[Senate Hearing 117-631]
[From the U.S. Government Publishing Office]
___
S. Hrg. 117-631
U.S. NATIONAL SECURITY AND ECONOMIC
STATECRAFT: ENSURING U.S. GLOBAL
LEADERSHIP FOR THE 21ST CENTURY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
JULY 27, 2022
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
51-626 WASHINGTON : 2023
COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware RON JOHNSON, Wisconsin
CHRISTOPHER MURPHY, Connecticut MITT ROMNEY, Utah
TIM KAINE, Virginia ROB PORTMAN, Ohio
EDWARD J. MARKEY, Massachusetts RAND PAUL, Kentucky
JEFF MERKLEY, Oregon TODD YOUNG, Indiana
CORY A. BOOKER, New Jersey JOHN BARRASSO, Wyoming
BRIAN SCHATZ, Hawaii TED CRUZ, Texas
CHRIS VAN HOLLEN, Maryland MIKE ROUNDS, South Dakota
BILL HAGERTY, Tennessee
Damian Murphy, Staff Director
Christopher M. Socha, Republican Staff Director
John Dutton, Chief Clerk
(ii)
C O N T E N T S
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Page
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 1
Risch, Hon. James E., U.S. Senator From Idaho.................... 3
Fernandez, Hon. Jose W., Under Secretary of State for Economic
Growth, Energy, and the Environment, U.S. Department of State,
Washington, DC................................................. 5
Prepared Statement........................................... 6
Ebong, Hon. Enoh T., Director, U.S. Trade and Development Agency,
Washington, DC................................................. 11
Prepared Statement........................................... 12
Baukol, Andy, Counselor to the Secretary and Performing the
Duties of the Under Secretary for International Affairs, U.S.
Department of the Treasury, Washington, DC..................... 16
Prepared Statement........................................... 17
Additional Material Submitted for the Record
Responses of Mr. Jose W. Fernandez to Questions Submitted by
Senator Robert Menendez........................................ 41
Responses of Ms. Enoh T. Ebong to Questions Submitted by Senator
Robert Menendez................................................ 44
Responses of Mr. Andy P. Baukol to Questions Submitted by Senator
Robert Menendez................................................ 46
Responses of Mr. Jose W. Fernandez to Questions Submitted by
Senator James E. Risch......................................... 47
Responses of Mr. Andy P. Baukol to Questions Submitted by Senator
James E. Risch................................................. 49
Responses of Mr. Jose W. Fernandez to Questions Submitted by
Senator Jeanne Shaheen......................................... 49
Responses of Ms. Enoh T. Ebong to Questions Submitted by Senator
Jeanne Shaheen................................................. 50
Responses of Mr. Andy P. Baukol to Questions Submitted by Senator
Jeanne Shaheen................................................. 51
Responses of Mr. Jose W. Fernandez to Questions Submitted by
Senator Mitt Romney............................................ 52
Responses of Mr. Jose W. Fernandez to Questions Submitted by
Senator Bill Hagerty........................................... 52
Responses of Mr. Andy P. Baukol to Questions Submitted by Senator
Bill Hagerty................................................... 53
(iii)
U.S. NATIONAL SECURITY AND ECONOMIC
STATECRAFT: ENSURING U.S. GLOBAL
LEADERSHIP FOR THE 21ST CENTURY
----------
WEDNESDAY, JULY 27, 2022
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Robert
Menendez, chairman of the committee, presiding.
Present: Senators Menendez [presiding], Cardin, Shaheen,
Coons, Murphy, Kaine, Booker, Van Hollen, Risch, Rubio,
Portman, and Barrasso.
OPENING STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
The Chairman. This hearing of the Senator Foreign Relations
Committee will come to order. Let me thank Under Secretary of
State for Economic Growth, Fernandez, United States Trade and
Development Agency Director, Ebong, and Acting Under Secretary
of the Treasury for International Affairs, Baukol, for being
here today to discuss an incredibly important topic, one that
has been an increasing focus of mine over the past several
years, how the United States can best use our economic, trade,
and development tools to promote our foreign policy objectives
and improve the lives of Americans and others abroad beyond
traditional government-to-government tools.
