[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
COERCIVE BELT AND ROAD DIPLOMACY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
June 14, 2023
__________
Serial No. 118-33
__________
Printed for the use of the Committee on Foreign Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov,
or http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
53-672PDF WASHINGTON : 2023
COMMITTEE ON FOREIGN AFFAIRS
MICHAEL T. McCAUL, Texas, Chairman
CHRISTOPHER H. SMITH, New Jersey GREGORY MEEKS, New York, Ranking
JOE WILSON, South Carolina Member
SCOTT PERRY, Pennsylvania BRAD SHERMAN, California
DARRELL ISSA, California GERALD E. CONNOLLY, Virginia
ANN WAGNER, Missouri WILLIAM KEATING, Massachusetts
BRIAN MAST, Florida AMI BERA, California
KEN BUCK, Colorado JOAQUIN CASTRO, Texas
TIM BURCHETT, Tennessee DINA TITUS, Nevada
MARK E. GREEN, Tennessee TED LIEU, California
ANDY BARR, Kentucky SUSAN WILD, Pennsylvania
RONNY JACKSON, Texas DEAN PHILLIPS, Minnesota
YOUNG KIM, California COLIN ALLRED, Texas
MARIA ELVIRA SALAZAR, Florida ANDY KIM, New Jersey
BILL HUIZENGA, Michigan SARA JACOBS, California
AUMUA AMATA COLEMAN RADEWAGEN, KATHY MANNING, North Carolina
American Samoa SHEILA CHERFILUS-McCORMICK, Florida
FRENCH HILL, Arkansas GREG STANTON, Arizona
WARREN DAVIDSON, Ohio MADELEINE DEAN, Pennsylvania
JIM BAIRD, Indiana JARED MOSKOWITZ, Florida
MICHAEL WALTZ, Florida JONATHAN JACKSON, Illinois
THOMAS KEAN, JR., New Jersey SYDNEY KAMLAGER-DOVE, California
MICHAEL LAWLER, New York JIM COSTA, California
CORY MILLS, Florida JASON CROW, Colorado
RICH McCORMICK, Georgia BRAD SCHNEIDER. Illinois
NATHANIEL MORAN, Texas
JOHN JAMES, Michigan
KEITH SELF, Texas
Brendan Shields, Staff Director
Sophia Lafargue, Staff Director
C O N T E N T S
----------
Page
WITNESSES
Pyatt, Honorable Geoffrey, Assistant Secretary, Bureau of Energy
Resources, U.S. Department of State............................ 8
Venkataraman, The Honorable Arun, Assistant Secretary of Commerce
for Global Markets, and Director General, U.S. and Foreign
Commercial Service............................................. 19
Herscowitz, Andrew, Chief Development Officer, U.S. International
Development Finance Corporation................................ 27
APPENDIX
Hearing Notice................................................... 69
Hearing Minutes.................................................. 71
Hearing Attendance............................................... 72
STATEMENT SUBMITTED FOR THE RECORD FROM REPRESENTATIVE CONNOLLY
statement submitted for the record from Representative Connolly.. 73
RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
Responses to questions submitted for the record.................. 75
ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
COERCIVE BELT AND ROAD DIPLOMACY
Wednesday, June 14, 2023
House of Representatives,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 2:12 p.m., in
room 210, House Visitor Center, Hon. Michael McCaul (chairman
of the committee) presiding.
Chairman McCaul. The Committee on Foreign Affairs will come
to order.
The purpose of this hearing is to understand the threats
posed by China's Belt and Road Initiative and review the
strategies and actions taken by the Biden Administration,
specifically looking at the role of the Foreign Commercial
Service, State Department's Energy Resources Bureau, and the
International Development Finance Corporation, or DFC, the role
they play in countering China's coercive Belt and Road
Initiative.
I now recognize myself for an opening statement. There's no
denying that the threat from the Chinese Communist Party is
real. The tentacles of the CCP reach every corner of the globe
as they continue to pull nations into their sphere of
influence.
Just this past week we learned a Chinese spy station
located 100 miles off the coast of Florida in Havana, Cuba.
China's malign influence is growing exponentially and its
encroachment into the Western Hemisphere poses a clear and
present danger.
Now is the time to act and address this with the
seriousness it deserves. We need a whole of government approach
including a concerted effort among the State Department, the
Commerce Department, the Development Finance Corporation to
successfully counter CCP's Belt and Road.
The BRI seeks to develop a system of PRC-controlled
infrastructure, energy, transportation, trade, and production
networks across the globe. The BRI initiative encompasses over
150 nations with a significant focus across Africa and the
Indo-Pacific and a growing focus on Latin America, the
Caribbean, and even Europe.
This debt trap diplomacy is saddling developing nations
with unsustainable debt, which China then leverages into
increasing its influence. BRI initiatives often lock countries
into reliance on PRC systems, leaving countries vulnerable to
exploitation by the PRC.
Specifically, PRC uses its investments across strategic
sectors to secure PRC exclusive or near exclusive to and
control over dual use infrastructure and programs that can be
used in conjunction with the PRC's military-civil fusion
program to help the PRC project coercive power into critical
global regions.
Some of these projects include 85 percent of Hungary's
largest ever infrastructure project. A $1.9 billion railway
link to Serbia will be financed with a loan from China's
Export-Import Bank.
Huawei has constructed up to 70 percent of Africa's
information technology 4G infrastructure including telecom,
national and government networks which have been used for
surveillance of opposition leaders.
While China has focused on consolidating power we have
prioritized a $100 billion climate fund to help developing
nations transition to clean energy and strengthen their climate
resiliency, offering Palestinians $100,000 to promote
diversity, equity, and inclusion in arts and sports, and a
State Department grant of over $20,000 for drag shows in
Ecuador.
How are we supposed to lead when this Administration
prioritizes green projects and social issues rather than
applying our resources to counter the malign influence of the
CCP?
This must change, and I want to refer to the Wall Street
Journal article that was written by the president of Uganda and
it's entitled ``Solar and Wind Force Poverty on Africa.'' He
says Africa cannot sacrifice its future prosperity for Western
climate goals.
The DFC was created, and I was part of it, to counter the
CCP's BRI and advance U.S. security interests and transition
countries from aid to trade through strategic development
investments.
We must make it clear that our assistance is designed to
build bridges to prosperity. Additionally, the Foreign
Commercial Service is prioritizing developing nations. We have
22 officers in Paris but only 12 in all of Africa. We are not
showing up in Africa and they tell me that repeatedly.
We need to be on the ground and on the field working to
counter BRI and the CCP's influence. That was the intent of
Congress, not to advance some social, gender, or some
environmental but to advance private investment to counter
China's aggression.
And look at this map. All of the green and blue are
projects throughout the globe spanning across Asia into Europe
and Africa and into Latin America, over 150 countries now.
For every nation FCS is involved in the CCP does not just
have a footprint but a regional stranglehold as the FCS is
woefully outnumbered and so is the DFC.
Regions where the CCP but the FCS is not engaged are rife
with opportunities for U.S. business. U.S. investment will
further embolden our relations and strengthen these economies
on an array of industrial areas including, and importantly,
critical minerals and I find it startling that China controls
the vast majority of global critical mineral refining. It
refines 68 percent of nickel globally, 40 percent of copper, 59
percent of lithium, 73 percent of cobalt.
If China controls the global supply of critical minerals it
will give them an edge in the development of advanced
technology, and following the deadly withdrawal of Afghanistan
China is moving in quickly. The CCP link to a 25-year-long
contract to extract oil and are negotiating a deal for access
to lithium reserves that could be worth up to a trillion
dollars.
They're also looking, consistent with Belt and Road
practices, and it's foreseeable--they are looking to take over
Bagram Airbase. After 20 years of blood and treasure and
sacrifice this is how it ended.
This is the Administration's greatest failure. We cannot
remain silent on China. We must prioritize developing our own
supply chains where we are not reliant on our greatest
adversaries like the Chinese Communist Party.
Let's get back to the intent of Congress and what Congress
intended to get private American investment to compete against
Communist China.
And with that, I now recognize the Ranking Member, Mr.
Meeks.
Mr. Meeks. Thank you. Let me begin by thanking Chairman
McCaul for organizing this hearing and the witnesses for
appearing before us today.
This discussion is pivotal to how the United States
undertakes a strategic competition with China because the Belt
and Road Initiative, a.k.a. BRI, is central to Beijing's
strategy to grow its economic and strategic influence globally.
I want to start by talking about what we know about BRI. We
know that BRI has increased the likelihood of debt crises
globally. We know that BRI lowered infrastructure financing and
negotiation standards.
We know that BRI projects have extracted natural resources,
harmed the environment, and undermined labor standards in many
countries.
We know that BRI has exploited corruption and poor
governance and has created economic dependencies and political
leverage that Beijing uses to its political and strategic
advantage.
After 10 years of BRI this is old news so I hope we will
not spend today's hearing bemoaning all the things we know
while simply admiring the challenge facing the United States
because complaining isn't competing, and to be able to be most
effectively to compete we have to know the terms of the
competition.
This is first and foremost a competition about results.
It's about how the United States engages in diplomacy,
development, trade, and investment that leads to better
outcomes for the American people and people around the world.
Whether you're a citizen in sub-Saharan Africa or Southeast
Asia or Central America, you do not need the United States to
tell you about the problems of BRI. You've experienced them
firsthand.
The reason BRI has grown into such an expansive global
initiative despite these failures is because it taps into
legitimate development needs around the world. China has
responded to the global demand for assistance, for
infrastructure, and for greater trade and investment networks.
The United States does not want to force countries to
choose between China and the United States. But we must make
clear that they have a choice. In order to do that what we need
is a proactive agenda for global diplomacy, for global
development, and economic growth.
We can only compete with China if we offer other nations a
credible alternative. We must demonstrate that the United
States' assistance and infrastructure lead to better
development outcomes, stronger governance, as well as better
social and environmental outcomes for local communities, and we
must leverage our partnerships with like-minded nations and
multilateral institutions.
So what does this mean? It means working together with our
allies to resource the Partnership for Global Infrastructure
Investment. That means making the Minerals Security Partnership
more inclusive and collaborative.
It means expanding and resourcing new initiatives such as
the partners in the Blue Pacific, who we met with in a
bipartisan way yesterday. It means Power Africa and Prosper
Africa. That means legislating an equity fix for the DFC to
improve its capacity and its ability to compete with the BRI on
infrastructure.
One thing we cannot do is say we're competing but then tie
our agencies' hands through budget cuts. According to witness
testimony China's tradeoffices outnumber ours three to one and
China spends more than $110 million annually in support of its
companies at global trade fairs.
How much does the United States spend, $5 million to $7
million? And, of course, DFC's budget pales--it pales in
comparison to the amount of money China is spending on
infrastructure.
But instead of joining in a bipartisan fashion to meet this
challenge, unfortunately, when I look at what our Republican
majority has sought to dramatically slash, development and
diplomacy spending, when I looked at proposed--it slashes
substantially development and diplomacy spending.
That's a warning. We cannot compete with China if we do not
believe in dollars for development and we do not believe in
diplomacy, and why believing is not just talking. It's by
putting your money where your values are. That's how we make
that determination.
So what was shocking to me yesterday, according to reports,
the House Appropriations Committee's top line allocations, the
Republican proposal is worse than what I thought.
It would be the most poorly resourced diplomacy because
what they want to do is cut U.S. foreign assistance by 31
percent. It would be the worst poorly resourced diplomacy and
development budget in a generation, and if the final budget
aligns with the Republicans' proposed cuts it would serve as a
self-inflicted wound to the United States and a danger to
American interests and global standing.
And with that, I yield back the balance of my time.
Chairman McCaul. The gentleman yields back. Other members
of the committee are reminded that opening statements may be
submitted for the record.
We're pleased to have a distinguished panel of witnesses
before us today on this important topic.
First, Mr. Geoffrey Pyatt is the Assistant Secretary for
the Bureau of Energy Resources at the State Department and has
had a long distinguished career as an ambassador. Mr. Arun
Venkataraman is the Assistant Secretary of Commerce for Global
Markets and Director General at the U.S. and Foreign Commercial
Service. Thank you.
And Mr. Andrew Herscowitz is the chief development officer
of the U.S. International Development Finance Corporation.
Your full statements will be made part of the record. I ask
that you keep your remarks to 5 minutes.
I now recognize Mr. Pyatt for his opening statement.
STATEMENT OF THE HONORABLE GEOFFREY PYATT, ASSISTANT SECRETARY,
BUREAU OF ENERGY RESOURCES, U.S. DEPARTMENT OF STATE
Mr. Pyatt. Thank you very much.
Chairman McCaul, Ranking Member Meeks, members of the
committee, thank you for the opportunity to discuss the
Administration's efforts to strengthen global energy security
and counter the PRC's attempts to create economic dependencies
and coerce others through its Belt and Road Initiative.
Prevailing in our economic competition with China and
ensuring that the United States remains the partner of choice
on issues of energy security and energy transition has been a
priority for me from day one in the ENR Bureau.
Secretary Blinken frames our economic relationship with the
PRC in three words: invest, align, and compete. National
Security Adviser Sullivan emphasizes the goal is to derisk not
to decouple, and he notes that this effort extends beyond our
borders and includes working with like-minded partners to
advance our collective technology and industrial base.
ENR's work on energy security and energy transition,
including its congressionally funded technical assistance
programs, are integral to that effort.
We have all seen what happens when malign actors weaponize
their energy resources. Russia attempted to do this with
natural gas in Europe last year and failed, thanks in part to
the work of American LNG producers.
ENR is similarly engaged around the world to expand
countries' options and counter the PRC's efforts to monopolize
the next generation of clean energy technologies. In Latin
America and the Caribbean the United States remains the energy
partner of choice, a message I heard repeatedly during my
recent trip to Guyana and Trinidad and Tobago.
But we also see the PRC targeting Latin America for
investments in critical minerals, energy grids, and renewables.
ENR assistance in Ecuador, for instance, helped the
government design and conduct the country's first ever
competitive and transparent tenders for new generation
capacity. And DFC recently announced that it will provide
financing for a 200-megawatt solar power project that was
awarded through that process, providing a strong example of how
U.S. Government tools can complement each other to counter the
PRC model.
