Export Promotion Is Not the Same As Building Markets Abroad

February 18, 2011
Last month, President Obama laid out a bold pledge to consolidate and reorganize the federal government in support of a more competitive America.  If you missed that line, it was right before his joke about salmon being regulated by different agencies depending on whether they’re in fresh or salt water.  While President Obama specifically referenced a dozen agencies working on export promotion, it’s difficult to gauge whether the consolidation wave will touch all of them or just a lucky few.  Those talks are happening behind closed doors.  So, we’re left trying to read the tea leaves.  Based on early indications, it sounds like there may be confusion over a basic, yet fundamental issue – understanding the difference between export promotion and development mandates. Over time, a number of senior administration officials and their close allies have publicly detailed their thinking.  As far back as 2001, Obama’s Chief of Staff, Bill Daley, made the case that parts of the Departments of Commerce, Agriculture, Labor, and Education should be consolidated along with the U.S. Trade Representative (USTR), Small Business Administration (SBA), U.S. Export-Import Bank, and Overseas Private Investment Corporation (OPIC).  Last December, the Center for American Progress – which is intimately linked to the Obama Administration – argued for something very similar. Of all the government agencies listed above, one sticks out like a sore thumb.  Here’s a hint – it doesn’t even work on export promotion issues.  If that wasn’t enough, then here’s a complete giveaway.  It has the word ‘investment’ in it – as in overseas investment.  That’s right, OPIC is the only one that doesn’t do export promotion.  In sharp contrast, its mission focuses on promoting international development overseas by financing or insuring U.S. companies’ investments in risky markets.  Places that U.S. banks wouldn’t touch with a ten foot pole – such as Afghanistan, Pakistan, or the West Bank – but are important for national security reasons.  By mobilizing the U.S. private sector, OPIC helps these countries build more credible, inclusive economies.  And as aid budgets continue to get tighter, America’s national security will increasingly rely on innovative development vehicles like OPIC. OPIC could not be more different than an agency like the Ex-Im Bank, which lends money to foreign governments so that they can buy Boeing jets or John Deere tractors.  Yes, they both lend money – but that’s where the similarities stop.  Or the Commerce Department, which lobbies foreign governments and companies to buy America.  Or USTR, which opens up access to foreign markets.  These agencies – and the others listed above – help grease the wheels for U.S. exports in some way.  In contrast, OPIC is a leading tip of the foreign policy spear – creating economic development opportunities abroad for people yearning for a better life. Yes, OPIC’s operations may indirectly produce some additional exports on the margins.  One could imagine a U.S. investor purchasing Caterpillar equipment for a OPIC-financed mining venture in the Congo.  Perhaps, that’s where the confusion comes from.  But, we must differentiate between a positive secondary effect (exports) from the primary mission (promoting development). How one of the most dynamic and effective agencies can be so misunderstood is beyond me.  In addition to confusing OPIC as an export agency, few people seem to know that it actually makes the U.S. government money.  In fact, a lot of money.  The average OPIC employee generates about $1.5 million in revenue.  According to OMB, it has contributed roughly $2.2 billion to the government budget since 2005. Just to be clear, I see a lot of value in consolidating the plethora of export promotion agencies.  While working for a large multinational, I had to go to at least five different agencies for help on a single business transaction.  As President Obama says, “the American government can do better.”  For similar reasons, I also believe that several development agencies with reinforcing or overlapping missions – such as promoting private sector-based development – should be merged.  But, more on that later.  For now, let’s just get one simple fact straight for the export promotion exercise – OPIC’s core business is not growing U.S. exports.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.