Opposite the Belt and Road Initiative: U.S. Developmental Aid Done Right

Brand new high-speed rail lines from Jakarta to Bandung, Indonesia. Ports and military bases across Southeast Asia. Rare-earth mines in Central Africa. New roads, bridges, railways and other transportation infrastructure across the developing world. All of these projects have one thing in common. They’re financed and completed by the Belt and Road Initiative (BRI), which is China’s attempt to shake up the current Bretton Woods status quo of the Western world. However, it is a program that is first and foremost hurting the countries it claims to help. 

The Bretton Woods Conference (July 1944)—an economic forum composed of 44 nations—resulted in the creation of the International Monetary Fund (IMF) and the World Bank, the two primary institutions that continue to govern the global economic system and are involved in promoting economic growth in the developing world. The IMF and World Bank face mounting distrust from the Global South, particularly because of their draconian rules in terms of debt restructuring and how countries that receive loans are allowed to organize their own economies. Chinese President Xi Jinping saw an opportunity to propose an alternative mode of economic growth for developing nations and began the BRI. This initiative enables Beijing to extend its own loans to other countries such as Sri Lanka. The BRI also enables China to build infrastructure abroad, such as major gas pipelines, railways, roads, bridges and rare-earth mines, mostly concentrated in Africa and Southeast Asia. 

Given the continued need for developmental aid in Global South countries, as well as the many failures and built-in predatory effects of China’s BRI, the United States should use this moment as an opportunity to reflect on its past failures in the developmental economy space and determine where it can go from here. The initial appeal of the BRI to the Global South shows that many developing economies are tired of the continual debt restructuring and inevitable resource extraction that goes hand-in-hand with any IMF or World Bank loan. However, it is also clear that many developing nations are unhappy with the other current alternative—the BRI. 

The BRI has seen some major successes, such as the launch of a high-speed rail line from Jakarta to Bandung, Indonesia. However, this global project has been mired in issues, especially for the signees of agreements with China. Beijing has been accused of engaging in debt trap diplomacy, where they sign agreements to fund infrastructure projects in developing nations, and the developing nations incur unsustainable levels of debt in order to fund these projects. When the signees are inevitably unable to meet their debt obligations, China uses the threat of debt overhang to gain influence or even total control of the just-completed projects, as they did with the Hambantota Port Development in Sri Lanka. Alternatively, China can use their debt leverage to force developing nations into extreme debt restructuring agreements—much like the Bretton Woods system does already—or selling control of other existing infrastructure assets in the country to Beijing. 

China is also using the BRI to legalize and facilitate resource extraction from developing nations. Beijing has invested heavily in opening cobalt—a rare earth crucial to China’s burgeoning electric vehicle industry—mines in the Democratic Republic of Congo (D.R.C.), which contain four-fifths of the world’s cobalt. In 2009, the president of the D.R.C. signed a deal with China to give them ownership of 15 out of the country’s 19 primary cobalt-mining concessions. Since then, there have been grievous human rights abuses perpetrated by Chinese firms, including forced evictions from towns surrounding the mines, child labor exploitation and dangerous working conditions. Additionally, China’s economic interference is also negatively impacting the Congo’s economy. Despite having such rich cobalt resources, very little of the money made from this cobalt actually stays in the D.R.C. It is mined on-site, but the unrefined cobalt is then taken back to China to be refined and used in batteries. Thus, little to no economic value is being added in the Congo, as the value-adding industrial processes are happening offshore in China. Additionally, in many cases, the only Congolese workers present are the miners themselves, with the employees higher up the hierarchical ladder being Chinese nationals who aren’t contributing to the D.R.C.’s GDP or upward economic mobility. 

In response to this, the U.S. needs to step away from the traditional Bretton Woods system, which has utterly failed in terms of uplifting developing nations and has left the Global South tired of opportunistic and for-profit Western interventionism. Developing nations no longer want direct loans that will almost inevitably be impossible to pay back and lead to invasive debt restructuring. Instead, Congress should expand funding to the United States Agency for International Development (USAID). This agency already provides dollars for education, global health and nutrition, and a strategic pivot can allow USAID to fund more desperately needed infrastructure projects worldwide. This can take the form of paved roads, railways and an expanded and secure electrical grid, amongst other possible projects. This infrastructure supports developing nations as it helps connect previously disparate regions to each other and, thus, facilitates economic and social mobility. Additionally, it directly helps the U.S., as a nation with better infrastructure can more easily export their goods and participate in the global economy. With this new program, the U.S. could continue to gain trade partners, especially focusing on ones with strategically important materials such as lithium, cobalt and other rare-earths. 

In tandem with more funding and a restructuring of the priorities of USAID, the U.S. can also use the already-established Generalized System of Preferences (GSP) to help the developing nations they are allied with. The GSP is a system established in 1974 that allowed the U.S. to selectively eliminate duties on products imported from certain countries. If, for example, the U.S. were to use the GSP to eliminate tariffs on lithium imported from Chile, Santiago would likely feel more inclined to strengthen their trade ties with the U.S. and send more of their lithium America's way, rather than sending it primarily to China and Korea to be refined and used in batteries. This creates a mutually beneficial system for developing nations and U.S. companies, as the Global South can make more money on their valuable primary and secondary exports, whilst the U.S. ensures a supply of important materials for its growing on-shore manufacturing industries like semiconductor and electric vehicle production. 

In doing this, it is important that the U.S. not repeat the mistakes of the past. The objective is not to intervene intrusively in the Global South, saddle developing nations with debt and extract their resources. Rather, the U.S. can help fund infrastructure projects that help burgeoning primary and secondary sector industries so that these industries can grow on-shore and developing nations can add value to their products at home, before exporting them out to countries like the U.S. to put in finished products like electric vehicles. 

This ensures a more equitable system that supports the economic growth of developing nations and does real work to lift people out of poverty, rather than Western industries swooping in and extracting the resources they need from the Global South without helping local economies. If the U.S. is capable of doing this effectively, it is probable that developing nations will see the newfound advantages of partnering with America as an ally in development and trade, rather than continuing to participate in traditional developmental systems that saddle them with unreasonable debt expectations and tank their future economic prospects. 

This system, if done right, creates a massive amount of positive leverage with the Global South to encourage these nations to continue to participate in the rules-based international order, and avoids developing nations simply entering a tributary system where they serve as sites for resource extraction to aid China’s manufacturing industries. It also allows—through this leverage—the U.S. to continue to export the ideal of the American Experiment abroad, and nudge countries in a more democratic and socially progressive direction without foisting an American point of view and ideology upon the rest of the world.

The image used in this article is licensed for noncommercial reuse under the CC BY-NC 2.0 Deed. It was taken by Joaquin Sarmiento and has been unaltered from its original form. It can be accessed here.