Susan A. Thornton, senior fellow at Yale University’s Paul Tsai China Center and visiting lecturer in law, leads a conversation on the challenges that China’s Belt and Road Initiative (BRI) poses to the United States, and strategies to address economic risks, work with allies and partners on meeting developing countries’ needs, and protect U.S. security interests in BRI countries.
FASKIANOS: Welcome to CFR’s Winter Spring 2021 Academic Webinar series. I'm Irina Faskianos, vice president of the National Program and Outreach at CFR. Thank you all for joining us. Today's meeting is on the record and the video and transcript will be available on our website, CFR.org/academic. If you would like to share it with your colleagues or revisit it, please do. As always, CFR takes no institutional positions on matters of policy.
We are delighted to have Susan Thornton with us today to talk about China's Belt and Road Initiative. Ms. Thornton is a senior fellow at the Paul Tsai China Center and a visiting lecturer in law at Yale Law School. In 2018, she retired from the State Department after a 28-year diplomatic career focused primarily on East and Central Asia. In leadership roles in Washington, D.C. she worked on China and Korea policy, including stabilizing relations with Taiwan, the U.S-China Cyber Agreement, the Paris Climate accord, and she led a successful negotiation in Pyongyang for monitoring the Agreed Framework on denuclearization. Ms. Thornton is also a member of the recently released CFR Independent Task Force report, China's Belt and Road: Implications for the United States. We circulated the task force report to you in advance of this webinar. Just to set the stage, CFR sponsors independent task forces to assess issues of critical importance to U.S. foreign policy. Task force members endorse a general policy thrust and judgments reached by the group—though not necessarily every finding and recommendation. So, Susan was part of this. The task force was chaired by Columbia University's Jacob Lew and Stanford University's Gary Roughead. And these task forces are bipartisan. So, we have a Republican and a Democrat to be the chairs. The directors of the report were Jennifer Hillman and David Sacks. And so with that, I want to turn it over to you, Susan, to talk a little bit about the task force's deliberations, your findings, and the recommendations that you put forward vis-a-vie China's Belt and Road Initiative.
THORNTON: Great. Well, thank you so much, Irina, and it's great to have so many of you with us tuning in today, and I'm really happy to be here and to talk about not only the task force report, but also more generally, China's Belt and Road Initiative. I know that many people may have read the task force report or heard about the Belt and Road Initiative, but I just wanted to start off with a story about my first meeting with the so-called Belt and Road Initiative. I was working in Central Asia as a diplomat, when the United States was pushing forward the concept called the New Silk Road. This was an effort that we were undertaking to try to connect North to South—countries of South Asia to countries of Central Asia through Afghanistan—as part of a program to try to develop Afghanistan. And low and behold, working on that project in 2010, 2011, 2012, and all of a sudden, in 2013, Xi Jinping announced his sort of New Silk Road initiative, which initially was called something about the Silk Road, but then was over time, developed and morphed into the so-called Belt and Road Initiative. And I think it's really interesting to look at sort of how the whole thing has developed over time. In 2014, I moved back to the State Department in Washington to work on China policy, and, the Belt and Road, as we talk about in the task force report, sort of started—there were various kinds of justifications or explanations for it by the Chinese government. One was that they wanted to close the gap between their inner-underdeveloped provinces and the coastal areas by connecting the inner part of China to markets further to the west, Central Asia, etc., connecting through to maybe India or other places. Of course, at that time, this was after the great financial crisis and they had a lot of excess construction and manufacturing capability, especially steel, which was creating havoc with international steel markets and cement and things like that. And they had companies that needed markets. So, they were pushing out construction. They also, had a lot of excess foreign exchange reserves and were creating also at this time, the Asian Infrastructure Investment Bank to use some of those reserves. But, they had even more than they needed for that, so they were pushing out some of their finance and lending to new markets. They were looking to, of course, expand markets, also for their manufacturing sector and they wanted transport linkages and connectivity with new markets in that area. And they were also, I think, looking to have transport options. They were very worried about being hemmed in, cut off, encircled, and that the Malacca Straits might at some point no longer be open to their shipping and commerce. And so, they're always looking for new alternatives in these routes, overland, or some kind of a plan B, or a safety valve for Chinese commercial transport.