We also recognize that some of China's larger investments
in energy supply chains are being led by ostensibly private
companies with ties to the PRC.
For example, in August 2022 PRC manufacturer CATL announced
plans to invest over $7 billion in a new battery gigafactory in
Hungary intended to lock in supplies for BMW and Mercedes.
PRC investments in critical infrastructure in Europe create
clear security risks and ENR has engaged with allies and
partners to facilitate U.S. alternatives.
In Romania, for example, we're working actively with EXIM
and DFC on nuclear power projects to advance our climate goals
and level the playing field for U.S. exporters.
Similarly, in Greece we work closely with DFC to complete
the Elefsina Shipyard investment that otherwise might have
fallen into PRC hands in a country that Beijing labeled the
dragon's head of the Belt and Road Initiative in Europe.
We're also competing with the PRC model for energy
investment and development in Central Asia. The United States
has long supported U.S. oil and natural gas investment in
Central Asia and now we're looking to renewables and critical
minerals.
But the PRC has made some headway, for instance locking in
75 percent of Turkmenistan's pipeline gas.
Further east ENR is strongly focused on support for a free,
open, and prosperous Indo-Pacific. Since taking this role I've
traveled to Japan, the Republic of Korea, Pakistan, and India
to advance our cooperation on energy security and renewables.
I held an inaugural strategic energy dialog with Japan in
December and continued our important dialog with the Republic
of Korea, two countries that are key to reducing PRC dominance
of clean technology supply chains.
ENR efforts in the Indo-Pacific increase resilience against
PRC economic coercion and dependencies. We do this by
leveraging U.S. interagency expertise including through the
Department of Commerce's Commercial Law Development Program and
DOE's national laboratories.
Despite pledges to the contrary the PRC has continued to
deploy coal-powered projects overseas. In Pakistan this has had
serious financial repercussions because of its reliance on
imported coal.
During my visit to Islamabad Prime Minister Sharif appealed
for more U.S. engagement to support Pakistan's clean energy
transition including in emerging areas like clean hydrogen.
After December's U.S.-Africa Leaders Summit the United
States pledged to step up its energy engagement in sub-Saharan
Africa. With this in mind next week I will travel to Nigeria to
advance cooperation on clean energy and carbon abatement and to
explore future energy partnership possibilities.
The PRC owns mines throughout Africa and dominates the
processing of the battery minerals we need to drive the energy
transition. As part of our response to this challenge ENR
administers the intergovernmental Minerals Security
Partnership.
In marked contrast to the PRC approach, the MSP aims to
support not only developing countries' extraction but also
higher value activities such as downstream processing and
recycling.
The MSP works with our partners to identify bankable
projects around the world and ENR is also engaging with
American mining companies to advance the MSP as I did last
month in Alaska, ensuring that our work supports growth here at
home as well.
In addition to diplomatic engagement we will need financing
to bolster these critical mineral supply chains and that's why
ENR's partnership with EXIM, DFC, and our colleagues working on
the PGII will be crucial to the success of these efforts.
We need to increase their ability to assist both by
providing more resources and reforming rules that unnecessarily
restrict their ability to support projects.
We should, for a start, temporarily raise the default rate
cap that currently limits EXIM's exposure to default risk from
2 percent to 4 percent as requested in the President's Fiscal
Year 2024 budget.
In the case of DFC, we encourage support for the creation
of a new $2 billion revolving equity fund to expand equity
investments by DFC.
In sum, the State Department will continue to work and
trade with the PRC in areas of mutual interest but we will also
compete relentlessly with them economically, a contest where
the State Department and our embassies abroad are key assets.
Thank you very much for your attention and I look forward
to addressing your questions.
[The prepared statement of Mr. Pyatt follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you.
The chair now recognizes Mr. Venkataraman for his opening
statement.
STATEMENT OF THE HONORABLE ARUN VENKATARAMAN, ASSISTANT
SECRETARY OF COMMERCE FOR GLOBAL MARKETS, AND DIRECTOR GENERAL,
U.S. AND FOREIGN COMMERCIAL SERVICE
Mr. Venkataraman. Thank you.
Chairman McCaul, Ranking Member Meeks, and members of the
committee, thank you for inviting me here today.
I am pleased to have the opportunity to discuss with you
how we are competing against China's Belt and Road Initiative
at the U.S. Department of Commerce's International Trade
Administration and more specifically in our global markets
business unit, which includes the U.S. and Foreign Commercial
Service. My remarks are reflected in my full written statement
provided to the committee.
Notwithstanding China's efforts to portray BRI as a
solution to advance infrastructure development and economic
growth our trading partners increasingly share our view that
BRI poses more risk than opportunity.
First, China's BRI can threaten our trading partners'
economic development. BRI projects contribute to unsustainable
debt levels in many recipient countries, as the chair and
ranking member have noted, and these can position China to
press for greater control over that infrastructure against the
interests of borrowing governments.
Second, China's BRI threatens U.S. economic and national
security interests. BRI investments in infrastructure, together
with its transnational subsidies, have reinforced China's
control over critical supply chains choke points.
Third, China's BRI hinders U.S. companies from competing in
markets overseas. Combined with longstanding anti-competitive
practices BRI has used its financing to open doors for China's
State-owned or State-controlled firms while ensuring those
doors remain closed for market-based competitors from other
countries including the United States.
In the face of these challenges how do we counter the BRI
and help American companies compete and compete to win? Our
strategy for success rests on three pillars: one, pursuing
market share; two, promoting market openness; and three,
preserving market security.
We are pursuing market share by aligning U.S. Government
export promotion efforts to help U.S. businesses succeed in
sectors targeted by China's State-backed entities.
Critical to these efforts are partnerships with the
Department of Defense, including regional commands in SOUTHCOM
and INDOPACOM as well as with the range of agencies that form
the deal teams at U.S. embassies around the world.
We are also intensifying our commercial diplomacy efforts
to promote market openness by engaging with foreign
counterparts in critical sectors and on infrastructure
projects.
We are using all the tools available to us across the
Commerce Department and the interagency, often in
collaboration, to build necessary regulatory capacities,
increase transparency, and enable commercial environments in
markets around the world.
Finally, we are focused on preserving market security both
here at home and in overseas markets. We are promoting U.S.
capabilities across strategic areas important to our national
security.
We are also focusing our efforts, including through our
advocacy center, to ensure that China's BRI does not threaten
either the reliable performance of critical infrastructure in
foreign markets or the secure supply of inputs for U.S.
production critical to our long-term economic and national
security.
In each of these pillars of our strategy the Championing
American Business Through Diplomacy Act, or CABTDA, has brought
focus to the importance of new partnerships among the State
Department, Commerce, USTR, and others that has helped us
collaborate and innovate in support of U.S. businesses in a
more strategic and impactful way.
We cannot speak about countering BRI or their commercial
tools deployed by China without underscoring its resources. As
Ranking Member Meeks noted this includes China's tradeofficers
outnumbering us three to one and spending more than $110
million annually in support of its companies at global trade
fairs, compared to the approximately $5 million to $7 million
annually that our budget allows.
I am thankful that Congress provided Global Markets with
$6.5 million in Fiscal Year 2023 to expand our capacity to help
U.S. business compete.
With those funds we plan to open new operations in Cote
d'Ivoire, Guyana, and Zambia while making additional
investments to existing operations in the Indo-Pacific region,
Eastern Europe, and Central America, subject to approval of our
Fiscal Year 2023 spend plan.
Moreover, the President's Fiscal Year 2024 budget request
includes a $16.8 million increase for Global Markets to
continue investing in our work force at a time when we must
show up and show up often if we are to help U.S. businesses
compete in markets around the world.
Thank you, Mr. Chairman and members of the committee, for
the opportunity to speak with you today. I'd be pleased to
answer any questions you have.
[The prepared statement of Mr. Venkataraman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you.
The chair now recognizes Mr. Herscowitz for his opening
statement.
STATEMENT OF ANDREW HERSCOWITZ, CHIEF DEVELOPMENT OFFICER, U.S.
INTERNATIONAL DEVELOPMENT FINANCE CORPORATION
Mr. Herscowitz. Chairman McCaul, Ranking Member Meeks,
members of the committee, thank you so much for convening this
hearing and inviting me to testify on behalf of the U.S.
International Development Finance Corporation that we all call
DFC.
A key reason that you all, Congress, created DFC through
the BUILD Act was to offer a better and more sustainable
alternative to the People's Republic of China's Belt and Road
Initiative.
Since DFC was established just 3 years ago we have been
catalyzing investment from the private sector and empowering
developing countries.
Unlike the PRC we focused on helping countries take
advantage of their own resources--their human resources, their
commodities--so they can tackle poverty, accelerate inclusive
and sustainable economic growth, and become stable U.S. trading
partners, all through private investment.
DFC provides countries with an alternative to the terrible
choice many of them faced, which was to either forego economic
growth or embrace the PRC model that required countries to risk
their financial independence, to suffer the loss of their
resources and commodities, to endure environmental degradation,
and sometimes even to suffer harm to their local communities.
DFC and its partners give countries an alternative,
sustainable economic growth and empowerment. The PRC model
burdens countries with excessive sovereign debt for projects
that are often unsuitable or even unnecessary for local
populations.
The PRC supports projects with one beneficiary in mind, the
PRC. DFC, on the other hand, supports private entities,
mobilizes private capital, and builds resilient market
economies, creating local jobs and building local knowledge and
human capacity.
DFC's track record investing in critical infrastructure
demonstrates the impact that it can have. In Ecuador we
recently made a $150 million commitment to modernize a port,
which will create 1,250 jobs and generate $750 million in
foreign direct investment--private capital.
In Sierra Leone, one of the poorest countries in the world,
we have invested in providing broadband access to a significant
swath of the population, we have helped increase the country's
capacity to generate power by nearly 25 percent, and we're
working to improve the country's main airport to connect the
people of Sierra Leone to global markets and opportunities.
DFC is also supporting projects that diversify supply
chains away from the PRC including for critical minerals and
solar panels. DFC focuses on working with the private sector
because closing the $40 trillion global infrastructure
financing gap is beyond the capacity of any government or any
public institution.
We amplify our impact by working closely with development
finance institutions of our allies and our partners including
our G-7 partners so that we can do more together. By working
with like-minded countries we give countries where we work even
more alternatives to the PRC and we generate new trade and
investment leads for U.S. companies.
Mobilizing private capital is an effective way to achieve
durable development outcomes, allowing governments to focus
their resources on other public needs like education. Our
investments carry forward U.S. values of openness, respect for
local conditions, transparency, and internationally recognized
environmental, social, and labor standards.
By championing these values we enhance the long-term
sustainability of our projects, we amplify development impacts,
and we guard against the danger that projects will harm local
populations.
I've highlighted a few examples in my written testimony of
where we're doing this type of work. While we're confident in
the strength of our model we know that we need to strengthen
DFC's ability to counter BRI effectively and at scale, and to
enable DFC to do more faster DFC is building its internal
capacity and aligning its organizational structures to meet
demand in sectors where there are enduring needs including
infrastructure, energy, health, food and agriculture, ICT, and
support for small businesses.
In the energy sector we're pursuing a balanced approach
that recognizing that the PRC is competing aggressively to
dominate the clean energy industries while also recognizing
there are circumstances which countries--when countries need
fossil fuels to further their development.
Congress and this committee have recognized the close
linkage between development and U.S. strategic interests and we
thank you for your support of DFC.
Through continued partnership with Congress we're
positioning DFC to be an effective, respected, and powerful
presence for the U.S. in developing countries.
The U.S. can compete effectively with the PRC model or any
other model. Our model drives economic development in a way
that benefits Americans and the people of the countries where
we work.
We treat the countries and their people as partners and we
advance the strategic interests of the United States.
Thank you again for the opportunity to testify and I look
forward to your questions.
[The prepared statement of Mr. Herscowitz follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman McCaul. Thank you. I now recognize myself for 5
minutes of questioning.
Let me say, first, the DFC--the equity issue is long
overdue to be fixed. I am determined in a bipartisan fashion to
get that fix marked up out of this committee and I believe Mr.
Barr is leading that and I know on the other side, Mr. Meeks.
Let me just start by saying when you look at China they are
a--for purposes of the United Nations a developing nation,
which qualifies them for World Bank loans at nearly zero to
interest-free loans that they then use to turn around and loan
to truly developing nations at a usurious interest rate that
finances this whole scam.
They know how to manipulate global institutions. Then they
get the countries in a, through predatory lending, in a debt
trap. They rape the rare earth minerals. They bring their own
workers in.
They take over a port or military base and then, at the end
of the day, if they default or they go into bankruptcy the IMF
bails them out. This is incredible.
This is really an incredible story that is not out there.
But they are really manipulating it and when they're in 150
countries that gives them power at the United Nations.
Twenty African nations voted against the resolution on
Ukraine because China has them under their thumb. You know,
I've been very invested in Development Finance Corporation.
It's supposed to be OPIC on steroids. You know, I passed the
Champion U.S. Business Through Diplomacy Act.
Sir, you know, Keith Krach really ran that office well. I
was with him just last weekend. But, in my judgment, we're
losing this competition. If they're in 150 countries--and by
the way, they have to sign a contract denouncing Taiwan and
they get on the digital yuan as a direct threat to our global
U.S. currency.
I've really got two quick questions. One, our intention was
to get investment in these countries--private investment to
compete. I was with a group of African financial leaders at the
Milken Institute. Speaking to them I asked, have any of you
worked with the Development Finance Corporation. Not one hand
was raised.
I talk to Ambassadors. The ranking member does, too. They
say, we'd rather do business with you but you're not on the
field and if we're not on the field we cannot win. We cannot
compete.
This has to change, and when I looked at the president of
Uganda's op-ed saying that this policy will force poverty on
Africa, talking about, only certain energies can be invested
in, or these African nations said, we do not like you imposing
your social value system on us, and that's not what Congress
intended.
We passed this for national security reasons to compete
with China and I'd like to hear comments from all of you on
this.
And my second question is the Partnership for Global
Infrastructure and Investment--PGII. Now, that was supposed to
bring together all these entities and I got to tell you, it's
confusing even--I think I'm pretty educated but you got USAID,
you got MCC, you got DFC, you got EXIM Bank, and a whole host
of about 17 different--you know, that needs to be coordinated
and it's hard to even know what are the roles of each of these,
departments and how do they all fit together under this one
umbrella that needs to be coordinated in this what I say are
not Republican and Democratic issue--an American issue in this
great power competition.
