Reauthorizing the Development Finance Corporation is a strategic necessity

The rise of a new isolationism is constraining American global leadership. Fixating on domestic disputes, like how to address border security, stands in the way of military support for Ukraine, Israel and Taiwan. At the same time, major new trade deals are “on pause” as the policy focus has shifted toward onshoring critical supply chains.

But history shows that the idea of focusing attention at home and leaving others to fend for themselves results in greater future challenges for America. Advancing national interests requires active engagement overseas.

As Congress begins talks to reauthorize the U.S. International Development Finance Corporation (DFC), it cannot let America’s development financing fall prey to inward thinking that limits U.S. leadership in defense and trade. The DFC plays an essential role promoting America’s strategic interests.

The DFC was created under the BUILD Act of 2018 to provide financial support for overseas development projects across emerging markets and developing countries. It has committed to date over $40 billion in 112 countries to financing projects ranging from small business loans and public health initiatives to infrastructure lending. These projects provide net positive returns to recipient countries — and to the American taxpayer.

DFC projects, particularly in infrastructure financing, also advance U.S. strategic goals that more than justify reauthorization.

The first goal is growing American exports. Infrastructure is the conduit through which future commerce flows; not just the original sale, but maintenance, replacement parts and upgrades. Greater infrastructure support is likely to lead to greater current and future exports. The experience of the U.S. Trade and Development Agency is illustrative of the benefits that infrastructure finance generates. The agency reports that every $1 it programs generates $231 worth of additional U.S. exports.

Unfortunately, America has fallen behind its competitors in funding projects that are vital to ensuring the free flow of goods. Chinese companies now have ownership interests in at least 100 ports in 63 countries — a number that doubled in the last decade. This includes key sites in Europe and Israel. Just as the DFC has done recently in Sri Lanka, the U.S. needs to finance crucial investments important to locking in America’s access to important foreign markets.

The second goal is strengthening global diplomatic ties, which have been strained by the recent unpredictability in American policy. Durable, long-term investments can reinforce political relationships abroad. Developing countries currently face massive shortfalls in access to the infrastructure financing they need to create a solid foundation for growth. DFC projects facilitate that growth by creating jobs and providing vital services that promote development. As a result, there are few better ways to foster sustainable relationships.

Advancing American principles of free and open societies means protecting digital security. The U.S. should ensure that affordable communication technologies empower citizens rather than empowering governments to coerce or repress. Facilitating digital infrastructure that incorporates Western standards can ensure trustworthy and secure global communications.

The third goal is promoting American security. America’s ability to maintain a rules-based system depends crucially on assured access to ports and trusted communications. But it also depends on resilient supply chains. Reliable, stable access to supplies like critical minerals and rare-earth metals are fundamental to our economic security. Infrastructure investments provide an effective way to shore up essential supply chains and guarantee that the U.S. is not over-reliant on any one country for these cornerstones of economic security.

Of course, U.S. development lending has a lot of other benefits, too. It facilitates green energy transitions that incorporate American products, helps people get clean water and food, and promotes democracy and the rule of law.

Yet America’s foreign policy remains stymied by the idea that being preoccupied with domestic matters is the best way to promote national interests. It’s not. America succeeds when it has avenues for free commerce, open communication and stable supply chains. Congress can ensure these goals are met by reauthorizing one of the most important instruments in America’s foreign policy toolkit — the Development Finance Corporation.

Mark Kennedy represented Minnesota in the House of Representatives from 2001 to 20007 and is director of the Wilson Center’s Wahba Institute for Strategic Competition and president emeritus of the University of Colorado. Jeffrey Kucik is a global fellow at the Wahba Institute for Strategic Competition at the Wilson Center and an associate professor at the University of Arizona.