What should the United States do about Russia’s longstanding application to become a member of the World Trade Organization, after the crude Aug. 7 Russian invasion of Georgia? The next US president will have to decide whether to use the proverbial carrot or stick. The carrot approach would seek to bring Russia into the WTO’s rules-based multilateral trading system, as an inducement to settle economic differences peacefully. But current emotions in Washington, D.C. are strongly in favor of using the stick: continue blocking Russia’s WTO accession as punishment for its bad behavior in Georgia. How long will the punishment last? Well, China didn’t get into the WTO until December 2001, twelve years after the 1989 massacre in Tiananmen Square.

The bottom line question that isn’t presently being asked in Washington, D.C. is: who stands to benefit, the longer the world’s 10th largest economy is excluded from the WTO? So far, thoughtful answers aren’t coming from either of the two American presidential candidates. When Russian tanks roll across the borders of small neighboring democracies, American voters don’t look for nuanced responses — they mainly want to know how tough the next commander in chief would be prepared to be. The candidate who promises to pick up the stick today will always beat down any candidate who would dare to suggest that the carrot approach might be wiser tomorrow or the next day. And on the 2008 campaign trail, the only difference between Republican John McCain and Democrat Barack Obama is over who would pick up the bigger anti-Russian stick.

Does continuing to frustrate Russia’s hopes to join the WTO help encourage the bear to behave more responsibly? There is a history here that suggests otherwise. Let’s take a look, both from the perspective of the American eagle and the Russian bear.

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Some 3,000 members of the international financial elite gathered in Madrid last month for the 41st annual meetings of the Asian Development Bank. One measure of the meetings’ importance is seen in a leaked list of attending financiers that ran to 48 pages — including such serious players as Citigroup, Barclays, Goldman Sachs, Franklin Templeton, Clearstream, Standard Chartered, Sumitomo, Nomura, Mitsubishi, Banco do Brasil, BNP Paribas, Deutsche Bank, the Bank of America, the Bank of China, and other assorted bond traders, private-equity mavens, finance ministers, and central bankers.The ADB, which was launched in 1966, is headquartered in Manila, has some 2,400 international civil servants who work there and in 26 regional field offices from Afghanistan to Vietnam. Major American newspapers pay scant attention to the ADB.

But for anyone interested in trade and investments in the world’s fastest-growing and most dynamic region, the ADB is worth paying attention to. First, there’s a lot of money, not to mention the government backed credit guarantees with their Triple-AAA ratings. Last year, the development bank — which has doled out more than $130 billion in development assistance in the past four decades — lent $10.1 billion, of which $1.75 billion was channeled to the private sector, the ADB’s emerging new priority. For example, on April 25, as the financial movers and shakers prepared to fly to Madrid, the ADB announced that it had executed a $450 million loan to Coastal Gujarat power Limited, which is a wholly owned owned subsidiary of India’s giant Tata Power Co. Ltd. The project “is expected to be the first in a series of large energy-efficient power plants to help ease power shortages” across India, ADB officials announced.

During the May 2-6 meetings in Madrid, the ADB’s 67 member countries expressed overwhelming support for enhancing the bank’s involvement in private-sector oriented development projects over the next twelve years. Traditionally, the majority of the ADB’s financing has been directed to public development projects aimed at helping governments build such infrastructure as roads, dams, and irrigation projects. But now, the so-called Strategy 2020 is aimed at boosting the ADB’s private-sector funding, which presently accounts for some one fourth of the total lending portfolio, to about half of total expenditures by the year 2020. Everyone in Madrid applauded the new direction.

Well, not everyone. The United States, the ADB’s second largest donor after Japan, flatly refused to support the new plan. Why would the world’s largest market economy be the only one of 67 countries to vote against moving the development bank in an increasingly market-oriented direction? Moreover, there are other controversies associated with Strategy 2020. To some observers, the ADB’s new strategy could pit Asia’s weaker economies like Cambodia and Bangladesh against more rapidly developing Asian tigers like Vietnam and Thailand that are more attractive to the private investors the ADB will be working with. The poor Cambodians and Bangladeshis want to remain on the dole, and fear they will be left further behind. Others ask why emerging economic powers like China and India, which are able to attract major capital inflows on their own, need the ADB’s “corporate welfare.”

Let’s sort out the controversies.

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