Ripon Forum - April 2019

an Pro TH d t sp E N he ec EW ke ts U ys for SM to pa CA th ss : ed a eb ge at e.

“Our nation has a spending problem.”

BRAD WENSTRUP, IN OUR RIPON PROFILE

April 2019 Volume 53, No. 2

“We can’t fight for freedom alone.”

Don Bacon discusses the importance of the NATO alliance.

Plus: Mario Diaz-Balart on the crisis in Venezuela, and what the United States should do to restore order in the country.

And: Ann McLaughlin Korologos on the work of the Middle East Investment Initiative to promote stability through economic growth.

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“Ideas that matter, since 1965.“ Volume 53, Number 2 Beyond the Beltway

Politics & Perspective

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16

The New USMCA: Prospects for Passage & the Keys to the Debate

By Scott McCandless & Caitlin Mackay There could be enough votes to pass the new United States-Mexico-Canada Trade Agreement.

But based on historical trends, passage is not guaranteed.

19

A View from the Heartland on the Importance of Trade

By Doug Goehring Farmers may not like the tariffs that China is imposing on our commodities, but they also don’t like China dragging out the process for approving registrations for years at a time.

20

Time to Hit “Reset” on Transatlantic Trade

By Peter Chase If the U.S. and EU can resurrect at least the spirit of the Transatlantic Trade and Investment Partnership, it could inject new purpose into the transatlantic partnership.

23

China’s New Silk Road

By Bonnie Girard At a time when hundreds of millions of Chinese do not have piped running water in their homes, the Chinese government is lavishing loans on countries far away.

A Lesson in Good Governance from the Hoosier State

By Erin Houchin Over the past decade, Indiana has consistently enacted honestly balanced budgets each biennium, while cutting taxes and reducing state debt.

Cover Story 6

“We Can’t Fight for Freedom Alone.”

By Don Bacon NATO has been a force for peace in Europe and has shared the burden of war in the Middle East.

America should want to strengthen this voice, not weaken it.

8

The U.S. Must Stay Vigilant in Venezuela

By Mario Diaz-Balart Despite ruthless oppression, Venezuela’s opposition movement continues to grow. The U.S. must support this movement as it seeks a democratic transition.

10

We are Safer with the INF Treaty

By Richard Lugar According to the former Indiana Senator, the decision to withdraw from the IntermediateRange Nuclear Forces Treaty is short-sighted and not in America’s long-term interest.

12

Promoting Peace Through Economic Growth A Q&A with Ann McLaughlin Korologos A conversation with the former Reagan Cabinet Secretary about the work of the Middle East Investment Initative to promote stability in that volatile region of the world.

Publisher The Ripon Society

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In this Edition News & Events Ripon Profile - U.S. Rep. Brad Wenstrup

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THE RIPON SOCIETY HONORARY CONGRESSIONAL ADVISORY BOARD U.S. Senators: Shelley Moore Capito - Senate Co-Chair Cory Gardner - Senate Co-Chair Marsha Blackburn Roy Blunt Richard Burr Bill Cassidy, M.D. Susan M. Collins Steve Daines Joni Ernst Deb Fischer John Hoeven Jerry Moran Pat Roberts Mike Rounds Thom Tillis Roger Wicker Todd Young U.S. Representatives: Susan W. Brooks - House Co-Chair Greg Walden - House Co-Chair Martha Roby - Vice Chair, South Darin LaHood - Vice Chair, Midwest Mike Kelly - Vice Chair, Northeast Dan Newhouse - Vice Chair, West Frank Lucas - Vice Chair, Southwest Mark Amodei Don Bacon Andy Barr Vern Buchanan Larry Bucshon, M.D. Michael C. Burgess, M.D. Ken Calvert Buddy Carter Tom Cole Doug Collins Paul Cook Rodney Davis Sean Duffy Tom Emmer Ron Estes Brian Fitzpatrick Bill Flores Kay Granger Sam Graves French Hill Bill Huizenga Bill Johnson Dave Joyce John Katko Adam Kinzinger Bob Latta Billy Long Kevin McCarthy Michael McCaul Cathy McMorris Rodgers Paul Mitchell John Moolenaar John Ratcliffe Tom Reed Tom Rice Steve Scalise John Shimkus Steve Stivers Glenn “GT” Thompson Mac Thornberry Mike Turner Fred Upton Jackie Walorski Brad Wenstrup Steve Womack

In this Edition

My family and I are planning a visit to Normandy this summer to mark the 75th anniversary of D-Day. In preparing for our trip, I naturally am doing some research on the invasion and the area where our troops landed on June 6, 1944.

Like many others, I have read books about the operation, and I have seen movies that depict the heroic efforts and tragic sacrifices that combined to make that day one which Americans look back on with pride, humility, and a deep sense of appreciation. What Americans sometimes forget is that it wasn’t just U.S. troops who landed on the beach that morning. It was British troops and Canadian troops and troops from several other nations, as well.

President Ronald Reagan paid tribute to these gallant forces during his famous speech at Normandy to mark the 50th Anniversary of the landing in 1984. “There was the impossible valor of the Poles,” the Gipper stated, “who threw themselves between the enemy and the rest of Europe as the invasion took hold, and the unsurpassed courage of the Canadians who had already seen the horrors of war on this coast.

They knew what awaited them there, but they would not be deterred. And once they hit Juno Beach, they never looked back. All of these men were part of a rollcall of honor with names that spoke of a pride as bright as the colors they bore: the Royal Winnipeg Rifles, Poland’s 24th Lancers, the Royal Scots Fusiliers, the Screaming Eagles, the Yeomen of England’s armored divisions, the forces of Free France, the Coast Guard’s ‘Matchbox Fleet’ and you, the American Rangers.”

In past appearances before The Ripon Society, House Armed Services Committee leader Mac Thornberry has spoken about the sacrifices that allied forces made on that day in Normandy and over the course of World War II. He has also spoken about how, in many respects, Americans have grown complacent about the international order that has been created since that time. “I can give you lots of statistics about how many people have been lifted out of poverty, how life expectancy has increased, and how the world has benefited from what we and our allies created and maintained,” Thornberry said in a November 2017 speech. “I think what Americans don’t appreciate is how much better our lives are. We have been able to increase our prosperity and our quality of life and our length of life largely because of the security situation in the world, and the economic situation that comes from that security.”

Today, that sense of security is under assault. Treaties are being scrapped, institutions are being scrutinized, and America’s role as the leader of the free world is being questioned like it never has been before. In this edition of The Ripon Forum, we take a look at some of these institutions and treaties and examine why they remain important to the United States and our interests around the world.

Nebraska Congressman and retired Brigadier General Don Bacon kicks off our coverage with an assessment of the NATO alliance at a time when the President has called the value of that alliance into doubt. Along similar lines, former Senator Richard Lugar offers up a reasoned defense of the INF Treaty, and an explanation of what’s at stake by leaving it. With the situation in Venezuela growing worse with each passing day, Florida Congressman Mario Diaz-Balart shares his thoughts on how America is responding to the crisis and why we cannot afford to sit back and let other countries – particularly Russia – lead the way. In an interview with the Forum, former Reagan Cabinet Secretary Ann McLaughlin Korologos discusses another volatile region of the world and explains how, over the past 10 years, the Middle East Investment Initiative has been working to promote stability through economic growth.

With Britain trying to figure out how to leave the European Union and the global trade picture being called into doubt, this latest edition also includes a series of op-eds and essays looking at America’s changing relationships with a number of its trading partners and how China is becoming a global economic force. We stay closer to home in our latest Beyond the Beltway feature with an op-ed by Indiana State Senator Erin Houchin about the lessons that can be learned about governance from her home state. And in our latest Ripon Profile, Ohio Congressman Brad Wenstrup discusses the issue facing America that no one is talking about and the historical figure he would most like to meet.

As always, we hope you enjoy this latest edition, and encourage you to contact us with any comments or questions you might have.

