In early June, the Group of Seven (G7) announced their plan to mobilise hundreds of billions of dollars of infrastructure investment for low- and middle-income countries.

The White House Fact Sheet describes this “Build Back Better World” (B3W) plan as a “values-driven, high-standard, and transparent infrastructure partnership.” It also prominently alludes to strategic competition with China.

This framing refers to China’s own global infrastructure plan, the Belt & Road Initiative (BRI). Launched in 2013, BRI is Chinese President Xi Jinping’s signature foreign policy endeavour and the world’s largest infrastructure program, totalling approximately $575 billion.

Since BRI’s inception, the G7 has expressed concerns about its potential to expand China’s political, economic, technological, and military influence at the expense of the West and the rules-based international order.

At first blush, this strategic competition doesn’t look like much of a contest. B3W can’t compete with China’s lower costs, looser standards, and faster timelines. Nevertheless, the G7 initiative could still be a huge win for global welfare, sustainable development, and multilateralism.

The two plans differ markedly in their scope, funding, and governance. Rather than physical infrastructure, the G7 plan places human infrastructure at the core of its global development ambitions.

The White House and G7 emphasise the goals of promoting health security, digital technology, and gender equality, objectives consistent with other G7 initiatives, ranging from global vaccine distribution to decarbonisation to expanded education for girls.

By contrast, while China has recently renewed its claims to develop the “Health Silk Road,” the “Digital Silk Road,” and the “Green Silk Road,” its overwhelming focus remains on traditional projects such as ports, roads, dams, railways, telecommunication facilities & power plants.

If the G7 intends to outbid China as the primary provider of traditional, bread-and-butter infrastructure, directing funds toward social spending and human capital development is not the way to go.

B3W also faces funding challenges. The G7 communique commits each of its members to mobilise the needed financing from their own development institutions, bilateral partnerships, multilateral development banks, and other international financial institutions. B3W also aspires to mobilise substantial private capital for its infrastructure investments, which typically has been challenging due to perceived risks in developing and emerging markets, including weak rule of law, macroeconomic instability, and environmental, social, health, and safety hazards.

China has also had limited success in leveraging private capital for BRI, but it has been able to offset this challenge through other funding sources. These include bilateral funding agreements between Chinese banks and developing countries, with the infrastructure projects themselves serving as collateral for the loans.

Such direct funding mechanisms, which permit Beijing to fund otherwise “unbankable” projects, are unlikely to figure into B3W, due to separations between state and private business in Western countries.

The biggest difference between the two initiatives is B3W’s emphasis on “good governance.” The White House dedicates entire paragraphs to the “values-driven” nature of the plan, underscoring its commitment to transparency and financial, environmental, and social sustainability.

The G7 specifically promises dedication to anticorruption, social inclusion, high labor safeguards, and combating climate change.

By contrast, BRI raises significant governance concerns. Some are financial, focused on corruption, lack of lending transparency, and unsustainable debt traps for recipient countries.

Others are social and environmental, stemming from BRI’s poor labor standards and stories of socio-ecological damage. For instance, an ongoing port project in Peru is predicted to eradicate local flora and fauna, emit substantial toxic pollutants, and displace local communities.

Collectively, these differences suggest that B3W is unlikely to pose a serious geopolitical threat to China’s BRI. B3W’s stricter standards will result in greater public scrutiny, higher up-front costs, and longer timelines, making it less competitive.

Without direct funding mechanisms, B3W is also less streamlined. Other attempts to compete with BRI by the Group of Twenty, Japan, EU, and the Blue Dot Network have all failed to challenge Beijing. B3W is likely to follow suit.

But that doesn’t matter. Many of B3W’s goals—e.g., those in climate and gender equality—fall outside of BRI’s ambit.

Accordingly, B3W constitutes less of a challenge and more of a complement to BRI. More important, regardless of its strategic intent, B3W still has the potential to improve global welfare, reinforce good governance systems, and strengthen partnerships.

Regardless of whether it competes with BRI, B3W can still facilitate big gains in human welfare. The world currently faces a $40 trillion infrastructure gap, a deficit only exacerbated by COVID-19 and China’s recent scaling back of BRI. The world economy relies on infrastructure, human as well as physical to connect supply chains and efficiently move goods, people, and services.

While the extent of B3W’s focus on hard infrastructure remains uncertain, even the plan’s “soft infrastructure” investments such as digital technologies and health systems can improve global welfare.

B3W’s values-driven approach will reinforce humane norms and bolster labor standards, while promoting financial solvency in recipient countries.

By contrast, BRI’s infamous reported abusive labor practices such as human trafficking, forced labor, and hazardous conditions endanger workers’ lives. Additionally, BRI’s reliance on migrant labor and limited skill transfer undermines durable growth and development.

The G7’s commitment to high environmental standards will also help the world combat climate change and the destruction of nature. Although in 2019, China committed to greening BRI investments, BRI remains dominated by fossil fuels, and as of 2020, coal composed 40 percent of Chinese overseas power plant capacity.

BRI’s continued export of coal-fired power plants will lock in partner country dependence on carbon-intensive power for decades, as modern coal-fired plants have an operating lifetime of more than thirty-five years.

If B3W follows through on its stated prioritisation of the Paris Climate Agreement and Agenda 2030 (in support of the UN Sustainable Development Goals), it could provide an alternative, green energy path for developing countries.

Finally, B3W will advance global multilateralism, which China’s bilaterally-focused BRI has challenged. Beyond reviving solidarity and partnership among G7 nations, B3W provides the foundation for a new, productive, strategic relationship between the West and developing nations.

The plan signals that the United States and the G7 are “back” in the development game and committed to advancing global economic recovery and prosperity in the wake of COVID-19. The B3W initiative is also smart geopolitically.

Previously, the Western response to BRI has been to highlight its shortcomings and warn of Beijing’s expanded influence, without providing a real alternative. B3W offers developing countries tangible options and puts the G7’s money where its mouth is, while giving aid recipients a voice in shaping promised aid to their needs.

B3W can help to rebuild a more secure, connected, and prosperous world. To be successful, it doesn’t have to “beat” China’s BRI. It simply needs to follow through on its promises, by placing the needs of B3W partners first and investing in a financially, socially, and environmentally sustainable manner. And it doesn’t hurt to reinforce partnerships, value systems, and credibility along the way.

Author: Caroline Crystal
Editor’s note: The article reflects the author’s opinion only, and not necessarily the views of editorial opinion of Belt & Road News.