Open Letter to Jack Lew – US Treasury Secretary – Concerning the Asian Infrastructure Investment Bank
Open letter to Jack Lew, US Treasury Secretary
I write in earnest to encourage your sincere desire and willingness to recommend to the President of the United Sates and Congress that the U.S. apply as a founding member of the China-backed Asian Infrastructure Investment Bank (AIIB).
As U.S. Treasury Secretary you are in a unique position to understand the likely influence this bank will have on world affairs in the next fifty years. In your position you are no doubt thinking of how you can further advantage our children’s position in the future. And with history on your side I know you also appreciate the opportunity, and risks, this bank will brink.
I am sure you are far more aware than me concerning the equivalent situation facing the U.S. at Bretton Woods in 1944. Britain’s Imperial preference was to be disabled and the Empire’s debts were to be settled in dollars, just as large imbalances in sterling balances prevented full convertibility. In a similar way China and other countries hold significant dollar denominated debt and the global economy is tilting toward China. The similarities between 1944 and now are quite interesting, as you know.
The new bank promises to invest in the development of Asia. Such development should bring increased stability if and when such investment is governed by fair, open, and collaborative means. Bretton Woods provided the framework for the IMF and World Bank, and U.S. took a leading role in their formation as the presumed global financial hegemony. This bank will play a key role in the future and so it needs to coordinate closely with our established organizations. The U.S. is not in the same situation the UK was in 1944 since there has been not shock like WWII. So the opportunity is golden.
China was a founding signatory at Bretton Woods. Why can’t the U.S. be a founding member of this bank?
The new bank’s initial funding was set at $50bn and will approach $100bn. The World Bank’s official goal is reduction of poverty. As you know it spends its money on many different projects. The new Asian bank will challenge the World Banks’ position especially in Asia. I am sure you will agree that we want to help others less well-off and in so doing create a more level playing field for all future investments in the region. It is also possible that the new bank will take on a similar role to that of the IMF. It would be unforgivable if we allowed this to happen when in fact we are not at the table. The goodwill and access to Asia this offers is just there for the sharing.
The value of the dollar and its position as reserve currency will also be challenged – not now, but gradually over time. Perhaps not this year or next, but 5 years hence the dollar will be less desirous by this countries able to work with the new bank.
So what better way than to join the UK, France and Germany, and apply for founding membership. By not applying as a founding member the U.S. might look weak to some, especially in Asia. By not directly participating and influencing others inside the governance framework, the U.S. might look disinterested. By not being involved at the start, the U.S. runs the risk of being left out.
And what is the risk from participation? I would suggest, most humbly, that the risks are minimal. China is betting on a long, sustained path of growth. We know how this works. I think we can help China and the bank become a force for good in Asia specifically, and the world in general.
Sir, I implore you, convince the President and Congress that reasons why we need to join.
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