Lou Zickar, Editor louzickar@riponsociety.org RIPON FORUM April 2019

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Beyond the Beltway

Management Matters…

A Lesson in Good Governance from the Hoosier State

by ERIN HOUCHIN Although our federal government is plagued by living is taken into account, Hoosiers are better off partisan gridlock and grandstanding, that is not always than workers living in other states whose wages are the case at the state level — at least not here in Indiana. higher on paper.

Indiana has been and continues to be a national Additionally, the 2019 State Business Tax Climate leader when it comes to good governance and common- Index from the Tax Foundation once again ranked sense solutions, and I am proud to play a small role in Indiana as having the No. 1 tax climate in the Midwest affecting positive change as a and among the top 10 nationally. member of the Indiana State Furthermore, CNBC’s America’s Senate.

Top States for Business 2018 As a Republican, I am ranked Indiana No. 2 in the certainly pleased that our nation for infrastructure, No. 4 party holds supermajorities for business friendliness, and in both the State Senate and No. 5 for lowest cost of doing House of Representatives. business. We maintain the However, that does not mean highest possible ‘AAA’ credit we don’t work together rating, and incidentally, a 2017 with our colleagues across report from U.S. News and World the aisle. As of the halfway Report ranked Indiana No. 1 for point of the 2019 legislative government efficiency and No. session, 218 bills were passed 1 for budget transparency. by the State Senate. Of these With all of that said, Indiana bills, 57 percent passed with is not without its challenges, and unanimous support, and 89 there is room for improvement. percent passed with bipartisan Good governance requires Erin Houchin support. Good policy is good us to understand where this policy, no matter who it comes improvement is needed and to Over the past decade, from or with which party the take action on these fronts. author is affiliated.

One of the top issues I Indiana has consistently Over the past decade, frequently hear about as a enacted honestly balanced Indiana has consistently Senator from a rural district in enacted honestly balanced southern Indiana is the lack of budgets each biennium, budgets each biennium, while affordable and efficient highwhile cutting taxes and cutting taxes and eliminating speed internet access. While eliminating two-thirds of two-thirds of our total state broadband accessibility may not debt. We passed a Balanced be a concern for all districts in our total state debt.

Budget Amendment, which all states, it is for many of the was ratified by Hoosier voters people I represent. Since my during a 2018 referendum, election in 2014, I have made and eliminated the inheritance tax and other costly it a priority to author legislation intended to bridge financial burdens. We put our fellow Hoosiers first, the digital divide between our communities and have and the results speak for themselves. worked with my colleagues and the governor to make For instance, Indiana’s wage growth has been changes that leave a lasting impact on Hoosiers. consistently improving, and when our low cost of During the 2018 legislative session, I authored and 4

RIPON FORUM April 2019

passed legislation to create a broadband grant program, than how they were introduced, and that’s not a bad allocating funds to qualified broadband projects in thing — working collaboratively with Republicans unserved areas. Provisions in this legislation will and Democrats in both the Senate and House often ensure grant funds are first allocated to unserved leads to better policy in the end. It is impossible to areas, bringing vital services to those who need it give everyone exactly what they want on any given topic, but it is our duty as most. This was not an easy elected officials to understand bill to get passed, but through all viewpoints and make collaboration with other Good policy is good policy, informed decisions with as legislators and stakeholders, much information as possible. we made it happen — with no matter who it comes My colleagues and I work broad bipartisan support in from or which party the relentlessly toward the best both chambers. Since the policy without worrying about passage of this legislation, author is affiliated with. who gets the credit — as long the executive branch has also as Hoosiers see the benefits. I taken action, with the Office think Washington, DC, could of the Lieutenant Governor take a lesson from this Hoosier announcing the hiring of a

RF director of broadband opportunities, along with several common-sense approach. other broadband grant programs and allocations.

Adding voices and opinions to the legislative Erin Houchin is a State Senator from Indiana’s 47 th process sometimes causes bills to end up differently District.

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5

Cover Story

“We can’t fight for freedom alone.”

In this age of uncertainty, NATO plays a vital role.

by DON BACON 6

RIPON FORUM April 2019

Seventy years ago, the United States and 11 other Allies bring is critical, but the different ways of thinking countries formed an alliance to protect each other against have made our strategies more effective. I saw this in Iraq the Soviet Union. Today, 29 members belong to the North in 2007 and 2008 where the British influence strengthened Atlantic Treaty Organization (NATO), and operate under the our reconciliation process with those we had fought with but agreement that if one member is attacked it is considered were willing to make peace. Many NATO countries bring an attack on all. This agreement has worked for these last niche capabilities that make tremendous difference.

70 years to protect Eastern Europe and other countries from But we have our challenges: many of our bases are bullying or outright invasion by Russia and other enemies. reliant on Russian gas that is vulnerable to being turned off Since the Cold War ended, Russia has continued to in time of crisis, many of our Allies are spending too little remain a clear threat to its neighbors, as evidenced by which puts more burden on the US, and the reliability of Georgia and Ukraine. Without our presence, the Baltic States Turkey is open to question to a point that we need to rethink and Poland would be very vulnerable to Russian aggression. the sale of our F-35s.

When I travelled to NATO countries in 2017 as part of a NATO remains pivotal to our nation’s security, and while congressional delegation, it is good to advocate for I heard from many leaders more defense spending by in Poland who asked for a our Allies, it is destabilizing permanent US presence, and self-destructive public because it sends the message policy to threaten to leave to Russia that an attack on NATO. them is an attack on America.

We want a world where They want American boots the citizens are sovereign on their territory. over their own nations; where Estonia is a proud human rights, freedoms, nation and a great success free markets, and free trade story in the Baltics that has reign supreme. This can embraced democratic and only be done with American free enterprise principles. leadership, but we can’t do it Russia continues to regularly alone. We need strong Allies conduct cyber-attacks by our side. This is best against Estonia and has been done with active but humble Rep. Bacon meets with NATO forces in Europe in hostile on their borders.

American leadership.

April 2017.

Estonia also has expressed NATO has been a force a strong desire to have for peace in Europe and has permanent U.S. forces as a shared the burden of war in deterrence against Russian the Middle East. We should While it is good to advocate for aggression and possible want to strengthen this more defense spending by our incursions like in Ukraine. voice, not weaken it. This is Allies, it is destabilizing and We also must consider why I joined my colleague increased Russian activity and For Country Caucus self-destructive public policy in the northern flank near Co-Chairman, Rep. Jimmy to threaten to leave NATO. Norway, who serves as Panetta (D-CA), as an original the eyes and ears of that co-sponsor of H.R. 676, the area in support of NATO. Norway is concerned about the NATO Support Act. This legislation would prohibit the use increased military presence of Russia in the Artic region, or appropriation of funds to withdraw the United States from and it is important for us to work with Norway to help them NATO. As Winston Churchill said in April of 1945 prior to strengthen defenses against Russia. the formation of NATO, “There is only one thing worse than The strength of our continued presence in NATO compels fighting with allies, and that is fighting without them.” Truer Russia to tread lightly, which helps foster peace. In all of words have never been spoken. our recent conflicts in the Middle East it is our NATO Allies We can’t fight for freedom alone. We need NATO at that are first to fight by our side, along with Australia. Today our side. RF there are 26 NATO countries serving with us in Afghanistan, including 6,706 Allied troops serving alongside our 8,475 Don Bacon represents the 2nd District of Nebraska in the U.S. troops. Allied nations also have presence in other countries House of Representatives. He previously spent nearly 30 years in the Middle East that are not NATO commitments. serving in the U.S. Air Force, retiring in 2014 as a Brigadier My experience has been that not only the firepower our General.

RIPON FORUM April 2019

7

The U.S. Must Stay Vigilant in Venezuela

by M A R I O D I A Z -B A L A R T Much like defunct communist dictatorships of an John Bolton estimated there are about 25,000 Cubans in earlier era, Venezuela is facing crises on all fronts. The Venezuela. Reports indicate that Cuban counterintelligence economy is in shambles, Venezuela’s once democratic agents are planted in Venezuela’s Ministry of Defense, institutions are corrupted, and human rights abuses, and positioned throughout the Venezuelan military and including crimes against humanity such as torture and Maduro’s protective guard. The Secretary General of extrajudicial killings, escalate. More than 3 million the OAS has labeled the Cuban presence an “occupation Venezuelan nationals have fled the country, creating army.” daunting security challenges for its neighbors.

