From Friend to Foe-ish: Washington’s Negative Turn on the Belt and Road Initiative

Despite its status as a Pacific power, the United States has been somewhat peripheral to China’s Belt and Road Initiative (BRI) since the latter’s inception in late 2013. The United States does not host BRI investments and, like many other major countries, has not signed a formal cooperation agreement setting out terms and conditions for a US role in the BRI, even though some US firms have participated on an individual basis. Nevertheless, China has closely watched, and sought to influence, US policies and perspectives for two reasons: US support helps grant legitimacy to the BRI, and by extension, to one of President Xi Jinping’s legacy achievements, while active US opposition—alone or in concert with allies and partners—could undermine the BRI by casting aspersions on China’s motives and by providing alternatives to Asian states in need of development finance for large-scale infrastructure projects.¹

US responses to the BRI under the Obama administration, and initially under the Trump administration, were benign and even positive at times. This was not so much a function of US enthusiasm for Xi’s initiative but a result of bilateral cooperation in other areas. Since mid-2017, however, senior US officials have been far more critical of the BRI, and Washington has begun to explore ways to promote alternatives to Chinese financing by proposing reforms to the US development finance system and coordinating with allies and partners. Both a downturn in Sino-US relations and an evolving strategic outlook emphasizing China as a competitor (and India as a partner) help explain this trend. While limits on the US willingness to compete in this area remain—for instance, there has not been a major increase in US funding for Eurasian infrastructure development projects—the shift represents a diplomatic failure for Beijing and at least a qualified victory for US policy elites who see the BRI as a strategic challenge.

This essay traces and explains the evolution of US official perspectives on the BRI from 2013 to mid-2018 and is divided into five parts. The first covers initial US responses during the Obama and early Trump administrations. The second outlines more critical US approaches beginning in mid-2017. The third explains the latter development, focusing on problems in US-China relations and the evolution of the Trump administration’s strategic views on China. The fourth identifies the budgetary, economic, and diplomatic factors that have prevented a more direct US confrontation with Beijing. The conclusion argues that the likeliest outcome over the next few years is a continuation of the current modestly antagonistic US policy, though a pivot in a more cooperative or competitive direction is also possible.

Initial US Responses

From Xi’s earliest articulation of the BRI (then known as “One Belt, One Road”) in late 2013 until mid-2017, US official responses were largely benign. The Obama administration was well known for its rejection of China’s invitation to become a founding member of the Asian Infrastructure Investment Bank (AIIB), which helps fund BRI projects, and its calls for other states to exercise caution.² This hesitance reflected US concerns about China’s willingness to compete with the United States for regional economic influence and potentially undermine US – and allied-led international financial institutions (IFIs), such as the World Bank and the Asian Development Bank (ADB). ³ Nevertheless, Obama ultimately dialed back his rhetoric on the AIIB, arriving at the equivocal position that the bank “could be a positive thing,” since it could contribute to regional growth, but “if it’s not run well, could be a negative thing.”⁴

Obama also never fully critiqued the BRI itself or developed a specific alternative (even though the Trans-Pacific Partnership (TPP) was intended to solidify US regional leadership). He even offered some positive, though general, words of praise, remarking that “Asia needs infrastructure… so to the extent that China wants to put capital into development projects around the region, that’s a good thing.”⁵ During Xi’s September 2015 visit to Washington, a White House factsheet on bilateral economic relations similarly stated that the United States “welcomes China’s growing contributions to financing development and infrastructure in Asia and beyond.”⁶ The best explanation is that Obama was simply more focused on other priorities in Sino-US relations, such as climate change and the Iran nuclear issue, and saw little benefit in confronting Xi on his signature initiative.⁷

In its early months, the Trump administration likewise placed the BRI behind other, more pressing bilateral issues. Far more important was addressing the North Korean nuclear issue, on which Trump sought to elicit Xi’s support, and correcting bilateral trade imbalances, which was a persistent message of his presidential campaign.⁸ A May 2017 US-China joint statement noted that the United States “recognizes the importance of China’s One Belt and One Road initiative,” and confirmed that a senior official would attend the upcoming Belt and Road Forum (clearing up doubts about whether the White House would send any delegation at all).⁹ However, the BRI was the last and least detailed of ten items in the joint statement and likely inserted due to China’s desire to create a positive atmosphere for the forum—Xi’s most important foreign policy event of the year—and to facilitate Xi’s cooperation on higher priority items.¹⁰

