese purchases of US agriculture products rose 197%. There's reason to think this recoupling will continue.
For the full year, the US Department of Agriculture forecasts record exports of $35 billion. DTN Lead Analyst Todd Hultman predicts that in the year beginning October 1, "China's bullish demand should continue to be an important source of support for US corn and soybean prices, at their highest levels since 2013."
Contrast that with the situation of another group of American sellers to China - the companies that make airplanes and airplane engines.
China's state-owned aircraft maker Comac has developed a competitor for the Boeing 737 and Airbus 320. It's not ready for prime time yet and it will start by using foreign-made engines. But it could be on sale around the world in a few years, and China is working on the engines.
"What if the Chinese government orders the country's airlines to buy their planes from Comac? What if the subsidies thus received enable Comac to undercut its foreign competitors on price? Judging from experience in other industries, World Trade Organization rules might not be strong enough to deter China," wondered Lehner.
If the US decouples some critical industries that will, to some extent, be a reaction to Chinese decoupling. For years now, China has worked to develop dominant high-tech industries. When it succeeds, Lehner claims, it stops buying from foreigners and starts selling to them.
As the competition between the US and China in other industries intensifies, though, China, Lehner believes, will naturally try to avoid becoming too dependent on American agriculture. By the same token, American producers are right to be wary of becoming too dependent on China.
Even as they recouple, both sides of the agriculture trade will be looking to diversify, believes Lehner.
Competition brings out the best in the contesting teams. And if the contestants are two top most teams of the world, then the fallout especially if the two are competing in trade and technology tends to be global and that too highly positive, enhancing global interdependence for the universal good.
Also, it is a misnomer to call such a competition as a cold war. It was indeed a cold war between the Soviet Union and the US as long as it lasted. In such a competition when the contestants are fighting for military and ideological supremacy, one of the two has to give in ultimately. And that is what happened finally when the Soviet Union disappeared from the face of the earth leaving the US at the head of a unipolar world.
But even if one were to call it a cold war, the US-China competition for global supremacy in trade and technology, it is likely that both the contestants would come out equally victorious, enhancing global interdependence and promoting in the process what can be called a multipolar world, with no losers.
Copyright Business Recorder, 2021