Maybe if I can just go down straight the line if you could
address both of those issues.
Mr. Herscowitz. Thank you.
Why do not I address the Partnership for Global
Infrastructure and Investment first? I think it has the
potential to be an extremely powerful tool for the U.S.
Government, and I do not know if you know my background but
before I was in this position I was the coordinator for Power
Africa for 7 years under the Obama and Trump Administrations
and we learned a tremendous amount about what it means to try
to mobilize partners to try to advance infrastructure, having
helped over 120 power projects reach financial close.
It's challenging to coordinate the U.S. Government agencies
but we did it very, very well and we did it with strong
bipartisan support from Congress as well and it was a
partnership where we sought input.
The Commerce Department contributed in big ways by helping
educate African ministries about how to enter into power
purchasing agreements. State Department provided advocacy.
So we're working from something that we have done before
but the additional element of PGII is also bringing in our G-7
partners and so one of the things that we at DFC have been
doing is we have actually been mapping out what each of our
partners, whether it's France or Japan or the U.K., can offer
as an alternative to the BRI as well so that we can find trade
leads and investment leads for DFC and for one another and we
can step in when the other one cannot be there.
So already in the last year when we look at PGII of that
$7.4 billion that DFC did in deals last year $5.2 billion of
those projects qualified as PGII, and so going back to your
first question, of course, we're growing. Our portfolio has
grown year after year. We're becoming more and more strategic.
I can talk about some of the other specific projects but
I'd like to leave time for my colleagues to discuss as well.
Chairman McCaul. And my time has--it's already expired. If
I could have a quick comment from the two of you. Thank you.
Mr. Venkataraman. Thank you.
Just to respond on the work that we're doing on
infrastructure and in particular to counter BRI, one of the
things we have at the embassies are these deal teams which are
literally interagency teams that work together that harness the
tools that each of us has and the first thing we do is try to
identify the early leads, the early projects that we are aware
of on the ground so that we can bring them to the American
companies that we want to bid on those projects.
We worked with foreign governments to shape their tenders
so that their tenders are open and transparent. We also pushed
back on China's attempts to drive single source tenders and so
we have examples where China has gotten into government-to-
government agreements with our trading partners to require
single source tenders for projects that would advantage China
and we have pushed back on that and been able to undo those
single source tenders to make sure that American companies can
compete and win.
Chairman McCaul. And Mr. Pyatt? Very briefly.
Mr. Pyatt. Yes. Thank you, Mr. Chairman. I really
appreciate the question about the strategic purpose of the DFC
because I have a unique perspective on this issue.
I was an ambassador serving abroad when you passed the
BUILD Act. I remember what an incredibly powerful impact it had
on my work in pushing back on China in Greece, a country where
COSCO, a Chinese company, had acquired control of what is now
the largest transshipment port in the Mediterranean.
It made all the difference in the world to have a positive
offer to put on the table that attached to American values and
American investment.
It takes time because the DFC team has higher standards
than the PRC does, has a fiduciary responsibility to the
taxpayers, has to deal with transparency. We have environmental
issues.
And I was just talking to my successor in Athens,
Ambassador Tsunis and now DFC has completed that shipyard
project in Greece. He sees it as transformative in terms of the
perception of the United States. But I also saw how once we put
that on the table China's hand was dramatically weakened.
Chairman McCaul. Well, so when--I'm always asked, how are
you countering China, specifically Belt and Road, and it's
right here. This is the response.
So we need to prevail in this great power competition. So
we need to work with you to strengthen your hand because, in my
judgment, we're not--we're not winning right now.
So with that, I recognize the ranking member.
Mr. Meeks. Thank you, Mr. Chairman, and, you know, let me
be clear, and I think that we all agree that we do not want to
replicate China's infrastructure model. We know that's not
good.
So we need our own approach that plays to what our
strengths and comparative advantages are to deliver the
financial and environmentally sustainable development that
lifts up communities and facilitates trade.
To that end, you know, we keep talking about this. How do
we demonstrate to nations that our development and assistance--
the models that we have--are better for them, as we know in the
long run, and their populations as opposed to China?
How do we--first, how do we demonstrate that? So whoever
wants to take it first.
Mr. Herscowitz. At the most basic level one of the main
issue--one of the main differences with DFC is that we're
looking at the outputs, not just the inputs.
It's not how much money that we're investing and how much
money that we're spending--that's important because that moves
capital--but how are people benefiting from that?
Every single deal that we do looks at what the development
metrics are going to be or the foreign policy metric, how many
people are getting access to water, to electricity, to the
internet so that we can tell that story as well.
That's not something that the PRC is doing. We're making
sure that our transactions are designed for that impact and we
evaluate every single one of them in that way, and we're seeing
huge results whether it's in healthcare, helping nearly 2
million patients get consultations for the first time or
helping smallholder farmers get access to credit for the first
time.
People feel those results and that's what really makes
people want to get the financing. Obviously, when we support a
huge port like we're doing in the Republic of Georgia, like
we're doing also in Ecuador right now--an airport in Sierra
Leone--people see the impact of our investments in those
infrastructure projects. There's a lot more we can do but we're
on that right path.
Mr. Meeks. So and I guess I'll Mr. Pyatt this question and
then I'll come--how do you--you know, again, we're in this
competitive piece and we're talking to these countries and when
you talk to them how would you characterize the United States'
comparative advantages and unique strengths in the sustainable
infrastructure development assistance space going on what we
were just talking about so that they could say, well, we want
you, United States?
Because that's not--I agree with Mr. McCaul what he said
earlier. Most of them said to the United States, you're not
there to compete.
We do not have an alternative. You're not giving us an
alternative, and we need to try. So how do we do that so that
not only can we say it we can do it?
Mr. Pyatt. So, Ranking Member, let me start by thanking you
for your reference to the Minerals Security Partnership because
I think that's a great example of what you're talking about,
and I had the opportunity to join Secretary Blinken and Reta Jo
Lewis, the chair of the EXIM Bank, and Under Secretary
Fernandez in New York in September when we had the first big
public event to roll out the Minerals Security Partnership with
some of the resource-endowed countries from the developing
world that we're looking to work with.
And one of the most powerful moments in that event for me
was when one of the African ministers came up to me afterwards
and said, you know, I just want to say thank you for showing up
because for too long we have only had one interlocutor on these
issues of mining and extractive industries and it's China, and
you are giving us an alternative, and both you and the chairman
used that idea as well in your presentation.
So I think the first thing we have to do is show up. We
need to mobilize resources, and, Ranking Member Meeks, I really
appreciate your reference also to the importance of the State
Department budget in this context.
I had the opportunity yesterday--as you know, we have all
of our Ambassadors in town right now and I did a roundtable
with some of our Ambassadors focused on these issues of Belt
and Road, critical minerals, clean tech supply chains and one
of the--one of the chiefs of mission I asked to present was
Lucy Tamlyn, our Ambassador in the DRC, and Ambassador Tamlyn
made the point that today her mission has two economic officers
covering all of the issues in that large and consequential
country, one of the--a country with the critical endowment of
the battery minerals that we are going to need to power our
energy transition.
The junior officer who covers mineral issues is very widely
regarded and that position will have a gap of 7 months coming
up. So we will have one person working on all of these issues
in a country that's absolutely critical.
So we need to resource the State Department, and then we
have to bring things to the table and this is where the
partnership between our three agencies and DOE is so critically
important because it lets us bring to the table the strengths
of the United States, our entrepreneurial ecosystem, the
transparency of our companies.
And I have spent a lot of time since starting this job
traveling around the world and talking to countries that also
are being approached by China and the answer I consistently
hear is, please bring us more, America. Nobody ever asks for
less U.S. investment or less----
Mr. Meeks. Let me just as quickly because I guess I'm just
about out of time also. I'm out of time.
Mr. Venkataraman, how would the Foreign Commercial
Service--how are you building on the strengths that we just
heard about or innovating new approaches in our programs and
initiatives around the world?
Mr. Venkataraman. Thank you, Ranking Member.
Well, first, I just wanted to add that showing up, really,
in a lot of these countries means our companies showing up.
It's important for our government to be there. It's important
for us to be on the ground.
But it is equally important if not more important for our
companies to show up because, at the end of the day, as my
colleague from DFC mentioned, it is the private investment--it
is the private companies that are going to effectuate change on
the ground.
And so what we have done at the Commerce Department is make
sure that we take what these--projects are available on the
ground, bring them to our companies at home, bring them to
these--to the continent or to other markets through our trade
missions and through other vehicles where we show them these
projects that they're aware of.
We introduce them to the government decisionmakers. We
provide the opportunity for the U.S. private sector to see
opportunity where they may not be aware of it and then these
governments know that when American companies invest they do
not invest for the short term.
They invest for the long term and they are able to make
change on the ground in ways that are long lasting and are to
the benefit of those economies.
Mr. Meeks. Let me just say this, and I agree with the
chairman again. I go from company--anybody that comes into my
office, whatever company it is, financial institution,
whatever, I ask them are they investing in Africa or in any of
the emerging nations.
I've yet to find one that say, yes, I'm investing. Yes, I'm
working with the DFC. I do not find anybody that says yes to me
and, you know, it's puzzling. You know, we've talked about the
cuts and there's no additions, you know, from the private
sector.
It seems to me somebody would say, yes, I'm investing. So I
yield back. But I couldn't agree with you more on that.
Chairman McCaul. Yes. I think you see this is a bipartisan
point of view.
There are 13 votes on the House floor so the committee will
stand in recess until after votes. Thank you.
[Recess.]
Chairman McCaul. I want to thank the witnesses for your
patience during that long vote series and for staying here. The
committee will come to order.
The chair now recognizes Mr. Smith.
Mr. Smith. Thank you very, very much, Mr. Chairman, and for
calling this important hearing.
Let me just ask a question because our last two--the
chairman and the ranking member and, of course, Mr. Pyatt, you
did mention it as well the importance of these minerals and--
like lithium and cobalt.
As we all know, they're two of the world's most precious
resources powering the lithium ion batteries which energize our
phones, laptops, and EVs. Stable supplies are central to
America's economic future as the International Energy Agency
predicts a 40 and 20 fold increases in respective demand for
lithium and cobalt by 2040.
The Democratic Republic of Congo--and I have been there
like I know many of you have been there as well. I've been to
Goma. We know that the mines are very seriously being exploited
by the Chinese Communist Party.
Well, 70 percent of the world's cobalt is produced by DR
Congo and excavation in newfound lithium deposits will begin
this year. Typically, the often labor intensive artisanal mines
rely on the toil of an estimated 40,000 children, some as young
as six, working 12-hour days in gruesome conditions including
exposure to life-threatening toxins, coercion, and physical
abuse.
Despite pervasive victimization the People's Republic of
China has heavily invested, as you know, in these cobalt and
lithium reserves. PRC firms own 15 of the DRC's 19 mines, five
of which hold lines of credit totaling $124 billion from PRC
State-owned banks.
Instead of correcting the abuses multiple human rights
watchdogs have reported that PRC investment coincided with a
significant exponential increase in injuries and deaths and the
possibility of even worse cover ups.
Now, I've been working on a bill now for several weeks that
I hope to be introducing shortly called Countering China's
Exploitation of Strategic Metals and Minerals in Child and
Forced Labor in the Democratic Republic of Congo Act. It's a
working title.
I did chair a hearing last July at which we heard from
people from DR Congo and other human rights activists who
talked about the savagery that's being imposed, all at the
behest of the Chinese Communist Party.
And so, you know, and many of this--this cobalt and
lithium, especially cobalt now, will find its way into our
batteries and so what I'm asking, you know, if you could look
at this bill.
I know that there are some initiatives you're taking. I'm
meeting with our Ambassador to DR Congo tomorrow. I know she's
in town, and I'm so happy to be doing that.
But the bill would enforce Section 307 of the Tariff Act of
1930, require the president to present an annual report to
Congress on foreign persons found facilitating the exploitation
of child labor in DRC mineral mining or evading--the evasion of
U.S. importation laws and a number of other important
provisions as well.
And I, you know, will share this with you. I hope that we
can work together on coming up with a legislative initiative.
But I also know that you're concerned about this as well.
Again, that hearing was an eye opener. I've had hearings on
the mining industry many, many times in the past. But that one
just blew me away to hear about these children who are dying,
getting sick, getting cancers--you know, the inhalation issue,
and then at the behest of the Chinese Communist Party, you
know, the beatings that occurred in order to enforce compliance
and hard-working conditions.
Your thoughts, Mr. Secretary?
Mr. Pyatt. First of all, Congressman, thank you very much
for devoting so much attention to this, for taking the trouble
to go to DRC, for meeting with Ambassador Tamlyn.
Just showing up, as we have all talked about, is of
critical importance. And then the other aspect of this issue,
which Chairman McCaul alluded to in his opening statement, is
the fact that China controls so much of the processing of these
minerals as well.
So their business model is to extract raw minerals and then
take all the processing and the value addition back to China
and then to control the global supply chain.
We are trying to create, as both the chairman and the
ranking member described, a better alternative. That's why we
are, for instance, working with both DRC and Zambia on a
battery MOU and a battery council to bring the governments
together to identify opportunities to bring back to Africa more
of the processing and the value addition and to create a real
alternative to PRC's--to the PRC's role in this space.
The other thing I would really like to put a spotlight on
today, and you alluded to it yourself, is the critical
importance of these technologies to American economic
competitiveness.
In this role I've met with Ford. I've met with GM. I've met
with Tesla. All of our companies are chasing the EV marketplace
because that's where consumers are going and China has used its
years of investment in these upstream battery minerals
resources in order to also dominate the larger story of
electrification of vehicles.
And in my prepared statement I noted just the reporting
last week from the Wall Street Journal putting a spotlight on
the rise of Chinese auto manufacturers, companies that most
Americans have never heard of like BYD or Chery Automotive and
as I travel around the world it's concerning to me to see how
much headway these companies are also making in grabbing market
share.
So this is about strategic competition at the highest end
of our respective economies and it's one where we're trying to
build partnerships and also working not just with the resource-
endowed countries but with other companies that have--other
countries that have a similar outlook, allies like Japan, like
Korea, like the European Union. So thank you.
