Russia is involved in two wars right now. The first is the one they instigated against Ukraine. The second is an economic war being waged in response to Russia’s aggression. The weapons in this war are economic sanctions, closed trade routes and disappearing access to capital.
To our business community: welcome to the war.
For too long, our companies have been gone from the playing field – concerned about political backlash from the Chinese Communist Party (CCP) or unwilling to submit bids on foreign projects because Russia’s state-led companies will undercut them on price. Foreign buyers often wonder, “where are the Americans?”
A respected friend of mine once summarized the current state of trade by saying, “I used to compete against foreign companies for international procurements, now I compete against foreign countries.”
Russia and China have never played by the rules in global markets. Their state-led models have only produced unfair competition and the decimation of American companies and jobs. Many of our businesses will never return after the theft of their intellectual property or from being undercut on price by forced labor.
These two countries are increasingly working together and must be addressed as one axis, at least for the time being.
China’s Belt-and-Road Initiative (BRI) is a great example of how these authoritarian regimes operate. The program offers foreign countries debt financing to build domestic infrastructure projects that private markets would never finance.
In reality, the BRI is one giant ticking time bomb, wrapped in a pretty bow of cheap interest rates and long payback periods. The projects look nice during the ribbon cuttings, but quickly become unsustainable debt traps. After the countries default on their loans, China gladly assumes ownership of these projects and then milks them for profit.
And this isn’t just happening in low-income countries. The Port of Piraeus in Greece was purchased by the Chinese as a BRI investment and now employs almost no Greek citizens, and all of the profits are shipped to China.
So, while we are rightfully focused on sanctioning Russia, we also need to bring the fight to them in other regional markets and America needs our business community to win those battles.
As Russia’s war on Ukraine continues, we must transition to the next phase — cutting off Russia and China’s geopolitical strongholds. To accomplish this goal, we need buy-in from American companies, because the U.S. government isn’t designed or positioned to compete for projects in the same way these socialist systems operate.
This isn’t a call for industrial policy. It is an appeal to support the very foundations that allow our economy, communities and families to thrive.
Enter “Economic Patriotism.”
The might of the U.S. economy and financial markets are the only tool that can effectively compete with these socialist schemes. Programs like the China and Transformational Exports Program at the Export-Import Bank of the United States (EXIM) and the Defense Production Act, which both provide funding for strategic U.S. priorities, are key tools in plugging gaps where private financing doesn’t exist, but they are no match for China and Russia, who lend more export credit to foreign buyers each year than the G7 countries combined.
This economic war pays dividends back home that continue to finance their war machines and the repression of their own people. To effectively counter these programs, we can look at Argentina to provide us with a good basis for understanding “Economic Patriotism.”
Evolution Metals, a U.S. company, just procured a substantial position in the largest uranium and critical metals basin in Argentina.
Argentina has a close relationship with China and Russia, including in their nuclear sector. Earlier this year, the Government of Argentina signed a new contract with China National Nuclear Corporation for the development of yet another Chinese nuclear power plant in Lima, Argentina.
The decision by two private companies to partner on the development of the 546,000-acre Argentinian land package implodes China’s plans to utilize Argentine uranium as feedstock for their power generators.
Thus, an American company has effectively cut off a supply line for China (and Russia, who had also made attempts to purchase this uranium) to further control an additional energy commodity.
Another great example of this concept is Cerberus Capital Management’s recent acquisition of the commercial port at Subic Bay in the Philippines. If Cerberus hadn’t stepped in to purchase this asset, which sits near a former U.S. naval shipyard, it undoubtedly would have ended up in Chinese hands and furthered the Chinese Communist Party’s quest to take over the South China Sea.
Instead of a double-bottom-line approach that focuses on corporate social responsibility — whatever that means — why can’t we have a double-bottom-line that puts profits and America first?
To this end, our American businesses can help us win this economic war by:
- Detailing and releasing the extent to which they face direct competition from Russia and China’s state-owned-enterprises – this information is often opaque and hard to come by, however, it is invaluable. Helping the U.S. government understand the interest rates, payback periods and other details of foreign loans as well as information on illegal bidding practices and foreign corruption can instigate both legal actions and provide justification for additional support and direct engagement by programs like the Advocacy Center at the Department of Commerce.
- Partner with the U.S. government to de-risk foreign transactions – EXIM has nearly $85 billion in lending capacity that is currently going unused and could be deployed to minimize risk for exporters through its trade credit insurance program. The Development Finance Corporation can also offset political risks in volatile countries through the agency’s Political Risk Insurance program.
- Better leverage the trade promotional activities and information available to them, like the Deal Team concept that was established by the U.S. Departments of State and Commerce under President Trump to centralize agency activity in support of American bids on foreign projects.
There is money to be made, if we work together to appropriately identify risk, show up to the table and look at a longer horizon on investments that support the very foundations on which our businesses operate.
Free, open markets have lifted more people out of poverty than any other system in the history of man. Businesses, shareholders, employees and families have all benefited from these gains.
Our businesses have a strategic interest in defending Pax Americana so they can continue to return earnings to shareholders and contribute to the prosperity of our nation. Doing so may actually be their most important fiduciary responsibility.
It takes this level of coordination to ensure the future of our freedoms and democracies.
The only other options may be decimation or nationalization.
Luke J. Lindberg is a Senior Fellow at the America First Policy Institute and is the former Chief of Staff and Chief Strategy Officer at the Export-Import Bank of the United States.