* Four big EU states agree to join new investment bank
* Bank could spread Chinese "soft power" in Asia
* U.S. says new bank must meet high governance standards
* India also joins, Japan seen staying away
(Adds background on IMF reforms, Bergsten comment)
By Matthias Sobolewski and Jason Lange
BERLIN/WASHINGTON, March 17 The United States
urged countries on Tuesday to think twice about signing up to a
new China-led Asian development bank that Washington sees as a
rival to the World Bank, after Germany, France and Italy
followed Britain in saying they would join.
The concerted move by U.S. allies to participate in
Beijing's flagship economic outreach project is a diplomatic
blow to the United States and its efforts to counter the
fast-growing economic and diplomatic influence of China.
Europe's participation reflects the eagerness to partner
with China's economy, the world's second largest, and comes amid
prickly trade negotiations between Brussels and Washington.
European Union and Asian governments are frustrated that the
U.S. Congress has held up a reform of voting rights in the
International Monetary Fund that would give China and other
emerging powers more say in global economic governance.
Washington insists it has not actively discouraged countries
from joining the new bank, but it has questioned whether the
Asian Infrastructure Investment Bank (AIIB) will have sufficient
standards of governance and environmental and social safeguards.
"I hope before the final commitments are made anyone who
lends their name to this organization will make sure that the
governance is appropriate," Treasury Secretary Jack Lew told
Lew warned the Republican-dominated Congress that China and
other rising powers were challenging American leadership in
global financial institutions, and he urged lawmakers to swiftly
ratify stalled reform of the IMF.
German Finance Minister Wolfgang Schaeuble announced at a
joint news conference with visiting Chinese Vice Premier Ma Kai
that Germany, Europe's biggest economy and a major trade partner
of Beijing, would be a founding member of the AIIB.
In a joint statement, the foreign and finance ministers of
Germany, France and Italy said they would work to ensure the new
institution "follows the best standards and practices in terms
of governance, safeguards, debt and procurement policies."
Luxembourg's Finance Ministry confirmed the country, a big
financial center, has also applied to be a founding member of
the $50 billion AIIB.
The AIIB was launched in Beijing last year to spur
investment in Asia in transportation, energy, telecommunications
and other infrastructure. It was seen as a rival to the
Western-dominated World Bank and the Asian Development Bank.
China has said it will use the best practices of those
A spokeswoman for the European Commission, the EU's
executive arm, endorsed member states' participation in the AIIB
as a way of tackling global investment needs and as an
opportunity for EU companies.
The World Bank is traditionally run by a U.S. nominee and
Washington also has the most influence at the IMF.
The adjustment of shares and voting rights in the IMF was
brokered by Britain at a Group of 20 summit in 2010, and
European countries ratified it long ago.
Lew told lawmakers that the U.S. delay in ratifying the
agreement was undermining its credibility and influence as
countries question the United States' commitment to
"It's not an accident that emerging economies are looking at
other places because they are frustrated that, frankly, the
United States has stalled a very mild and reasonable set of
reforms in the IMF," Lew said.
The reforms would double the fund's resources and hand more
IMF voting power to countries such as the BRICS - Brazil,
Russia, India, China and South Africa.
Some Republicans have complained the changes would cost too
much at a time Washington is running big budget deficits. The
reforms have also ran afoul of a growing isolationist trend
among the party's influential Tea Party wing.
China said earlier this year a total of 26 countries had
been included as AIIB founder members, mostly from Asia and the
Middle East. It plans to finalize the articles of agreement by
the end of the year.
China's state-owned Xinhua news agency said South Korea and
Switzerland were also considering joining.
Chinese Foreign Ministry spokesman Hong Lei would not
comment on which countries had applied, and repeated that the
bank would be "open, inclusive, transparent and responsible."
Washington says it sees a role for the IAAB given Asia's
immense infrastructure needs and regards it as a potential
partner for established institutions like the ADB.
But its strategy of questioning the IAAB's standards has
drawn criticism from some observers, who say the administration
should have been more accepting of the new bank or offered
alternatives within the existing institutions.
"If you try to fight the rising power's peaceful ascent you
sow big problems in the future," said Fred Bergsten, a former
top international affairs official at the U.S. Treasury and
currently a fellow at the Peterson Institute in Washington.
Scott Morris, a former U.S. Treasury official who led U.S.
engagement with the multilateral development banks during the
first Obama administration, said Washington was paying the price
for delay on IMF reform.
"It's a clear sentiment among a pretty diverse group of
countries: We would like to mobilize more capital for
infrastructure through MDBs (multilateral development banks),"
said Morris, now with the Washington-based Center for Global
"And the U.S. stands in the way of that and now finds itself
increasingly isolated as a result."
A government official in India, which also has joined, said
the members of the AIIB would meet in Almaty, Kazakhstan, on
March 29-31 to discuss the articles of agreement.
China has said March 31 is the deadline for accepting
founder-members into the organization.
Japan, Australia and South Korea remain notable regional
absentees from the AIIB. Australian Prime Minister Tony Abbott
said at the weekend he would make a final decision on membership
soon. South Korea has said it is still in discussions with China
and other countries about possible participation.
Japan is unlikely to join the AIIB, but ADB head Takehiko
Nakao told the Nikkei Asian Review that the two institutions
were in discussions and could work together.
(Additional reporting by David Brunnstrom, Anna Yukhananov, and
Douwe Miedema in Washington; Yann Le Guernigou and Marine
Pennetier in Paris; Erik Kirschbaum in Berlin; James Mackenzie
in Rome; Ju-min Park in Seoul; Michael Martina and Ben Blanchard
in Beijing; Manoj Kumar in Delhi; and Leika Kihara in Tokyo;
Writing by Paul Taylor and Stuart Grudgings; Editing by Gareth
Jones and Leslie Adler)