Mr. Smith. I thank you. I know I'm out of time. We'll look
to work together because I think we need to have a united front
on this, especially with so much exploitation and so much
corruption.
Thank you. I yield back.
Chairman McCaul. The gentleman yields back.
The chair recognizes Mr. Sherman.
Mr. Sherman. Earlier in--at the early years of this century
I chaired the subcommittee that oversaw what was then called
OPIC, the least fortunately named organization in American
government since it sounded so much like OPEC.
We--I was able to craft legislation to reauthorize OPIC. We
got it through the House and I'm pleased that so many of its
provisions are now in the charter of the Development Finance
Corporation.
Mr. Chair, I look forward to working with you to make sure
that the Development Finance Corporation is able to make equity
investments.
President Biden in his 2024 budget includes a new mandatory
proposal to outcompete the PRC including $2 billion of support
for high-quality strategic hard infrastructure projects
globally and $2 billion for a new revolving fund at the DFC to
boost equity investments, and I look forward to working with
you to make this a reality and it will have to go through our
committee.
But one thing I might disagree with the chairman on is I'm
not interested in advice from--these days from the government
of Uganda. It is most famous around the world for calling for
the--for passing legislation calling for the execution of
people simply because they are part of the LGBT community.
[Side comments.]
Mr. Sherman. And I look forward to working with Mr. Meeks
on our other committee to push for the creation of mutual funds
that specialize in publicly traded companies based in Africa
and give Americans a chance to invest in private equity
companies that will focus on Africa.
There are six big differences between how we do business
and China does business. First, we're a coalition of our
government, our allies' governments, and truly independent
private sector companies, and even when you just focus on the
U.S. Government it's divided between two parties.
China is a one-party State and when it comes to the
independence of their companies not so much. So it's one entity
versus a coalition.
Second, we're opposed to corruption. That's why we have a
Foreign Corrupt Practices Act. The Chinese are not only free to
bribe, they do it and it was a subcommittee in this room where
I presented the letter from the outgoing president of the
Federated States of Micronesia where he details how his--people
in his own government are being bribed by China.
One thing that concerns me is that we do almost nothing to
publicize this and I'm not sure that our intel community is
really getting us all the information they could on Chinese
bribery.
Related to that is we're dedicated to democracy and the
rule of law, which puts us at a real disadvantage in appealing
and making alliances with those who want to be corrupt
dictators in foreign countries.
We should have a strategic alliance with the peoples of
those countries that would like to be governed by somebody
other than a corrupt dictator. But, of course, we do not
publicize that we have a Foreign Corrupt Practices Act and
China has a practice of corruption. So we get no benefit.
We engage in genuine philanthropy. I'm going to ask our
witnesses to raise their hands if they could give me a real
example of where China did something just to help people and
not for its own economic and strategic advantage.
And I see no hands going up to volunteer to answer that
question.
Fourth, we care about climate. China funds new coal-fired
plants. But I will point out for those who like to see coal-
fired plants, et cetera, the biggest investors in the Third
World in fossil fuels are American oil and mining companies.
And, finally, while China is crafty to make sure its
foreign efforts advance its national interest, America, not so
much.
We do almost nothing to publicize their role in climate
versus ours, our role on democracy versus theirs, and
especially the corruption, and I have not in 26 years been
briefed by our Intel Community on the details they've been able
to find where you can say this Chinese entity bribed this
foreign leader. If they do not tell me they do not tell the
world, and I'm not sure they're gathering it.
And finally, when it comes to being strategic, as the
ranking member pointed out there are those pushing for a 31
percent cut in our foreign aid, foreign development, and
diplomacy efforts. That is not strategic.
I do have a question, believe it or not, and that is China
has these unfair loans. The question is why do countries pay
them back.
Now, the number-one reason to pay China back is so you can
get another loan from China. But if their first loan to you was
an anathema that does not--the real reason I've been told they
pay back is they do not want their bond ratings reduced. They
want to be able to borrow from the international communities
outside of China.
So I'll ask a reaction from our witnesses to a proposal
where we would simply instruct the bond rating agencies that
they cannot downgrade any country's debt rating because they
decide to extend the middle finger in the direction of Beijing.
Do we have--is there a witness that wants to respond to
that? And can you think of any other reason why a country that
gets an unfair loan from China would choose to pay them back?
Mr. Herscowitz. So I would agree with you that the terms of
the loans are extremely unfavorable and I think it's not only
the terms of the loans unfavorable but they also lack
transparency and we look at countries like Zambia and Angola
and the significant amount of debt that they owe to the PRC.
It's just absolutely debilitating and it prevents the countries
as well from taking on additional debt and so it makes it
challenging for us.
It also leads into default on projects where their
governments are guarantors and pushes them up against IMF debt.
Mr. Sherman. So is the answer to simply urge these
countries----
Mr. Herscowitz. So the answer--my answer, though, is this
would be a question for the Treasury Department and not for DFC
to opine on something like this.
Mr. Sherman. I look forward to taking that up and I look
forward to our intel agencies briefing you as I certainly
haven't--briefing us, as I know they haven't and in most--many
cases exposing to the world the details of the incredible
corruption that China pays for and supports while we do the
opposite.
It's time for the people of the world to understand that. I
yield back.
Chairman McCaul. The gentleman yields. The chair recognizes
Mrs. Wagner.
Mrs. Wagner. I thank you, Mr. Chairman, and I thank our
witnesses for their service.
Members of this committee were among the very first to
sound the alarm bells on China's insidious Belt and Road
Initiative, Xi Jinping's plan to extend China's influence
across the globe through predatory investments, debt trap
diplomacy. We have just talked about an outright bribery and
coercion.
China is no longer hiding the fact that it seeks to replace
the United States of America as the world's dominant power.
This would be an unmitigated disaster for human rights,
international security, and global economic development.
America's allies and partners are eager for the U.S. to
demonstrate leadership and commitment, specifically seeking
assurances that the U.S. will remain present and engaged in the
long term as they work to limit their reliance on China.
Assistant Secretary Venkataraman, how many Foreign
Commercial Service officers do you have across Southeast Asia?
Mr. Venkataraman. I do not have that exact number for you
but I'd be happy to get that to you.
Mrs. Wagner. The next question was going to be how many
comparable PRC ministry of commerce staffers are in the same
region?
Mr. Venkataraman. I can tell you it's a lot more----
Mrs. Wagner. OK. Well, that's good to know. I'd like to
know how many we have and if there's a way to find a comparable
number that represents that it's a lot more, you know, because
the point is is the FSC's Southeast Asia presence--is it
sufficient to help U.S. businesses compete with PRC entities? I
assume the answer is no.
Mr. Venkataraman. The short answer is no.
Mrs. Wagner. Yes.
Mr. Venkataraman. We--as you know, we--the President has
put forward a budget that reflects expansion--excuse me, an
expansion of the Foreign Commercial Service precisely for this
reason and the Indo-Pacific is one area where we need to
strengthen our presence to do a better job.
Mrs. Wagner. If you could get us those numbers I'd
appreciate it.
Mr. Venkataraman. I sure will.
Mrs. Wagner. Many Pacific Island countries are so small
that they struggle to attract private sector investments in
essential services like banking.
Again, Assistant Secretary Venkataraman, are you concerned
that Pacific Island countries will have no choice but to
partner with Chinese entities to access, let's say, banking or
IT, any other critical industries?
Are you seeing any efforts from the U.S. businesses in the
banking industry competing for bids in the Pacific Islands and
how are you encouraging those efforts?
Mr. Venkataraman. Thank you, Congresswoman, and I can tell
you that I cannot speak directly to the banking industry but I
will tell you I share your concern very much about American
companies being present and visible in the Pacific Island
countries and we are already taking steps to change that
situation on the ground.
We, in the past year, have added our first two permanent
positions in the Pacific Island countries so that we have
commerce representation on the ground. We are looking very
closely at what additional representation might be required.
Last September Secretary Raimondo also announced the
launching of negotiations on bilateral MOUs with these
countries so that we could strengthen the commercial
partnerships and really work on setting the right conditions
and creating these interagency frameworks where we can make
sure that the conditions are right for American companies to go
in and I would assume that would include the banking companies.
Mrs. Wagner. OK. Well, as a followup, Assistant Secretary
Venkataraman, in areas across the Pacific Island countries
where there isn't a U.S. Global Markets office but there is a
Chinese ministry of commerce, you know, what are we doing to
mitigate the gap?
And you said you've got the presence now of at least two.
Is that right?
Mr. Venkataraman. Yes. And, Congresswoman, I should say
that while we are speaking about the presence of those two on
the ground the Pacific Island countries are not in any way
ignored by the Foreign Commercial Service.
We do have a team out of Australia that does cover that
region. So while they're not present in all of the Pacific
Island countries those countries are very much part of our
attention and particularly as we negotiate these MOUs they are
top of mind.
Mrs. Wagner. In 2018 China laid out an ambitious plan to
extend the Belt and Road Initiative to the Arctic.
Assistant Secretary Pyatt, how well has China's plan been
able to--how well have they been able to implement this plan
and is State tracking any PRC natural resource exploitation in
the Arctic?
Secretary Pyatt?
Mr. Pyatt. Thank you for the question, Congresswoman.
I should note, as I said in my statement, I was recently in
Alaska and had the opportunity to talk with Governor Dunleavy
and some of our mining companies active there about all that
they are doing working with other Arctic States and dealing
with both the challenges that that region is facing because of
a changing climate but also with the opportunities and, in
particular, the opportunities attached to the energy transition
and the tremendous growth in demand for minerals that we're
going to see as a result of that.
I do not have any specifics for you know on your question--
--
Mrs. Wagner. So you do not whether China's plan, which is
very specific, to extend their Belt and Road Initiative into
the Arctic--you do not know anything about that plan----
Mr. Pyatt. No, I am--we are certainly conscious of the
plan. That is why we have been engaged as forcefully and as
systematically as we have been.
Mrs. Wagner. And how is it that you've been engaged?
Mr. Pyatt. For instance, our new consulate in Nuuk, the
work that we have done with our Arctic partners.
I was part of a conversation that Secretary Blinken's
counselor, Counselor Chollet, led at the U.N. General Assembly
with all of our partners in the Arctic Council other than
Russia, of course, to talk about some of these issues and the
opportunity that it represents.
I think we're actually in relatively good shape in this
area precisely because we have these partnerships, and if I can
allude quickly, Congresswoman, to your question about the South
Pacific islands as well.
I think the United States' greatest strength in working on
these issues and dealing with the challenge that China
represents is the fact that we're not doing this alone. We're
doing it with allies and partners.
In the South Pacific we're working closely with Australia,
with New Zealand----
Mrs. Wagner. Yes. New Zealand--I'm very aware of that.
Mr. Pyatt [continuing]. In the Arctic. We're doing it
closely with our NATO allies, with Canada, of course and as I
said with our State of Alaska.
So we need to continue to invest in those kind of
partnerships and that's how we deal with the challenge that
China presents.
Mrs. Wagner. I'm way over my time. I apologize to the chair
and I yield back. Thank you.
Chairman McCaul. The gentlelady yields. The chair
recognizes Ms. Wild.
Ms. Wild. Thank you, Mr. Chairman.
I'd like to start with a question to Mr. Herscowitz. One of
the--one aspect of the PRC's authoritarianism that I find
particularly egregious and troubling is its use of forced labor
and widespread labor violations, which I believe have been very
well documented, and I think that one of the, hopefully,
competitive advantages that we should have abroad is in
contrasting that PRC record with our approach to not only
affirmatively embracing worker safety and rights but also
prioritizing hiring local workers, which my understanding is
has not been something that the PRC has done, although I've
also heard that perhaps they've started to hire more local
workers, for instance, in Africa. I may be wrong about that.
But you in your testimony write while the PRC often brings
in its own labor force on projects, even having operations
manuals written in Chinese, the projects we support create
local jobs, bring more people into the formal economy, and
train workers so they can build skills, all of which help
promote economic opportunities and prevent migration or
participation in illicit activities.
Can you tell us a specific example of this approach and how
it's been successful?
Mr. Herscowitz. Sure. I'm glad that you brought up my old
testimony because I was thinking that maybe they've been
listening to my testimony and suddenly they're doing some
window dressing and hiring some more local employees.
I spent 6 years living on the African continent traveling
to a significant number of the countries and I've been back to
Africa, I think, four or five times this year and I always look
at this issue and ask about this issue.
To give you a specific example, I spoke in my--earlier
about a project that we're going to be financing in Ecuador to
build a port and that port alone will create about, I think,
1,250 jobs.
One of the things that's important to remember is that for
U.S. companies in particular it's expensive to bring your own
labor. So even I was--I explained to African countries, like,
we're not trying to take over your local--we want to build
skills. We want to have good partners.
I visited a project in Burundi recently that DFC is
participating in. It's a solar array. It's the first--it's like
the largest provider of power in Burundi right now, one of the
poorest countries in the world and I was really impressed. It's
an American-Israeli company called Gigawatt Global. All of the
people who worked at that solar array were local Africans.
And so this is the model that people see and this is why
they want more of it because we look to train and empower local
staff.
In fact, one of the things that we did early on with Power
Africa is we created a program to train young women in Africa
to power in leadership positions and we have watched how these
women have gone into senior positions in utilities and
elsewhere.
So that's what we offer that the PRC does not. We offer the
ability to have true partnerships, build capacity, and make
sure that the people who are running the projects are in
control of their own resources and building that mutual trust.
Ms. Wild. OK. I'm going to stay with you because I want to
get to another question and that is on the impact of failed BRI
projects, some of which have very publicly failed and in some
cases, like in Sri Lanka, the--their failures have even
resulted in public backlash, as I understand it, against the
Chinese government.
We have continued to hear about infrastructure projects
that have had construction problems, are financially
unprofitable, and added to the host nation's debt burdens. What
has been the result of those failed projects in terms of
China's reputation at large and whether it's--and the growth or
not of its influence in these countries?
Mr. Herscowitz. So there are failed projects and a lot of
it's anecdotal but a lot of it's real and I think there's been
a lot published, for example, about the Coca Codo Dam project
in Ecuador which has cracks in it.
There's other hydro projects built by Sinohydro that have
cracks in them and now governments need to fix them. Roads that
are falling apart as well. Even the African Union building that
the Chinese built had all kinds of issues with it.