Our task force looked at a lot of the aspects of the Belt and Road as it's developed since Xi Jinping first announced it in 2013 and found a number of areas—you've probably all read in the media, there's lots of aspects of the Belt and Road Initiative that are held up as potentially problematic. So, we looked at these and what we came up with in terms of concerns that we might have and how the Belt and Road might negatively impact U.S. global interest, we first noted—and you've heard a lot about this debt trap phenomenon that's associated with the Belt and Road Initiative—and we did look at that and did find that the debt burdens that were being loaded on to BRI investment countries were of some concern and not always transparent, and not always being considered in terms of what debts those countries already owed. A second concern was the subsidization of state-owned enterprises in China for doing this work might present with an uneven playing field for non-Chinese firms trying to enter those markets. We also found that the Belt and Road would enable China to sort of lock in Chinese ecosystems—economic ecosystems—by installing technology and standards in countries that would then make those countries dependent on a whole line of Chinese imports. We thought that countries’ dependence on—in a lot of cases, China was building sort of carbon-intensive power plants, and that this is potentially problematic from obviously a climate change mitigation point of view, but once they're built, it makes it much more difficult to mitigate CO2 emissions. The standards issue is one that we looked at and found some concerning aspects, not just with respect to power plants, but also the environmental and labor impacts of other projects and other kinds of standards—safety standards—and how those were being looked at and whether or not some of these projects were involving some kind of non-transparent financing arrangements that could undermine governance in these countries and potentially promote corruption. And I think last but not least, there was a concern about whether or not the Belt and Road Initiative is allowing China to sort of—under the cover of economic infrastructure development—also expand its military footprint in the region more widely. So those were some of the concerns that we found.
Admittedly, a lot of this opportunity that China was exploiting to build infrastructure was meeting a critical need that wasn't being met otherwise. And I think when we talked about this in the task force, we have to acknowledge that the U.S. has really gotten out of the infrastructure provision business. USAID does not really do infrastructure anymore. OPIC has been sort of beleaguered in terms of financing and has not really been in the business of doing risk insurance for these kinds of projects. And U.S. companies have not really been active as much as they had been in previous decades in the infrastructure business around the world, especially in high-risk environments, as many of these countries were—not all, but some. And then secondly, that international financial institutions, the World Bank, and the other development banks had really also gotten away from infrastructure building. And so, this left the field open, and you can't really blame countries that need infrastructure—and the need has been well identified—for turning to Chinese alternatives that were being offered. And, the Chinese construction companies, it turns out, are actually quite good at building things and can do so quite efficiently, notwithstanding these other concerns that I mentioned. So, I think what we recommended to try to mitigate the potential risks of BRI to U.S. interests is that we should try to come up with an effort that would lead sort of a competing BRI effort or a competing coalition of countries that could offer countries to at least have an alternative to Chinese-financed investment so that they could compare and have some alternative, I guess I will put it that way. We also thought that we should enhance U.S. commercial diplomacy to promote these high-level standards alternatives to BRI and raise public awareness in host countries and among the governments of standards problems in case they're not aware of them. We also thought we should offer some technical support to BRI countries to help them vet prospective projects, so that there's more of an equal playing field in the negotiation part. They can look at standards and maybe demand some higher standards of construction, etc. And that we should encourage countries to be mindful of and to make sure they have safeguards in place against corruption and non-transparent financial dealings.
We also recommend a number of other things that the U.S. needs to do to improve its competitiveness in this area: devoting additional funding to research and development, increasing investment in STEM, amending our immigration and visa policies to make it easier for us to attract and retain the world's best talent, etc. And I think some reforms to some of the development banks would also be in order. One of the reasons why countries find it so easy to go with a Chinese project proposal is that the Chinese make it quite easy for governments that have low capacity or have limited resources to scrutinize project documents, etc., they make it quite easy, the project agreements are short, they are understandable, the terms are fairly clear, there's not a lot of lead time, and they do things quickly. So, these are some of the areas where I think criticisms of the international development banks need to be examined and taken into account.
So, there are a number of other recommendations, and I don't want to go on too long, but I do just want to mention that from my vantage point, which was inside the U.S. government looking at this pretty closely from 2014 to 2018, there's been a huge range of opinion and a swing in the opinion in the United States about China's Belt and Road Initiative, and the task force really wanted to try to get to the bottom of this and find out what was going on and whether it was really warranted. In 2014, we were talking about, well, maybe we should join the BRI—we even attended the BRI summit in Beijing—and then sort of over the next couple of years opinion swung pretty wildly in a 180-degree fashion to "this is a real Trojan horse, and it's very bad." And I think what the task force shows in our report is that it's really somewhere in the middle and you really have to look at projects and countries on a case-by-case basis and make an assessment. And it's very hard to have a kind of a blanket comment or assessment of the overall sprawling kind of project that the BRI has become. So, I'll just stop there and see if people have questions. Thanks.
