Last week, Britain announced that it would go ahead and join the $50 billion Asian Infrastructure Investment Bank (AIIB), a potential rival to the Washington-based World Bank, despite America’s disapproval. France, Germany and Italy have also decided to follow Britain’s lead, delivering a blow to US efforts to keep leading western countries out of the new institution.
Even Australia and South Korea, key US allies in Asia, have now suggested that they will now rethink their earlier positions of not joining the bank. The Obama Administration has long argued that the western countries should stay together on the outside and push for higher lending standards if they want greater influence over the workings of the new bank. But as the West starts to join the Chinese bandwagon, the US finds itself increasingly isolated.
But the decision by Britain, the closest of American allies and sharing a special relationship with the US, remains very significant underlying the dramatic shift in the global balance of economic power. No wonder US, officials have been very critical of the British decision, arguing that the US is “wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.” For Britain, which is often accused of America’s poodle, this was a brave decision but a necessary one as well given its evolving economic and trade interests.
The BRICS (Brazil, Russia, India, China and South Africa) are becoming increasingly significant to British trade. The UK exports to those countries have increased by 53 per cent since 2007. British Prime Minister David Cameron has been assiduously courting them since coming to office in 2010, leading to increased trade with those countries.
For example, Cameron's visited to China in November 2010, a country to which, in 2013, the UK exports grew by 80 per cent from 2010. Cameron has made three visits to India, a period that was associated with almost 45 per cent increase in British exports to India. Russia looked a promising destination for UK exports before the current conflict with Ukraine.
Since 2001 and until 2011, UK-Russia trade grew by an average of 21 per cent. The UK has been one of the largest foreign direct investors into Russia, with Russian companies accounting for about one quarter of all foreign IPOs on the London Stock Exchange. This will definitely be affected by the ongoing events in Ukraine the imposed sanctions by both sides.
Cameron’s visit to Brazil in 2012, a country expected to assume a greater role in the world as it hosts the Olympics in 2016, was also seen as a crucial visit, aimed at boosting UK trade. In 2012, the UK was Brazil’s 11th trading partner in terms of exports and 14th in terms of imports with the balance of trade in favour of Brazil by around £630 million. British ties with the BRICS are likely to continue to grow in the coming years except in the case of Russia with which the Ukraine crisis will remain a burden for any further rapprochement.
Great turmoil
This is happening at a time when there is great turmoil in the UK’s ties with the European Union. In addition to the saga of the UK's membership to the EU, there is a steady decline in its representation at senior levels in EU institutions. This has undermined London's influence in Europe and its traditional role as a bridge between the US and Europe. In relation to its share of the EU’s population (12.5 per cent), the UK remains significantly under-represented among the staff of major EU institutions, and its presence continues to shrink.
British foreign policy is passing through a phase of unprecedented flux. The invasion of Iraq was based mainly on a dilemma of maintaining or damaging the UK-US special relations and ignored assessments by different stakeholders which illustrated, at the time, the potential tragic outcomes.
The intervention in Libya which appeared, at the time, to be necessary to save lives of thousands of Libyans from their notorious dictator; this intervention was followed by the country turning into chaos in the absence of any viable post-intervention plan for the transitional period. The UK has made a series of fundamental errors in the region starting from the Iraq war and ending with intervention in Libya and the ongoing campaign against ISIS.
The current debate in the UK on the relationship between security, prosperity and values has been characterised in part by a critique of the failure of the Labour governments of Tony Blair and Gordon Brown to live up to the rhetoric and emphasise on values, moral responsibility, dialogue and partnership which suggested that they were making a qualitative shift away from pragmatism and away from a previous Tory emphasis on sovereignty, national interest and non-intervention in internal affairs.
Labour claimed an ethical content to its foreign that was not to be defined by a narrow Realpolitik. While achievements in areas such as debt relief and climate change can be seen as giving substance to their claims, critics argue that arms sales to countries with poor human rights, the alliances of the global war on terrorism and the mixed record of liberal intervention suggest a gap between rhetoric and actions and a failure to prioritise interests.
At a time when the rise of China is shaking up the global economic and security architecture, Britain seems to have decided that it is best to hedge its bets as a potential rivalry between the US and China looms large on the horizon. By deciding to join the AIIB, London has heralded the beginning of a new era in global politics. No wonder, Washington is annoyed.
(The writer is Professor of International Relations, Department of Defence Studies, King’s College London)