So everybody knows it and they laugh about it a little bit
because they know that they're not getting the best quality and
they want U.S. companies, and one of the projects--and I know I
just spoke about Ecuador but I'll talk about it again.
DFC recently approved a 200 megawatt solar project in
Ecuador, which is a massive solar project for Latin America.
Chile has got some really large solar but that's really huge
for Ecuador and that's going to offer less expensive power and,
in some ways, more reliable power than what you're getting from
that hydro project. But there are quite a few out there that
are problematic and it's causing significant reputational harm
to the PRC.
Ms. Wild. OK. Thank you very much. I yield back.
Chairman McCaul. The gentlelady yields.
The chair recognizes Ms. Radewagen.
Ms. Radewagen. Thank you, Mr. Chairman.
[Speaks foreign language.] Good afternoon. I want to thank
you all for being here today.
I want to focus on some of the loans that the PRC is making
to small nations, and just following up on Mrs. Wagner's
question about specific island nations and thank you for
mentioning that.
About a week and a half ago I was in independent Samoa and
their airport was built using BRI funds. Now, when my good
friend, Prime Minister Afioga Fiame Naomi Mata'afa was elected
to lead independent Samoa she canceled many of these BRI
projects in independent Samoa before they actually destroyed
Samoa's economy.
So Mr. Herscowitz, my first question is for you. There have
been reports and trends that PRC investment into BRI is
suffering due to their heavy saturation of loans. Has DFC
outlined or explored any plans to capitalize on this
opportunity? And if so, can you share some of the details?
Mr. Herscowitz. So DFC is an important tool for the U.S.
Government in trying to provide support in the Pacific Islands.
It's a challenging place to work, as has been highlighted,
because a lot of the economies are quite small and so we're
even looking at how we can support some of the islands on a
regional basis.
I met with one of the ministers from Tuvalu recently at
the--at the Least Developed Countries Conference and just
talking about what we can do, and it's such a small population
there and we're looking at if there were ways for us to support
even the development banks in that country or at least a
regional development bank.
A significant project, though, and I think one of my
colleagues mentioned that--it's been mentioned--our
collaboration with partners who are very active in the region
like Australia, like Japan, was the work that we have just done
in Papua New Guinea to basically upgrade a 5G network, which
outbid a Chinese bidder as well and that was collaboration with
the Japanese government and Australian governments. We are
constantly looking for these types of opportunities but there's
always more we can all do.
Ms. Radewagen. Thank you. And as a followup--and you can
all answer but I may not have enough time--can any of you share
all the current bids for strategic projects that are ports,
undersea cables, and telecommunications systems?
Mr. Herscowitz. I do not think we have that--do you have--I
do not know if Commerce tracks this. One of the--go ahead. I'll
defer to you first.
Mr. Venkataraman. Yes. I cannot provide an answer on that
right now. We'd be happy to look into it. We might have some
information that's on point or at least gets us close to some
of that information that our deal teams might be tracking. But
we'd be happy to followup.
Ms. Radewagen. OK. Mr. Secretary?
Mr. Pyatt. So I think what I would highlight in this area
in particular are the opportunities around new energy
technologies, and as Andy pointed out, these are very small
economies. Most of their power historically, as you know, has
come from diesel generators systems that aren't very clean.
But now the technology is evolving and so we're working
with partners including both DFC but also with American
companies. I should also point out that I was very pleased that
earlier this year one of my deputies, our Deputy Assistant
Secretary Laura Lochman, was in the Pacific Islands talking
about exactly these issues of technological opportunity but
also trying to build partnerships.
Ms. Radewagen. Thank you, Mr. Chairman. I yield back the
balance of my time.
Chairman McCaul. The gentlelady yields back.
The chair recognizes Mr. Schneider.
Mr. Schneider. Thank you, Mr. Chairman. I want to thank the
witnesses for sharing your perspective today.
Assistant Secretary Pyatt, it's good to see you. I last saw
you in Greece seems like forever ago. But it's good to be here.
Obviously, what we're talking about is a critical issue and
making sure the United States maintains its leadership role and
are able to stand up against the BRI. I want to kind of walk
through an intellectual exercise for a second, though.
If there was no Belt and Road Initiative what would be our
international priorities within the context of building
relationships and assuring U.S. alliances?
And maybe, Mr. Herscowitz, I'll start with you.
Mr. Herscowitz. So I would start by saying that prior to
the Belt and Road Initiative the U.S. Government has for a long
time invested a significant amount in developing countries,
going back to the Marshall Plan and doing it for the right
reasons because we see developing countries as our partners and
we see that it benefits Americans when the countries throughout
the world are in a better place economically and that people
are well educated, they have access to health care.
So whether it was through USAID or OPIC or DFC the work
that we have been doing has been building the partnerships that
we have had and it's helped build the reputation of the United
States to where it is internationally today.
We can continue to do more but I would just submit that we
would--we have been doing this work and we can do more and we
can do it better.
Mr. Schneider. Assistant Secretary Venkataraman?
Mr. Venkataraman. I would just echo that to say that our
focus even without Belt and Road would be on the emerging
markets where that is the locus of economic growth. That is
where U.S. business sees a significant opportunity. That's
where the middle classes are growing and that's where we would
be still.
Mr. Schneider. And Assistant Secretary Pyatt?
Mr. Pyatt. On the energy and climate issues that I'm
responsible for, Congressman, much is guided by the priorities
that Secretary Blinken has given us.
The top of that list is the competition with our two great
adversaries, the PRC and Russia, and then another critically
important consideration, again, in the energy and climate space
is the large developing countries that are going to have such a
decisive impact on how successful we are in managing the
climate crisis--so India, Pakistan, Bangladesh, Nigeria, where
I'm traveling this weekend, Indonesia, these are of critical
importance--and then also I would say influenced significantly
by what we hear from Congress and the priorities that this
committee and the Foreign Relations Committee give us in terms
of areas of particular focus.
Mr. Schneider. And I was looking at some of the numbers and
the materials we had in preparing for this hearing and it
struck me our direct investment--foreign direct investment of
China over the 20 years, 2001 to 2021, grew from $34 billion to
$2.6 trillion, a 76 times increment.
The United States is still significantly larger. We're at
$9.8 trillion FDI in 2021, four times China's, but our relative
share of the global total has dropped from 32 to 23 percent.
But I think one of our superpowers as a nation is our
alliances--we have talked a little bit about this here--is our
ability to bring others together. I think each of you have
talked about this of how we--working with others and the
relationships we build with the countries we partner with and
the countries we're investing in.
And the reason I asked about what if there was no Belt and
Road I think there's overlap. Even if China wasn't doing what
it was doing we would still be doing what we are doing because
it serves our interests. It serves our national interest. Our
strategic interests are served making sure that China does not
continue to grow.
In the minute we have left, and maybe I'll start with
Assistant Secretary Pyatt, coming the other direction, what are
the most important things? You mentioned the role or positions
coming out of Congress.
What do we have to make sure that we address and what do we
need to say or do to make sure that you all are successful,
that the United States continues to be successful on the global
stage?
Mr. Pyatt. So, Congressman, if I can just circle back to
Ranking Member Meeks' point, and we had a powerful presentation
yesterday to our Ambassadors, also from Senator Coons and
Senator Graham, who talked a little bit from the Senate side,
their perspectives on where the budget debate stands and the
potential repercussions for the State Department's operational
budget.
And so I think giving us the resources that we need, and as
I said earlier, I was so grateful to hear about the engagement
with Ambassador Tamlyn in DRC, which is a critically important
country in this energy transition game.
But it's also an embassy that's operating right at the
fringes in terms of their operational effectiveness for
resource reasons.
Mr. Schneider. Anybody else?
Mr. Herscowitz. I just wanted to add that one of the most
powerful changes that I thought took place when DFC was
established in contrast with OPIC is opening up the ability for
DFC to work not only with U.S. companies what that's done is
it's opened the door for us to work with companies from--both
local companies.
From a development standpoint you build long-term
sustainability but with like-minded partners as well and the
reason why intuitively it seems like that does not favor U.S.
companies it actually does because when we're in on a project
early it gives us an opportunity to find out who the EPC
contractor was going to be, who the vendors are going to be, so
that we can then pass trade leads on to the Commerce Department
so that U.S. companies can get in there.
OPIC had a vast majority of its business with a relatively
small number of companies. I'm really proud of the fact that
over the last 3 years DFC has added at least, I think, 200 or
so new clients and I think that's really making a big
difference in terms of our collaboration with like-minded
partners and making sure that the U.S. has some touch in terms
of what's going on in countries.
Mr. Schneider. Thank you. I do not want to take--I'm over
time but if--with permission if you want to add anything or----
Chairman McCaul. Very briefly.
Mr. Schneider. OK.
Chairman McCaul. We have a congressional baseball game
tonight.
Mr. Schneider. Thank you for the extra time and, Chairman
McCaul, thank you for having this hearing. This as a critical
issue that we need to stay united in a single voice here.
Thank you very much.
Chairman McCaul. The gentleman yields. The chair recognizes
Mr. Davidson.
Mr. Davidson. I thank the Chairman. I thank the witnesses I
appreciate you guys being here and the work that you're at
least supposed to focus on. Hopefully, we'll find 100 percent
alignment.
Does the Administration assess that our partners and allies
in the Western Hemisphere are in alignment with the United
States on the need to address the threats posed by China?
Mr. Venkataraman. Thank you, Congressman. I think there are
different perspectives throughout the hemisphere on this
question. I think what we hear most often is that our trading
partners will look to China for assistance with certain
projects and for that investment that does come from China.
But it is also the case that many of our trading partners
in the region do understand some of the risks associated with
that investment or with that----
Mr. Davidson. I mean, it's great that they understand the
risks but, nevertheless, they do not assess China as a
significant threat. They're continuing to actually increase
their ties with the United--with China and in some cases
diminish their ties with the United States.
I'm glad you recognize that and acknowledge it. I guess my
concern is that the Administration seems OK with it and I'll
point out that during a background press call on the Summit of
the Americas a senior White House official said, quote, ``Any
country that is investing in the economic prosperity, security,
and social wellbeing of the countries of the region are
advancing U.S. national security interests and are welcome as
far as we're concerned.''
That does not sound like there is a policy from the United
States to counter China's influence. It seems like it's
inviting it like, hey, I do not know. If you're going to invest
and grow the economy here come on over.
That's concerning. This official also quoted National
Security Adviser Jake Sullivan, who said on a previous
occasion, quote, ``We're not asking the countries of the region
to choose between the United States and China.''
Is it the policy of the Biden Administration to permit the
Chinese Communist Party to expand their malign influence in the
Western Hemisphere? Is that a policy position?
Mr. Venkataraman. Congressman, I would just say that we
spend every day pushing back on that. That was what we do with
our American companies.
We provide these governments in the region with an
alternative to what is presented by China. So we are not in the
business of standing back and letting China take over the
Western Hemisphere with their investments.
Mr. Davidson. Mr. Pyatt?
Mr. Pyatt. Congressman, the policy of the United States is
to invest, align, and compete and we're competing every single
day with the PRC, including here in the Western Hemisphere.
I mentioned earlier my travel recently to Guyana, a small
developing country that has just discovered 11 billion barrels
equivalent of oil and gas.
The conversations I had there everybody used the phrase
that China was a partner of necessity, not a partner of choice.
There was great appreciation for the fact that I was there, the
most senior U.S. official to go to that country in a long time.
Mr. Davidson. Thank you. Mr. Herscowitz?
Mr. Herscowitz. It's part of DFC's mandate, a key part of
our mandate, to counter malign influence and to use private
sector solutions to advance development and the strategic
interests of the United States.
Mr. Davidson. Is China's influence malign?
Mr. Herscowitz. Absolutely.
Mr. Davidson. All right. I'm glad we agree.
This is encouraging, because some of the statements, as I
said, lends credibility to the idea that the Biden
Administration may not have a formal policy that's OK with the
Chinese Communist Party growing their influence in the Central
and South America and the Western Hemisphere.
It's certainly happening. It is happening, right? I mean,
China's influence in the region is growing, right? Does anyone
disagree with that? Everyone agrees?
So we're not succeeding, you know, so--you know, I'm
concerned about that. I'll just close on natural resources.
Control of national resources critical to maintain power and
leverage and the People's Republic of China has choke points
and limitations on some of these.
You know, you mentioned Guyana but we're also concerned
about rare earth minerals and, you know, maybe not quite rare
earth, whether you're talking around the world--cobalt,
lithium, the things that are going, frankly, out of the green
new deal that the Biden ministration loves. They're driving
investment into China, into areas that China has garnered
market.
So when you look inside the Western Hemisphere are our
policies effectively allowing China's influence to grow or are
we doing things to counter it?
Mr. Pyatt. Congressman, we are working very hard to counter
it, including with the Lithium Triangle countries that you
alluded to, working with Argentina, working with Chile, working
here in the--in the near neighborhood including, of course,
with Mexico.
So our intent is to respond to the opportunities that the
energy transition represents and I would suggest to you,
Congressman, that the growth in demand that we're seeing for
those battery minerals is not coming so much because of any
government's policy.
It's becoming because of consumer choice and that's
certainly what I hear when I talk to Ford or General Motors----
Mr. Davidson. Interesting perspective. I yield my time.
Chairman McCaul. The gentleman yields.
The chair recognizes Mr. Castro.
Mr. Castro. Thank you, Chairman. I thank all of you for
your testimony today and for being with us.
I've often said that the United States should engage in
competition with China, when necessary prioritize our sources
of strength at home and provide funding to countries that need
our support.
The United States has an opportunity to present ourselves
as a viable and better partner for the realities many nations
face. To succeed, the United States must regain confidence with
other countries and discourage actions that undermine agreed
norms.
So, in other words, competition between the United States
and China should be fair. China should be able to compete with
the United States without cheating the world and the
Development Finance Corporation is a critical tool for the
United States, which I strongly support.
But I would caution the Administration in tying the DFC too
closely to U.S.-China competition, and we saw with the
Millennium Challenge Corporation's experiences in Nepal and Sri
Lanka. Giving the impression that our development efforts are
intended to counter China paints a big target on the backs of
our work and can be counterproductive.