FASKIANOS: Fantastic. Thank you so much, Susan, for that. And we will go to all of you for your questions. In addition, you can also ask Susan about her career if you want to know more about the Foreign Service. So, let’s go into questions now. (Gives queuing instructions).
And we will take the first written question from Kevin Lockett, who is a senior student at Ohio University: “How can recipients of the Belt and Road Initiative utilize anti-dumping laws and countervailable subsidies to mitigate its negative effects on their economies?”
THORNTON: That is a really interesting question. I think that what Kevin's getting at is there may be countries that are unhappy with the projects that they have taken on from the Chinese government through the Belt and Road Initiative, and are there projects that people are so unhappy with that they would be looking for some kind of mediation or dispute resolution? Normally the dumping and countervailing subsidies duties would come into play when China is—or another country, any country really—has produced sort of overcapacity through subsidization and is dumping it at below market prices in another country and injuring their industry. So, I'm not sure in most of the cases that we're talking about here—if you're talking about countervailing subsidies and dumping of kind of steel and concrete in the form of construction projects—the only reason that a country would bring that to the WTO would be if it's injuring their own concrete and steel industry, and that they want to get protection for that. But, most of these countries have taken these projects on knowing the Chinese were bringing that. So, I'm not sure that that would be a relevant example, as much for a sort of infrastructure case. The steel dumping is something that has been an issue for developed countries who have steel industries that compete with a lot of the steel that China is producing. And there have been steel dumping cases in the U.S., in Europe, Canada and elsewhere. But most of the BRI target countries would not be major steel producers, I think, so that probably hasn't come up.
FASKIANOS: Great. I'm going to go next to a raised hand to Mojubaolu Okome.
Q: Thank you very much. I'm a professor at Brooklyn College of political science. I wonder about this assumption that the corruption in the infrastructure development projects is particularly to be identified with the Chinese, but the other actors are not corrupt. Because I am from Nigeria, and I study Nigeria. And actually, there is a lot of corruption in international development. It's quite well known that bribing political officials is part of the way business is done. So, the Chinese didn't bring this. They're just getting into the mode in terms of how business is done.
With the abandonment of funding sources, given the funding of such projects, what are the African countries supposed to do? I heard from you that, yes, the Chinese were taking advantage of the absence of alternatives. So, moving forward, how do you think the U.S., as an actor, should proceed? Really an honest assessment of how bad things are in this sector.
THORNTON: I could not agree with you more, professor. I'm originally from Boston, and you don't have to go to international development to find corruption in big infrastructure projects. There was a pretty notorious case after the so-called "Big Dig" in Boston, which was a huge highway and tunnel project. So, infrastructure projects are notorious for this, because they are huge sums of money, and they usually involve government permits because you have to set aside large areas, and usually a lot of them are government procurement projects. So again, there's a lot of rent-seeking activity. So you're absolutely right about this. And you're right, that the Chinese didn't bring it, and actually, the Chinese are probably better in this area than some other major construction firms around the world. So, I wouldn't say that, necessarily, we found in the task force report that this was a particular risk with China. It's a particular risk with big infrastructure projects in countries where governance is a little bit less than what we would want to see. So that's what the risk area is that we're talking about.
I think what we should look for, and what we should be particularly wary of, is projects that don't make any economic sense. Those are the ones that are the real white elephant projects that are clearly political vanity projects, and that will basically be a complete waste of money for countries that don't have that money to spend and waste. So, the most prominent example that I can think of off the top of my head, in the case of BRI in this category, would be that port in Sri Lanka, that was built at the behest of the previous president of Sri Lanka, who was from that town, who wanted this port there, even though there was another port one hundred miles down the coast that was already set in a big trading port. They also built an airport in that town, and made flights land in the airport, and then take off again and go to the capital city twenty minutes away, in order to have traffic at the airport. So, there are some things that—especially at the beginning, I think, of China's Belt and Road Initiative—that were not very heavily scrutinized, probably. The Chinese really don't want to be financing projects that are not economically viable, because then they have a hard time getting repaid, and that's what happened in that case. So, I think this is what the World Bank and other development banks spend a lot of time doing. They do feasibility studies to find out if the project is going to be economically sustainable, how is the government going to pay it back, what is the rest of the debt picture look like, and then what are the labor impacts and environmental impacts? But all that bureaucracy also frustrates local populations and governments who need infrastructure, and it takes a long time. So, there's a balance to be struck there. And I think the Chinese are probably not striking the right balance. I think maybe the IFIs are not striking the right balance, and we need to really try to move these two things back together and come up with solutions that can work for local countries and populations; that they can take care of these externality problems and impact on the labor market environment, etc., but not take seven years to do feasibility studies before you can say yes or no to a project. That's just unacceptable as well.