Russia has also bestowed diplomatic, military, and Sadly, Venezuela has become financial sustenance to the ailing another chapter in the massive tome Maduro regime, blocking tough of Communism’s failures. History measures at the U.N., selling has shown that communism and more than $4 billion in weapons its trendier cousin socialism to Venezuela, and sending are readily co-opted by tyrants. nuclear-capable bomber Tu-160 These totalitarian systems allow plans to Venezuela in 2013 and corrupt elites to determine what December 2018. Starting in 2015, the “collective good” entails, then Russia provided $6.5 billion in restrict freedom and redistribute revenue to bolster Venezuela’s oil property to achieve that vision— industry, and Russia’s state-run oil all at the expense of individuals. company continues to purchase oil Well-connected government elites from Venezuela’s PDVSA despite determine who deserves what, and U.S. sanctions. how much, and of course conclude The Trump Administration that they deserve an especially has enacted effective measures hearty share. And so the ideology against the Maduro regime. It has becomes a practicable license to imposed tough sanctions to cut steal. off the Maduro regime’s revenue History has shown that Venezuela nationalized streams, isolating the nation’s lucrative industries, justifying the corrupted oil, gold, digital communism and its seizures with seductive promises currency, debt, and banking trendier cousin socialism that it was done “for the people.” sectors. The Administration has The result is that Venezuela’s once are readily co-opted also sanctioned more than seventy oil-rich economy lies in ruins.

Venezuelan individuals for by tyrants.

Once again history has shown that corruption, human rights abuses, the powerful elite are actually poor and otherwise contributing to stewards of “the people’s” property, and actually more Venezuela’s decline, and nearly two dozen others for drug suited to plundering than fostering prosperity. trafficking. It has provided millions in humanitarian aid Secretary of State Pompeo has correctly pointed out and recognized the Guaido administration. These efforts that America’s adversaries, most of them with authoritarian are bold and effectual, and they demonstrate firm solidarity governments, are protecting the Maduro regime from with the Venezuelan people. This policy is in stark contrast total collapse. They seek to exploit Venezuela to extend to the anemic efforts of the previous administration which their influence into our hemisphere. By 2014, China sanctioned only seven individuals and paid lip service to Development Bank had loaned more than $30 billion to the demands of the protesters.

Venezuela. In February 2019, National Security Advisor The Congress has also taken a strong, bipartisan 8

RIPON FORUM April 2019

stand in support of freedom. In 2014, Congress passed the contrast, a despot in our hemisphere partnering with our Venezuela Defense of Human Rights and Civil Society Act, adversaries endangers our security. Democracy assistance voting again to extend it through 2019. These sanctions and solidarity were essential in Eastern Europe and the have given the president tools to hold accountable ultimate toppling of tyrants. Those nations, whose people Maduro’s cronies. Already in the 116th Congress, important now live in freedom, remember that the U.S. stood with legislation has been introduced to investigate Russia’s them. Today, a statue of President Ronald Reagan stands role in propping up the Maduro regime, which passed the in Hungary’s Liberty Square.

House on March 25, and to extend TPS to Venezuelans in Venezuela reminds us to remain vigilant against the United States. creeping tyranny. The These efforts are paying Chavez-Maduro regime dividends. Despite ruthless did not destroy Venezuela Venezuela reminds us to remain oppression, Venezuela’s but through vigilant against creeping tyranny. overnight, opposition grows and has the culmination of daily coalesced behind interim assaults on democratic President Guaido. The U.S. institutions, civil society, must support the pro-democracy opposition movement as independent media, and private industry. In a country also it seeks a democratic transition. Democracy assistance to brimming with resources and innovative, hard-working Venezuela increased to $17.5 million for fiscal year 2019. people, I hope the U.S. never falls into the trap of trusting While a relatively small sum within the overall budget, a small cadre of know-it-alls with utopian promises to do RF assistance is especially crucial now to bolster Venezuela’s more for us than we can do for ourselves. opposition leaders risking everything for freedom.

History has shown that free, democratic countries Mario Diaz-Balart represents the 25th District of Florida tend to be peaceful countries; they tend to be allies. In in the U.S. House of Representatives.

RIPON FORUM April 2019

9

We are Safer with the INF Treaty

that give us a window on Russian activities and capabilities.

Third, effective arms control is less about negotiating brilliance than it is about the accumulation of leverage.

Withdrawing from the INF Treaty does nothing to bolster our leverage. It foolishly plays into the hands of Russian propagandists by focusing global attention on our rejection of the treaty instead of on Russian violations.

It complicates relations with allies. And it signals to

by RICHARD LUGAR the Iranians, North Koreans, and others who would pursue a I was one of the original co-chairs of the Arms Control nuclear arsenal that we are devaluing our own historic legacy Observer Group, put together by President Reagan in the 1980s as the guarantor of legal frameworks designed to prevent to ensure unity of purpose between the executive and legislative nuclear proliferation.

Finally, regardless of near-term decisions on the INF branches on arms control with the Soviets. I was a floor manager for every arms control treaty that came before the Senate from Treaty, drifting towards unrestrained arms competition would be an incredibly hazardous outcome. This does not mean that the INF Treaty in 1987 to the New Start Treaty in 2010.

In conjunction with the Nunn-Lugar program, I witnessed the United States cannot modernize elements of its nuclear the safeguarding or dismantlement of just about every type of deterrent. But allowing verification procedures to expire weapon of mass destruction imaginable in the former Soviet and basing our security on the hope of winning an expensive arms race would be the height of Union, from Typhoon submarines irresponsibility. and SS-18s, to Backfire bombers, This isn’t 1981. We live in millions of VX-filled artillery shells, an increasingly multipolar world and laboratories housing anthrax and that features cyberwarfare, suicidal plague. terrorism, additional nuclear states, I mention this history to make and increased avenues to nuclear a point: Our relationship with proliferation. We also had a sobering Russia and our mutual interest in budget deficit of $779 billion in 2018. constraining the threat from weapons The bottom line is that of mass destruction is a long game, jettisoning treaties that provide not a short one. That being said, there a legal framework for exposing can be no breaks in our determination Russian violations achieves nothing. each day to prevent disaster. I fear We should be pursuing a consistent that President Trump’s decision to strategy that strengthens the Western withdraw from the INF treaty is alliance, makes sensible defense short-sighted and not in our long-term investments, and builds leverage that national interest. could put the arms control process Let me explain why. First, the back on track.

I fear that President Russians are in violation of the INF To do that we need much Treaty. But Russian violations are Trump’s decision to withmore consistency of purpose. not a new phenomenon. A major draw from the INF treaty The successful launching of an feature of every arms control debate era of arms control by Presidents since 1987 was discussion of actual is short-sighted and not Reagan and George H.W. Bush or potential Russian violations. in our long-term national was achieved largely because those Every President has dealt with this. I Presidents projected a consistent interest. believe it is easier to expose, counter, foreign policy that undergirded and reverse those violations with the international law, stood up to INF Treaty than without it.

Second, arms control is not just about limits on weapons. dictators, commanded respect, and united the free world.

Much of the value of agreements comes from verification The United States returning to that posture would be a major setback for Russian oligarchs and would strengthen U.S. provisions. There is safety in transparency.

Our strategic relationship with Russia was never better ability to press a new strategic dialogue based on mutual than when Russian and American technicians were working interest. RF together on Nunn-Lugar projects to circumscribe the decaying Russian arsenal under provisions of active arms treaties. We Richard Lugar serves as President of The Lugar Center in knew a lot about each other, and we were talking every day. Washington, DC. He previously served for 36 years as a The worst thing we can do is undercut verification procedures U.S. Senator from Indiana.

