Countering China: Foreign aid in America’s national interest

The reelection of President-elect Trump has once again surfaced the important question: Why does the U.S. spend taxpayer dollars to support the developing world?  

The purpose of foreign economic assistance has evolved since after World War II when the Marshall Plan helped to ensure that Western Europe remained free from the reach of the Soviet Union. 

As the Cold War intensified, President Truman launched the Point Four Program that expanded U.S. support globally. The program focused on creating markets for the United States by reducing poverty and increasing production in developing countries and diminishing the threat of communism by helping countries prosper from capitalism. 

President John F. Kennedy created the U.S. Agency for International Development in 1961 to centralize U.S. assistance programs as part of a broader diplomatic and defense effort to counter communist influence. 

Over the last 50 years, development priorities have adapted to address shifting global challenges, including absolute poverty, democratic backsliding and emerging health crises. Currently, 20 U.S. agencies (international and domestic) are involved in disbursing foreign aid.  

Focusing U.S. foreign economic assistance is more vital than ever to address the geopolitical threat from China as Washington is losing the battle against Beijing in the developing world over trade routes, supply chains, digital infrastructure and economic spheres of interest. Unlike the Soviet threat, the new fight is over the very nature of capitalism and which system of governance is best to promote. 

Using foreign assistance to create free markets for American businesses is not sufficient. To counter China, Washington must use its aid to unlock and directly support the transformative potential of the U.S. private sector to usher in global innovation and competitiveness, while benefiting American workers and consumers.    

Through the Belt and Road Initiative, China is actively extending its veins of authoritarian and corrosive capitalism into over 150 countries and multiple international organizations. 

Like a drug, Beijing has injected over $1 trillion over the last 12 years into expanding its global network, corrupting government officials, creating debt dependences, locking up natural resource and supply chains, spreading digital authoritarianism, undercutting local companies, and, ultimately, threatening American jobs and U.S. global influence.  

Over the past decade, Washington has established and reoriented government-led programs and institutions in its struggle with China, including the International Development Finance Corporation, USAID, Department of State, Millennium Challenge Corporation, Prosper Africa, Power Africa and Feed the Future. 

Other U.S. government institutions are focused on helping American business overseas including the Export-Import Bank, Trade and Development Agency, Foreign Commercial Service, and Foreign Agriculture Service. 

Although this collective U.S. support has demonstrated some success, it needs greater strategic purpose and institutional coordination to win the economic battle against China. 

U.S. businesses face an array of challenges when considering international investment, including non-transparent legal and regulatory frameworks, corruption, inadequate product quality and quantity produced by local providers, trade restrictions and extreme weather impacts to supply chains. Helping to resolve these constraints will increase U.S. capital and blended-finance investments, which will create jobs, spark innovation, and offer a multiplier effect to ripple across the developing world, freeing these countries from China’s economic servitude. 

Like Japan, the United Kingdom and France, the U.S. must have a more direct alignment between its foreign aid and commercial interests.  

As a first step, every U.S. foreign economic assistance program should ask the following question: How does the program improve economic opportunities for American private-sector investment? 

Programs should pivot directly to help U.S. businesses address the above constraints and support financial return on investment decisions. In the process, development principles like transparency and sustainability will be strengthened and local economies will grow, leading to a win-win for both American businesses and consumers and the host countries. 

More ambitiously, the United States should reorient and align its foreign, commercial and development assistance through an American Private Sector Development initiative to support U.S. businesses of all sizes in the developing world. Foreign economic assistance must again become a vital tool of national security by empowering the American private sector. 

Only with this unity of purpose and resources does Washington have a chance to turn the tide against Beijing’s push for global domination. 

Jason Foley is a former U.S. Agency for International Development deputy assistant administrator for Asia and the Middle East. Jim Barnhart was a U.S. Agency for International Development senior foreign service career minister, serving as mission director in the Middle East and Eastern Europe. Both are now executives at J.E. Austin Associates, Inc.