In the 21st century, geopolitical power increasingly rests
on geo-economic foundations. With a powerful bully pulpit,
China uses its economic might to spread its preferred
authoritarian governing method around the world and pressure
the developing world to choose between our system of values, of
self-determination, respect for human rights, and openness, or
their system and their values of autocracy, repression, and
censorship.
We must not lose sight of the fact that democratic values
and good governance also include economic transparency and
competitiveness. While the United States is almost always the
security and diplomatic partner of choice for countries around
the world, we are not always their economic partner of choice.
That is often because China's most effective power is their
international and economic toolkit, using their own form of
economic statecraft to punish, coerce, and undermine the
sovereignty of other nations, or because Russia will offer
energy supplies far below market value in exchange for
political support.
Take, for example, the case of Lithuania. After opening a
Taiwanese representative office in Vilnius, Beijing reacted by
immediately downgrading diplomatic relations with Vilnius and
preventing Lithuanian goods from entering China, effectively
creating a trade barrier. They also denied them critical
supplies necessary for the production of their products. This
is economic warfare, and it is a test for the West and the
international community. We must stand with Lithuania.
I look forward to hearing from our witnesses how the
Administration has pushed back against China and others'
economic coercion.
In this new era of strategic competition, it is critical
that the United States Government respond to these challenges.
We have to ensure we are competitive; not just confrontational.
We have to invest in American workers and our own economic
prosperity here at home, and we have to channel and focus our
economic statecraft programs that are fragmented across the
United States Government.
That is why earlier this year, I introduced my Economic
Statecraft for the 21st Century Act. It provides a
comprehensive plan to confront the anti-competitive and
predatory nature of China's international economic policies,
and it will allow us to lead through our values by
strengthening our supply chains with reshoring and near-shoring
strategies, by achieving our energy-related sustainability
goals, by fostering cooperation in multilateral institutions,
and by building global resiliency.
However, this legislation is not meant to be the end of
this economic statecraft initiative. It has to be a start. I
know the ranking member just introduced his own economic
statecraft bill and I look forward to working with him on
further developing this agenda and passing the critical
legislation we need in the coming months and years.
As part of our multilateral strategy, one of the best tools
we have to counter China's predatory economic practices is to
leverage our influence at international financial institutions.
Yesterday, I introduced the International Financial
Institutions Mobilization Act, which uses the United States'
votes and leverage at international financial institutions to
build resiliency and growth. It works to prevent future debt
shocks in emerging markets and developing countries that are
facing increased economic instability, and it includes an
increase of resources in our own hemisphere, at the Inter-
American Development Bank.
In recent years, Latin America and the Caribbean have seen
devastating impacts from COVID and alarming erosion of
democratic governance, rising poverty, and massive force
migration. With so much at stake, it is critical that we expand
the resources available to the Inter-American Development Bank.
That is why I have worked continuously over the last years, 2
years, to advance a capital increase for the IDB, and I welcome
the growing cooperation from the Treasury Department on this
crucial issue.
Let me just, as an aside, I will not name the country, but
one of our hemispheric neighbors, who very much wants to be
aligned with us, but is facing, as many others in the
hemisphere, rising energy costs, almost to the point that it
can create an explosive situation, rising food costs, the
strictures of their IMF obligations, which they have been
meeting, and, at the same time, no help from us, but China is
willing to give them $600 million with virtually no strings
attached, at least no economic strings. Maybe there will be
other strings attached.
In the face of that, if I am governing and taking care of
the people in my country and I am going to have social unrest
because people cannot afford the gas to get to their job or the
food prices cannot be afforded, at the end of the day to
achieve the goal of feeding my family, as much as I want to be
with the United States, I am going to go ahead and probably
make that decision.
We need to come together and think about how we help,
particularly through these international financial
institutions, including the IDB, but also the IMF. We should be
talking to the IMF not about anybody relieving their debt
burden, but certainly about transitioning during a period of
time of pandemic, food prices, and rising energy prices. That
is a toxic, explosive mix.