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RIPON FORUM April 2019

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Promoting Stability Through Economic Growth A Q&A with Ann McLaughlin Korologos about the Middle East Investment Initiative On a warm Tuesday evening this past September, a group of about 150 political and business leaders from both the United States and around the world came together in Georgetown for a dinner to mark the 10th Anniversary of the Middle East Investment Initiative.

The organization has received relatively little attention here in our nation’s capital. But among those who are working to promote peace and stability in the Middle East, the MEII has made a name for itself as an organization that is working to achieve these goals by harnessing the untapped economic potential of local entrepreneurs and small businesses and unleashing that potential as a force for the common good.

In an area where the rate of unemployment is among the highest in the world and the GDP is caught in a spiral of slow growth, the MEII has provided nearly $300 million in loans to over 2,000 small and mediumsized businesses in the Middle East and North Africa. In the process, the organization has helped to create over 25,000 jobs in the region – including more than 5,600 jobs for women.

The MEII is based in Washington, where it is headed up by Jim Pickup, a former aide to U.S. Sen. George Mitchell (D-ME) who serves as the organization’s President, and Ann McLaughlin Korologos, a former Secretary of Labor for President Ronald Reagan who serves as Chair of the MEII Board.

The Forum sat down with Korologos to discuss the work of the organization, their accomplishments over the past 10 years, and their goals at a time when U.S. global leadership is needed perhaps more than it ever has been before.

group included American, Israeli and Palestinian business leaders, and the focus was on launching pragmatic economic initiatives to advance prospects for peace in the Middle East.

Working with the U.S. Overseas Private Investment Corporation (OPIC), we launched our first loan guarantee facility in 2008 in the West Bank and Gaza, followed by additional guarantee facilities in the Palestinian territories and Tunisia. Since then, we have also developed projects in the West Bank, Jordan and Tunisia to provide businesses with direct technical assistance and match them with available financing using an online platform called Tamweeli, or “finance me” in Arabic.

Today, MEII is managing $330 million in loan guarantee facilities and has financed over $300 million in lending to more than 2,000 businesses with a cumulative loss rate of RF: The MEII was founded just over 10 years ago. less than 2%. In addition, our team of business advisors What have been some of the main accomplishments has provided technical assistance to more than 1,000 SMEs. This has helped create and sustain an estimated 25,000 jobs of the organization over that time?

AMK: MEII started as an idea at the Aspen Institute’s in the region.

As a Board member, it’s been very rewarding for me to Middle East Strategy Group, which was chaired by former Secretaries of State Henry Kissinger and Madeleine Albright visit the countries in which we operate and see the impact and Senators Dianne Feinstein and Chuck Hagel. The MEII is having on people’s lives. We visited one woman in RF: Talk for a moment about the mission of the Middle East Investment Initiative. In a nutshell, what does MEII do?

AMK: The Middle East Investment Initiative’s mission, at its core, is to build peace and security in the Middle East and North Africa (MENA) through economic development and job creation. We believe that the path to social and political stability – in the MENA region and elsewhere – requires a sound and sustainable economic base.

Essentially, we identify sound businesses and entrepreneurs, provide them with targeted technical assistance — primarily accounting and financial support — and facilitate access to loans and investment so they can achieve transformative growth.

12

RIPON FORUM April 2019

the West Bank who owns the only major pharmacy in the immediate area. Thanks to a $151,000 loan guaranteed by MEII, she was able to open a second branch in a nearby town and even hire other women to work for her. It was so fulfilling to meet this woman and see how MEII has enabled her to expand her business and offer important products and medications to her community.

able to achieve over the past 10 years. We have also been fortunate to have the support of individuals passionate about our mission and believers in the impact business development and job creation can have on the MENA region.

RF: How, if in any way, has this model changed over the years? The past decade has been one of great hope and upheaval. Has that changed the way RF: What is your basic business model – where MEII does business, or it just a fact of life in this part does your funding come from, and how do you go of the world? about determining where these funds are invested AMK: We have been evaluating and adjusting our and spent? approach from day one. We started with a loan guarantee AMK: From the beginning, we realized that our focus model, focusing primarily on lenders, but quickly realized needed to be on small and medium-sized enterprises (SMEs) that many bankable businesses could improve their chances and breaking down barriers to business growth. SMEs of getting loans by adopting better accounting practices. This are critical to economic led to the development of development everywhere MEII’s technical assistance in the world, yet in MENA programs and Tamweeli they are stunted by a lack platform. of access to finance. While We also learned that SMEs account for more improved bank lending is than 95% of enterprises and only part of the answer to up to 70% of employment addressing the substantial in MENA, only 20% of the SME financing gap. Even region’s SMEs have a bank with guarantees, most loan or line of credit, and businesses don’t have the they use equity at a lower rate minimum collateral needed than anywhere in the world. to secure a bank loan, nor the To address this market gap, resources required to service we focus on three pillars of a loan in the period before activity: Stimulating local the investment translates to A woman-owned pharamacy was able to open a bank lending; improving increased revenue. Venture second branch because of an MEII-backed loan. entrepreneur and SME capital and private equity are capacity; and developing a also not the solution – such platform to invest directly in financing is only available to MEII is managing $330 million these businesses. a tiny fraction of the region’s in loan guarantee facilities and MEII typically works SMEs. This is why MEII is with development finance leveraging its accumulated has financed over $300 million institutions and donor agenexperience to launch a in lending to more than 2,000 cies from around the world, regional risk capital fund including the OPIC, USwhich will invest directly in businesses … This has helped AID, the International Fiexceptional SMEs through a create and sustain an estimated nance Corporation (IFC), hybrid of lending and equity 25,000 jobs in the region. the Swedish International investment.

Development Cooperation Agency (Sida), the GovernRF: Talk for a ment of Norway, and the Government of the Netherlands. moment about your team. You have a small staff Our funding is a mix of grant support, user fees, and private here in Washington, with the bulk of your personnel investment. Importantly, we develop our projects based on on the ground in the countries where you invest and our own regional and financial expertise, but also in partner- work. How important is it to have local experts and ship with our funders and investors. residents involved in the decision-making when it We are so grateful for the support we have received comes to the start-ups and businesses in which MEII from our donors, particularly OPIC and USAID. They have may invest? believed in our mission from the start and without them, we AMK: Our locally based teams in Ramallah, Amman, would not have had the positive outcomes that we have been Tunis, and now Cairo have been critical to our success.

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They know the local communities in which they operate, speak the local language, confer daily with local bank loan officers, and can properly evaluate local businesses based on their market knowledge. There is also a lot of underutilized talent in the MENA region. Over half our 35 staff members have advanced degrees, such as MBA, accounting and management degrees; 50% of our staff in the region are women and their average age is 34.

former Cabinet Secretaries and Ambassadors from both Republican and Democratic Administrations.

At a time when Washington is politically divided, what it is about the mission of MEII that has caused officials like yourself to put politics aside in support of this group?

AMK: From the beginning, MEII has been a bipartisan effort, focused on impact, not politics. Our first loan guarantee facility was announced by President George W. Bush in the Oval Office, expanded during the Obama administration, and sustained by the Trump administration. We have support from the Palestinian leadership and recognition from the Government of Israel that programs such as ours contribute to peace and security in the region.

It’s also a lot of fun to support businesses and put people to work.

Policy debate has its place, but it’s immensely rewarding to meet entrepreneurs in the region who can now support their families, send their children to school, and have status in their communities because of our work. It’s also been very valuable that we have annual Board trips to the region, which really remind people what we are trying to achieve through MEII’s programs.

RF: As you know, U.S. foreign aid dollars are under increased scrutiny these days. How has MEII provided American taxpayers with value when it comes to the funding you have received from the U.S. government in recent years?

AMK: Foreign assistance is critical to U.S. foreign policy, especially in a region like MENA. As former Defense Secretary James Mattis once said, “if you don’t fund the State Department fully, then I need to buy more ammunition.”