I think having competition for Chinese projects is difficult because they have this cushion of foreign exchange reserves that they're sitting on. I will say, though, that in the post-pandemic period, that cushion has diminished a lot. So, we'll probably see more selectivity. I think over the course of the Belt and Road, we are seeing China be more judicious about what it funds, so I would expect it to sort of go that direction; to not be funding as much. Maybe the concerns will be reduced as that happens as well. I think the U.S. really needs to get after the international financial institutions to make their lending more demand driven. They've really gotten out of the business of funding infrastructure because of all of the potential for corruption and environmental and labor impacts. So, I think we've really got to look harder at what we're funding and get back into the business of providing an alternative.
FASKIANOS: Thank you. I'm going to take the next written question from Jon West, who's gotten two up-votes. He's a senior at the Virginia Military Institute:
“My question is, how do we, as a leader of the liberal international order, reestablish our appeal to these countries in Africa and South America who are underdeveloped, from the expansionist mentality of China? Seeing as China and Russia are heading there, as you say, to the alternative ‘international order’?"
THORNTON: I think some of the things that we need to do have already been mentioned. So first and foremost, I would say, if you're just talking about the United States, we need to make sure that we are the most dynamic, most competitive, most vibrant economy with the most innovative technology, the most talented workforce, and that we keep running faster, so to speak, in the international economic competition. And I think a lot of the things that the Biden administration has put forward in terms of this new bill to invest—I mean I'm not going to get into the specifics of whether the amount of money is right, and whether it's placed right—but the U.S. comparative advantage is that we attract talent from all over the world, we attract the best brains, and they all come here to go to school and do their research, and have scientific collaborations and work on new inventions, and get financing, startup financing from our financial sector. So, we've got to keep that comparative advantage going. And immigration policies are obviously relevant there. I think investing in the R&D sector in the U.S. is something we've gotten away from and that was probably a mistake. None of this, however, is going to bring back U.S. construction companies building infrastructure overseas with USAID funding that as we did in the 1970s and 1980s. Those industries have gone to places like Turkey, Ukraine, China, Korea, and Japan, and we just don't do as much of that as we used to. We have big energy pipeline construction, offshore construction. We have companies that participate in these big projects, but as far as the general contractors in these high-risk areas, we just don't have them as much as we used to. So, I think there are other areas where we will compete in technological and innovative areas. I know that the green technology is going to be a big area of intense international competition going forward and people with low cost, high quality technology will win that competition. But that's what the liberal international economic order is: it's a competition, it should be open market. And to do that, you've got to make sure the playing field is level and you've got to make sure that we get rid of subsidies that advantage non-market players, and that's part of what you heard a lot about in the Trump administration, was trying to tackle all of those aspects of China's economic structure that allows them to sort of subsidize these state-owned enterprises.
FASKIANOS: Thank you. I'm going to go next to Morton Holbrook, who has written a question, but he also raised his hand. So Morton over to you. Please identify yourself and unmute.
Q: Yes, thanks for a very clear description of the good points and bad points of Belt and Road.
You probably know the China people in the Biden administration. Do you think they'll mostly criticize that? Or will we actually go to bat and try to compete in the ways you've just suggested? What do you think is the likely course?
THORNTON: Thanks for that question. I do know them, and I think they're aware of all of these areas of vulnerability that we have in terms of this infrastructure push in the broader global market. They're looking to partner with allies, I think, in order to tackle and to do a better job in this space. Japan still has a quite robust construction and infrastructure building effort ongoing in East Asia, so do the Koreans. And I think what we've been doing recently is partnering with some of those countries to try to provide financing where the U.S. might have a comparative advantage or certain aspects of technology where we might have a comparative advantage, and let those countries do the bulk of the construction work and doing the contracting. So, I think that's what we're going to be looking at. There have been a few efforts to try to also push on higher standards for infrastructure projects. It may be that at some point, they'll get into a conversation with the Chinese about that. We've talked to the Chinese about suspending debt payments for infrastructure because of the pandemic. The Chinese have been receptive to that. They want to get, I think, the Chinese to be a member of the so-called Paris Club, which is the lenders club that coordinates all the debts and make sure everyone gets paid back in a certain fair way. And so far, the Chinese have been resisting that, but we may see movement on that, which would be good. I think we'll see partnerships in other parts of the world as well to try to give alternatives to what the Chinese are proposing, as well as working the Chinese directly on their standards issues.
