Russia is involved in two wars at the moment. The first is the one they fomented against Ukraine. The second is an economic war waged in response to Russian aggression. The weapons of this war are economic sanctions, the closing of trade routes and the loss of access to capital.
To our business community: welcome to war.
For too long, our companies have been sidelined from the playing field – concerned about political backlash from the Chinese Communist Party (CCP) or unwilling to bid on foreign projects because Russian state-run companies would cut them on the costs. Foreign buyers often wonder “where are the Americans?”
A respected friend of mine once summed up the current state of trade by saying, “I was competing with foreign companies for international purchases, now I’m competing with foreign countries.”
Russia and China have never respected the rules of global markets. Their state-directed models have produced nothing but unfair competition and the destruction of American businesses and jobs. Many of our businesses will never come back after their intellectual property has been stolen or after being dumped by forced labor.
These two countries are increasingly working together and should be treated as one axis, at least for now.
China’s Belt-and-Road Initiative (BRI) is a prime example of how these authoritarian regimes work. The program provides foreign countries with debt financing to build domestic infrastructure projects that private markets would never finance.
In reality, the BRI is a giant ticking time bomb, wrapped in a nice arc of cheap interest rates and long payback periods. Projects look good at ribbon cutting, but quickly become unsustainable debt traps. After countries default on their loans, China willingly assumes ownership of these projects and then operates them for profit.
And it’s not just happening in low-income countries. The port of Piraeus in Greece was bought by the Chinese as part of a BRI investment and now employs almost no Greek citizens, and all profits are shipped to China.
So while we are rightly focused on sanctioning Russia, we also need to fight them in other regional markets, and America needs our business community to win those battles.
As Russia’s war against Ukraine continues, we must move on to the next phase – cutting off the geopolitical strongholds of Russia and China. To achieve this goal, we need corporate American buy-in, because the US government is not designed or positioned to compete for projects the way these socialist systems work.
This is not a call for industrial policy. It’s a call to support the very foundations that allow our economy, our communities and our families to thrive.
Enter “Economic Patriotism”.
The power of the American economy and financial markets is the only tool capable of competing effectively with these socialist regimes. Programs like the Export-Import Bank of the United States (EXIM) China Exports and Transformational Program and the Defense Production Act, both of which provide funding for U.S. strategic priorities, are key tools to fill the gaps where private financing does not exist, but they are no match for China and Russia, which extend more export credit to foreign buyers each year than G7 countries combined.
This economic war pays dividends to the country which continues to finance their war machines and the repression of their own people. To effectively counter these programs, we can look to Argentina to provide us with a good basis for understanding “economic patriotism”.
Evolution Metals, an American company, has just acquired a substantial position in the largest pool of uranium and critical metals in Argentina.
Argentina maintains close relations with China and Russia, including in their nuclear sector. Earlier this year, the Argentine government signed a new contract with the China National Nuclear Corporation for the development of another Chinese nuclear power plant in Lima, Argentina.
The decision by two private companies to partner in the development of Argentina’s 546,000-acre land package implodes China’s plans to use Argentinian uranium as feedstock for their electricity generators.
So an American company effectively cut off a supply line to China (and Russia, which had also tried to buy that uranium) to gain more control of an additional energy feedstock.
Another excellent example of this concept is Cerberus Capital Management’s recent acquisition of the commercial port of Subic Bay in the Philippines. Had Cerberus not stepped in to buy this asset, which sits near a former US shipyard, it would undoubtedly have ended up in Chinese hands and furthered the Chinese Communist Party’s quest to take control. of 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 approach that puts profits and America first?
To that end, our American companies can help us win this economic war by:
- Detail and disclose the extent to which they face direct competition from Russian and Chinese state-owned enterprises – this information is often opaque and difficult to obtain, but it is invaluable. Helping the U.S. government understand interest rates, repayment periods, and other details of foreign loans as well as information about illegal auction practices and foreign bribery can both prompt legal action and provide a rationale for additional support and direct engagement through programs like the Advocacy Center at the Department of Commerce.
- Partnering with the U.S. Government to Reduce Foreign Transaction Risk – EXIM has nearly $85 billion in lending capacity that is currently unused and could be deployed to minimize risk to exporters through its export program. trade credit insurance. The Development Finance Corporation can also offset political risk in unstable countries through the agency’s political risk insurance program.
- Better leverage trade promotion activities and the information available to them, such as the Deal Team concept that was established by the United States Departments of State and Commerce under President Trump to centralize agency activity at the support of American bids for foreign projects.
There is money to be made if we work together to properly identify risks, come to the table, and consider a longer horizon on investments that support the very foundations on which our businesses operate.
Free and open markets have lifted more people out of poverty than any other system in human history. Companies, shareholders, employees and families have all benefited from these gains.
Our companies have a strategic interest in upholding the Pax Americana so that they can continue to return profits to shareholders and contribute to the prosperity of our nation. This may in fact be their most important fiduciary responsibility.
This level of coordination is needed 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 America First Policy Institute and former Chief of Staff and Chief Strategy Officer at the Export-Import Bank of the United States.