That said, we have to be smart with taxpayer money and look for opportunities where we can leverage private sector capital to achieve U.S. foreign policy and development objectives.

OPIC returns a profit each year to the U.S. Treasury, and with RF: Looking ahead, what Ann McLaughlin Korologos minimal grant-based operational do the next few years look like funding, MEII’s loan guarantee for MEII and the work you are We have to be smart facilities generate more fees than doing to bring stability to the losses. Similarly, our Tamweeli Middle East and North Africa? with taxpayer money platform and regional investment AMK: Our primary goal in the and look for opportunities fund are designed to be selfnext few months is launching our sustaining, earning modest returns regional investment fund, called where we can leverage for investors. the Sharaka Capital Fund (sharaka private sector capital to These businesses have the means “partnership” in Arabic). achieve U.S. foreign policy potential to be part of a supply We plan to target Egypt, Jordan, chain for large U.S. business Tunisia, Morocco, and West Bank/ and development sectors such as hotels, restaurants, Gaza as our initial markets and will objectives. larger corporations, and the likely double our regionally-based creative arts. staff as we build out our investment teams. We also want to grow our Tamweeli platform and RF: Let’s return to the make-up of your technical assistance work throughout the region. Most organization. MEII has a small staff as stated, but importantly, we want to continue growing projects and you have a powerhouse board of directors with partnerships in the region to expand our impact.

RF

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Politics & Perspective

The New USMCA: Prospects for Passage & the Keys to the Debate

by SCOTT McCANDLESS & CAITLIN MACKAY On November 30, 2018, President Donald Trump, a report assessing the agreement. This report was delayed by the Canadian Prime Minister Justin Trudeau, and outgoing Mexican government shutdown earlier this year and now is expected to President Enrique Peña Nieto signed the United States-Mexico- be delivered to Congress in April.

Canada Agreement (USMCA) to replace the North American Next under the TPA timeline, the President will submit Free Trade Agreement (NAFTA). The new agreement leaves a draft statement of administrative action and a copy of the in place the basic framework of NAFTA, but updates the legal text of the agreement to Congress at least 30 days before arrangement with revised labor and environmental standards, submitting a bill implementing the agreement to Congress for a new chapter on trade in digital goods, stronger intellectual consideration. Lastly, before the implementing bill is introduced property protections, and a more stringent set of requirements in the House and Senate, the President submits a copy of the final for automobiles and automotive parts to qualify for tariff-free legal text of the agreement along with an environmental review, access in North America. an employment impact review, a The first key concept to report on labor rights, and a plan know about USMCA is that, for implementing and enforcing with its ratification, there will the agreement. United States be a North American free trade Trade Representative Robert area. This is a critical point, Lighthizer has indicated that as the past several years have these steps could be taken this been filled with uncertainty over spring, setting up initial USMCA whether the United States would consideration in Congress over withdraw entirely from NAFTA. the summer.

While USMCA ratification is The TPA process is detailed not guaranteed, the conclusion and deliberative, but it also of trilateral negotiations and the provides certain advantages to Based on historical trends, prospects for its implementation trade legislation. Namely, TPAare encouraging signs of stability there could be enough votes compliant trade bills generally for the region and businesses that are not subject to amendment to pass USMCA. But it is not operate within it. but rather receive only an up-orguaranteed.

Still, the greatest uncertainty down vote. The no-amendment for ratification lies with the policy is based on the idea that United States. In Mexico, a simple majority vote in its Senate US trading partners would be unlikely to negotiate if any deal is required to ratify USMCA. The Mexican president, Andres they strike would be subject to later changes by 535 Members of Manuel Lopez Obrador, reportedly has enough support for the Congress. TPA is all but essential for trade deals – only one such agreement to pass. In Canada, no parliamentary vote is required agreement, a trade pact between the United States and Jordan, before the Cabinet ratifies the USMCA, and it is expected that has been ratified without TPA protections. the agreement will be ratified this year. It appears that Mexico However, because the USMCA bill itself is largely and Canada are waiting for signs of US movement towards unalterable, it is often the case that other legislation ancillary to ratification before concluding their own steps. the USMCA may be required to ensure passage. That is, expect In the United States, trade promotion authority (TPA), some deal-making to occur in order to win support for the pact. also known as ‘fast track’ trade negotiating authority, sets out Congressional approval of USMCA implementing legislation a timeline for US ratification of USMCA. The first step of this will require bipartisan agreement between the House and Senate. process has been completed, with the Office of the US Trade House and Senate Democrats are expected to focus on laborRepresentative (USTR) on January 29 submitting a list of the related concerns, focusing on the impact of trade on US workers changes to US law that would be required to bring the United and the ability of the trade partners to enforce their own labor States into compliance with USMCA. The next step requires provisions. Domestically, labor unions’ neutrality or support the International Trade Commission (ITC) to issue to Congress regarding USMCA will be vital for eventual passage in Congress.

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HISTORICAL TRENDS ON TRADE Breakdown of party support, 1993 - 2015

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Historical data on House and Senate voting percentages for part of USMCA ratification. Complicating this issue is the fact trade issues in the past few decades highlights the challenges of that President Trump is considering whether to apply similar passing trade agreements in Congress (see accompanying charts tariffs against automobile imports. Further imposition of such on page 17). Based on historical trends, there could be enough tariffs could jeopardize USMCA ratification in Congress. votes to pass USMCA. But it is not guaranteed. Democrats in Despite the many twists and turns ahead, the outlook both the House and the Senate have lower voting percentages in for ratification later this year remains cautiously optimistic. support of trade agreements than Republicans. It will be a point Politically, USMCA represents an opportunity for both parties of interest to see if and how this historical dynamic changes with to claim an end to NAFTA while at the same time ensuring a Democrat-controlled House. benefits for North American businesses and consumers alike.

Another complicating factor is the possibility that President Substantively, NAFTA entered into force in 1994, largely before Trump will declare United States withdrawal from NAFTA. If the digital age, and many of the USMCA’s proposed changes he withdraws, it will put pressure Congress to pass USMCA are overdue and welcome. USMCA ratification could be the or be left with no trilateral North American trade agreement. biggest political and legislative development of 2019.

RF Under NAFTA, a notice of withdrawal does not become effective for six months, essentially establishing a deadline for Scott McCandless is a Principal with PricewaterhouseCoopers Congress to ratify the new agreement without a lapse, provided LLP based in Washington, DC. Scott has over 20 years of the President’s authority in this area is not tested or is sustained. private practice as well as government policy experience, While it is possible that the President may be threatening to use including serving as Tax Counsel to US Senator Olympia authority he may not have, a presidential notification of NAFTA Snowe; Tax Counsel to Congressman Tim Griffin; and withdrawal would mean greater uncertainty for business and Law Clerk to Judge R. Kenton Musgrave of the US Court of possibly could result in higher tariffs.

International Trade. Caitlin MacKay is a Senior Associate in B:7.625” Finally, there is a growing bipartisan call in Congress forT:7.375” the PricewaterhouseCoopers LLP Tax Policy Services practice S:6.875” President Trump to remove the tariffs on steel and aluminum in Washington, DC, where she analyzes and provides advice to imports at least as applied to Canada and Mexico before or as clients on a wide range of tax and trade policy matters.

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A View from the Heartland on the Importance of Trade

by DOUG GOEHRING

Is trade essential?

Consider that 95 percent of the world’s population exists farmers paid for it; now it’s being used to drive down prices outside of U.S. borders, 80 percent of the buying power is even more in the global market because they either don’t pay outside our borders, and 92 percent of the middle-class growth the same price for access to that technology, or they don’t pay slated to happen in the next three decades is going to be outside for it at all.

