U.S. foreign policy has been thrown into chaos. Among the (many) executive orders Trump signed on Day 1 of his second term was a 90-day pause on new obligations and disbursements of development assistance, pending review. Secretary of State Marco Rubio followed up by expanding the pause to existing work, ordering State and USAID to “immediately issue stop-work orders” for all ongoing programs. The Development Finance Corporation (DFC) is working through the legal confusion of what the pause might mean for its ability to continue providing technical assistance or make the payments it owes to private sector clients around the world. And in the midst of the chaos, USAID’s career leadership staff and members of its general counsel have been sent home.
Lots of smart people have written about the dire expected ramifications of these moves on humanitarian aid, global health, and internal expertise — see here and here. All true — and all very bad. (Though Rubio has now issued exemptions for some life-saving programs). But I’m also concerned about something deeper and longer-term. The U.S. is proving itself to be fundamentally unreliable at the very same moment it’s making plans to use development agencies like DFC to go big on strategic investments in global infrastructure and supply chains: ambitious, risky projects that require a partner who can help weather unpredictability over multiple years. We — apparently — aren’t that partner.
The extent of this “pause” — and the carelessness with which it’s being applied — are eroding basic trust in the U.S. as a development funder that follows through on its commitments and pays its bills on time. That damage has already been done, even in the (very unlikely) scenario that all existing programs get restored. And it will absolutely knee-cap our ability to invest in important projects, to make a compelling (and competitive) offer to potential partners, or to do any of the ambitious things this administration claims it wants DFC to tackle.
Self-sabotage and delusion
For the record, I’m all for disrupting U.S. foreign aid. I would LOVE a robust debate about reforming development assistance. USAID’s effectiveness is strangled by overbearing congressional earmarks; exclusionary, uncreative procurement practices; and a broken human resources system. Our development agencies — including USAID and DFC — are too risk-averse and disclose far too little information on what they actually accomplish. I also believe every incoming administration has a right to reconsider long-standing practices and change the way agencies operate and spend money. But that’s not what’s happening here. This pause speaks to something inherently self-sabotaging and delusional about how our political leaders think about U.S. development assistance.
Why is it self-sabotaging? Infrastructure projects are complex, arduous, multi-year efforts — especially in the challenging economies where our development agencies operate. It takes years to shepherd a power deal to financial close and, ultimately, to operation. It takes a greenfield mining project (which this administration claims it wants to do more of) at least a decade! The U.S. is proving itself thoroughly unreliable as an infrastructure development partner. Not just on amorphous policy questions — but in following through on commitments to help fund feasibility studies, advising governments, and potentially fulfilling payments to private clients. Why would companies embarking on multi-year projects want to take the risk of relying on us? While this administration has taken unreliability to new extremes, the risks of U.S. policy volatility have been ramping up for years, especially in areas (like energy technology) that have been needlessly and dangerously politicized. For partners working on long-term deals, major policy flip-flops every four years are not only frustrating but costly. Forward-looking policy can change — but our established commitments must mean something.
And why is it delusional? For all our policy discussions about “countering” Chinese global investment, the U.S. hasn’t worked particularly hard to make its own offer more attractive. U.S. policymakers seem to assume everyone will desperately want to work with the United States simply because… what, we’re awesome? There’s a laziness born of longstanding privilege at work here. Countries won’t automatically beg for our partnership. We need to offer something of value. And here’s the problem: our development finance isn’t fast — it takes years to navigate DFC bureaucracy and congressional reviews to approval. It’s not big — we provide far less finance than China. And it’s not particularly cheap — DFC does not offer concessional loans. Our competitive advantage (at least historically) has been stability and dependability, which are incredibly precious to partners operating in extremely uncertain environments. If we don’t offer that anymore, we have nothing.
This administration is kneecapping its own foreign policy agenda
This administration’s strategy in its opening days seems openly hostile to the very idea of ‘partnership’. But the problem with a ‘burn it all down’ approach is that when you (finally) decide you’re ready to govern, there may be nothing left. If this administration wants to follow through on the sorts of ambitious global investments they’ve suggested — and if they truly want to offer countries a meaningful alternative to Chinese investment — they need to understand that we can’t do it on our terms alone. And we can’t bully our way into productive partnerships. Our allies and the private sector clients that work with USAID, DFC, and EXIM don’t just care about how much money we ultimately put on the table. They’re trying to get big things done in very tough places. More than anything, they need a partner that follows through on its commitments. For years, Republicans have complained about an erosion of U.S. credibility compared to China and Russia. Well…. this is how it happens.