So we are at an inflection point. From emerging
technologies to securing supply chains, from the threat of
economic coercion to global infrastructure gaps, from the
transition to a zero-carbon economy to development, finance,
and economic leadership of the G20, and the international
financial institutions, American leadership is vital to a
peaceful and prosperous world order.
I look forward to hearing from the witnesses their thoughts
on this legislation, on this agenda. I am happy to hear what
they like, what they do not like, and how our toolkit can be
improved.
With that let me turn to the ranking member for his
remarks.
STATEMENT OF HON. JAMES E. RISCH,
U.S. SENATOR FROM IDAHO
Senator Risch. Thank you very much, Mr. Chairman. Leading,
promoting, and protecting economic freedom should be a major
goal of the United States. The embrace of free market
principles, inclusive economic growth, and trade makes
Americans more prosperous. It is also imperative that we defend
against countries like China and Russia who place commerce at
the service of their political objectives.
I would associate myself with the remarks of the Chairman
that this is an incredibly important subject, particularly in
the face of the fact that we are competing with countries who
do just what I said, and that is use economics to promote their
political objectives. I think the Chairman has underscored
that, and I know he has been very active in this field. That is
one of the reasons I have joined the bill so that we can work
together to craft a bill that hopefully we will all be able to
get on board with and attack this problem, which is a serious,
serious problem.
We, in America, do business differently than autocratic
countries do, and that causes no end to problems, not only for
America, but also for American businessmen.
We face severe economic challenges here at home, and many
of our partners struggle with post-COVID economies or political
instability. Meanwhile, China is capitalizing on these
opportunities to benefit itself, to anti-competitive means, as
outlined by some of the remarks of the Chairman. With this in
mind, legislative and executive branch focus on international
economic policy is absolutely crucial. Soon I will introduce
the Economic and Commercial Opportunities Network Act to help
strengthen that policy, and again, I hope to work with the
Chairman to be able to bring our two bills together to one,
where we can have agreement and move forward with the
objectives that we have in common.
There are several key areas of my bill I would like the
witnesses to explore today. The first is strengthening the
Department of State's economic corps. The private sector is key
to market-based economic growth. However, our economic officers
and their colleagues at other agencies are key to whether our
economic and commercial diplomacy is successful. My bill
includes provisions on promotions, recruitment, and retention,
among other things. I would like to hear directly from all
three witnesses on the health and the state of their workforce,
what types of staffing challenges they face, and ideas for
addressing these challenges.
Next I want to hear about energy engagement. I am concerned
that the Biden administration's immense emphasis on climate
change is coming at the expense of our energy needs and those
of developing nations. Most Indo-Pacific nations still want to
work with the United States on oil and gas, but are finding
their U.S. counterparts are not interested. Similarly, we must
work with our sub-Saharan African partners. Energy
infrastructure in Africa is nascent, at very best, without
large distribution grids required for wind and solar. Africa's
energy needs are significant, and a range of solutions,
including oil and gas, are needed to power the continent and
support economic development.
With Russia's invasion of Ukraine, the President is finally
waking up to the reality that the world will, by necessity,
continue to rely heavily on fossil fuels for some time into the
future, be that short-term, medium-term, or long-term. We do
not know yet.
However, the State Department has not clarified whether it
is able to work on natural gas and other fossil fuels with
partner countries. The Development Finance Corporation's self-
imposed and arbitrary mandate on carbon means it cannot finance
any future natural gas projects. I would like a clear
understanding of what each of your agencies are doing on energy
and what specific guidance and mandates you are operating
under.
Third, I expect the witnesses to lay out how each agency
contributes to pushing back on anti-competitive economic
behavior. My bill includes three new tools to tackle
intellectual property theft, forced technology transfer, and
unfair subsidies. That includes a novel reform to U.S.
antitrust law so United States companies can take action
against foreign, state-owned enterprises engaged in predatory
pricing.