More concerns are present with the lack of understanding of our borders. and grandstanding by politicians Trade is essential for U.S. who use labor and social issues agriculture. Our farmers have been to oppose multilateral trade deals experiencing crop prices that reflect and undermine our economy. The the early 1990s, but are also facing Trans-Pacific Partnership (TPP) expenses for land rent, seed, and wasn’t supported by Congress, but fertilizer that reflect the height of this multilateral trade deal would commodity prices of 2012 and 2013. have strengthened our position in Farmers, ranchers, and manufacturers the Asia-Pacific region and would depend on trade to drive our have given us more leverage with economy, supporting jobs through China. Countries are willing to work goods, services, and processing in for multilateral trade deals so we’re our communities and country. We all playing by the same rules. If we are hopeful that trade disputes can be have another opportunity in the resolved in the very near future. future, we should take advantage of There is support from many it. agriculture producers to deal with The United States-Mexicothe bullies and bad actors like China.

Canada Agreement (USMCA) may Our farmers and ranchers have Doug Goehring not be perfect, but we are better off been subjected to technical trade if it’s implemented.

The USMCA barriers, which are almost as bad as addressed some issues around the tariffs that China is imposing on Farmers may not like the the grain grading system; milk us now. Farmers may not like the tariffs that China is imposing classifications, which prevented tariffs that China is imposing on our our dairy producers and processors on our commodities, but commodities, but they also don’t access to the Canadian market; like China dragging out the process they also don’t like China and geographical indicators, which for approving registrations for years dragging out the process for barred our spirits and wine from at a time, just to deny an imported having a place on the shelf in commodity access because it lacks approving registrations for Canadian stores. that approval. That is disingenuous years at a time.

What’s important, though, is and arbitrary. ratification of USMCA. If Congress We’ve also experienced the doesn’t ratify the agreement, same behavior with sanitary and phytosanitary rules. Products potential partners like Japan, Great Britain, and the EU will are rejected under false claims about the grade or quality, and our not want to put the time or effort into similar deals. small companies lose shipments or incur more expense moving It is imperative that USMCA is ratified by Congress for containers to another country. the sake of American jobs and the health and welfare of our Another issue is stealing or forcing the transfer of U.S. economy.

RF technology. We in the ag community have paid for much of the research and development through tech fees, royalties, and increased costs in biotech traits, precision equipment, and new Doug Goehring serves as Agriculture Commissioner of North formulations of plant food and plant protection products. We as Dakota, a position he has held since 2009.

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Time to Hit “Reset” on Transatlantic Trade

by PETER CHASE

When Chancellor Merkel visited President Bush in the early stages of the negotiations, and the Snowden during the first week of Germany’s six-month presidency revelations, which helped give more credence to concerns of the European Union in January 2007, she proposed whipped up about American companies allegedly seeking to a transatlantic free trade agreement (FTA) to strengthen weaken Europe’s regulatory protections, including through Europe and America’s ability to compete with what she investor-state dispute resolution (ISDS). saw, even then, as a rising China.

European leaders were Washington wasn’t ready: the querulous at President Trump’s World Trade Organization (WTO) decision to withdraw from TPP. Doha negotiations were our top trade They welcomed the “own-goal” priority, and the threat from China that reinvigorated Canada, Japan still seemed distant. The United and Mexico’s interest in concluding States and EU instead created the FTAs with the EU, but wondered Transatlantic Economic Council, that China should be the other which discussed China over a beneficiary. ministers-only lunch during its They were astonished when the first (and most successful) meeting Administration then used national in November 2007, a discussion security concerns to levy punishing facilitated when then EU Trade tariffs on imports of steel and Commissioner Peter Mandelson aluminum. While EU exports were convinced his colleagues that Europe relatively modest at $6 billion, and needed to stop playing the “good cognoscenti understood that the Peter Chase cop” with Beijing. Cooperation on Administration’s trade policy leaders China between Washington and came from a steel industry that had Brussels flourished for the remainder long felt beleaguered (especially Europeans now of the Bush Administration. after the WTO struck down Perhaps ironically, it was a President Bush’s steel “safeguard” argue they will only Democrat, President Obama, who action in 2003), they wondered how put their “sensitive” resurrected the US-EU FTA idea in hurting America’s allies helped its agricultural sector into his 2013 State of the Union. China’s national security, and knew they had economic weight loomed larger, to respond with their own tariffs and the talks if the US will and Mr. Obama and his new Trade in the WTO against a step any other allow access to its Representative, Michael Froman, country could use to justify closing saw the Trans-Pacific Partnership its markets. “sensitive” government (TPP) and what became the But they were aghast when procurement market.

Transatlantic Trade and Investment the Administration then cited the Both are wrong.

Partnership (TTIP) as a response. same (spurious) grounds to possibly TPP renegotiated NAFTA and justify an attack on Europe’s $60 opened new FTAs with Japan, New billion of autos and auto-parts Zealand, Malaysia, and Vietnam; TTIP built on the unique exports to America. The move would only affect U.S. allies U.S.-EU investment-based relationship (then $5 trillion of in America, Europe and Asia; it undermined huge U.S. two-way foreign direct investment) to strengthen the global investments by firms like BMW and Toyota; U.S. industry competitiveness of American and European firms and opposed it; and autos are even further removed from workers. Froman brought TPP to signature in October 2015, national security. Indeed, Europeans could only see this as a but TTIP was held back by the priority given TPP, miscues naked attempt to create negotiating leverage in the form of a 20

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cudgel… A cudgel that would beat not only them, but also did on steel. Even though the EU’s planned retaliation at €20 destroy the burgeoning US-EU-Japan cooperation against billion is only one-third the level of the possible US action, a Chinese economic threat that is no longer distant, but combined with the steel saga, $100 billion in transatlantic immediate. This cooperation, instigated largely by Tokyo, trade will be impaired. had led to a statement on the need for a Level Playing Field Meanwhile, Beijing – and Moscow – are delighted. on the margins of the December 2017 WTO Ministerial, A reset is needed. A TTIP that helped heal the Brexit which was further elaborated in trilateral meetings in wound by including the UK (and perhaps Canada and Brussels in March 2018, in Paris at the OECD Ministerial Mexico) would be ideal, but won’t happen. But the two later in May, and in Washington in January 2019. sides can agree to reframe their approach. Rather than the EU Commission President Jean-Claude Juncker European approach of drawing the line by sector, they can do travelled to Washington in July to ward off the blow by so by function. Include agriculture in a market-access only refocusing Washington on the importance of U.S.-EU trade agreement, accepting that both parties will retain some collaboration, and to lay the grounds for renewed trade duty and quota protections on say three percent of sensitive talks. But when the two tariff lines, and knowing this sides eventually laid their won’t resolve America’s cards on the table in legitimate concerns about EU January, with the US Trade import restrictions, which are Representative’s (USTR) largely regulatory. negotiating objectives and That said, at the same the Commission’s request time the two sides need to for a negotiating mandate learn the political lesson of from the EU member states, TTIP and keep specific food they were playing different safety (and other regulatory) games. USTR effectively issues out of the trade talks. resurrected the full TTIP Have regulators, overseen agenda (suggesting it could by politicians, address these be done in stages); the EU separately, cognizant that remained steadfast to the neither side can afford to letter of the Juncker-Trump be seen as “lowering” food statement, which referred safety standards. The EU only to industrial goods. has numerous “sanitary and Stung by the steel duties phyto-sanitary” issues with and the threat on autos, the US, just as the US has Europeans now argue they with Europe. Not all reflect will only put their “sensitive” concerns about safety; many But the Administration’s tactics agricultural sector into the reflect instead bureaucratic are also wrong; threats against talks if the US will allow inertia. Some–even in the access to its “sensitive” an ally dealing with Brexit contentious biotech area–can government procurement be resolved, especially if a and upcoming elections were market. Both are wrong. And constructive atmosphere on always likely to be met with a both are short-sighted. trade talks replaces the threats The EU, by its own and bickering we see today. defensive crouch. account, has been the world’s If the US and EU can largest agri-foods exporter resurrect at least the spirit for the past three years. It has run an agri-foods surplus of TTIP, it could inject new purpose into the transatlantic since 2010; its exports to America (its largest market) are partnership, and help the US and the EU refocus on the double its imports. This is no longer an “infant industry” problem Mrs. Merkel rightly highlighted a decade ago. RF to be shielded by tariffs. But the Administration’s tactics are also wrong; threats against an ally dealing with Brexit Peter Chase is a Senior Fellow of the German Marshall and upcoming elections were always likely to be met with a Fund of the United States, based in Brussels, who served defensive crouch. for 30 years as a U.S. diplomat (including tours at the U.S. Europe now waits for the auto shoe to drop. Commerce Mission to the EU, in London, at USTR, and as head of the has delivered its national security assessment to the Office of European and Regional Affairs 2004-07) and six President. It’s not public, but EU leaders expect the worst, representing the U.S. Chamber of Commerce in Brussels and know they will have no choice but to respond as they before joining GMF full time in 2016.

