To Counter China, U.S. Looks to Invest Billions More Overseas
White House hopes to expand Overseas Private Investment Corp., a little-known agency it wanted to eliminate a year ago
Josh Zumbrun and
Updated Aug. 31, 2018 1:19 p.m. ET
The U.S. is finalizing plans to double funding for big infrastructure projects around the world, seeking to counter China’s growing influence.
Congress is working to resolve the last barriers to passing a bill that would boost the U.S.’s role in international development. It would combine several little-known government agencies into a new body, with authority to do $60 billion in development financing—more than double the cap of the current agency that performs that function. The measure, supported by the Trump administration, easily passed the House this summer; it faces its biggest test in the Senate.
The new agency would have broad authority to go toe-to-toe with China in offering countries financing options for major infrastructure and development projects.
The bill’s momentum reflects growing bipartisan concern in Washington about the scale of China’s ambitions to restructure global trade routes so that all roads lead to Beijing. Senators have become especially concerned with China’s global investment plan known as the One Belt, One Road Initiative. China, which has flexed development muscle across the globe since it announced its plan in 2013, is thought to be willing to spend and lend trillions of dollars on projects like superhighways, railroads, harbors and ports.
“People are waking up to what China is doing and see that we have to counter that,” said Rep. Ted Yoho (R., Fla.), one of the House co-sponsors of the bill, which was introduced with bipartisan sponsorship in both chambers, with Sens. Bob Corker (R., Tenn.) and Chris Coons (D., Del.) in the Senate, and Mr. Yoho and Adam Smith (D., Wash.) in the House.
Passage is “achingly close,” Mr. Coons said this month. “We are down to just a few holds in the Senate and I remain optimistic that, given the engagement of the White House and persistent work, we will get this done.”
The legislation represents a sharp reversal for the agency that currently promotes U.S. investment abroad, the Overseas Private Investment Corp. In President Trump’s first budget in 2017, the agency was proposed for elimination—with the administration saying it provided “unnecessary federal interventions that distort the free market.”
But as trade tensions rose with China, so did focus on the extent—and consequences—of China’s infrastructure binge. The government of Sri Lanka could not make payments on a Chinese-funded super port, and ended up granting China a 99-year lease, giving Beijing a key foothold in the Indian Ocean. Pakistan, with $62 billion in Belt and Road projects, is seeking out bailout options to manage its payments.
Officials on the White House’s National Security Council and in the Office of Management and Budget decided to throw White House support behind a new development agency, and the president’s budget released in February 2018 put forth a proposal for combining and beefing up U.S. development finance.
The main body of the new agency would be OPIC, founded by President Nixon in 1971 to help American businesses invest in developing and emerging markets in order to further U.S. foreign-policy goals. The new agency would also take over several programs run by the U.S. Agency for International Development, the biggest of which is known as the Development Credit Authority.
Like many technocratic White House budget proposals, which often go nowhere, the odds of passage appeared remote. But the legislation has a number of features with appeal across party lines. Since it would combine several government agencies into a single one called the U.S. International Development Finance Corp., it’s attractive to those who favor streamlining government programs.
Another source of the bill’s popularity is OPIC’s track record: It has been profitable every year for the last 40 years and has contributed $8.5 billion to deficit reduction.
The agency has a portfolio of $23 billion, with its business consisting of loan guarantees, direct lending and political-risk insurance. Projects it has financed or insured include a toll road in Colombia, a geothermal power plant in Honduras, cellphone towers in Uganda and a nuclear-fuel storage facility in Ukraine.
Trump administration officials say they have heard repeatedly that countries in need of infrastructure would rather go with American-led financing, but China has been the one making offers.
Yet OPIC has been limited by a congressional cap on its portfolio size and a prohibition on owning equity stakes in projects—issues addressed by the new legislation. China’s effort faced no such hurdles in expanding its investments at a pace some consider reckless.
“Their projects economically don’t make a lot of sense,” said OPIC President Ray Washburne, a former Trump fundraiser who congressional aides say has been crucial in making the case that the agency can put forward a market-oriented American alternative. “It’s a loan-to-own program the Chinese are doing.”
Mr. Washburne sees his agency’s model as a sharp contrast.
“We come in with projects that make economic sense, because we’re not an aid organization,” Mr. Washburne said. “We’re for the free trade of goods. We’re for private businesses.”
The main obstacle to the new agency is in the Senate, where Majority Leader Mitch McConnell (R., Ky.) has been spending his time confirming judges and racing to pass spending bills in order to avert a partial government shutdown at the end of September. Because of the Senate’s procedural rules, each such vote can take days, meaning that legislation to take on China, which isn’t a top priority, doesn’t neatly fit into the schedule.
The quickest pathway through the Senate is via unanimous consent, a process that would allow the bill to pass on an expedited basis so long as all 100 senators agree. But if even one senator objects, the Senate can’t use that fast-track method. At least one senator—Republican John Barrasso of Wyoming—could upend such a process. Mr. Barrasso was the lone senator to vote against the bill in June, when it was approved by the Senate Foreign Relations Committee 20-1. He declined to comment about his current thinking during a brief hallway interview last week, and his office hasn’t responded to requests for comment.