So for my questions, Mr. Herscowitz, you testified that the
DFC is working on improving its overall capabilities and
recognizing--organizing its structure to counter the Belt and
Road Initiative.
The DFC is first and foremost a development agency. I
understand the pressures to finance projects that provide
alternatives to the PRC but in doing so the DFC cannot lose
sight of the development mandate that the law requires.
How do you view your role as the chief development officer
in ensuring the DFC does not lose sight of its development
mandate?
Mr. Herscowitz. So let me start by saying that I'm really
pleased of the direction that DFC has taken and the progress
that it's made over the last few years in terms of making sure
that every single project that we do is evaluated for its
development impact, and development impact and strategic
interest tend to be mutually reinforcing as well.
And so when we look at every project it's evaluated using a
system that gives it different values, depending on how many
people are going to benefit, whether it's innovative, whether
it's to promote economic growth.
It happens with every single project and I've watched the
quality of those projects from a development standpoint
increasingly improve. I see us reaching into areas that are
tougher places to work.
I view DFC's mandate to be, yes, to counter influence of
PRC and other malign influence but it's also to make sure that
we're reaching some of the most underserved populations.
And why is that important? Why do countries swing back and
forth from left and right in Latin America? I spent 12 years
living in Latin America. I've lived in South America, Central
America. I've lived in Nicaragua. I've lived in the Caribbean.
Why do they do it? Because they're not necessarily catering
to the populations who are underserved who vote for their
presidents and as they see that they are left behind they
continue to vote in the other direction and that's just basic
politics.
And so what DFC is doing is looking at how we can reach the
underserved populations in a lot of these countries, whether
it's indigenous groups or Afro-descendant populations in South
America, to make sure that we see greater stability and that
people get jobs and we're not dealing with as many people who
want to migrate across the border to the U.S.
Creating jobs and making sure that people are happy where
they are is what creates stable----
Mr. Castro. Sure----
Mr. Herscowitz [continuing]. For us.
Mr. Castro. No, and I'm encouraged to hear that. I'm
encouraged with many of the projects that DFC has taken on. But
I just want to reiterate that the main mission of the DFC is
not to be reactionary to China.
That's not the main mission of the DFC, and the danger
there is that we start following what China does and only
investing in countries where China is making a play, so to
speak, and I do not want us to get to that point.
But let me--let me move on to my second question. During
the last Congress I led an effort with my colleagues on this
committee to change how equity appropriations to the DFC are
scored so we can treat equity appropriations fairly and unlock
more resources.
I was glad to see this proposal raised by Secretary Blinken
at the budget hearing earlier this year. What would changing
how equity appropriations are treated do to help the United
States' development priorities and provide alternatives to PRC
financing?
Mr. Herscowitz. I think most people in this room agree that
the equity authority that was given to DFC was a great new
authority but that we haven't been able to deploy it for
reasons that nobody anticipated and that has to do with how
equity is scored, which means that when we make an equity
investment it gets treated as if it's a grant. It's assuming
that we're going to lose all that money and everybody knows
that's not the case.
When you make an equity investment often you get the
greatest return of any type of investment. Solving this issue
is going to--would have would have a dramatic impact.
First of all, it will allow us to get involved in--and I'm
going to mention the strategic first--strategic projects where
there's a lot of risk, whether it's mining or geothermal
projects.
There's a lot of up front sunken costs where people do not
want to give them loans and you need to be able to get that
equity in there and demonstrate some success over time.
But it's also designed to help reach those small
businesses, those entrepreneurs who have the good ideas, who
cannot go to a bank right away and if you can give a----
Mr. Castro. Sure.
Mr. Herscowitz [continuing]. Full amount of equity to them
that helps them grow their business.
Mr. Castro. I apologize. I've run out of time. I know that
people want to ask their questions. But thank you so much for
your answers. I yield back.
Chairman McCaul. The gentleman yields.
The chair recognizes Mr. Hill.
Mr. Hill. Mr. Chairman, thank you for holding this hearing,
and it certainly echoes the work we do over on House Financial
Services Committee as well in trying to strategize and work
collectively with our friends here on the House Foreign Affairs
on countering Belt and Road and one of the key things is China
not being a member of the Paris Club is just not an acceptable
reality.
We need those of you engaged at--in the Foreign Commercial
Service and at State advocating that in the interagency to
really press the U.S. to press China to join the Paris Club for
debt restructuring so we have fewer Ecuadors, fewer Sri Lankas,
fewer catastrophic situations.
I do not want to belabor that fact but we know about the
predatory loan process of China. We know about their lack of
transparent lending, their predatory terms, and all these
things are things that this Congress have been active on.
My Chinese Debt Transparency Act was signed into law in
2020. Young Kim's bill, PRC Is Not a Developing Country Act,
passed the House in March. So we are taking actions to counter
this.
But we need to build a consensus within the U.S.
Government, American business, and our allies and partners
around the world on how best to counter it, and on the House
Intelligence Committee I work--in my area of geography I work
in Africa and I was on a CODEL to the Republic of Congo in 2017
And everywhere we went in that little place--corner of the
world, where we only have 14 people in our embassy, by the way,
you see millions of dollars' worth of Chinese construction.
They built elaborate concrete bridges, freeways, sporting
complexes, and even the Presidential palace and the foreign
ministry building, and we were directed, oh, go up this
beautiful highway and we did.
We drove this highway. It goes to this major new Chinese-
built construction project of our community college and we come
to the end of the road because the road is just purely a
Potemkin Village fake concrete freeway and it goes to this
beautiful campus.
From the distance you see these white buildings on the
green hillside and guess what? It's--there's nothing there.
They're just empty concrete buildings built by China. There are
no students. There's no teachers. There's nothing.
There's not even a Chinese restaurant in the country. I
mean, they left nothing except deteriorating concrete that as
you know you would not have in any way, shape, or form.
So in addition to predatory terms of Belt and Road the
construction techniques are bad. So what are we doing to--with
countries in the Global South to inform them?
What are you doing in your daily work to inform the
countries in the Global South about the dangers of financing
things from China and using Chinese construction companies?
Who wants to start on that?
Mr. Pyatt. Congressman, I can start with that one and just
to say both in my former Ambassadorial role but also knowing
what my colleagues around the world are doing one of our most
powerful weapons on that kind of advocacy that you've described
are our Ambassadors who are on the ground every single day
making exactly that point and bringing to the table the better
offer that Secretary Blinken talks about all the time.
And thank you for raising the debt issue, and I would cite
an example right next door to where you were in DRC in Zambia,
a reforming government that has not been able to extract
concessions from the PRC on its debt overhang.
And if you will excuse one more example from Guyana, which
I mentioned to Congressman Davidson just a minute ago, when I
was in--when I was in Georgetown there too you have an airport
that was built by the Chinese.
It was so shoddy that the president actually went out to
the airport and was pointing out all of the defective air
conditioning and jetways and other problems. They also built
the building that the parliament meets in.
So we have an adversary there. But I was also very
encouraged because today it's Bechtel that's developing the
construction plans for the new highways and the new ports and
the new--the new waterfront.
Mr. Hill. Thank you.
Let me, in my remaining time, do all of you support an all
of the above energy strategy for financing by U.S. Government
financing arms? Yes or no--do you support nuclear financing?
Mr. Herscowitz. Yes.
Mr. Hill. Do you support oil and gas finance?
Mr. Herscowitz. We support whatever project is appropriate
for the situation in a country and that's what we look at. We
are market driven and we're financing fossil fuel projects.
We're looking at nuclear--we changed our nuclear policy.
We're looking at nuclear policy. We also look at geothermal,
solar, hydro----
Mr. Hill. Sure. I'm not saying look----
Mr. Herscowitz [continuing]. Looking at--we look at----
Mr. Hill. So you support an all of the above energy
strategy for multilateral assets of the U.S., how we
participate in the----
Mr. Herscowitz. So for us we're generally supporting, you
know, IPP--you know, independent power projects. So we look at
whether this project is going to be commercially viable and
whether it makes the most sense for the country. So we financed
a gas project in Sierra Leone just 2 years----
Mr. Hill. Thank you. If you have other thoughts on that I'd
like you to respond in writing. And my time's expired and I
thank the chairman for his largesse.
Chairman McCaul. The gentleman yields.
The chair recognizes Mr. Jackson.
Mr. Jackson of Illinois. Thank you, Mr. Chairman. Thank you
for your testimoneys this afternoon.
In light of the potential Fiscal Year 2024 operations bill,
if there are cuts--draconian cuts to our foreign assistance by
$18 billion--30 percent--can you share with me how that will
affect your outlook and what challenges we'll be confronting in
your operations in Africa?
Mr. Pyatt. Congressman, I'll just say we have just begun
that conversation at the State Department but there will be a
severe impact including a negative impact on our ability to
engage in the competition with China that we have been talking
about this afternoon.
Mr. Jackson of Illinois. Can you be specific in which
regions? If we had to look at a 30 percent cut where would we
divest ourselves of, where would we concentrate, reallocate our
resources in light of the potential cut?
This is on the table now. This is realistic that it's being
proposed to have a 30 percent cut.
Mr. Pyatt. Congressman, as far as I know, on the State
Department side we have not begun that rack and stack exercise.
But as I mentioned earlier, we had a presentation yesterday
from Senator Coons and Senator Graham, which made very clear
that this would--be this would have a significant impact on the
effectiveness of our diplomacy.
Mr. Jackson of Illinois. Thank you. Would anyone else like
to comment?
Mr. Venkataraman. Thank you, Congressman. I would just say
that we do not have a specific answer for you on that point but
I do know that that is something we'd have to consult very
closely with our colleagues at the State Department, in
particular with respect to the operations of our foreign field.
Mr. Herscowitz. In terms of DFC, any reduction in our
budget is going to impact our ability to make investments. It's
going to impact our ability to have more people overseas and to
invest overseas as well. So it will have--any reduction will
have a direct impact.
Mr. Jackson of Illinois. Thank you so much.
So as we are talking about as their influence grows and we
are entertaining the possibility of reducing our ability to
give you funding, let's think of a blue sky. What would you
like to see the funding level increase to to give you all the
tools and support that you need to attract U.S. business?
And from my personal travels in Africa and experience they
would love to do business with Americans but we haven't
extended the hand, shall we say.
They've not been a priority and under the previous
Administration we did not fund the embassies, we did not staff
them, and many people in the continent were left with no other
choice. How do we make up time and lost ground?
Mr. Pyatt. So, Congressman, I'll--thank you for that
question and I'll give you a specific response in the case of
the State Department and the ENR Bureau.
The President's budget proposal includes $35.5 million for
programs in the area of critical minerals and our ability to
compete in that space, and a lot of that resource would go to
Africa because that's where so many of the minerals are.
Mr. Jackson of Illinois. Anyone else like to comment?
Thank you. I yield back my time, Mr. Chairman.
Chairman McCaul. The gentleman yields back.
The chair recognizes Mr. Baird.
Mr. Baird. Thank you, Mr. Chairman, and thank the witnesses
for being here today. Appreciate your comments.
You know, the CCP's Belt and Road, and we have been talking
about that all evening, has led to a tremendous amount of
Chinese influence in Africa, including the countries of Kenya,
Namibia, Zimbabwe, Mozambique, Congo, and many more.
So the Chinese have made it clear that Africa is a key part
of their BRI and they leverage investments backed by collateral
and commitments that is implemented in such a way that it's
almost impossible to repay and, you know, this impacts American
agriculture and American production because what they are doing
in these countries is trying to gain access to the land and the
production of food and so that impacts the American
agriculture.
And on top of that, they have built four military ports in
2022 and they did not have any in 2021. So this is an obvious
attempt for China to expand its military presence. So my
question is this.
Eight out of 10 of these countries that are afforded the
highest levels of Chinese diplomatic partnerships are eligible
for AGOA--the African Growth Opportunity Act.
So my question is what is it--what are we doing, what's the
Administration doing, to effectively counter Chinese
involvement with these countries that have duty-free access to
the U.S. market?
Mr. Venkataraman. Thank you, Congressman. I know that the
Administration is taking a very close look at AGOA but that is
a question that I would defer to my colleagues at USTR.
Mr. Herscowitz. One of the most important things that DFC
has been doing, in my opinion, has been the growth of its food
security and agriculture portfolio. When I arrived at DFC a few
years ago we had very, very few deals.
We have now grown our portfolio to be doing almost a
billion dollars of transactions that have been approved in the
last 3 years and most of those transactions are benefiting
smallholder farmers.
I mean, when you have smallholder farmers who are getting
access to credit it puts them in a position also to push back
on the influence of others who are going to come and try to buy
their land.
So I'm actually really quite proud of the work that DFC has
been doing to support smallholder farmers throughout Africa and
all over the world.
Mr. Baird. Anyone else?
My next question then focuses on the digital Silk Road and,
you know, China's involvement in Africa that Huawei has got,
what, 70 percent of the 4G network. And so I think it's
important that we counteract some of their activities there.
So I just ask how the department is monitoring the supply
chain to ensure that American components do not end up in
products which ultimately end up used to spy on African
citizens.
Mr. Pyatt. Congressman, maybe I'll take that one and again
refer back to my experience as a chief of mission overseas and
the work that we did during the Trump Administration to really
raise consciousness regarding the vulnerabilities that some of
Huawei's 5G systems bring along and the ability that our
embassies overseas have had to bring in the technical experts
who could have the conversations with the intelligence
counterparts, with the telecommunications executives.
But it also comes back to the point of having a competitive
alternative product and it's not in my ENR responsibilities
today.
But I am quite aware that there's significant effort across
the U.S. Government to figure out how we bring American and
Western alternatives to the table to compete, including in this
space around advanced telecommunications.
Mr. Herscowitz. So I just wanted to add that while the PRC
is extremely competitive with Huawei and that type of
equipment, which is problematic for us, I mentioned the project
that we supported working with the Australians and the Japanese
and Papua New Guinea.
We did a project in Brazil, the Smart Rio Transaction,
where we're helping build out smart cities that'll provide some
level of digitization and wifi access using non-PRC equipment.
And then we're doing a lot of work with data centers as
well. In Africa, we'd provide a $300 million loan to Africa
data centers because where you store all that data it's
increasingly important that that's secure in a way. And so
that's another area of growth for DFC.