Finally, I am in the process of crafting the bill on
cooperation with U.S. allies and partners on critical and
strategic minerals. The U.S. must have a two-track approach to
critical minerals, increasing domestic production and working
with allies and partners. I want to hear from the witnesses how
we can work with allies and partners to provide secure access
and means of production throughout the critical mineral supply
chain, foster market-based incentives for joint investment, and
ensure robust environmental standards. I also want to hear what
each agency is doing on critical minerals. We continue to get
very, very bleak reports on--my service on the Intelligence
Committee and the Energy and Natural Resources Committee--about
China's monopolies and near-monopolies of minerals critical to
the United States and allies and critical to their industrial
base.
Let me be clear, however. Working with allies and partners
is not a substitute for expanding domestic development and
production of critical minerals. Idaho and several other
Western states have a lot of these critical minerals, but the
U.S. Government blocks companies from extracting and/or milling
these minerals. I remain very concerned by efforts to erode our
domestic mining industry and to rely solely on other countries
for resources that we have here at home. We must explore both
tracks.
Thank you, Mr. Chairman.
The Chairman. Thank you. We will start the testimony. All
of your statements will be fully included in the record,
without objection. We would ask you to summarize them in about
5 minutes or so, so the committee members can have a
conversation with you. We will start off with Secretary
Fernandez.
STATEMENT OF HON. JOSE W. FERNANDEZ, UNDER SECRETARY OF STATE
FOR ECONOMIC GROWTH, ENERGY, AND THE ENVIRONMENT, U.S.
DEPARTMENT OF STATE, WASHINGTON, DC
Mr. Fernandez. Good morning and thank you, Chairman
Menendez, Ranking Member Risch, and members of this committee
for the opportunity to appear before you this morning.
Chairman Menendez, Ranking Member Risch, I appreciate the
interest in the economic work that you have discussed in the
State Department. It is my pleasure to be here with my
colleagues, Acting Under Secretary Andy Baukol and Director of
the USTDA Enoh Ebong. State works closely with our interagency
colleagues to build a prosperous and secure global economy that
benefits American workers, American families, and American
businesses.
The economic work of the State Department is a vital part
of rejuvenating rules-based global economic institutions and
the U.S. alliances and partnerships of today and those to come,
whether they be in Europe, the Indo-Pacific, the Middle East
and Africa, or in our own hemisphere.
As Under Secretary for Economic Growth, Energy, and the
Environment, I oversee a diverse team responsible for
developing international policies and cultivating partnerships
to promote economic growth and prosperity and also address
challenges in a transparent, rules-based, and sustainable
manner. This includes teams across my old bureau at the State
Department, the Bureau of Economic and Business Affairs, the
Bureau of Energy Resources, and the Bureau of Oceans,
International Environmental and Scientific Affairs, as well as
a number of offices, including the Office of Chief Economist,
the Office of Global Food Security, the Office of Global
Partnerships, and the Office of Science and Technology Adviser.
What makes the State Department's contribution to this goal
unique is our team of ambassadors and more than 1,500 officers,
located in almost every country in the world, officers who work
with host governments to advance the Administration's economic
statecraft agenda across a wide array of issues from supply
chains to artificial intelligence, while leveraging U.S. global
leadership to strengthen our domestic economy.
These efforts are many. They include promoting commercial
and investment opportunities for U.S. companies and workers,
intensifying our efforts on energy and climate security and
environmental sustainability, ensuring sustainable and reliable
supply chains, improving health security and resilience,
enhancing food security, expanding access to secure
communication networks, and fostering innovation through robust
science, entrepreneurship, and technology policies.
Recognizing the important role of commercial diplomacy and
the role that it plays in promoting U.S. prosperity, in 2019,
Congress passed the Championing American Business Through
Diplomacy Act in which the State Department has been involved,
and we welcomed the opportunity to coordinate this whole-of-
government effort, and we will be releasing the first CABDA
report to Congress later this year. The CABDA report, beyond
creating an inventory of interagency commercial and economic
advocacy efforts at posts, will also establish a critical
baseline on U.S. companies' priorities and challenges, and how
we are working to support them.