FASKIANOS: Susan, we got a written question from Gail Evans at Georgia Institute of Technology.
“Can you give us an example of a successful project of the Initiative and example of the worst one, and why in each case?”
THORNTON: Well, it's kind of hard to come up with an example of the best project because there's not a clear list of projects that are considered Belt and Road. But I would say that quite a large project that has been successful in both China's eyes and the recipient countries’ eyes has been this Central Asian pipeline project, which takes oil and gas from Central Asian states like Kazakhstan, Turkmenistan, across Uzbekistan and Tajikistan, and brings it all the way to a Terminus in eastern China. It's a multi-thousand mile or thousand kilometer set of pipelines that has been constructed over a long period of time—started before the Belt and Road project actually—but it allows countries that are pretty poor and resource poor to transport their resources to an actual market that can pay top dollar for it. And it also allows countries to get transit fees for the pipeline that goes across their territory if they don't have the resources themselves, but they're allowing transport of it. So, I think that has been a quite successful project where the synergies of the two economies are resource-intensive exporter and the Chinese-importer has allowed all the countries to benefit. The construction projects are huge. And there have been instances where the local countries have required local labor to be used. So, in other words, local populations have gotten training by the Chinese. I know in Turkmenistan, where I actually worked at one point, there was a requirement that 70 percent of the labor force be local. So, the Chinese had to train them all and give them skills in engineering and other things. So that's a good project.
There are a lot of examples of the other kind. I mentioned the Sri Lankan port. I would say that another example—and again, this project started before the Belt and Road Initiative but it continues still—and this is the Gwadar port in Pakistan. It may eventually come online and be useful, but it's been in the works now at great expense for decades. And it's in a part of Pakistan where there's an insurgency and so it's been riddled with security problems. The Chinese have been really unable to actually even open it or operate it, never mind make it profitable. This is one of the objectives that people who are concerned about China's security footprint as a result of the Belt and Road, raise this project. But at this point, it's not a concern, because they're still not able to really operate the port safely.
FASKIANOS: Thank you. I'm going to go next to Zoe Steffensen, who has raised her hand.
Q: Hi, hope you're doing well. I'm an undergraduate student at UCLA presently studying communication and political science.
My question is, what do you perceive as the most effective strategy for curbing China's subsidy of coal exports, and outsourcing of pollution to other countries through its continuous financing of dirty fossil fuel energy projects—an unfortunate outcome to which the BRI has given rise?
THORNTON: Good question. I think that people are working on this actually, right now in the context of the COP26, upcoming at the end of the year in the UK, and in the course of all of the negotiations on climate going on right now. It's certainly something that in the last US administration was not addressed directly with China. But I think the Europeans have been working on this with China already for a couple of years and urging them to make a pledge that they will not build any more coal-fired power plants,—no more capacity. So that's a pledge that's been taken on by a number of countries that used to build coal-fired power plants and are no longer building them. And I think especially the Europeans—I'm not sure about the U.S.—but the Europeans would like the Chinese to make a similar pledge as part of their commitments in the context of the climate change negotiations. So, we'll see if they're successful, but it's certainly something that Chinese are well aware of people being very concerned about.
FASKIANOS: Okay, I'm going to go to a written question from Wei Liang, a professor at Middlebury Institute of International Studies, who says:
“Will the intensifying U.S. economic-tech decoupling with China reinforce China's efforts to engage those BRI countries, despite the fact that it could be politically and economically risky to do so?”
