Trump’s Global InfrastructureOpportunity
ZiadHaider
Senior Associate (Non-resident), SimonChair in Political Economy of CSIS
In his inaugural address, President DonaldTrump reiterated a central policy priority of his campaign: the need to investin our nation's crumbling infrastructure. Last week, Senate Democrats introducedtheir own $1 trillion infrastructure plan. What has garnered less attentionis the critical demand for infrastructure overseas, estimated at $4 trillionannually, that presents significant strategic and commercial opportunities forthe United States. Yet the infrastructure arena is also one of fiercecompetition where other countries are leading and U.S. firms are lagging. Asofficials who recently concluded their service at the U.S. Departments ofCommerce and State, we traveled across the globe leading U.S. businessdelegations and engaging foreign officials in support of our companies and jobcreation at home. While the United States has made strides in shoring upits competitiveness in the infrastructure sector, more can and must be done.
U.S. firms have a longstanding record ofbeing at the fore of infrastructure development globally—combining the latesttechnologies, superior engineering, and sustainable businesspractices. Yet the competition is stiff and growing. According to EngineeringNews-Record’s 2016 rankingsof the Top 250 Global Contractors, the four largest firms are Chinese,followed by four European firms; the largest U.S.-based firm is 12th in therankings. This differential is, in part, due to our competitor nationsmaking infrastructure development a core pillar of their economic and foreignpolicy and supporting their firms with robust financing packages and politicalsupport at the highest levels of government.
China, for example, has launched its Beltand Road Initiative (BRI)—championed by President Xi Jinping and undergirded byfinancing mechanisms such as the Asian Infrastructure Investment Bank and SilkRoad Fund. If implemented with high standards and open bidding, BRI couldincrease development benefits around the world and commercial opportunities forU.S. firms; however, it could also entrench Sino-centricpatterns of trade and investment that require the United States toelevate its infrastructure game. Indeed, China is already seizing thegeoeconomic initiative following President Trump’s withdrawal from theTrans-Pacific Partnership. As announced by PresidentXi at Davos, China will be hosting a major international summit on BRIin May.
Given this landscape, the Departments of State and Commerce undertook a numberof initiatives in recent years to support U.S. firms competing forinfrastructure contracts. For example, the DirectLine Program connects U.S. firms with U.S. ambassadors across 270diplomatic missions through webinars. In 2016, we hosted infrastructure-specificwebinars in markets ranging from India to Nicaragua. We pursued targetedregional strategies such as in sub-Saharan Africa where Commerce led numerousinfrastructure-focused trade missions and provided market entry counseling forU.S. firms. We honed in on key sectors of the infrastructure market suchas smart cities, including developing a resourceguide that profiles smart cities initiatives andopportunities for U.S. firms.
We also worked closely with foreigngovernments on improving the regulatory environment for market entry andbusiness operations. Through U.S.-ASEANConnect, a new strategic framework for U.S. economic engagement with the 10Southeast Asian nations, we partnered with our firms and governments in theregion to tackle key policy barriers to building a vibrant regional digitaleconomy. And through the GlobalConnect Initiative, we promoted Internet connectivity and broadbandinfrastructure, which is critical to economic development and leverages acomparative strength of our economy.
We also stepped up our efforts to help U.S.firms secure deals around the world with clear results. In Fiscal Year2016, U.S. government advocacy resulted in a record 100 case wins, contributingto U.S. companies winning bids for an estimated $50.9 billion worth of foreigngovernment contracts, with $36.2 billion in U.S. export content, that supportabout 178,000 American jobs. In the infrastructure sector, this includedGeneral Electric securing a $2.6 billion tender for diesel freight locomotivesin India. To incentivize continued collaboration between the twodepartments in advocating for our firms, we established the first-ever joint Commerce-StateAward, recognizing excellence in commercial advocacy at our embassies.
Despite these strides, our engagementsaround the world revealed areas where the United States is lagging in the raceto meet the world’s infrastructure needs. Three areas stand out in particularthat merit the close attention of the Trump administration if we are to lead:financing, coordination, and capacity building.
Financing is key for the execution ofinfrastructure projects, yet we frequently heard from U.S. firms that foreigncompetitors are able to obtain far greater infrastructure financing with moregenerous terms from their governments. This asymmetry is partly our owndoing. Due to Congress having yet to confirm the full Board of the Export-ImportBank (EXIM), the official export credit agency of the United States, EXIM, hasnot been able to finance projects greater than $10 million—directlyhamstringing U.S. firms. Yet even with EXIM financing back in full force,U.S. government funding will be limited by comparison.
The United States must find creative waysto leverage its private sector’s strength in the financial services sector tobring more capital to the table. In India, for example, the U.S. Department ofthe Treasury is helping explore novel financing methods, such as a municipalbond pilot program. We must also explore partnerships with other countries thathave made significant financial commitments to infrastructuredevelopment. In May 2016, Prime Minister Shinzo Abe of Japan expanded hiscountry’s Partnership for Quality Infrastructure Initiative to cover developingcountries around the world and committed approximately $200 billion to theeffort over the next five years. The initiative is a unique opportunityfor collaboration with a close ally given the strategic dimensions ofinfrastructure development in Asia, as well as U.S. firms’ record ofcooperating in the infrastructure space.
The United States must also enhance itscoordination within the government and with the private sector. Oneinitiative that has proven successful is the establishment of Power andAviation Working Groups by the U.S. embassy in Jakarta. This model, whichbrings together U.S. companies and host country ministries to discuss projectsin the power and aviation sectors, has helped U.S. companies win hundreds ofmillions of dollars of business since it was launched in 2015. Otherembassies around the globe could adopt a similar model. Another area forcoordination is in facilitating the establishment of U.S. consortia that canoffer countries the entire package of goods and services required for aninfrastructure project (a “turnkey solution”)—a facility that firms fromcompetitor countries provide with greater speed and ease, often giving them theedge over U.S. companies.
Finally, the United States needs to focuson developing the capacity of foreign officials who serve in key decisionmakingroles on infrastructure projects. We frequently host training programs forsuch foreign officials on project development, bidding, negotiating, andcontracting—encouraging them to select project winners based on a project’slife cycle costs rather than the lowest cost bid. Yet U.S. competitors aregoing a step further. Many of them embed advisers in key ministries andoffer free training and advice on infrastructure projects that, in turn, shapeprojects in a way that favors their firms. To engage meaningfully and shapeforeign decisionmakers, we must similarly seek to place U.S. personnel in keyministries overseas.
The United States’ geoeconomic leadershipdepends, in part, on our ability to deliver infrastructure overseas that servesas the backbone for prosperity abroad and creates jobs and strengthens oureconomy at home. If we deliver, foreign partners will view the U.S. governmentand U.S. firms as reliable partners with whom they will want to collaborate inmyriad ways. If we fail to do so, they will turn to others to meet theircore needs. In an arena where geopolitical competition, commercialdividends, and development imperatives are intertwined, the stakes are high—yetso are the rewards.
Even as we build at home, the Trumpadministration must seize the opportunity to do so abroad.
ZiadHaider is a senior associate(nonresident) with the Simon Chair in Political Economy at the Center forStrategic and International Studies in Washington, D.C. He served asspecial representative for commercial and business affairs and on the PolicyPlanning Staff at the U.S. Department of State. Arun Kumar served as assistantsecretary of commerce for global markets and as director general of the U.S.and Foreign Commerce Service at the U.S. Department of Commerce.
