As Trump Heads to China, U.S.-Japan Sign Infrastructure Deals

  • Development agencies ink agreement on joint Asian projects
  • U.S., Japan have stayed out of China’s development bank

U.S. President Donald Trump, raises a wine glass as he toasts after delivering a speech during a state banquet at Akasaka Palace in Tokyo on Nov. 6.

Photographer: Shizuo Kambayashi/Pool via Bloomberg

A day before U.S. President Donald Trump is welcomed on a lavish state visit to China, his government signed two deals with regional rival Japan, pledging cooperation on infrastructure projects in the Indo-Pacific region.

The agreements appeared to offer emerging economies an alternative to China’s Belt and Road initiative, a pillar of President Xi Jinping’s economic policy. The "new Silk Road" connecting China with Europe is financed by China’s Asian Infrastructure Investment Bank, in which both Japan and the U.S. have so far declined to take part.

Trump’s rejection of the Trans-Pacific Partnership regional trade deal in January disappointed many Japanese policy makers, who had seen it as an opportunity for the allies to exercise joint influence in the region, counterbalancing the growing weight of China. Joint funding of infrastructure projects could be a step toward a new regional strategy.

"Of course both the U.S. and Japan are concerned about the possibility that the Belt and Road could be used for geopolitical and military purposes," said Masahiro Kawai, director-general of the Economic Research Institute for Northeast Asia, adding that infrastructure cooperation could form part of a new U.S. strategy in Asia, which he said had been lacking since Trump took office.

Voting Rights

Kawai previously worked at the Asian Development Bank, an organization traditionally headed by a Japanese citizen, and where the U.S. and Japan have the largest voting rights.

While the signing ceremony between organizations that finance and insure overseas investment projects took place after Trump had left Japan, he referred to the agreements as "a major development that will advance our shared interests in the region" in remarks to business leaders in Tokyo on Monday.

According to a White House statement, Trump had discussed the deals with Prime Minister Shinzo Abe and agreed that infrastructure projects in the region needed market competition, transparency and responsible financing.

Ray Washburne, president of the Overseas Private Investment Corporation, signed the memoranda with his counterparts from the Japan Bank for International Cooperation and Nippon Export and Investment Insurance.

"It sends a message to this entire region that the United States and Japan are working in a cooperative fashion to take both our expertise and leverage them in a much greater sense," Washburne said in an interview ahead of the signing. "We both see a great economic opportunity to invest in this whole region, it just needs a new focus on it. It’s re-setting the table on U.S. focus in the whole region."

Swath of Countries

No specific projects have been earmarked for cooperation as yet, and there is no budget forecast, but the focus will be on a swath of countries from Pakistan and India down to Southeast Asia, Washburne said. The agreements came a day after the U.S. Trade and Development Agency signed a separate memorandum of cooperation with Japan’s Trade Ministry on building energy infrastructure in third countries.

Abe said in June that Japan was ready to cooperate with China’s Belt and Road initiative under certain conditions. However, there were no discussions this week about Japan or the U.S. joining China’s AIIB, Washburne told reporters before the signing, saying that the two nations would operate separately from China.

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