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China’s New Silk Road What America can do to keep the belt from becoming a noose

by BONNIE GIRARD continent, the island nations of the Pacific, Africa, and even It was an audacious move.

In 2013, Chinese President Xi Jinping announced plans Latin America and the Caribbean, into a Beijing-directed relationship of economic cooperation and collaboration. to resurrect the old Silk Road – 21st century style.

China estimates the project thus far has created $1 In the six years since, he has opened his country’s trillion in trade, and has reached not only four major wallet – loaning vast amounts of money to countries across intercontinental trade routes, but, perhaps more crucially, the Eurasian continent and beyond in an ostensible quest one maritime route dotted with ports. China’s target for to develop infrastructure, trade, new markets, and probably trade with BRI countries is $2.5 military assets. trillion by 2025, just six years from The scope of the project – now. The Chinese want to develop referred to today as the Belt & new markets, much in the way that Road Initiative, or BRI for short the West and its partners helped to – has raised eyebrows around the develop China. globe. It’s also raised eyebrows at But the trade that the Chinese home. Indeed, even though China is tout as the motivation behind Belt the second largest economy in the & Road can only occur on the world after the United States, it only st back of massive investments in ranks 71 in the world in terms of infrastructure.

Roads, railways, per capita GDP. airports, energy pipelines, and At a time when hundreds of maritime ports are all required to millions of Chinese do not have support the interconnectivity that piped running water in their homes, is ostensibly BRI’s goal. And the Chinese Communist Party and that investment is being made by its government are lavishing loans Bonnie Girard China, galling as it may be, largely on countries far away. Dry statistics from the profits of the investments hardly capture the course that Xi and trade which America and her Jinping has set for himself and allies have been engaging in with There are estimates his country. In many respects, the China since the late 1980s.

Belt & Road Initiative is a land that suggest that China There are estimates that grab – one that rivals in scope the may spend $1 trillion in suggest that China may spend $1 ambitions of Cyrus, Genghis Khan, trillion in developing infrastructure and Alexander the Great rolled into developing infrastructure with target countries. one. with target countries.

But Genghis Khan only got to The Reaction at Home Vienna. By contrast, one of the Belt In the face of these grand & Road train routes already goes all ambitions, ordinary Chinese and many in the Chinese the way from eastern China to Madrid. Another one goes to Communist Party itself (which comprises about 6% of the Rotterdam. And just last month, in a first for a G7 member, population) are unhappy with Xi Jinping. There are several the government of Italy endorsed and embraced the Chinese reasons for this. project.

First, Xi Jinping has become something of a killjoy.

He has cut off the money and the good times that national, The Glory & the Dream provincial, and local Party leaders have been enjoying to Using the historical notion of the Silk Road as a excess over the last 25 years. Huge budgets, lavish banquets, romanticized hook for countries today, the grand plan of Belt and the accompanying lifestyle have all been slashed and & Road envisions bringing much, if not all, of the Eurasian RIPON FORUM April 2019

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fair share exists because officials in the target country have been financially compromised by the Chinese. Work with countries to expose projects which are infeasible, loan offers that are usurious, and debt-levels that are disastrous.

4) Operating from the top down – The United States should take a top-down approach to its understanding and response to Chinese maneuvering through BRI. Our intelligence on Chinese BRI investments globally should be comprehensive, and in one set of hands that reports directly to the President.

5) Being realistic about the potential for failure, or success – It is not inconceivable that the entire venture is going to collapse under its own weight. China may be overextending itself in loan commitments, particularly as its own growth is slowing. It may run into backlash at home and abroad that causes it to pull back. But don’t count on failure The Backlash Abroad At the same time, an international chorus is rising that in determining policy toward it.

6) Going bilateral – The US should work to srengthen says BRI is about nothing less than luring target countries into loan and infrastructure deals – deals which ultimately bilateral relationships with BRI target countries that are supposed to be firmly in China’s will put these countries at risk of camp, but aren’t necessarily. default, bankruptcy, receivership, The United States should Malaysia is an excellent example. and having to transfer their assets Minister Mahathir to Chinese state control. avoid the temptation of trying Prime Mohamed, back in office after Importantly, the charge of to counter BRI projects head a 15-year hiatus, visited Beijing debt-trap creation is rising from on. Work with countries to in August of last year. In front the very countries being targeted of the press, while standing next for BRI investments. These voices expose projects which are to China’s premier, Le Keqiang, include savvy commentators infeasible, loan offers that are Mahathir effectively called and politicians from Malaysia to usurious, and debt-levels that China guilty of “a new version of Zambia. In Zambia, which is rich colonialism”. in copper, the Lusaka Times said are disastrous.

7) Accessing expertise – in July 2018 that, “It is apparent Today in Washington, there is an that there is…subtle and informal colonization of the Zambian economy taking place.” Such appalling lack of policy professionals who have in-depth, comments are being echoed across the continent, and in long-term, real-world expertise and experience dealing with China. That said, there is a population of Americans who Europe and Asia, as well. have lived, worked, and developed savvy field knowledge in the test tube that is modern China. Their expertise should be What America Can Do The United States needs a cohesive and comprehensive tapped.

8) Supporting the opposition – Where there is opposition set of policies to counter the negative consequences of China’s to BRI investments in the media and among politicians of geo-political BRI strategy. These policies should include: 1) Interrupting connectivity – China’s BRI routes depend any BRI country, the US should support their call in real and on complete connectivity and control along those routes. The moral terms, if justified.

In conclusion, China’s Belt & Road Initiative is a grand US should be in the business of interrupting that connectivity at critical nodes along both land and sea routes. Our plan to co-opt tangible and intangible resources for itself, methods should be commercially viable and diplomatically away from the sphere of Western influence. It is in the longterm interest of the United States to counter abuses arising out underwritten.

2) Rescuing where possible – Some BRI projects are of BRI with all of the tools we have.

The belt should not become a noose.

RF going to go into receivership; some already have, such as in Sri Lanka. Such occurrences provide a terrific opportunity for the United States and her partners to rescue the project, if Bonnie Girard is in her 32nd year of a China-focused career, having spent over 20 years in-country. She is the worthwhile to our interests.

3) Acting, not reacting – The United States should founder of consultancy China Channel Ltd, and can be avoid the temptation of trying to counter BRI projects head reached at chinachannel@hotmail.com, and on Twitter on. Many BRI projects are specious from the beginning. A @BonnieGirard. banned, as probably they should have been.

There is a deep resentment among the Party faithful over this return to an austere, straight-laced life. Added to that is a growing feeling that Xi Jinping is “getting above himself.” Some of the Old Red Army families who have the same revolutionary pedigree that Xi has – and some with even greater status – see Xi’s international exploits as evidence of hubris, and something that runs against the tide of Chinese history.

Finally, many everyday Chinese are quietly seething over BRI investments in other countries. Despite the fact that China is decidedly not a democracy, it is crucial for social consent to exist. Anyone who witnessed the events of 1989 in Beijing knows that the Chinese people do, indeed, have a boiling point.

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News & Events

Larsen & LaHood Discuss U.S.- China Relationship with Crucial Trade Negotiations Underway “Rick and I brought four businesses here at home, but level WASHINGTON, DC – The bipartisan Co-Chairs of the U.S.- other members of Congress -- all the playing field for American China Working Group appeared from different states and different companies and workers trying to yesterday before a breakfast backgrounds -- so it was a diverse compete overseas.