Since my confirmation last August, almost a year ago, much
of my work, and it is detailed in my longer written statement,
has centered around combating Russia's brutal aggression
against Ukraine and its challenge to the international rules-
based order, and also countering the People's Republic of
China's unfair economic practices, including economic coercion.
In addition to these pressing issues my office is central to
coordinating the international COVID-19 response and building
partnerships for resilient clean energy, semiconductor,
critical mineral, and medical/pharma supply chains.
I look forward to discussing these and other issues related
to the economic work of the State Department in greater detail
over the course of this morning's hearing.
Mr. Chairman and Ranking Member Risch, let me conclude by
saying that I look forward to working with both of you, as well
as with the members of this committee in the years to come on
the initiatives I have described today, that we will discuss
this morning, and the challenges and opportunities that we are
sure to face in the future. I look forward to your questions.
Thank you.
[The prepared statement of Mr. Fernandez follows:]
Prepared Statement of Mr. Jose W. Fernandez
Thank you, Chairman Menendez, Ranking Member Risch, and Members of
the committee for the opportunity to appear before you today. Chairman
Menendez, Ranking Member Risch, I appreciate your interest in the
economic work at the State Department. It is my pleasure to be here
with my colleagues, acting Treasury Under Secretary Andy Baukol and the
Director of the U.S. Trade & Development Agency Enoh Ebong. State works
closely with our interagency colleagues to build a prosperous and
secure global economy that benefits American workers, families, and
businesses.
The economic work of the Department of State is a vital part of
rejuvenating rules-based global economic institutions and the U.S.
alliances and partnerships of today and those to come. As Under
Secretary for Economic Growth, Energy, and the Environment, I oversee a
diverse team responsible for developing international policies and
cultivating partnerships to promote economic growth and prosperity and
address challenges in a transparent, rules-based, and sustainable
manner. This includes teams across the Bureau of Economic and Business
Affairs, the Bureau of Energy Resources, and the Bureau of Oceans,
International Environmental and Scientific Affairs, as well as the
Office of Chief Economist, Office of Global Food Security, Office of
Global Partnerships, and the Office of Science and Technology Adviser.
What makes the State Department's contribution to this goal unique
is our team of ambassadors and more than 1,500 economic officers,
located in almost every country in the world, who work with host
governments to advance the Administration's economic statecraft agenda
across an array of issues from supply chains to artificial
intelligence, leveraging U.S. global leadership to strengthen our
domestic economy. These efforts include promoting commercial and
investment opportunities for U.S. companies and workers, intensifying
our efforts on energy and climate security and environmental
sustainability, ensuring sustainable and reliable supply chains,
enhancing health security and resilience, expanding access to secure
communication networks, advancing protection for U.S. intellectual
property and innovation, and fostering innovation through robust
science, entrepreneurship, and technology policies.
Recognizing the important role commercial diplomacy plays in
promoting U.S. prosperity, Congress passed the Championing American
Business Through Diplomacy Act (CABDA) in 2019. CABDA gives the
Secretary of State primary responsibility for interagency coordination
in support of U.S. economic and business interests abroad. The State
Department has welcomed the opportunity to coordinate this whole-of-
government effort and will be releasing the inaugural CABDA Report to
Congress later this year, highlighting these efforts. The CABDA report,
beyond creating an inventory of interagency commercial and economic
advocacy efforts at posts, also establishes a critical baseline on U.S.
companies' priorities and challenges, and how we are working to support
them.
Since my confirmation in August 2021, much of my work has centered
around combating Russia's outright aggression against Ukraine and its
challenge to the international rules-based order, countering the
People's Republic of China's (PRC) unfair economic practices, including
economic coercion, coordinating the international COVID-19 response,
and building partnerships for resilient clean energy, semiconductor,
critical mineral, and medical/pharma supply chains.
responding to russia's further invasion of ukraine
Russia's unprovoked aggression in Ukraine and the humanitarian and
economic consequences of Russia's actions have not only severely hurt
Ukraine but also impacted the global community. The Department's
economic team, alongside the Department of Treasury and others, has
worked round the clock on measures to hold Russia and Putin
accountable. Our sanctions have hit the Russian economy hard--limiting
the Russian military's resources and sowing dissatisfaction among those
who would prop up the regime. The U.S. Government has sanctioned over
1,000 individuals and entities under our Russia sanctions programs, and
we have frozen or blocked billions in assets. My team continues to work
closely with Allies and partners to coordinate sanctions measures and
amplify their impact. My team is also supporting efforts to assess and
respond to the environmental impact of damage caused by the war, as
well as to coordinate with other global leaders to deliver much-needed
medical supplies into Ukraine.
