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KPMG Representative
At kpmg, we make the difference by creating value, like developing strategic insights that help drive M and a success, or embedding AI solutions into your business to sustain competitive advantage. KPMG make the Difference. Learn more at www.kpmg. uS Insights.
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Marco Rubio
China is operating the Panama Canal and we didn't give it to China, we gave it to Panama. And we're taking.
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Luke Vargas
During his first term as president, Donald Trump changed American policy toward China by framing it as the top economic and security threat facing the United States. Then, to start his second term in January, he used his inauguration speech to pinpoint where he would launch a new challenge against that perceived threat. Panama, where China had been building influence through its Belt and Road initiative, the trillion dollar infrastructure lending program Beijing has used to plant its flag in more than 150 Trump's vow to seize back the canal and push out China is part of a broader and still evolving approach to counter Beijing in places where a lack of US Presence or interest has allowed a new partner to move in. I'm Luke Vargas for the Wall Street Journal, and in today's final episode of our what's New Sunday series, Building Influence, my colleague Daniel Bach will be looking at what the US has done to respond to Belt and Road and whether Trump's early actions in office could signal a new, more aggressive.
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Marco Rubio
China's involved with the Panama Canal. They won't be for long, and that's the way it has to be. Marco just got back. As you know, he's in the process.
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Daniel Bach
In the early days of Donald Trump's second term, he dispatched America's top diplomat, Secretary of State Marco Rubio, to a surprising place for a first trip abroad. Panama in Central America became ground zero for Trump's plan to hit back at China's growing influence in America. America's backyard 4% of global trade is ferried along Panama's 50 mile canal between the Pacific and Atlantic Oceans, and Trump was threatening to take control of it. The significance of the decision was clear. Panama was the first Latin American nation to officially join Beijing's Belt and Road initiative back in 2017. That same year, it dropped its diplomatic recognition of Taiwan in favor of establishing ties with China. Since then, China has built or financed a canal bridge, a new subway line, a cruise ship terminal, a convention center, and a wind energy farm there. It's those projects, along with port infrastructure, that a Hong Kong based company has operated on either side of the canal that Trump says violate U.S. panama treaties, treaties that required the canal to remain neutral after it was turned over by the US a quarter century ago. Just this past week, word came that a group of investors led by BlackRock had agreed to buy majority stakes in the ports for about $23 billion. A change in ownership could go a long way toward addressing the administration's concerns, though an executive from the port's Hong Kong owner said the deal was purely commercial. As for those US Concerns, in an interview with Fox News, Rubio said that Chinese owned infrastructure gives Beijing leverage over the waterway. We cannot continue to have the Chinese and through their companies exercising effective control of the canal area, and that needs to happen. Before he left for a five country tour through Central America, Rubio wrote in a Wall Street Journal op ed that the Chinese Communist Party uses economic and diplomatic pressure, including at the canal, to turn sovereign nations into vassal states. China's Foreign Ministry says Beijing respects Panama's sovereignty over the canal and that China has never participated in managing and operating it. But Trump ratcheted up the rhetoric, saying if Panama doesn't limit China's influence, we're.
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Marco Rubio
Going to take it back or something very powerful is going to happen.
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Daniel Bach
Trump got a lot of pushback. Panamanian officials and several former US Military officials, including a former NATO commander, say Chinese built infrastructure there doesn't breach the canal's neutrality, let alone show that Panama's come under the influence of Beijing. But Journal reporter Vera Bergengruen was on the Latin America trip with Rubio, and she says the administration's threats were heard loud and clear.
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Vera Bergengruen
When Rubio arrived in Panama City, he came with an ultimatum from Trump and he told Panama's president, Jose Raul Molino, that his country either had to curb China's presence around the Panama Canal or face some kind of unspecified response from the US but behind closed doors, we were told that it was actually a very productive meeting and Panamanian officials were really eager to show the Trump administration that they were willing to curb Chinese influence and welcome all kinds of US Investment in the country.
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Daniel Bach
The biggest outcome of all of this Molino announced that Panama will leave the Belt and Road program when its funding agreement with China expires and will also seek to end the deal sooner.
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Vera Bergengruen
And it was a big concession for his government. But it's important to remember that Molino is a very pro US President who's very eager to align his country with the US Over China. And this kind of strong arming tactic may not be as productive with leaders who have a warm relationship with Beijing.
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Daniel Bach
I reached out to the State Department and a spokesperson told me Panama's exit from Belt and Road proves the Trump administration's approach to diplomacy works. It's too soon to say what Panama leaving the program will mean. In practice, it's hard to imagine any small nation completely turning its back on the world's second biggest economy. As for whether Washington would pressure other countries to cut ties with Beijing or its investments as a condition of working more closely with the U.S. the State Department declined to comment. After the break, we'll hear why past efforts by the west to counter Belt and Road have been slow to get off the ground.
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Marco Rubio
ADP imagines a world of work where smart machines become too smart copier I need 15 copies of this printing, by the way. Irregardless Not a word, Janet.