THORNTON: I think there's a whole bunch of questions embedded in that question. One that would be important for answering this would be how far would the decoupling of U.S. and China in the technology sphere go? I know that the Chinese are worried about how far the technology decoupling will go. And they've also—for even longer than they've been worried about that—been worried about how they will have markets for their technology when all of the developed country markets for technology are already sewn up by high-end producers. For example, in the handset—the smartphone market. Apple and other high-end producers in Asia—Samsung in Korea—have sewn up a lot of the market in the developed world. And so, they were looking for markets for their handsets. This was back a couple of decades ago, and it turned out that their handsets were very popular in the developing world where people couldn't afford maybe as much an Apple iPhone, but still wanted to have a reasonable phone. So, I think they've been working those developing markets for their technology for some time now, and many of the developing countries that are also BRI recipient countries—but even before BRI existed already—were dependent on Chinese telecommunications—backbone equipment, etc. So, a lot of those countries are already using kind of Chinese standard telecoms equipment, and that gives them a leg up in certain markets for telecommunications and infrastructure equipment. So, that is one of the realities and it's probably exacerbated by the BRI, that there is this part of the world that has Chinese equipment, and how will that look going forward if there's a major technology decoupling where there's a curtain or a division between these two systems, I think is something that we should all be worried about, actually, because probably countries have that equipment don't want to be in sort of a separated state. So, how we will manage that is a good question. But certainly, the Chinese have taken advantage of those developing country markets where they've been active to sell their equipment and install it and a lot of those countries are now dependent on it for sure.
FASKIANOS: There are a couple questions in the chat about the pandemic. From Catherine McQueeny at St. Louis University, Madrid:
“How has the pandemic affected the BRI specifically? Has there been a shift to soft power diplomacy and a shift towards a health Silk Road?”
And then one other question from Laila Bichara about the effect of the pandemic on African countries unable to pay China's loans:
“Are international organizations such as World Bank, IMF helping them, so they avoid China taking over those loans?”
THORNTON: On the issue of loan payments and the pandemic, I think China has suspended most of its loan repayment programs. There's been some discussion about whether a suspension of loan payments is better than a restructuring of the loans. In other words, taking down the interest rates or forgiving some of the principal etc., which the Chinese have not done. And the Chinese have said that at this point during the pandemic, suspending the payments because if you start to restructure loans, then your credit rating drops, and they don't want to see the credit ratings drop. So, we'll see how this develops. I think the Chinese have expressed kind of understanding that it's going to be hard for countries to pay it back and they're probably preparing to take a haircut. But they haven't determined what that's going to be yet.
I think as far as the pandemic's effect on the BRI—we're already seeing it—which is that the Chinese are going to have to scale back based on economic realities, not only out there in the field, but also based on what they're going to be willing to put at risk now in the face of economic straightened circumstances. I think the health Silk Road has really been talked about much more since the pandemic—it existed in a very nascent way before the pandemic. And, probably, the vaccines that the Chinese are making available to the developing world, and particularly to BRI countries are being touted as part of the health Silk Road. But that's not really what the health Silk Road was meant to be initially. China does have significant health cooperation programs in a lot of these countries that predate the BRI. So, in looking at this, my sense is that they're wrapping a lot of their pre-existing cooperation into the BRI, and so that's where the health Silk Road comes from. As far as what new development or infrastructure investment they're putting in on health, I'm not really sure that that has been or will continue to be a major focus. It will continue to be a focus, as it always has been, but whether it's something new or not, I haven't really been able to identify.
FASKIANOS: Thank you. I'm going to go next to Owen Greene, who's raised his hand.
Q: Thank you very much. Thanks very much for the comments so far. I'm a professor at a UK university, University of Bradford, and a China watcher and I've been investigating BRI for some time. And there are so many issues, can I just raise two linked ones?
I'd like you to explore the prospects and the limits of your suggestion from your report to do with the technical support for vetting deals, which obviously in order to enable a more equal set of negotiations when BRI—and other big infrastructure projects are there. So therein lies the first question. And the other: if we were to simply set things up, which are purely targeted at the BRI, rather than as you say, there are many large infrastructure projects, which raise issues about what deal the government—the recipient government is getting. I wonder whether you can elaborate on how you think that would be best organized.
You could imagine some scenarios in which you handed over to IFIs or OECD, DAC or something. But then it would become risky in terms of getting entangled in their own bureaucratic procedures as it were. But at the same time, you'd want some multilateralism in some way, and I just wonder what your thinking is about that. And maybe in a similar vein, one of the biggest areas—and one of the areas that I'm personally most engaged with China—is opening the discourse in China to do with the conflict sensitivity of their investments overseas. By conflict sensitivity, often you can do unintentional harm to local tensions and conflicts through the way you design your investments, who you employ, etc. And in my experience, China has become more aware of these risks over the last five years, but in the end isn't well set up to manage or to assess those risks on its own. And so having some forum in which there is a more collective discussion with other outside countries—including the United States—that have done their assessments about the fragility within the country and the areas in which for a sustainable investment, you need to take care.