Mr. Baird. Thank you, and my time is up. So thank you, Mr.
Chairman. I yield back.
Chairman McCaul. The gentleman yields.
The chair recognizes Mr. Keating.
Mr. Keating. Thank you, Mr. Chairman. I'd like to thank our
witnesses for their patience, going through all those roll
calls and waiting here and still here to provide us some
insight. I really appreciate that.
There's been--this has gone over before in some respects
but I think it's important to emphasize too I agree with the
comments before that we're not there the way that--when I
talked to our allies and Africa in particular, talk to them,
they said, you just--we want you to be our partners. You're not
there.
And but if we're going to put a--you know, if we're going
to be there and we're going to put ourselves on the field you
have to fund a team and I'm concerned about--and I do not think
it's all the Republican members here but there are Republican
proposals that went through that would have had the effect of
22 percent budget cut on USAID, Commerce, State Department.
And if you could briefly just say--the Chinese aren't
cutting their investment by that amount in terms of doing
this--that this really puts us at a competitive disadvantage
that we have to deal with.
So without going into too much detail that's a--that cut
would really hamper what you're trying to do overall in
continents like Africa and the countries there, correct?
Mr. Pyatt. Severely.
Mr. Keating. Yes, and I think that's--if we're going to be
competitive we have to fund the team on the ground.
But we do have advantages. You know, the Chinese with their
plans, besides the predatory loans, promises of local
employment and then bringing in their own people, in the macro
sense they're coming out with a lot of profits out of this.
They are in effect taking the rare earth, the minerals,
shipping them, and the rest of the processing is being done
elsewhere. So, in effect, they're probably leaving those
countries with 20 percent of the profit they could get.
The U.S., on the other hand, with the efforts that you're
working on we want to really try and encourage growth in the
country so these other types of manufacturing, these other
kinds of processing, the other parts of their economy will
benefit and they could probably get, like, 80 percent instead
of 20 percent.
So we're going to be successful if we have the tools to do
it, I believe, and we should never forget that. China has
certain advantages but so do we and I think we're dealing from
a stronger position and, hopefully, we'll take advantage of
that.
The biggest advantage we have among the fact that we view
the ability of them to profit better themselves as countries
and benefit their own people is the fact that we have something
the Chinese do not have.
We have a coalition and we're seeing the coalition in play
now in the military sense in Europe. We're seeing it expand
beyond Europe, over 50 countries with our involvement Ukraine.
The Chinese do not have that. So if you could briefly--the
importance of teaming up, particularly with the EU because with
the EU and the U.S. together that's over half the world's GDP.
Instead of sanctioning China, instead of trying to compete
with them in a micro sense, we should be dealing with strength
and that's our greatest strength, together with our own shared
values.
Do you want to comment on that?
Mr. Pyatt. So, Congressman, you really delivered my talking
points in so many ways in that presentation but just let me
highlight your last one in particular, which is the advantage
that we have in terms of our ability to build coalitions.
That's exactly what we are doing through the Minerals
Security Partnership--12 other countries plus the European
Union--and it's not just--it's not just Europeans. It's Japan.
It's Korea. It's Australia. It's Canada.
So these are all countries that bring to the table the
values that we hold in common and, in fact, the first thing
that we agreed on as an MSP coalition are a set of environment,
social, and governance standards. Those ESGs are public.
They're on the internet.
But we're also agreed to work together to bring together
the resources of our development finance institutions and then
also to mobilize our private sectors, and I'm not sure if you
were here when I made the point earlier that when we started
the MSP with Secretary Blinken and Reta Jo Lewis----
Mr. Keating. I was. I'm running out of time.
Mr. Pyatt. Yes. So I'll stop there.
Mr. Keating. Three hundred percent. But the other thing is
the State Department are working for a rule of law, stability.
That's what's going to encourage private investment. They're
going to want those things in place if they're going to invest
private funds.
Last, just--if you can get time for a response, perhaps,
but an observation that's important now with Russia's illegal
war in Ukraine, this war will be over someday.
Ukraine will have the second strongest military probably in
Europe. The work we do in State there is going to be so
critical in terms of having them--have a country with a civil
strength, a rule of law, going forward.
In the absence of that Chinese said they're prepared to
invest in reconstruction after the war is over. We have to be
there first.
Do you think that those statements attributed to some
Chinese officials that they will be prepared to come in after
the war is over and invest in that reconstruction presents a
real challenge?
Mr. Pyatt. So, Congressman, we could have a whole separate
hearing on this. As you know, I was Ambassador in Ukraine from
2013 to 2016. I'm enormously proud of the role the U.S. has
played and I, having spoken with the prime minister, deputy
prime minister, the United States is the preferred partner by
far in the reconstruction process and we will talk about that
with our allies and partners next week on Tuesday and Wednesday
when I join Secretary Blinken at the London Ukraine Recovery
Conference.
Mr. Keating. Thank you all for your service. I yield back.
Chairman McCaul. The gentleman yields.
Let me just say that we are working on a bill that would
use frozen Russian Federation assets to help fund the
reconstruction.
So with that, the chair recognizes Mr. Mast.
Mr. Mast. Thank you, Chairman. I'd just start by, No. 1,
saying I think it's naive to think that China's just building
cheap things to put people in their pocket. I consider this
much more long term.
I think they're looking to recreate the road system. Where
they did not have inroads they're creating roads, whether it be
through China and Pakistan or through Sri Lanka or to many
places in Europe.
This for the long term. They're looking to be embedded into
resource countries because that is what they do. They export a
tremendous amount of refined goods, of value added goods, and
for the long term to do that they need those resource countries
feeding them. They're not trying to do something to say, hey,
we're going to get you for a couple of years.
So in that, let me ask you all a question. What--the
various MOUs that these countries have signed across the Belt
and Road Initiative what countries have you seen leave the Belt
and Road Initiative after their MOUs expired?
Mr. Pyatt. So, Congressman, one example is in Europe with
the 17+1, which last time I checked I think is the 14+1 and
it's on the way to becoming the none plus one.
Mr. Mast. Which ones? Which countries?
Mr. Pyatt. I'll have to get back to you on that. I do not
want to give you the wrong data. But----
Mr. Mast. What do you think they are? This is important
information. Which ones do you think they are?
Mr. Pyatt. So 17+1 was a corridor of countries up and down
Central and Eastern Europe and a series of the 17+1 partners
have basically decided this is not a profitable avenue that
they want to pursue, in part because of a lot of consistent
diplomacy by American and other officials saying this is
inconsistent with our values and interests.
Mr. Mast. Yes. Let's continue on that in part. What
countries do you see joining in 2023?
Mr. Pyatt. I hope zero.
Mr. Mast. But I'm asking for a real assessment, not a hope.
Mr. Pyatt. What are the--Congressman, if you're asking what
are the places where I think we need to----
Mr. Mast. I'm asking specifically what countries do you
think join in 2023 specifically?
Mr. Pyatt. So let me--Congressman, let me try to be
responsive in this way. I would cite an example of Pakistan, a
country highly vulnerable because of years of indebtedness to
China and a country which is looking for engagement including
from the DFC or DFC----
Mr. Mast. Doesn't Pakistan already have an MOU?
Mr. Pyatt. Yes, they do and they have a--they have a port,
which is not producing value for them, which the Chinese have
constructed. They also have those roads that you described.
Mr. Mast. So who are they adding in 1923. Pakistan is
already on the list.
Mr. Pyatt. As I said, I think the--our goal would be that
that universe continues to shrink as it is shrinking in the
reduction of the 17+1.
Mr. Mast. Can you tell me--I want to dig a little bit into
some of these MOUs--which ones do you worry about being able to
be weaponized?
They build a port, they build a train, they build a road,
they build tremendous amount of infrastructure projects, you
know, thousands, literally. Which one of those do you believe
can be weaponized, are you most concerned about being
weaponized, being able to translate to military capabilities?
Mr. Pyatt. When I was Ambassador in Greece I was very
concerned about the PRC presence in the Port of Piraeus in
particular because of the critical role that NSA Naval Base
Souda Bay plays as part of our military force projection
platform in the eastern Mediterranean and also because the
vulnerabilities that Greece was suffering from when I arrived
as a heavily indebted country that nearly fell out of the
Eurozone.
We dealt with that including in partnership with the DFC
but also with a lot of persistent American diplomacy, working
in lockstep with our European allies.
Mr. Mast. Let me ask a reform question and this is, of
course, open to any of you all. This has been open to any of
you. Anything that I ask that you have an answer to that I did
not get an answer to please feel free to chime in.
Do you think that we should be encouraging reform at the
IMF or the World Bank to respond better to the way China is
getting countries to participate in the Belt and Road?
There's fundamentally different approaches between the way
the IMF and the World Bank approach building infrastructure and
how China. Do you think there should be reformed within the IMF
and the World Bank?
Mr. Pyatt. Congressman, this is really a U.S. Treasury
issue. But I will just say I have heard Secretary Yellen speak
eloquently about the need for reform at the MDBs.
Mr. Mast. OK.
Mr. Venkataraman. Congressman, I would just--I would just
add, the one area of reform I would highlight is in the World
Bank where we have been working very closely with them to
change their approach to infrastructure development.
Mr. Mast. Give us those changes before my time ends,
please.
Mr. Venkataraman. Yes. So particularly with respect to
factoring in the life cycle cost for infrastructure projects so
that it's not just based on lowest cost but it's based on an
overall cost, which is what creates better advantage for
American companies.
Mr. Mast. Thank you for the time, Chairman.
Chairman McCaul. The gentleman yields.
The chair recognizes Ms. Manning.
Ms. Manning. Thank you, Mr. Chairman, and thank you to our
witnesses for your patience in staying with us today.
Ambassador Pyatt, our colleges and universities are among
our greatest assets in our strategic competition with China,
helping us win hearts and minds by bringing talented young
people from around the world to study in the U.S., and not only
do we educate them but they learn our culture. They make
friends. They build lifelong ties to our country and our way of
life.
Yet, I was recently on a CODEL to Japan, an ally that has
now increasing importance in light of China's military
aggression, and we learned that Japanese students are no longer
coming to the U.S. to go to school for a variety of reasons,
including the high cost of our colleges and our universities.
What steps is the Administration taking to encourage more
foreign students to choose to study in the U.S. instead of
China?
Mr. Pyatt. So, Congresswoman, this one also is out of my
ENR lane but it's very much in my role as a U.S. Ambassador
that I had in the past. I am a--I agree with you completely.
I am a huge fan of every cent that we invest in our
educational partnerships. I think the Fulbright program is one
of the most lucrative developments that the U.S. has ever
committed to in terms of how we build partnerships around the
world because you're investing in future generations.
I know that all of my colleagues at the State Department
today who work on these issues are critically focused on
continuing to open these opportunities in the United States and
I also know, because I've been part of the preparations for
Prime Minister Modi's visit, that we will use that visit as
well to highlight the tremendous example that India provides of
a country that's sending lots of students to the United States.
I would also say as a parent who's finished paying for
university for two children and then as somebody who's watched
the role of international education that I see tremendous value
also having more American students be given the opportunity to
study overseas.
Ms. Manning. Since you brought up the issue of India, I
wonder if you can comment on whether it's become more difficult
for students who study at our colleges to get immigration visas
to stay and work in the U.S. after they graduate. Do you think
this is a disincentive for foreign students to come to the
U.S.?
Mr. Pyatt. Congresswoman, I'm going to--I'm going to punt
that one to my colleagues in the SCA bureau who work on these
issues every single day.
But I do know, and on this I can speak for Secretary
Blinken and the rest of the Administration, there is a very,
very strong commitment to continuing to build those educational
partnerships because they contribute to American economic
competitiveness.
Ms. Manning. Thank you.
Mr. Herscowitz, how can DFC help provide financing to more
companies that offer loans to help foreign students study at
our colleges and universities?
Mr. Herscowitz. So DFC actually has some active projects
that provide loans to help people finance graduate education,
including in the United States. So this is a--we have existing
projects in that regard.
We have to be careful, obviously, that we're not giving
opportunities to people that we might not otherwise provide to
Americans as well.
So we're very careful about when we do these types of
projects to make sure that they're targeting the right
populations of people who also with the ultimate goal of coming
back to their home country so that they're going to help
develop the local expertise and we do not promote a brain drain
in those countries.
Ms. Manning. OK. Understood.
Ambassador Pyatt, what is the State Department doing to
help other countries take steps to guard against China's
growing influence over foreign think tanks, academia, Confucius
Institutes, and media outlets?
Mr. Pyatt. So, again, Congressman--Congresswoman, this is
one where I will speak in my capacity as a former Ambassador
because I dealt with exactly these issues in Greece where we
worked very hard, including private conversations that I had
with senior university leaders, raising the concerns that we
had around some of the Confucius Institutes and the way in
which the Chinese--the PRC embassy was seeking to some extent
to limit academic freedom.
It's a core principle of the United States, the open
exchange of ideas, but we want to compete on a level playing
field. It's exactly the same principle that applies to the
economic and commercial issues that all of us work on.
Ms. Manning. Thank you. I have more questions but we have a
baseball game to get to. So I yield back.
Chairman McCaul. Thanks for reminding us. The gentlelady
yields.
The chair recognizes Mr. Mills.
Mr. Mills. Thank you so much, Mr. Chairman.
So I wanted to go through my understanding of the Belt and
Road Initiative. It's something that I had written on for many
years and I've published, you know, dozens of articles on the
ideas of the--also the geopolitical alignments that are
involved in this when we talk about Russia, China, Iran, and
North Korea and what their overarching goal is, which we know
is to eliminate the U.S. dollar as a global currency.
But we're seeing where we have already got an expansion of
Eurasia, which is one of the key elements that they were
looking for, that they're continuing to try and utilize the
proxy of Russia to be able to try and advance for them.
You already have a tremendous amount of growth when it
comes to Africa and the economic coercion that was undermining
a lot of the U.S. security cooperations and others, and then
you see the continual strengthening in Oceania, which is really
an idea of trying to choke off Western Hemisphere supply chain.
And then that marriage of convenience that they currently
have we know helps them a lot in our own hemisphere when we
talk about the Chavez of Venezuela, when we talk about Petro in
Colombia, when we talk about that Russian involvement as we--as
I mentioned.