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Rana Mitter
Yeah, I know.
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Marco Rubio
Page 6 should be regardless of or irrespective of, just print them, please. If it were a word, Janet, it would mean without irregard, which is copier. Switch to silent mode. Let's put a pin in it. Anything can change the world of work. From HR to payroll, ADP helps businesses take on the next anything.
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Daniel Bach
As China has backed more and more projects in the developing countries across Africa, Asia and Latin America, often referred to as the Global south, the US has struggled to respond. Rana Mitter teaches US Asia relations at the Harvard Kennedy School in Massachusetts.
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Rana Mitter
A few years ago, one of the biggest challenges that the Global south was giving the Western world was how to answer the availability of cheap and easily given finance from China when it came to goods and services they wanted. Right now, particularly infrastructure. And I'd say in the years since then, certainly into the early 2000s, the Western world and the United States in particular, has come up with partial but only partial answers to those questions.
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Daniel Bach
So what do those answers look like? In 2019, under President Trump's first term, the US set up the International Development Finance Corporation, known as the dfc, to help finance projects, including infrastructure, in developing nations. As of December, it had invested nearly $50 billion across 114 countries. That same year, Trump reauthorized the Export Import bank of the United States. It's the American equivalent to China's policy banks that, as you'll remember from episode one of this series, paved the way for Beijing's overseas lending push. And Washington also successfully pressured its European allies to cut out Huawei, arguing that allowing the Chinese company to build 5G networks posed an espionage threat. During the Biden years, the US And Western partners continued to look for ways to bring together public and private financing to offer an alternative to Chinese lending. But overall, the US Approach has struggled to compete with China's Direct full court press. A few years ago, David Sachs, a fellow for Asia Studies at the Council on Foreign Relations, co directed an independent task force on Belt and Road involving private sector experts and former government officials. And they concluded that it presented significant risks for American economic, political security, climate and health interests globally and that the US Response had been insufficient. Sachs still thinks so.
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David Sachs
If a second Trump administration is highly transactional, is going to be far more difficult because competing with BRI requires a more farsighted approach and also a kind of broader thinking about the costs and benefits of international assistance and loans and aid.
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Daniel Bach
That raises the question of what a robust response from the west to China's expansion across continents through building and lending actually looks like. Sachs said the best way to counter the influence China has built is not by trying to outspend them.
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David Sachs
There is a consensus that the United States should not try to match China dollar for dollar around the world. That's just not a game we can play and that we can win it. So if China's building a road, we're not going to say we will build this road in a neighboring country for cheaper or the same price. We just don't have that advantage. We don't have that kind of state backed support that China can bring to the table. So the question what are the strategic sectors that we should compete in? And I think that the Libido Corridor shows that.
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Daniel Bach
The 800 mile libido corridor railway runs through Angola, and a plan to upgrade and extend it, backed by the US And Europe, has been hailed by US officials as a blueprint for how Washington can counter China's infrastructure push in Africa. Angola has received more infrastructure loans from China than any other country In Africa, over $45 billion in total, including for constructing railways. But years of neglect left the Lobido Railway with rundown stations, equipment that local operators didn't know how to use or fix, and parts of the tracks disappearing into long grass. That opened the door for Washington to gain a bigger foothold in 2022 when Angola rejected a Chinese bid to refurbish the railway in favor of a plan from a European consortium backed by the US during his presidency, Joe Biden made shoring up commercial ties with Africa a policy priority, because the United States understands.
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Marco Rubio
How we invest in Africa is just as important as how much we invest in Africa.
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Daniel Bach
That was Biden last December when he traveled to Angola on his last foreign trip as President. On that trip, he announced more than $560 million in new funding for the libido corridor, bringing total US investment in it to over $4 billion. So what's the upshot for the West? The US and European investment will help connect a copper rich region of Zambia and the copper, lithium and cobalt mines of the Democratic Republic of Congo with the port city of Libido on Angola's Atlantic coast. That'll allow the US to access the critical minerals trade in the region, something China has dominated, and speed up the transport of those green energy minerals from the source.
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Marco Rubio
A few months ago, the DRC sent the first copper ship on this railway for transit onward to the United States.
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Daniel Bach
Journal reporter Vera Bergen Gruen traveled with then President Biden to Angola.
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Vera Bergengruen
Biden officials in Angola were very clear that they had heard from a lot of Republican lawmakers. They had heard from Trump officials that they are very interested in continuing this. There's a high level of interest because it's a lucrative business opportunity, but also because it's a blueprint that can be replicated across many other continents as well.
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Daniel Bach
So could this blueprint get picked up by the Trump administration?
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Marco Rubio
The America First, Make America Great Again agenda cannot be carried out without inputs of resources, access to these resources, and access to markets.
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Daniel Bach
That's Peter Fam. He was Trump's special envoy for the Sahel and Great Lakes regions of Africa during the President's first term. Fahm says focusing on projects that have a strong business case for securing critical minerals like those in Angola would align with Trump's aim of rebuilding America's industrial base.
