20 September 2018
by Alpha Daffae Senkpeni
Monrovia – The rivalry between Washington and Beijing for global dominance is becoming more palpable by the day and imminent spillovers have the tenacity of impacting small countries caught-up in the crossfire.
For Liberia, getting entwined in any contention would be detrimental, but sustaining solid ties with Beijing – that has proven to be a “strong partner” – comes with doles as well. It’s a difficult position to be in as a small economy and as a traditional friend of Washington.
US Senators’ Letter Opens Debate
The recent stance of several US Congressmen on China’s loans that is reportedly piling up hefty debts for developing countries is raising concerns.
Although the letter from the US Senate signed by 16 congressmen and sent to the Secretaries of the Departments of Treasure and State respectively came before the recent Forum on China-Africa Cooperation (FOCAC), it raises red flag over China’s dealings with several countries that are opting bailout from the International Monetary Fund of IMF.
The letter alleges that China is “weaponizing capital” while also expressing concerns about countries accepting “predatory infrastructure financing” from Beijing.
The letter mentions several Asian and European countries and Djibouti as the only African country, arguing that China’s Belt and Road Initiative is a “debt trap diplomacy” that is creating account deficit for countries.
The US Senators also accused Beijing of using “economic pressure to affect foreign policy decisions,” citing the Asian nation economic cooperation with Djibouti, which they infer exposes the East African nation to debt fragility.
“As Djibouti increases its dependence on China, there are fears that China will gain control Doraleh Container terminal, further consolidating China’s influence in the critically strategic region,” the US Congressmen wrote, while also seeking to diminish the influence of China’s BRI projects.
The Chinese media has often considered these views as a misconception and negative propaganda against Beijing’s cooperation with developing countries as China.
The letter from the US senators, dated August 3, 2018 came several weeks before the Liberian government announced that it had entered a mineral resource swap deal with China Road and Bridge Corporation – a major Chinese company.
Resources Swap Concerns
As the letter by the US Senate is making rounds in Liberia; at the same time, mixed views are swirling about the deal. Some have dubbed it as a ‘mortgage of the country’s future’. Others claim it mirrors mistakes of the past that have plunged the country into underdevelopment.
One Liberian diplomatic expert following the situation warns that the government of President Weah will have to be circumspective about the United States’ interest while clinching a crucial deal with China.
“One thing the government has to be mindful of is balancing the relationship between Washington and Beijing,” a former Liberian ambassador, who asked for anonymity, said.
Considering the traditional ties that we enjoy with America, we must not forget that – but we can also look to China but don’t forget that the US is also watching us keenly.”
China has emerged as one of Liberia’s major diplomatic and economic partners within the last 12 years, investing millions of dollars to remedy the country’s infrastructure deficit, impacting the health and human resource sectors of the country.
But growing concerns of fractions including a massive trade war and geopolitical maneuvering between the two powerful nations, experts say, would hand the George Weah-led administration’s headache when trying to balance its diplomatic ties with the two powers.
Liberia is regarded as America’s stepchild considering the history and foundation of the West Africa state. The bond with Washington is ingrained and pretty much inseparable.
‘Debt Trap’ Allegation
At the same time, the US is becoming increasingly concern about China’s globalization strategy, which includes FOCAC and the Belt and Road initiative – two multilateral frameworks the administration of President Weah is looking to tap into especially as chances to salvage resources to fund the new government’s ambitious road construction project narrows.
Beijing is loaning billions of dollars to countries in Asia and Africa to upgrade their infrastructure and at the same time increasing its foreign direct investments and trade – making the Asian economic powerhouse Africa’s largest trading partner since 2009.
A recent US$60 billion package announced by President Xi Jinping at the FOCAC summit is aiming to provide sustainable development. This has sparked mixed views from the West with some are speculating that China is poised to recolonize the continent by using “predatory loans”.
However, Beijing argues that enhancing multilateralism with smaller nations is the preferred antidote to the United States’ protectionism under a Donald Trump government offers a win-win opportunity. At the same time, some Western experts have warned that Washington’s pessimism about China’s dealings with Africa may likely face stiff criticisms from African governments who consider deals with Beijing as influential to economic and infrastructure progress for their respective nations.
There are also concerns about China’s military presence in East Africa – mainly Djibouti, something former US Secretary of State termed as a “new form of colonialism” that threatens America’s interest. In January 2018, the US Department of Defense declared China and Russia as “central challenge” to its military, saying that “long-term strategic competitions with China and Russia are the principal priorities” for the Pentagon.
Trade War Hits New Heights
Meanwhile, the ensuing trade war between the world’s two largest economies is intensifying and doesn’t seem to be showing any sign of a respite. On Tuesday 18 September, President Trump slapped massive new tariffs of US$200 billion on Chinese goods exported to his country. The new tax is the largest ever in the history of trade between the two nations, and China is also reportedly prepping to hit back.
Trump had often accused Beijing of playing “unfair trade practices,” warning that retaliation from China would exacerbate the situation and will force his hands to impose another US$267 billion tariffs on goods imported from China.
On the other hand, American companies in China are facing their own fears as analysts are predicting that President Xi would hit back soon. Earlier, the world second largest economy placed a US$50 billion tariff on US goods and is planning to impose and US$60 billion.
When the trade war erupted in early July this year, the International Monetary Fund of IMF warned that it would strangulate global economic growth.
“The risks that current trade tensions escalate further – with adverse effects on confidence, assets prices, and investment – is the greatest near-term threat to global growth,” Maury Obstfeld, IMF’s economic counselor said in June.
The imposition of additional 25% tariff on steel, which is made out of iron ore, by Mr. Trump administration, has already impacted countries like Liberia that heavily relies on iron ore export to fund its budget.
It is unclear how much Liberia is losing due to this new tariff, but economists say countries buying iron ore and those exporting will all feel the burn. ArcelorMittal, the world largest steelmaker is also the largest iron ore extractor in Liberia – this means factors affecting the sector is also upsetting the firm profits and the country’s revenue envelope at the time when the government’s desperation for funding is even more visible.