Trump Administration Rethinks Foreign Aid With Eye Toward China
A gleaming new $3.2 billion railway cuts in half the travel time from Kenya’s capital, Nairobi, to the coast. Major investments in transportation, energy and maritime infrastructure are turning Pakistan into a major economic corridor. A new industrial zone in Thailand boasts solar, rubber and industrial manufacturing plants and is slated to host 500 companies by 2021.
All are parts of China’s ambitious Belt and Road Initiative, featuring billions of dollars in infrastructure investment across Asia, Africa and the Pacific. The global impact is forcing the administration of U.S. President Donald Trump to rethink elements of its plan to cut back on foreign assistance under an “America First” strategy.
When “very senior people” in the administration traveled abroad and “saw that China was eating our lunch, they thought to themselves, 'We have to do something,' ” said Daniel Runde, an analyst with the Center for Strategic and International Studies (CSIS) in Washington.
And in a number of quiet moves affecting private investment, humanitarian aid and women’s empowerment abroad, the administration and the U.S. Congress have been doing just that.
Major policy reversal
In what is being seen as a major policy reversal, Trump this month signed the so-called BUILD Act, described by the nonpartisan CSIS as "the most important piece of U.S. soft power legislation in more than a decade."
The new law merges and boosts agencies and programs that had once been targeted for deep budget cuts, creating a new entity tasked with providing loans, political-risk insurance and equity stakes to U.S. firms investing in developing countries, from Afghanistan to Zambia.
The agency will be known as the U.S. International Development Finance Corp., or USIDFC, and have a $60 billion budget. It will absorb the existing Overseas Private Investment Corp. (OPIC) and more than double that agency’s current budget of $29 billion.
The USIDFC is “a much-needed instrument of commercial diplomacy that the U.S. has been sorely lacking,” said Witney Schneidman, a former deputy assistant secretary of state for African affairs, in a recent blog post for the Brookings Institution.
In a follow-up phone interview, Schneidman said he thought the new agency would help "get U.S. companies interested in Africa on its own merit. … It does put the U.S. on level with the Chinese” by matching Beijing’s policy of making equity investments in companies seeking to do business overseas.
Dwarfed by China
Even at $60 billion, the new U.S. program will be dwarfed by Chinese investments in Asia and Africa. But Brookings analyst George Ingram said its impact can be magnified by partnering with other international lending organizations.
“The French, the British, the Scandinavians – they all have similar organizations," Ingram said. "And now that the [USIDFC] has equity authority, this new entity will be able to be a much more effective partner than OPIC could be.”
The BUILD Act has its critics, especially among free-market conservatives who believe the government should not get involved in private business decisions.
"The idea of equity participation was kind of sold politically that it was going to be the U.S. responding to China’s One Belt, One Road [initiative] and yet there was no mention of China in the legislation at all,” James M. Roberts, an editor for the Washington-based Heritage Foundation’s annual “Index of Economic Freedom,” told VOA in an interview.
By ensuring equity stakes, “that means the government is going to be a shareholder in foreign companies,” added Roberts, who has listed a potential for “cronyism and misallocation of capital” among his concerns.
Advocates of the plan include Mark Green, head of the U.S. Agency for International Development, whose Development Credit Authority is being folded into the USIDFC. By encouraging U.S. private investment abroad, he has said, the new enterprise will “spur economic growth in less developed countries and advance the foreign policy interests of the United States.”
Interviewed last week for VOA’s “Plugged In With Greta Van Susteren,” Green, a former Republican congressman who later served as ambassador to Tanzania, said there’s a “fundamental difference” between U.S. and Chinese approaches to development abroad.
China favors loans that can include “unsustainable financing that mortgages a country’s future,” he said. In contrast, USAID expects recipients to implement reforms.
“We ask them to respect certain rights and values. What we want for them is to become eventual trading partners, but equal partners,” Green added.
The Trump administration has demonstrated a renewed openness to international aid in other ways as well, including a recent five-year extension to an anti-hunger measure known as the Global Food Security Act. It supports USAID programs such as Feed the Future initiative. It partners with governments, NGOs, private enterprise and others "to strengthen agricultural markets and then entire food systems," said Beth Dunford, who oversees the initiative.
Pending in Congress, meanwhile, is the Women’s Entrepreneurship and Economic Empowerment Act, aimed at improving women’s access “to economic participation and opportunity.”
It calls for supporting women’s property and inheritance rights and ending gender-based violence. It also requires that USAID integrate efforts to empower women in all of its programs, and it broadens support for women-run small- and medium-size businesses.
The bill, which enjoys bipartisan backing, is being promoted by first daughter Ivanka Trump. She tweeted her thanks this week to four members of the Senate Foreign Relations Committee for advancing the bill.
“Women’s economic empowerment doesn’t always get a lot of attention in Congress, so this bill is something we’re quite excited about,” said Nicole Ellis, who manages policy communications for the international relief agency CARE.
Gayatri Patel, CARE's senior policy advocate, said the agency is working closely with legislators, noting they want "practical recommendations and approaches."
That might include endorsing approaches such as the Village Savings and Loan program that CARE started in Niger in 1991. “You get women in a community to save, they give each other loans,” Patel said. “It's really an entry point for women for more formal economic endeavors … to start businesses or pay for their children's education, to connect with the market and mentor or be mentored by others in the community.”
The goal, she said, is to encourage aid that has "a catalytic effect on women, their families and their communities."