I just wonder whether you consider that and whether you think there's some opportunities for setting up some sort of dialogue process around particular countries, I suppose that would be best organized?
THORNTON: Those are all really good questions and really specific but necessary technical aspects of all of the responses that we've seen so far in the Belt and Road Initiative. My initial general thought is that it would have been good in my view, if when this all came about back when the AIIB was being put together—and back when the BRI was first mooted by the Chinese—the thing has been very politicized in the United States, so it complicates everything now that we're trying to do that would be substantive and good in responding to it in a way. So that's a general comment.
The first question about setting up an assistance or technical team to help BRI countries assess project proposals and the financing, etc.—I mean, we have done this in a couple of instances. And it is an area that is a good area for the U.S. to be helpful. We've done it, and the only case I know of for sure is Myanmar. And that has now taken on a new direction, unfortunately. So maybe that's not a great example. But, at the time it worked well, and the Myanmar government was appreciative of the help. And I think that's what you need. If you're not doing feasibility studies, with big World Bank teams or ADB teams coming in and looking at things, you can't expect a government with limited resources to be able to take the place of that. So you've got to come up with something that can be approximate stand in.
The second question about how to do this—give it to the IFIs—my view is that these things should be multilateralized. We have all these development banks, and we put a lot of money into them. One of the reasons why the U.S. doesn't have a lot of money the way the Chinese do for these kinds of projects is because we give a lot of money to the World Bank and the ADB and all the other development banks to do this kind of work to make these kind of project evaluations and to do the lending and etc. So, I do worry that in a lot of this "competing with China" area, we seem to be coming up with new structures and not fixing the old structures. And I don't think that is the right way to go, although it may be expedient. So one of the examples for this is the blue dot network—which the U.S. set up with a number of partners, including Japan and Asia to try to pursue sustainable development projects and have a label for a high standards project—hasn't really gotten off the ground. And I think you can't do a standard labeling project if you're only a few countries. That has to be multilateral, in my view.
And the last part of your question, I'm not sure that I'm going to remember it.
FASKIANOS: I think I should limit it to one question because we have over twenty written questions. So, I am going to go to another question. I'm going to pair these questions because it's interesting, they are from a professor and from a student. So, from Professor Terry Kleven who teaches at Central College in Pella, Iowa:
“Thank you for your summary of the BRI, and your example of how you bring your education and background to a life of civil service. By working with students regularly in advising them for career opportunities in Foreign Service, what would you say is the best kind of education background for students to work in an Asian context?”
From the student perspective, Mark Kleszczewski, who's a student in the masters in international affairs program at City University of New York, Baruch College, wants you to speak in broader terms about becoming a Foreign Service officer.
“How much, do you feel, you were able to make a difference directly? And, would you encourage people to apply?”
THORNTON: On educational background, to be a Foreign Service officer, you can study anything and go into the Foreign Service and do very well, we have doctors, we have lawyers, we have people who hadn't even finished undergrad come in. So, it's really a mixed bag. But what you have to know is that being a Foreign Service officer is kind of a jack of all trades type of undertaking, if you're going to make it a career. We are generalists. And maybe an educational background that would prepare you to move every two or three years to a completely new field, and then ramp up on a very steep learning curve, your knowledge about whatever that new place or new functional area is that you're going to have to learn about and be the expert within the first few months and represent the United States and talking to other government officials about it. That is kind of the scope. I would say people come in with scientific backgrounds, with economics backgrounds, political science is a very popular one, and international relations, of course, is good. I always recommend that people should have done some overseas experience, either study abroad, or somehow worked overseas or been an intern overseas—just immersion in a foreign culture in your past is a pretty big prerequisite for this. But it doesn't have to be anything dramatic or earth shattering, but it's just so that you can see that other cultures think differently from us about things, and you have to be able to meet people in the middle and if you're not interested in compromise, it's probably not the career path for you. But, if you are, and if you like being a generalist and working on new things, and meeting people and moving overseas, it's a terrific field. I think the thing I loved about it the most is—I'm a little bit ADD myself—so I loved that every two or three years or four years, I would get the itch and I'd be like, “Okay, now, where are we going to go next? What are we going to do next?" But I think, as far as the impact goes, I am a Foreign Service officer who loved being in the field; I worked a lot in Washington, and so-called [got to] see-the-sausage-get-made.