In Beijing, the US delegation head, National Security Council senior director for Asia Matt Pottinger, made headlines when he said that “US firms have a long and successful track record in global infrastructure development, and are ready to participate in Belt and Road projects.”¹¹ He qualified that statement by adding that China should adhere to norms such as transparency, “high-quality financing,” and broad participation.¹² Pottinger’s attendance appeared to be more a concession to Beijing than a sign of growing US interest in the BRI; other states, such as the United Kingdom and Germany, sent ministerial-level delegations and lobbied more aggressively for their countries’ commercial interests.¹³ The next month, China’s Foreign Ministry reported that in an Oval Office meeting with State Councilor Yang Jiechi, Trump said that the United States was willing to cooperate in “relevant” BRI projects.¹⁴ However, the White House did not publicize or elaborate on this point, and the encounter itself was likely more an attempt to make progress on North Korea than to discuss BRI cooperation.¹⁵

Thus, the Obama and initial Trump reactions to the BRI represented a qualified success for Chinese diplomacy. Although neither administration joined the AIIB or sought more formal cooperation within the BRI (such as by signing a bilateral framework agreement), both recognized the significance of the initiative as a priority for Xi and were thus willing to trade positive words and actions, including sending a delegation to the Belt and Road Forum, for Chinese cooperation in other areas. This both bestowed a degree of legitimacy on the BRI and protected it from the negative effects of more significant US opposition.

A More Negative Turn

The Trump administration’s early positive (if understated) rhetoric on the BRI was quickly overtaken by more negative, even hostile, messaging. Most notable were comments by Secretary of State Rex Tillerson, who argued in an October 2017 speech that Chinese development finance and infrastructure development projects were producing numerous problems for recipients, including failing to promote jobs “for the people they claim to help,” burdening poor states with “enormous levels of debt,” relying too heavily on foreign (i.e. Chinese) workers, and including provisions that result in “default and the conversion of debt to equity.”¹⁶ In another speech, Tillerson argued that China’s economic activities should “take place in the system of international rules and norms, and One Belt, One Road seems to want to define its own rules and norms.”¹⁷ During a Senate hearing in October, Secretary of Defense James Mattis made a similar point: “I think in a globalized world, there are many belts and many roads, and no one nation should put itself into a position of dictating ‘One Belt, One Road.’”¹⁸

During a visit to Beijing in November, Trump did not mention or endorse the BRI despite the topic having been raised by Xi.¹⁹ Later, in a speech to officials and business leaders in Vietnam, Trump implicitly critiqued the BRI by contrasting US investments with “state-directed initiatives that come with many strings attached.”²⁰ The administration’s first National Security Strategy, released in December, amplified these views by arguing that, in the area of foreign infrastructure development, the United States could “offer a stark contrast to the corrupt, opaque, exploitative, and low-quality deals offered by authoritarian states.”²¹ Mike Pompeo, who took over from Tillerson in April 2018, did not immediately address the BRI specifically, but spoke about China generally as a competitor in his Senate confirmation hearing.²² Thus, as the anniversary of Xi’s Belt and Road Forum approached, there were no signs that this rhetorical U-turn on the BRI would be reversed.

Complementing its critique of China’s practices, the Trump team also outlined a number of interlocking efforts to provide alternative development finance sources for the region. First was domestic bureaucratic reform. In his Vietnam speech, Trump called for changes to “our development finance institutions so that they better incentivize private sector investment in your economies.”²³ The National Security Strategy similarly argued for modernized “development finance tools so that US companies have incentives to capitalize on opportunities in developing countries.”²⁴ To realize this vision, Trump’s 2019 budget request to Congress anticipated a “new, enhanced U.S. Development Finance Institution,” that would consolidate functions from the Overseas Private Investment Corporation (OPIC) and other related agencies, such as USAID’s Development Credit Authority, into a single entity, thereby reducing fragmentation and increasing operational and cost efficiency.²⁵ Reforms to OPIC, which assists US firms seeking to enter emerging markets by providing loans, risk insurance, and strategic advisory services, were considered long overdue by several analysts.²⁶

In February 2018, bipartisan legislation creating this new organization began to make its way through Congress. The BUILD Act mandated a US International Development Finance Corporation that, unlike OPIC, would have the ability to make overseas equity investments and possess grant-making authority. Its loans to US private enterprises would be capped at $60 billion, more than double OPIC’s current lending limit.²⁷ If realized, this institution would not compete directly with China’s large development banks, such as the China Development Bank and the Export-Import Bank of China, but could offer some opportunities for US firms to play a larger role in the Eurasian development arena.

