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France, Germany, Italy Defy U.S. In Joining China-Led Development Bank

MELISSA BLOCK, HOST:

Four key European allies have broken ranks with the U.S. to join a major new development bank created by China. Washington deeply opposes the Asian Infrastructure Investment Bank, which is due to open later this year. The Obama administration says there's no need for another international lending institution. Some think the new bank could undermine American influence in Asia, as NPR's Jackie Northam reports.

JACKIE NORTHAM, BYLINE: Much of Asia is developing rapidly, and there's little question it needs major investment for all types of infrastructure, says Fred Bergsten, a senior fellow with the Peterson Institute for International Economics.

FRED BERGSTEN: The lack of infrastructure - roads, airports, ports, power facilities - are among the biggest barriers to development throughout Asia.

NORTHAM: Bergsten says roughly $8 trillion of infrastructure investment will be needed over the next decade. He says the new Asian Infrastructure Investment Bank will help fill that gap. It's believed China is prepared to put up half of the initial $100 billion budget, ostensibly giving it veto power; much the same as the U.S. has with the World Bank and the International Monetary Fund. Ever since China floated the idea of a new development institution about two years ago, Washington has been against it. The administration says it has concerns about transparency, environmental safeguards and procurement practices. Bergsten says there's a larger issue at stake.

BERGSTEN: I think the fact that it is China and this is part of the broader competition for global leadership, economic leadership, broader political leadership - that is, I think, a central part of this equation.

NORTHAM: The U.S. has pressured Asian allies, such as South Korea, Japan and Australia, not to join the new bank. But then last week, the U.K., one of America's staunchest allies, became the first Western nation to sign on. And today, Germany, France and Italy followed suit. Matthew Goodman, a senior adviser on Asian economics at the Center for Strategic and International Studies, says the Europeans have an incentive to deepen their economic ties with China. But it's a blow to the administration.

MATTHEW GOODMAN: Well, I do think it's a setback for the U.S. You know, it's obviously never a happy thing for the U.S. when its closest allies break away from it and do something that it isn't prepared to do itself.

NORTHAM: Each of the four European nations issued statements essentially saying they want to work with international partners to help shape and ensure the bank follows the best standards and practices. Goodman says it's better to do that beforehand.

GOODMAN: I think there's a question, again; if you're in, you don't have much leverage once you've joined. So if you're going to join you want to have all your questions and concerns answered before you go in.

NORTHAM: Still, it's believed the Europeans' move will open the door for more Western countries to join, except the U.S. Goodman says even if it wanted to, it's unlikely Congress would approve membership in and the use of American capital for a Chinese-led bank. China says countries have until March 31 to decide if they want to become founding members. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.