Should the Trump Administration Slash OPIC or Reward It?
WHY YOU SHOULD CARE
Because OPIC is one way to help America compete better abroad.
By Taylor Mayol
As a young staffer on Capitol Hill in the 1970s, George Ingram worked on a piece of legislation that, at the time, was considered a “conservative” bill. At some point during his career, the issue became a Dem favorite. Then it was a roundly bipartisan initiative. Today, it’s one of the Tea Party’s favorite things to hate — and the far left’s too. It’s a “political football between left and right,” Ingram laughs.
As you may have guessed, that bipolar bill created the Overseas Private Investment Corporation, a government-funded investment arm that helps American companies start businesses in developing countries. Even with the partisan flip-flopping, there’s one thing politicos agree on: OPIC operates at no net cost to taxpayers, according to its record keeping, and actually pays the U.S. Treasury money each year. In fact:
OPIC has paid the U.S. government $3 billion since 2006.
OPIC has a $21.5 billion portfolio spread across 550 projects in 100 developing countries. Though it’s an investment arm, some consider it an alternative tool for poverty alleviation — one that is fueled by the market and not by the heart. “Aid has never built economies,” says Rosa Whitaker, who was the assistant U.S. trade representative for Africa during the Clinton and Bush administrations and now heads up a consultancy that specializes in trade to Africa. Instead, she says, we need “aid that focuses on enterprise solutions.” Allow U.S. companies to more easily invest in poor or developing countries, so goes the thinking, and you have a win-win situation.
So why all the hate? Some critics decry it as corporate welfare. In a recent report, conservative think tank the Heritage Foundation argues OPIC is unnecessary — commercial banks could provide financing instead — and beyond the scope of government, besides. Do we really need the government to invest in a Ritz-Carlton in Turkey or a Papa John’s in Russia — and is that even proper? Heritage also points out OPIC’s potential to play favorites and squeeze out private-sector competitors that provide similar services. Its report does note, however, that eliminating OPIC would create a net cost of $268 million to the U.S. government this year. (Heritage did not comment.)
That’s why OPIC is languishing in a kind of purgatory. “It either could be quadrupled over the next four years or dead tomorrow,” says Ingram, now a senior fellow in the Brookings Institution’s global economy and development program. The Trump administration has yet to announce a new director and OPIC has appeared on some lists of potential budget cuts, including a memo circulated within the government’s Office of Management and Budget obtained by The New York Times. Others speculate OPIC is exactly the kind of business-friendly organization the president should love. A spokesperson for OPIC declined to comment.
It either could be quadrupled over the next four years or dead tomorrow.
George Ingram, Brookings Institution
If the administration is looking for areas to cut funding, cutting OPIC would be “the stupidest idea,” argues Todd Moss, senior fellow at the Center for Global Development and a former high-level official in the State Department for the Bush administration. OPIC focuses mostly on financing and providing loan guarantees in areas where doing business might be seen as risky, whether because of government seizure, uncertain government policies or political instability. One of the most well-known projects funded is Power Africa, which provides public-private funding for electrifying the continent; the project has received over $1.5 billion in funding from OPIC, with another $1 billion committed through 2018.
Some policy experts argue OPIC actually needs more money, which they say could mean even higher returns to the government. OPIC’s portfolio pales in comparison to its sister institutions in places like China and Europe, which are forging full steam ahead. “If the U.S. is closing these institutions while the Chinese are expanding different types of programs, it seems like the U.S. is withdrawing from the world and China is emerging,” argues David Dollar, the U.S. Treasury’s economic and financial emissary to China from 2009 to 2013.