Second were US diplomatic efforts to reaffirm liberal development finance norms. As early as June 2017, Trump said in a joint statement with visiting Indian premier Narendra Modi that a “set of common principles for the region” should include “bolstering regional economic connectivity through the transparent development of infrastructure and the use of responsible debt financing practices.”²⁸ In November, OPIC signed two MOUs with its Japanese counterparts to improve cooperation by “mutually collaborating on projects that meet policy objectives and by coordinating business development efforts.”²⁹ Speaking in Tokyo, Trump hailed those agreements as a “major development that will advance our shared interests in the region.”³⁰ At the multilateral level, connectivity was a theme of the revived US-Japan-Australia-India quadrilateral dialogue (“the Quad”), held on the margins of the ASEAN summit in Manila in November. Offering a contrast to the BRI, a US readout noted that officials discussed “increasing connectivity consistent with international law and standards, based on prudent lending,” and would enhance coordination on this and other issues “to further strengthen the rules-based order in the Indo-Pacific region.”³¹ In April 2018, a G7 communique similarly highlighted the need for “quality” investments defined by transparency, a level playing field, and sustainable growth.

Third were calls for existing IFIs to more effectively invest in Asian infrastructure development. In Vietnam, Trump called on the World Bank and the ADB to “direct their efforts toward high-quality infrastructure investment that promotes economic growth,”³² language that was repeated in the 2017 National Security Strategy.³³ Although US analysts have argued that both organizations need to be updated to become more attractive providers of development finance in light of growing regional lending by the AIIB and Chinese state development banks,³⁴ the Trump administration did not provide a more detailed roadmap for reform, and IFIs have generally sought to avoid the appearance of contestation with China.

Explaining the Shift

Some insight on the Trump administration’s changing tone on the BRI can be derived from changing US diplomatic and strategic priorities. Diplomatically, China failed to meet Trump’s initial expectations on two key issues. First, Pyongyang’s ballistic missile tests in spring 2017 undercut early optimism from senior US officials that Beijing might be able, and willing, to convince its erstwhile ally to scale back its nuclear ambitions.³⁵ In June, Trump tweeted that China’s efforts on this front have “not worked out,” and two months later the Treasury Department imposed sanctions on several Chinese firms accused of violating UN Security Council resolutions.³⁶ Second, despite the newly established US-China Comprehensive Economic Dialogue, no major progress was made in reducing the bilateral trade deficit, and by August the US Trade Representative had launched an investigation into unfair Chinese trade practices.³⁷ Disappointment with China’s responses on these issues weakened a reason why US officials would extend support on Beijing’s high-priority items, such as the BRI.

Strategically, US critiques of the BRI coincided with the crystallization of the Trump administration’s larger strategic outlook on China. Although Trump had long characterized China as an economic adversary,³⁸ the completion of an interagency review during his first year as president elaborated those concerns and cast them in geopolitical terms. In contrast to Obama’s final National Security Strategy, which highlighted China’s value as a partner on major global security, economic, and environmental issues,³⁹ Trump’s first edition of the document, released in December 2017, assessed that Beijing “seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model, and reorder the region in its favor.”⁴⁰ The unclassified summary of the Defense Department’s National Defense Strategy, issued a month later, similarly argued that China is pursuing “Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence in the future.”⁴¹

Concerns about China’s foreign infrastructure financing and developments are integral to these assessments. The 2017 National Security Strategy, without citing the BRI by name, argued that “China’s infrastructure investment and trade strategies reinforce its geopolitical aspirations,” and described Beijing’s use of economic tools to expand its influence in regions such as South Asia, Latin America, Africa, and Europe.⁴² Such language reflected growing concerns within US analytic and media circles that the BRI might simply be a pretext for China to expand its strategic influence and revise the regional order in ways inimical to US interests.⁴³ In 2017 congressional testimony reflective of these arguments, Roy Kamphausen summarized China’s motives in the following terms:

According to China’s vision [for the BRI], the long-term effects on the region will be that the renminbi replaces the dollar; customers will use Alipay instead of VISA; authoritarian rule will be consolidated thanks to closer cooperation with Beijing, including in the security domain; families will watch Chinese TV programs and read the news provided by Xinhua; students, professionals, and political elites will be educated and trained in Chinese universities; internet censorship technology and applications from China’s “great firewall” will cover the region and filter public cyberspace; the spread of universal rights will yield to “development rights”; and finally, Western influence, especially that of the United States, will be relegated to the margins. China, in short, will be the preponderant regional power. That’s the vision that BRI is intended to enable and serve.⁴⁴

While not unique in its conclusions, the National Security Strategy and other strategic documents placed the administration’s imprimatur on these views and reduced the space for dissenting (i.e. more receptive) rhetoric about the BRI from US officials. 