I was having a conversation with a friend of mine who's just gone into the administration, and he's very young, and he said, "Oh, guess what, I don't actually make policy." So, it is important to understand that there are differences within the kinds of different jobs that you'll do. So, you'll get to see a lot and you'll get to learn a lot about the U.S. government and how things work—or don't work, as the case may be. But it's all very exciting and very enriching and very satisfying. And whether you can move the mountain yourself or not—I don't want to pretend that that's the case—but certainly, you can have an impact whenever you're meeting people and representing the United States, I think you can have an impact.
FASKIANOS: And languages, Susan?
THORNTON: Languages. Yes. Many, as many as possible.
FASKIANOS: Good. I am going to go to Mike Nelson next who has raised his hand.
Q: Thank you very much. I was glad that Professor Liang asked about technology because I do technology policy and look at how governments shape the evolution of the internet and digital technologies.
You've talked about how the Chinese are using the Belt and Road Initiative to promote their companies. I'm just curious, are they really succeeding in doing that? Are they explicitly linking the contracts to the use of Chinese technology and technology standards? And is it only digital technology? Or are there other things that the Belt and Road Initiative is being used to promote?
THORNTON: That's a good question. I probably don't know as much about this as you do but the Digital Silk Road is certainly focused on telecommunication, and internet, and cyber technologies. At the beginning, I think it was just that, Huawei had this equipment, we know that they got a lot of subsidies from the Chinese government, they were a low-cost competitor to Western companies, they had entree to a lot of these developing country markets through other things that they've been doing, not just the Belt and Road. The Chinese have been active in Africa for a very long time, way before the Belt and Road was announced, going back thirty to forty years. So, I think they started already before the Belt and Road with their Huawei offers of telecom-backbone, and then once you have the backbone, and you have the entree with the local telecoms companies, then I'm sure that a lot of the Chinese consumer equipment followed from that—not that they had a lock on those markets. I'm not sure that there's a requirement that follows from having the big government infrastructure for using then following with consumer equipment. But the Digital Silk Road is definitely now part of this effort to push Chinese technology out there. And it is now, since the last couple of years, especially, a defensive move or protective move for them from this decoupling that they are so worried about. So, they are making a big push now with the Digital Silk Road to ensure that they can keep those markets and those countries continue to be dependent on Chinese equipment.
FASKIANOS: I'm looking for a last question that would be really short to answer, but I'm not seeing one that would take very little time. Tim McNamara asks:
“If several countries and several major projects fall into the debt-trap, would that not presumably cause China's economy to suffer to some extent?”
THORNTON: That's a really good question. The Sri Lankan port is really the best and really the only case so far of this debt trap, which is that the trap is the "you owe China money and you can't pay," so China takes your port as its own and commandeers it. If China had a lot of debts that could not be repaid, would they take debt for equity swaps? Or would they just take a hit and not be repaid is a good question. I guess it depends on what the object is that they're owed for. But if they end up losing a lot of money on Belt and Road investments, it's probably going to be a hit to their kind of government banking sector. But these are all state-owned banks, so the government has the resources to make them whole.
I don't think you'll see a financial crisis in China as a result of debt that is not paid back from the Belt and Road Initiative. But the Chinese government is worried about how many projects there may be out there in this category, and I think that's why you're going to see them start to really clamp down on and unchain the dogs on Belt and Road projects. All these companies went off and made all these deals and the Chinese government probably didn't have the kind of control over it that they now wish that they had had and you're going to see them start to impose that, I think, now to try to prevent that. But bottom line, I don't think they'll have a debt crisis from it.
FASKIANOS: Thank you so much. This was a wonderful hour. I apologize— we still have over twenty-five questions lingering, but we cannot get to them all. So, for that, I apologize. But we appreciate your taking the time, Susan Thornton, to be with us. You can follow Susan on Twitter @suea_thornton, so you can follow her tweets. And again, thank you, Susan for your service on our task force. Again, if you haven't had a chance to read the task force report, I hope you will do so. The link was circulated as a background resource and also, if you go that to our website, you'll find a lot of accompanying materials for the task force, so it's really worthwhile. This concludes our Winter/Spring Academic Webinar series. We will be sending the fall lineup in the coming weeks, so stay tuned. And again, follow us on @CFR_Academic, go to CFR.org, ThinkGlobalHealth.org, and ForeignAffairs.com for new research and analysis. Good luck with finals, or whatever is happening at your schools during this pandemic. Stay well and stay safe. For more event audio, subscribe on iTunes or visit us at CFR.org.