But they also have now Panama and Honduras whereby they're
going to continue to utilize these relationships to potentially
look at the promotion of increased taxes, tariffs, and
passageway when it comes to the canal.
So there's almost an encirclement attempt with conjunction
of further type of malign activity regarding WHO and WF and how
they utilize those but also attacking the petro dollar with
OPEC to try and see if they can supplement it and/or replace
it.
And so when you know that these are a lot of the
strategies--and we have been in an economic resource and cyber-
based warfare with China for quite a long time.
We continue to try and refer to it as competition, which is
why it kind of disturbs me slightly when I hear something like
what you Stated earlier about Sullivan saying that we should
derisk and not decouple because I do think that we do have
opportunities to be able to not only protect America and get
back control of our economic and supply chain capabilities but
also to really thrust China into an economic collision because
if you look they're in a far worse position than we are when it
comes to debt. They just aren't allowing their valuations to be
properly audited that would actually disclose a lot of these
things.
And so, you know, I'm concerned with a lot of the things
that we're doing that does not seem to be in line with us
actually trying to save America and more on a China first
agenda when it comes to this Administration when we talk about
the significant importance of energy dominance and, meanwhile,
one of the first things that was done was to cut the Keystone
XL pipeline.
You know, when we talk about the ideas of economic warfare
and yet we haven't recognized yet that it's not the dollar or
the baht or the dinar or the ruble. The common global currency
is energy and I'm just not seeing where this Administration is
really grasping that understanding.
Now, I would argue that we have a lot of things and
Chairman Xi has said it himself, that he can outpace us
militarily and economically, but his biggest fear is America's
innovation and I think that we have opportunities, as we all
know, to advance ourselves and almost treat the quantum race
the same way that Reagan treated the space race when it came to
helping to bankrupt, again, looking at the ideas of quantum
entanglement, AI autonomous drone capabilities, but also the
ideas that we know they control 15 of the 16 rare earth mineral
mines.
But we do not even explore the ideas of subsurface
harvesting where you actually have the ability to take the 100
percent manganese control out of Chinese hands by actually
utilizing that at the 10,000-to 12,000-meter depth levels,
something we have the capability of doing but also would
refocus China's attention.
Because if we decouple--the way to hurt China, because they
want to get into a nonkinetic element of things. They do not
want to go gun to gun with us. They want us to basically go
ahead and collapse ourselves financially, which means that they
essentially have won by not only buying up our lands and
controlling the farmlands but controlling us and our behaviors.
So I wanted to know whether or not we feel that energy
dominance, getting to a point of reliable--not just the race
for renewables where we buy a lot of the materials from China,
and the ideas of subsurface harvesting, quantum race, and these
types of elements where we understand that decoupling and
hurting China economically is far, far more superior than
anything else is something that you would agree with.
Mr. Pyatt. So, Congressman, I said, I think, in the opening
sentence of my statement that I see my job and ENR's role as to
ensure that the United States continues to be the partner of
choice around the world on issues of energy and energy
security.
We had that status during the fossil fuel era and we are
now working as hard as we can to ensure that that remains the
case. As we enter this era of technological change we see more
work being done in areas ranging from small modular reactors to
green hydrogen to geothermal to wind and solar and all the
other technologies that will----
Mr. Mills. Those are more renewables than were reliables. I
mean, when we look at the actual impacts of things but also
where the actual sources are originating. I mean, again, we
know cobalt, nickel, and lithium, especially after we gave $1.1
trillion in lithium to the Chinese with the handover of
Afghanistan, does not work in our favor.
But we do have LNG. We do have natural gas. We do have the
ideas of drilling more and actually getting resource
harvesting, and this cash diplomacy effort that the U.S.A.--
where we think we can buy our adversaries with $800 million or,
you know, whatever the case may be for Pakistan and the others
has shown not to work.
But what has worked is the model that Germany and Russia
have whereby you actually provided reliable cost effective
energy sources and that gained a lot of alliances, especially
for those countries that were moving away from their own
productivities of coal and nuclear, et cetera.
So I do not think that the strategy that we're utilizing--
if the idea is to understand that we're looking to try and be
the prevented--prevent China's expansion actually get to a
point of being the global dominant, I do not think the idea is
trying to derisk our involvement but decouple away from the
economic reliancy on China.
And so I do not think that preventing clean energy
dominance is necessarily the only mechanism. It's actually
utilizing and supplying our own internal energy when it comes
to oil and fossil fuels and the things that we need to be able
to be dominant to the point where that's our recognized
strengths.
And so I'm sorry when I disagree with the solar power
projects that majority of those isn't made in America, and
we're not in competition with China. We're in economic resource
warfare with China and we need to acknowledge that and stop
trying to hide away from it.
Thank you for the additional time, Mr. Chairman. With that,
I yield back.
Chairman McCaul. The gentleman yields back.
The chair recognizes Mr. Moskowitz.
Mr. Moskowitz. Thank you, Mr. Chairman.
So about a month ago now I got back from Egypt, Italy,
Israel, and Jordan with the Speaker of the House and we talked
a lot about China and a number of these countries.
We talked about the Belt and Road Initiative, and I have a
specific question for you all but I want to--I want to build it
up for a second.
So, you know, we learned about, obviously, what China is
trying to do in Egypt with China--with the Belt and Road
Initiative in Italy. We talked about China and Israel's
technology. We talked about how China is winning contracts
through procurement, and as I was sitting and listening to all
of these things and getting educated what I recognized is that
one of the significant challenges we have in this fight with
China is that the American people know none of us.
They know none of it. They do not know that China is on its
way to taking control of the African continent through
whatever--through loans, through dollars, you know, through 5G,
whatever which way.
They do not--they do not know that we're starting to hear
from countries that we cannot sell them weapons fast enough
because either we cannot get them approved or we cannot get
them manufactured and so, you know, China is an option.
They do not know that when China--when the United States
pulls back China comes in. They do not know that. They do not
know that Chinese workers are around the world building
projects in other countries.
They have no idea, and you know how I know they have no
idea? Because I had no idea until I started learning about it
through this committee and through talking to other people.
You do not--so what I want to ask you guys is as we have
this huge debate in this country on whether we should pull back
from the world how do we--how do you look at how we're going to
get the American people to understand that every time we pull
back China comes in and what that is going to result in in the
future.
And that's for all of you or any of you.
Mr. Pyatt. So, Congressman, let me start out by just
thanking you for raising the issue and pointing out the concern
because I think there's a fundamental principle that I've
learned over the course of my diplomatic career, which is that
when the United States pulls out and isn't someplace bad things
happen.
We have learned that history over various--we have learned
that lesson over various times in American history. I hope very
much we will not have to learn it again and I think the burden
is on all of us, whether in Congress, in the Administration.
Mr. Moskowitz. I do not mean to interrupt but it's
happening, though. It's happening. One of the--one of the
issues we heard from the leaders in the Middle East is that
Ukraine is very important.
They're happy with our position. They're supporting our
position. They understand the repercussions not just in Europe
but other places if we were to leave that area and let Russia
just take Ukraine.
But they were deeply concerned that while we were, you
know, asking them not to, you know, listen to the Chinese they
were deeply concerned that we're taking our eye off the ball in
Africa or we're taking our eye off the ball in the Middle East
because the United States is having problems of walking and
chewing gum at the same time.
Mr. Pyatt. So I would just say this is why Secretary
Blinken is constantly reminding us to keep our focus on ROW--
the rest of the world--and I think especially in an environment
where so many of the challenges to American security and the
safety and security of American citizens are coming not only
from countries now but from transnational challenges.
Whether that is climate change, energy insecurity,
pandemics and disease, food insecurity, all of these issues
ripple across global markets.
I'm glad to hear you were in Egypt because that's a perfect
example of a country that's sort of a Petri dish for all of
these different forces but which were the government is looking
to engage with the United States and is looking for strong
partnership.
Mr. Moskowitz. Yet, every country we went to it was clear
they would rather do business with us than China. It's not even
close, right? It was unequivocal.
But the subtext also was that if we cannot deliver they
just cannot not--they cannot do--they cannot not just do
anything. They got to buy weapons from somewhere. They got to
get loans from somewhere.
And so, you know, we're having this debate through Ukraine
about isolationism. You know, we should spend our money here.
We shouldn't spend it over there.
And how do we get the American people to really understand
that in this battle with China, right, that every time we're
going to pull back or every time we're going to look a
different direction that it's not just bad things are going to
happen. We know that it's going to be China who comes in.
How do we get the American people to understand that when
we're--when we're talking about foreign policy? When that's not
on MSNBC every night, it's not on Fox News every night, it's
not on social media, how do we get them to understand this?
Mr. Pyatt. So, Congressman, I guess the only lesson I would
offer from my own diplomatic career is actually here in our
pockets and it's this.
It's the sense of connectivity that the technology
revolution has brought and I think about, for instance, my own
involvement with India, which goes back to 1992 and what
happens when you have hundreds of millions of people who are
suddenly connected globally.
I'm a technology optimist--I think--and I think the United
States will continue to lead the creation of value in that
technology space.
But we also have to recognize that we--our economy, our
prosperity here at home, is more tied to the rest of the global
system than it has ever been before.
And, again, my portfolio working on energy, energy
transition issues, dramatically illustrates this as the United
States is now the largest gas exporter in the world, as the
United States will remain a critical center of technological
innovation on issues of energy, on issues of energy transition.
Mr. Moskowitz. Thank you, Mr. Chairman. I yield back.
Chairman McCaul. The gentleman yields.
The chair recognizes Mrs. Kim.
Mrs. Kim of California. Thank you, Chairman. I want to
thank all the witnesses for staying with us this long.
You know, as I serve as chairwoman of the Indo-Pacific
Subcommittee it is really important that, you know, we carry on
our priorities not only from the subcommittee but overall
committee to, you know, give our allies the tools and resources
they need so they can counter the Belt and Road Initiative and
other types of economic coercion, and our strategy for
countering the Belt and Road Initiative must also include how
we can bring the full force of the American private sector to
compete with the CCP-owned and affiliated companies.
Pacific Islands, for example, it's very, very essential to
the success of the Belt and Road Initiative, especially given
their strategic importance to the United States and its allies,
and combined with overt political pressure and bribery the CCP
is successfully using the economic leverage over Pacific
Islands to achieve their political goals.
So most notably, you know, the Solomon Islands they joined
BRI in 2019 and severed their ties with Taiwan and last year
they announced a security agreement with PRC that would allow
the PLA to station personnel and assets in the Solomon Islands.
This is very concerning to me.
But, Mr. Herscowitz, what projects is DFC undertaking in
the Pacific Islands and do you coordinate those projects with
Foreign Commercial Service?
Mr. Herscowitz. So I mentioned the project that we're doing
in Papua New Guinea in collaboration with the Australians and
the Japanese, a $50 million guarantee to upgrade to 5G network
there as well.
We have someone who's based in Indo-Pacific who travels
frequently to the Indo-Pacific Islands and I actually speak to
him on a fairly regular basis. Because a lot of the
transactions in these small--in the smaller islands tend to be
small and we're private sector driven so we're always looking
for creative opportunities about how we can make sure that
financing goes where it needs to go.
In a country with a population of 100,000, 200,000 people
there aren't the same large-scale projects that you might find
in other countries and so we're looking at how we can work
potentially with regional development banks to make sure that
small businesses are getting the financing that they need as
well.
Mrs. Kim of California. I want to--I want to continue that
and then I want to ask Mr. Venkataraman can you describe the
FCS engagement in the Pacific Islands and what are the biggest
challenges the American sector faces in engaging in more
commercial activity in the Pacific Islands?
Mr. Venkataraman. Thank you, Congresswoman.
We are very focused on shifting the dynamic in our
relationship with the Pacific Islands and paying much more
attention and bringing American companies to do business in the
Pacific Islands.
As we are in other markets we are out there to make sure
that the Pacific Islands see us as the partner of choice. But
as my colleague said it is a heavy lift. We are engaged right
now--we have staffed--we have added two staff to Fiji and Papua
New Guinea.
We are now in the process of negotiating MOUs to strengthen
our commercial relationship with a number of the Pacific
Islands and we're looking ahead to additional staffing to see
if that would assist the efforts of U.S. companies to get into
those markets.
However, the problem remains, as my colleague mentioned,
the size of those markets being as small as they are. In those
markets even more than in other markets the importance of
derisking mechanisms such as DFC, such as EXIM, cannot be
overStated.
American companies are always eager to do business where
there's opportunity but where these opportunities do not
translate into, you know, ways that make it amenable for them
to do the deals that they want to do we have to find ways to
bridge that gap. And so that's----
Mrs. Kim of California. Can you talk about those, like,
changes or additional tools that you will need for the DFC to
compete against PRC in those projects and in that region?
Mr. Venkataraman. Yes. So, I mean, I'll leave it to my
colleague to amplify, but I think the point is that the DFC
performs such a critical function that our businesses
appreciate to take these environments and these economies
around the world and make them accessible to our businesses by
virtue of the financing that they provide and by virtue of
making those projects bankable and it's a critical role that
DFC plays without which our companies could not engage in most
markets in the world but all the more so in a small market like
the Pacific Island countries.
Mr. Herscowitz. Sorry. So, again, DFC takes a market-driven
approach. So what we're doing is we're evaluating what is the
need in the market and who's willing to invest there.
Now, we want to give it a lot of nudging. We want to work
with Commerce Department and with others and with our embassies
to identify opportunities and we really look hard at any
potential opportunity with frequent travel to the region as
well to try to identify opportunities where we can have that
private sector investment that the countries want and need.
Mrs. Kim of California. Thank you. My time is expired so I
will yield back. Thanks.
Chairman McCaul. The gentlelady yields back.
Let me thank the witnesses for your patience. I know it's
been a very long afternoon with that long vote series. But this
has been very valuable and very important.
You are the counter to the malign influence of China. We
want to work with you and we want to support you and we want to
get that full equity. I will do everything in my power to move
that bill out of this committee.
And so, again, I want to thank the witnesses. Members may
have additional questions in writing. I would ask you to
respond. Members have 5 days to submit statements and questions
for the record.
And without objection, the committee stands adjourned.
[Whereupon, at 6:11 p.m., the committee was adjourned.]
APPENDIX
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
STATEMENT FOR THE RECORD FROM REPRESENTATIVE CONNOLLY
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]