Reauthorization of the Development Finance Corporation is strategically necessary

The rise of a new isolationism is constraining America’s global leadership. Preoccupation with internal conflicts, such as dealing with border security, will impede military assistance to Ukraine, Israel, and Taiwan. At the same time, major new trade deals are being “paused” as policy focus shifts to domestic support for critical supply chains.

But history has shown us that the idea of ​​focusing attention domestically and leaving others to fend for themselves poses greater challenges for America in the future. Promoting national interests requires active involvement overseas.

As Congress begins talks to reauthorize the U.S. International Development Finance Corporation (DFC), we cannot allow U.S. development financing to fall prey to an inward-looking mindset that limits U.S. leadership in defense and trade. I’m not going. DFC plays an important role in advancing America’s strategic interests.

DFC was established under the BUILD Act of 2018 to provide financial support to overseas development projects in emerging markets and developing countries. To date, it has committed to finance more than $40 billion in projects in 112 countries, ranging from small business loans and public health initiatives to infrastructure financing. These projects provide net benefits to recipient countries and U.S. taxpayers.

DFC projects, particularly in infrastructure financing, also advance U.S. strategic objectives that go beyond justifying reauthorization.

The first goal is to expand U.S. exports. Infrastructure is the conduit through which future commerce will flow. This includes not only original sales, but also maintenance, replacement parts, and upgrades. Better infrastructure support could lead to increased exports now and in the future. The U.S. Trade and Development Agency’s experience illustrates the benefits that infrastructure financing can generate. The agency reports that every dollar it programs generates $231 worth of additional U.S. exports.

Unfortunately, the United States lags behind its competitors in funding projects essential to ensuring the free flow of goods. Chinese companies now have ownership in at least 100 ports in 63 countries, a number that has doubled in the past decade. This includes major locations in Europe and Israel. The United States needs to fund significant investments to ensure U.S. access to important foreign markets, as DFC recently did in Sri Lanka.

The second goal is to strengthen global diplomatic relations, which have been strained by the recent unpredictability of American policy. Durable long-term investments can strengthen political relationships abroad. Developing countries currently face a significant lack of access to the infrastructure financing they need to build a solid foundation for growth. DFC projects foster that growth by providing critical services that create jobs and foster development. As a result, there are few better ways to foster sustainable relationships.

Promoting America’s principles of a free and open society means protecting our digital security. The United States should ensure that affordable communications technology empowers its people, rather than forcing and coercing governments. By promoting a digital infrastructure that incorporates Western standards, we can ensure reliable and secure global communications.

The third goal is to promote American security. The ability of the United States to maintain a rules-based system depends critically on reliable access to ports and reliable communications. But it also depends on a resilient supply chain. Reliable and stable access to critical minerals, rare earth metals and other sources is fundamental to our economic security. Infrastructure investments provide an effective way to strengthen essential supply chains and ensure that the United States is not overly dependent on any one country for the fundamentals of economic security.

Of course, there are many other benefits to US development financing. It accelerates the transition to green energy that incorporates American products, helps people get clean water and food, and promotes democracy and the rule of law.

However, U.S. foreign policy remains hampered by the idea that focusing on domestic issues is the best way to advance national interests. it’s not. America succeeds only when we have a path to free commerce, open communication, and stable supply chains. Congress can ensure these goals are achieved by reauthorizing one of the most important tools in America’s foreign policy toolkit: the Development Finance Corporation.

Mark Kennedy served as a member of the Minnesota House of Representatives from 2001 to 2007, is director of the Wilson Center’s Waba Institute for Strategic Competition, and president emeritus of the University of Colorado. Jeffrey Kucik is a Global Fellow at the Waba Institute for Strategic Competition at the Wilson Center and an Associate Professor at the University of Arizona.