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Marco Rubio
I think critical to US national security and economic security interest going forward. America's goal is a diversified supply chain. It doesn't benefit America and it certainly doesn't benefit African countries to have an outside power, any outside power, much less one like China. Monopolize these supply chains.
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Daniel Bach
Coming up, a look at what Trump's first weeks back in office can tell us about how he might counter belt and road.
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Marco Rubio
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Daniel Bach
In the first month of Trump's second term, plenty of his actions have disrupted the global diplomatic order and America's leading role in it. But perhaps the boldest was his move to shut down U.S. aid.
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Marco Rubio
Breaking overnight, workers at the U.S. agency.
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Daniel Bach
For International Development, USAID in Washington were.
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Marco Rubio
Told to stay home.
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Daniel Bach
Don't come in.
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Marco Rubio
The Trump administration has accused the United.
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Rana Mitter
States Agency for International Development of wasting money.
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Vera Bergengruen
The USAID organization in the United States is being stripped down to bare bones by Donald Trump's administration.
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Daniel Bach
The $40 billion agency helps some 130 countries fight famines, diseases and human trafficking. Many lawmakers, including Republicans, say it's a crucial soft power tool in combating Beijing. As we heard in episode one of this series, Marco Rubio has long warned of dangers posed by China's Belt and Road program. And as a US Senator, he spent years praising US Aid as a way of countering China. Here he was speaking at an event hosted by the Washington Institute for Near east policy in 2013. We don't have to give foreign aid. We do so because it furthers our national interests. That's why we give foreign aid. But almost overnight, President Trump gutted US Aid, saying its work doesn't align with American interests and leaving Rubio to preside over a vastly reduced assistance program. Foreign aid workers and some Democrats say they worry that the void left by US Aid cuts will push countries into China's arms. The State Department declined to comment. In its annual report ahead of November's election, a commission of security and economic experts convened by Congress said that to counter China's ambitions, there was a need for a clearly coordinated U. S led effort to build a coalition of like minded countries. So far, Trump seems to be going down a different path, primarily focusing on extracting from other countries concessions that serve American interests, like agreements with Colombia and Venezuela to take in deportees, or pushing for a mineral rights deal with Ukraine. David Malpass, a former World Bank President and U.S. treasury official in Trump's first administration, says the president's approach, which emphasizes negotiating, could help put China on the back foot.
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Vera Bergengruen
The US has an opportunity to really push back on China by working through a changed framework for international organizations. They can't have the rules set up for the benefit of China, and that enters Trump's wheelhouse. That's renegotiating bad deals and that would give the US A more level playing field in dealing with China in developing countries.
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Daniel Bach
Rana Mitcher from the Harvard Kennedy School, on the other hand, thinks Trump's tactics risk backfiring. He says that if the president makes good on his threat to impose tariffs on swaths of countries and at the same time demands that they draw down links to Beijing, he could end up making other countries more reliant on China.
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Rana Mitter
And what will probably end up happening is in many sectors, countries like Germany or countries like Canada might find themselves having to have conversations that we never dreamed of having, you know, two, three, five years ago, possibly even with Beijing.
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Daniel Bach
Out of necessity, Mitter says it remains unclear what the US Is pitching to countries it wants to bring on side. While China is telling a compelling story about what's on the table when it invests in a country making belt and road an ongoing risk to US Economic and security interests, David Sachs from CFR agrees that this threat won't be easy to displace.
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David Sachs
This is a signature foreign policy initiative of Xi Jinping. It has been incorporated into the Chinese Communist Party constitution. This is not something that Xi Jinping is attempting to distance himself from. It is actually something that Xi Jinping is trying to lean into. And I also think that right now there is a certain geopolitical logic for Beijing to continue down this path.
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Daniel Bach
I reached out to China's Ministry of Foreign affairs and the U.S. state Department for comment, but they didn't respond. So while Washington has signaled a transactional approach to foreign policy and given few specifics about how it plans to counter China's global infrastructure campaign, Beijing's ambitions remain laser focused. In 12 years, China has planted its flag in more than 150 countries, financing and building everything from roads, megaports and mines to green energy and digital infrastructure. It's weathered an economic downturn at home and a pile of loans turning sour, adapting its program so it can continue to lend to developing nations. And what China has bought and paid for is influence, which will remain key to advancing Xi Jinping's strategic goals for years to come. And while the US has warned of the dangers, if the aim is to push back, so far it hasn't put forward a comprehensive plan.
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Luke Vargas
And that's it for our what's New Sunday series, Building Influence. Today's show was hosted and produced by Daniel Bach. Our sound designers are Jessica Fenner and Michael Lavalle. Michael wrote this series theme music. Our supervising producer was Christina Rocca. We had editorial support from Chris Zinsley and Falana Patterson and special thanks to Ryan Dube, Sharon Weinberger and James Arity. I'm Luke Vargas for the Wall Street Journal and we'll be back right here tomorrow with a brand new show. Until then, thanks for listening.
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KPMG Representative
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