He touched on these efforts in meeting of The Ripon Society group of Republicans and Democrats and Franklin Center for Global that went. We met with Ambassador his remarks, and how the recent Policy Exchange, where they not Lighthizer before we left to get a CODEL focused on the need to hold only discussed the Congressional sense from the Administration on China to the same set of standards that other countries delegation they recently operate under around led to China, but the the world. future of the U.S.-China “We talked a lot trade relationship with about the enforcement crucial negotiations mechanism that we underway. haven’t been able to The Co-Chairs have in our relationship were Republican with China in terms Congressman Darin of trade,” the Illinois LaHood, who represents lawmaker said, adding the 18th District of that the group also Illinois, and Democratic focused on “how we get Congressman Rick China to abide by the Larsen, who represents same rules that every the 2nd District of other industrialized Washington. LaHood country in the world kicked off the abides by.” discussion by touching “We want substantive, structural “I’m not a fan of on the agenda of the tariffs -- tariffs are change when it comes to how the CODEL, and outlining taxes in my view. some of the key Chinese deal with us.”

You look at the effect briefings the delegation that they’ve had on had with both American Darin LaHood

agriculture products and and Chinese officials manufacturing. So we along the way.

“This was my second trip,” where they’re at with their current talked a lot about the retaliation that LaHood said of the mission, which trade negotiations. Just yesterday, China has engaged in with regard to took place earlier this month. “We we debriefed the Ambassador and tariffs. And moving forward, what were in Hong Kong for the first day his staff as they were on their way type of enforcement mechanism do we put in place with the Chinese and a half, and then Hangzhou and to China with Secretary Mnuchin.”

LaHood was elected to the to make sure that they abide by the then Beijing. We really had some high level, substantive meetings House in 2015 and was named Co- rules?”

Larsen echoed LaHood’s while we were there. I think we were Chair of the USCWG in 2016. He the first delegation from Congress is also a member of the Ways & remarks, and kicked off his own to be there in about the last eight Means Committee. In these and comments by describing the mood months. Obviously, the pinnacle other roles, he has pushed not only in Congress when it comes to China, point of the trip was trade. That was to reduce the number of regulatory and the message the USCWG shackles placed on American members were trying to send during our main focus.

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their visit to the country earlier this county. Two separate studies – from mechanism in place that works.” month.

“I think these next two weeks Brookings and from Peterson -- say “There are national security that my county gets hit the hardest we’ll know where we’re headed. hawks on China, there are trade if there’s an all-out trade war. So it But I think the Administration is hawks on China, and there are is not in the interest my district for prepared to continue on with tariffs. human rights hawks on China,” this thing to get really out of hand.” I don’t necessarily think that’s Larsen said, describing the political Following their opening good for our economy long term. landscape on Capitol Hill. “In the remarks, LaHood and Larsen took a It’s not good for my farmers. The last couple of years, those three number of questions, including one ag economy is down about 13% hawk groups have found each about the goal of U.S.-China trade over the last year. There’s a lot of other and have created a different negotiations, and the possibility anxiety. There’s a lot of stress out consensus in Congress on where that Lighthizer and Mnuchin might there because of the tariffs. So that center of gravity rests with reach an agreement during their we’ll have to see. But I think there’s regard to the relationship. That was trip. a narrow path to get this done.” one of the messages that we gave to The Illinois Republican and “We want substantive, the Chinese leadership with regard structural change when it comes Washington State Democrat were to trade.” to how the Chinese deal with us,” also asked about the state of China’s “There is bipartisan economy and their consensus on the need impressions in that for China to make some regard while they were changes in its economic there. policies. I think it’s “My impression of fair to say that some the state of the Chinese of us differ with the economy is that it’s not Administration on their as robust as they’re approach, but I left that predicting,” Larsen at home -- I didn’t take stated bluntly. “They’re that with me. I don’t predicting a band of think it’s appropriate growth – six to six and to have that debate in a half percent. It’ll front of the Chinese in probably be less than China. So we tried to that. It probably is less stay focused on that than that now. And the bipartisan message biggest driver of that of concern.

That’s aren’t the tariffs. It’s “There is bipartisan consensus on why Democrats and local debt -- provincial Republicans were there debt.

The central the need for China to make some together.” government doesn’t changes in its economic policies.”

Larsen was elected have a lot of control to Congress in 2000 and -- direct control -- over Rick Larsen

co-founded the U.S.provincial debt.

China Working Group “The provinces in 2005. In this role, he has visited LaHood declared. “That’s really have a desperate desire to create jobs, China nine times, and has led the the crux of what they’re getting at. because that’s what moves you ahead effort on Capitol Hill to educate A purchase agreement will be a part in the system there. But it moves you Members of Congress about U.S.- of that. They’re going to buy more ahead in the communist party system, China issues – issues, he said, soybeans and corn and ethanol and and so they’re not as likely to follow which are not just critical to the DDGS and airplanes and all that. national or central government dicta future of the American people, but But you know, particularly on the when it comes to debt. And that critical to the people he represents technology side, you look at the hangover on the provincial debt is a in Washington. forced technology transfers, you big problem for them. Now add on “In my state,” he noted, “40% look at the data localization issue, to that the tariffs, it becomes more of of the jobs are directly dependent you look at theft of IP, cybersecurity a problem. But the big driver on the on trade. 60% of the jobs are -- those are really issues regarding underlying problem in their economy directly dependent on trade in my how you put an enforcement is the mass of provincial debt.” RF RIPON FORUM April 2019

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Name: Brad Wenstrup

Current job: U.S. Representative, Ohio’s 2nd District, and Colonel, United States Army Reserve Previous jobs held: For years, I had my own practice as a podiatric surgeon and eventually joined a large orthopedic group. I served as a combat surgeon in the United States Army Reserve in Iraq. Before becoming a doctor, I worked as a drugstore clerk, busboy, dishwasher, bartender, cook, waiter, delivery boy, caddy, and lawn servicer.

Individual who inspired me as a child: I have been influenced by many different figures throughout my life. Each person has taught me lessons and helped develop the values I hold today. The figures that inspired and continue to inspire me include my mom and dad, Dr. Joe Gannon from one of my favorite television shows “Medical Center,” U.S. heroes from the TV show “Combat!,” President Ronald Reagan, and Pope John Paul II. I have a plaque that sits on my desk inscribed with President Reagan’s message, “There is no limit to what a man can do or where he can go if he doesn’t mind who gets the credit.”

Historical figure I would most like to meet: George Washington.

George Washington was a humble man and a revolutionary thinker ahead of his time. He had an unfailing commitment to a limited government that would exist to serve the people and he led by example.

He believed in this idea so strongly, that after the Revolutionary War he actually resigned his commission, declined a king-like role, and chose to live life as a civilian until called back to serve his country as president.

George Washington is a true patriot in my book.

Issue facing America that no one is talking about: Mandatory spending. Our nation has a spending problem, and it’s stuck on autopilot. Mandatory spending alone takes up 70 percent of our federal budget. Our national debt, and the associated increasing interest payments, are two of the largest threats facing our nation right now.

Challenge facing Ohio that I’m working hard to address: Ohioans deserve the opportunities made possible by a strong economy, and I am working every day to ensure that those previously on the sidelines of success have the opportunity to work and provide for their families. Ohio has felt the benefits of our national economic boom in recent years, and my hometown of Cincinnati was recently listed as a top U.S. city for manufacturing jobs. But there is still work to do for those who find themselves trapped in the cycle of poverty. Part of my efforts include the WORK Act, legislation to support the transition from federal assistance into the workforce.

Additionally, Ohio continues to face the challenges presented by the opioid crisis. Last year, we passed into law the biggest anti-opioid package in history. As the SUPPORT for Patients and Communities Act is implemented, I’m continuing conversations at the community level to find lasting local solutions to this epidemic.

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RIPON FORUM April 2019

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