Shifting views on the BRI also reflected a growing emphasis on India as a strategic partner.⁴⁵ In nearly the same breath as he used to critique Chinese financing, Tillerson argued that “the increasing convergence of US and Indian interests and values offers the Indo-Pacific the best opportunity to defend the rules-based global system that has benefited so much of humanity over the past several decades…”⁴⁶ Part of the cultivation of closer relations was US reiteration of Indian concerns about the BRI, most notably complaints about China-Pakistan Economic Corridor projects in Jammu and Kashmir.⁴⁷ Sympathy for Indian views was evident in the June 2017 US-India joint statement, which noted that regional connectivity should ensure “sovereignty and territorial integrity;”⁴⁸ in Mattis’s congressional hearing comments that the BRI “goes through disputed territory;”⁴⁹ and more generically in the National Security Strategy, which declared that the United States will “help South Asian nations maintain their sovereignty as China increases its influence in the region.”⁵⁰

Constraints on US Opposition

Despite the diplomatic and strategic reasons underpinning the Trump administration’s critiques of the BRI, actual US responses have remained confined to proposed institutional reform and modest increases in international coordination. There have been few signs that the United States would adopt the prescriptions of some analysts to dramatically increase funding for infrastructure development projects across Asia.⁵¹ Trump also failed to offer an explicit, compelling critique of the BRI either domestically or in discussions with regional counterparts, even though his key cabinet officials had begun to do so. Moreover, Trump did not revisit his January 2017 decision to withdraw from the TPP, which he regarded as a bad trade deal, but which some US analysts saw as a key to upholding US regional commitments and liberal norms.⁵²

Relative US restraint reflects four key realities. First, in order to help pay for a planned increase in defense spending and large tax cuts passed in December 2017 (and other reasons, such as signaling dissatisfaction with international organizations), the Trump administration has supported budget cuts in several areas relevant to foreign infrastructure development. Trump’s 2018 budget request to Congress eliminated OPIC (though funding was restored in the 2019 request through the new Development Finance Institution); budgets for both years cut funding for the ADB by half, from $99.2 Million in 2017 to $47.4 Million in 2018 and 2019; similar cuts were also made to the World Bank;⁵³ and both the State Department and USAID face their largest cuts since the 1990s.⁵⁴ These cuts raise questions about whether the Trump administration would be able, or willing, to fund BRI alternatives through IFIs or through diplomatic or development aid activities.⁵⁵ 

Second are the economic opportunities that several major US firms have pursued, or were expected to seek, through BRI projects. Notable examples include companies such as Honeywell, GE, Caterpillar, and ITT, all of which supply niche capabilities relevant to large-scale infrastructure projects. Some companies are already involved as subcontractors to Chinese enterprises along BRI routes, and others see expanded market opportunities as Beijing and others, such as the AIIB, increase funding.⁵⁶ The US Chamber of Commerce has also lobbied for US inclusion in the BRI, arguing that US firms “can offer the world’s best technology and management capability, thereby helping to ensure smooth and efficient completion” of projects.⁵⁷ These interests militate against more antagonistic US responses (such as actively discouraging US firms from participating).

Third, key US allies and partners have adopted nuanced or even positive attitudes towards the BRI, limiting the prospects for more aggressive diplomatic maneuvering. India has held longstanding concerns about the BRI, though an April 2018 summit between Modi and Xi aimed to “reset” the relationship and discussed the possibility of joint infrastructure development cooperation in Afghanistan (albeit likely outside of the BRI framework).⁵⁸ Driven by economic motives and domestic calls for rapprochement with Beijing, Shinzo Abe has said that Japanese firms may participate in BRI projects under certain conditions, such as transparency, debt sustainability, and no possibility that infrastructure could support Chinese military activities.⁵⁹ Australian businesses have also cooperated in the BRI, though enthusiasm is tempered by Malcolm Turnbull’s hawkishness on China and other factors.⁶⁰ Other countries, such as the United Kingdom and the Philippines, have been more proactive supporters.⁶¹ Regarding IFIs, the ADB has downplayed competition with the AIIB and pursued joint financing with Chinese partners,⁶² while World Bank president Jim Yong Kim has been an outspoken BRI advocate.⁶³

