Is There A Multilateralism That The U.S. Could Like?

Among the first acts on trade by the new US Administration was to withdraw from the Trans-Pacific Partnership multilateral trade pact. Trump's opposition to TPP was well-known, but less appreciated by his critics, is that the two leading Democrat candidates for the presidency in 2016 were also opposed.

Trump may not accept the Obama Administration's pivot to Asia, but he does seem to recognize the need preserve the US presence and provide a counter-weight to the rise of China. Moreover, it seems clear that it cannot be unilateral and successful. Although Trump talks the language of the post-WWI "America First," he is not the isolationist that is often depicted.

With the Australian Prime Minister visiting the US, it may not be surprising that cooperation is being discussed. Prime Minister Turnbull has suggested that Australian's A$2.53 trillion pension savings fund (the 4th largest such pool of retirement savings in the world), which invests infrastructure could be interested in providing some funding for Trump's new initiative.

There is a ten-year old regional security group dubbed the "Quad." It is composed of Australia, India, Japan and the US. A discussion has reportedly begun that reanimates the alliance to include an economic function. The preliminary discussion is about launching an infrastructure initiative that offers an alternative to China's One Belt One Road. Officials have been careful to stress it is not a rival to China but an alternative. Semantics.

China's Xi announced the 1B1R initiative in 2013. Last May, $124 bln was committed to the initiative. It has captured the imagination of many. One US investment bank predicted it would draw $1.3 trillion in investments over the next decade.

The size of the Quad's initiative is not known. It is still in the early stages. But it will not have to begin from scratch. With considerable less fanfare, Japan is already engaged in a substantial infrastructure initiative in Asia. Japan funds more infrastructure projects in Philippines, Myanmar, Singapore, Thailand, and Vietnam over China. China leads in Cambodia, Laos, Malaysia. BMI Research estimates that since 2000, Japan's regional infrastructure investment of around $230 bln has outstripped China's $155 bln investment, counting completed and ongoing projects.

For China, the 1B1R initiative seems to serve at least two purposes. First, it is about projecting its power and influence. Second, it is about absorbing its surplus capacity in various industries. Traditionally, the US financed global infrastructure to export its savings, extend its influence, and build markets abroad. For Japan, it seems only marginally interested in expanding its influence, but seems more interested in using is savings and spare capacity.

However, China appears clumsier on the world stage. Its loans are often collateralized with strategically important assets and projected-related loans are at market rates without transparency or environmental and social impact assessments. At the year, Sri Lanka, for example, surrendered the strategically important Hambantota Port because it was unable to service its debt to China. China has secured a Hong Kong-esque arrangement, where it has secured Hambantota with a 99-year lease by forgiving $1.1 bln of Sri Lanka's debt.

Similarly, China lent billions of dollars to Djibouti and established its first foreign military base there last year, which incidentally is a few miles from the US naval base, which is the only permanent US military facility in Africa. Due to its debt to China, Djibouti’s was forced to lease land to its creditor. Several other countries, including, Turkmenistan, Argentina, Namibia, and Laos, have also fallen into China's debt trap. Now Kenya may be forced into a situation like Sri Lanka and may have to grant China a concession for its Mombasa port.