In his inaugural address, President Donald Trump reiterated a central policy priority of his campaign: the need to invest in our nation’s crumbling infrastructure. Last week, Senate Democrats introduced their own $1 trillion infrastructure plan. What has garnered less attention is the critical demand for infrastructure overseas, estimated at $4 trillion annually, that presents significant strategic and commercial opportunities for the United States. Yet the infrastructure arena is also one of fierce competition where other countries are leading and U.S. firms are lagging. As officials who recently concluded their service at the U.S. Departments of Commerce and State, we traveled across the globe leading U.S. business delegations and engaging foreign officials in support of our companies and job creation at home. While the United States has made strides in shoring up its competitiveness in the infrastructure sector, more can and must be done.
U.S. firms have a longstanding record of being at the fore of infrastructure development globally—combining the latest technologies, superior engineering, and sustainable business practices. Yet the competition is stiff and growing. According to Engineering News-Record’s 2016 rankings of 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 the rankings. This differential is, in part, due to our competitor nations making infrastructure development a core pillar of their economic and foreign policy and supporting their firms with robust financing packages and political support at the highest levels of government.
China, for example, has launched its Belt and Road Initiative (BRI)—championed by President Xi Jinping and undergirded by financing mechanisms such as the Asian Infrastructure Investment Bank and Silk Road Fund. If implemented with high standards and open bidding, BRI could increase development benefits around the world and commercial opportunities for U.S. firms; however, it could also entrench Sino-centric patterns of trade and investment that require the United States to elevate its infrastructure game. Indeed, China is already seizing the geoeconomic initiative following President Trump’s withdrawal from the Trans-Pacific Partnership. As announced by President Xi at Davos, China will be hosting a major international summit on BRI in May.
Given this landscape, the Departments of State and Commerce undertook a number of initiatives in recent years to support U.S. firms competing for infrastructure contracts. For example, the Direct Line Program connects U.S. firms with U.S. ambassadors across 270 diplomatic missions through webinars. In 2016, we hosted infrastructure-specific webinars in markets ranging from India to Nicaragua. We pursued targeted regional strategies such as in sub-Saharan Africa where Commerce led numerous infrastructure-focused trade missions and provided market entry counseling for U.S. firms. We honed in on key sectors of the infrastructure market such as smart cities, including developing a resource guide that profiles smart cities initiatives and opportunities for U.S. firms.
We also worked closely with foreign governments on improving the regulatory environment for market entry and business operations. Through U.S.-ASEAN Connect, a new strategic framework for U.S. economic engagement with the 10 Southeast Asian nations, we partnered with our firms and governments in the region to tackle key policy barriers to building a vibrant regional digital economy. And through the Global Connect Initiative, we promoted Internet connectivity and broadband infrastructure, which is critical to economic development and leverages a comparative 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 Year 2016, U.S. government advocacy resulted in a record 100 case wins, contributing to U.S. companies winning bids for an estimated $50.9 billion worth of foreign government contracts, with $36.2 billion in U.S. export content, that support about 178,000 American jobs. In the infrastructure sector, this included General Electric securing a $2.6 billion tender for diesel freight locomotives in India. To incentivize continued collaboration between the two departments in advocating for our firms, we established the first-ever joint Commerce-State Award, recognizing excellence in commercial advocacy at our embassies.
Despite these strides, our engagements around the world revealed areas where the United States is lagging in the race to meet the world’s infrastructure needs. Three areas stand out in particular that merit the close attention of the Trump administration if we are to lead: financing, coordination, and capacity building.
Financing is key for the execution of infrastructure projects, yet we frequently heard from U.S. firms that foreign competitors are able to obtain far greater infrastructure financing with more generous terms from their governments. This asymmetry is partly our own doing. Due to Congress having yet to confirm the full Board of the Export-Import Bank (EXIM), the official export credit agency of the United States, EXIM, has not been able to finance projects greater than $10 million—directly hamstringing 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 ways to leverage its private sector’s strength in the financial services sector to bring more capital to the table. In India, for example, the U.S. Department of the Treasury is helping explore novel financing methods, such as a municipal bond pilot program. We must also explore partnerships with other countries that have made significant financial commitments to infrastructure development. In May 2016, Prime Minister Shinzo Abe of Japan expanded his country’s Partnership for Quality Infrastructure Initiative to cover developing countries around the world and committed approximately $200 billion to the effort over the next five years. The initiative is a unique opportunity for collaboration with a close ally given the strategic dimensions of infrastructure development in Asia, as well as U.S. firms’ record of cooperating in the infrastructure space.
The United States must also enhance its coordination within the government and with the private sector. One initiative that has proven successful is the establishment of Power and Aviation Working Groups by the U.S. embassy in Jakarta. This model, which brings together U.S. companies and host country ministries to discuss projects in the power and aviation sectors, has helped U.S. companies win hundreds of millions of dollars of business since it was launched in 2015. Other embassies around the globe could adopt a similar model. Another area for coordination is in facilitating the establishment of U.S. consortia that can offer countries the entire package of goods and services required for an infrastructure project (a “turnkey solution”)—a facility that firms from competitor countries provide with greater speed and ease, often giving them the edge over U.S. companies.
Finally, the United States needs to focus on developing the capacity of foreign officials who serve in key decisionmaking roles on infrastructure projects. We frequently host training programs for such foreign officials on project development, bidding, negotiating, and contracting—encouraging them to select project winners based on a project’s life cycle costs rather than the lowest cost bid. Yet U.S. competitors are going a step further. Many of them embed advisers in key ministries and offer free training and advice on infrastructure projects that, in turn, shape projects in a way that favors their firms. To engage meaningfully and shape foreign decisionmakers, we must similarly seek to place U.S. personnel in key ministries overseas.
The United States’ geoeconomic leadership depends, in part, on our ability to deliver infrastructure overseas that serves as the backbone for prosperity abroad and creates jobs and strengthens our economy at home. If we deliver, foreign partners will view the U.S. government and U.S. firms as reliable partners with whom they will want to collaborate in myriad ways. If we fail to do so, they will turn to others to meet their core needs. In an arena where geopolitical competition, commercial dividends, and development imperatives are intertwined, the stakes are high—yet so are the rewards.
Even as we build at home, the Trump administration must seize the opportunity to do so abroad.
Ziad Haider is a senior associate (nonresident) with the Simon Chair in Political Economy at the Center for Strategic and International Studies in Washington, D.C. He served as special representative for commercial and business affairs and on the Policy Planning Staff at the U.S. Department of State. Arun Kumar served as assistant secretary of commerce for global markets and as director general of the U.S. and Foreign Commerce Service at the U.S. Department of Commerce.
This article was originally published as a CSIS commentary.