Fourth, despite mounting friction in bilateral relations, Trump has continued to build a productive working relationship with Xi. During his November 2017 state visit to Beijing, Trump described an “opportunity to strengthen the relationship between our countries and improve the lives of our citizens,” and pressed Xi once again on North Korea and trade, signaling his belief that China might be willing to do more on these issues.⁶⁴ In April 2018, Trump praised his “friend” Xi for helping bring Kim Jong-un to the negotiating table. On the trade front, Commerce Secretary Wilbur Ross has announced $250 billion in bilateral deals, involving some US firms that are already involved in BRI projects, such as Honeywell and GE.⁶⁵ Those deals support part of Trump’s larger agenda to produce jobs and revitalize the domestic economy. These considerations may have reduced the Trump administration’s desire to adopt a more combative posture on the BRI, which as noted is one of Xi’s top priorities. 

Conclusion

In sum, US official perspectives on the BRI pivoted from ambivalence, with some positive overtones, during the Obama and early Trump administrations, to a more critical approach by the end of Trump’s first year in office. This has included negative rhetoric, along with proposed bureaucratic reforms and diplomatic activities designed to catalyze alternative sources of infrastructure financing in Asia and preserve long-established lending norms. The shift can be at least partially explained by friction in US-China relations and an evolving strategic outlook emphasizing China as a competitor and India as a key partner. Thus, earlier Chinese diplomatic successes in securing US acquiescence have foundered as those who support a more negative approach have gained the upper hand in US policy debates. At the same time, Beijing has not faced an unmitigated challenge: Washington has not offered a fully-funded alternative to the BRI, while Trump himself has maintained cordial relations with Xi. 

Over the next few years, the likeliest outcome is a continuation of the current US approach, which balances impulses to provide alternatives, on the one hand, with recognition of the budgetary, economic, and diplomatic costs of confronting China, on the other. Such an outcome would frustrate Beijing, though it would probably not fundamentally threaten the BRI due to limited resources and political will. Perhaps the bigger challenge from a Chinese perspective would be that US efforts will amplify broader international misgivings about China’s economic influence, thus impairing its “soft power” across the region, and galvanize more coherent cooperation between the United States, India, Japan, Australia, and others in promoting regional connectivity. This could provide important “glue” for developing an Indo-Pacific strategy focused, at least in part, on restraining China’s geopolitical ambitions.

Nevertheless, two other scenarios are also possible. First is a more positive turn, which could include a reduction of critical rhetoric and a return to at least qualified US support. This would be most likely under several conditions: evidence that BRI projects are producing positive economic results for recipients as well as US businesses, a diplomatic breakthrough on North Korea and other major US priorities, and demand by US allies and partners for greater inclusion in BRI projects. Beijing might seek to tilt US policy in this direction by offering concessions on other issues, providing additional incentives for US firms, attempting to mitigate India’s concerns, and demonstrating that BRI projects can adhere to international norms.

Second is stronger US opposition. This could involve financial support for a competing infrastructure development scheme, perhaps organized under the Quad framework, as well as more negative rhetoric from Trump and other senior officials. This would be most likely given another downturn in Sino-US relations, increasing negative perceptions of the BRI among US allies and partners, the willingness of Congress to fund alternatives, and weakening of perceived opportunities for US corporations. China could inadvertently promote this outcome by committing regional provocations, such as in the South China Sea or across the Sino-Indian border, stoking tensions with the United States on other issues, or restricting BRI-related opportunities for the US business community (such as through opaque bidding processes designed to benefit Chinese enterprises).⁶⁶    

Another variable is US domestic politics. Support by many Democrats and nearly half of Republican senators for a reversal of the US withdrawal from the TPP, combined with pressure from interest groups and regional allies, could prompt reconsideration (though this outcome seems unlikely due to opposition from Trump’s populist base).⁶⁷ While the TPP would not compete with the BRI, it could increase the effectiveness of any Indo-Pacific strategy by solidifying Washington’s regional commitments. In addition, the 2018 midterm and 2020 presidential elections could impact US policy to the extent that a shifting balance of political power changes US priorities with China, the willingness of Congress to fund alternatives, or the political efficacy of the US business community. Transition to a moderate Democratic or mainstream Republican administration could also have an impact: suggesting a more receptive turn in future US policy, John Kerry said in a January 2018 interview that “We [the United States and China] should be partners. I should like to see us be involved in the [BRI] and the [AIIB] and I said that to President Xi, but somehow we got off track.”⁶⁸

* The views in this paper represent only those of the author and not the National Defense University, Department of Defense, or U.S. government.