Food security, and the impending crisis exacerbated by Russia's war
of choice on Ukraine and its impact on the production and
transportation of key commodities, is also at the forefront of our work
at the Department. Of course, these issues not only threaten vulnerable
populations worldwide, but they also impact American families, as food
prices increase globally. My team is working diligently to help
Ukrainian officials reopen seaports--and find additional, alternate
export routes by rail, road, and barge--so shipping of agricultural
products can continue.
We are also leading discussions with our allies and partners on the
need for diversified and sustainable international energy markets. In
the near term, we are committed to helping our European allies find
ways to improve energy resilience and support their plan to end their
dependence on Russian energy.
The United States continues to work, in concert with our allies and
partners, to enhance Europe's energy security. One of Putin's biggest
miscalculations in undertaking his war of aggression against Ukraine
was underestimating how it would bring our alliances closer. Since
September 2021--even before Putin initiated his war--the United States
engaged major natural gas producers around the globe to understand
their capacity and willingness to surge natural gas output and allocate
these volumes to European buyers. This work has produced tangible
successes, including allies like Japan and the Republic of Korea
agreeing to redirect liquefied natural gas (LNG) cargoes to Europe. We
continue to support efforts that diversify and increase LNG supplies to
Europe, particularly as Russia cuts off and decreases natural gas
supplies to EU member states.
While we continue to support efforts to diversify LNG supplies to
Europe, reducing demand for fossil fuels and advancing the clean energy
transition remain key short- and long-term deliverables to eliminate
Europe's energy dependencies on Russia. We are collaborating with clean
and renewable energy technology providers to help reduce overall
natural gas demand in Europe, including through deploying technologies
such as smart thermostats, efficient grid technologies, and energy
efficiency and productivity improvements. We are also collaborating to
accelerate deployment of clean and renewable energy solutions, such as
offshore wind, nuclear energy, and clean hydrogen.
Moreover, the Department is working to address the global energy
crisis Putin's war has caused. With the Department of Energy in March
and again in April we marshalled support for the two largest
International Energy Agency collective oil releases in history.
Together with the United States' commitment, these releases added a
combined 240 million barrels to global supply.These actions show the
President's unwavering focus on doing everything in his power to help
American families who are paying more out of pocket for gasoline due to
Putin's war.
All of this work has helped the United States and our allies assert
a comprehensive and unified Russia policy that exacts maximum cost to
Putin and his regime while mitigating, to the extent possible,
unintentional impacts on civilian populations worldwide.
countering the prc's economic coercion
Additionally, as Secretary Blinken highlighted in a major policy
address in May, Russia is not our only geopolitical economic challenge.
As Members of this committee know well, the PRC is increasingly
advancing economic policies and practices fundamentally at odds with
the market-oriented global system.
Additionally, the PRC uses its economic position to intimidate and
coerce governments throughout the world in order to advance Beijing's
strategic interests, or to punish countries for pursuing legitimate
policies that the PRC deems harmful to PRC interests. The PRC has
increasingly employed intimidation tactics and pressure campaigns
against a number of U.S. partners, including Japan, the Republic of
Korea, Norway, Australia, and, most recently, Lithuania.
As you are aware, last year, after Lithuania decided to allow
Taiwan to open an unofficial representative office in Vilnius, with a
name the PRC deemed unacceptable, Beijing began targeting Lithuania
with a range of coercive and punitive economic measures which we
believe were aimed at forcing Vilnius to change the name of the office,
or, if Vilnius refused, to impose enough economic damage on Lithuania
to deter other nations from following suit. State worked with the
interagency to develop a plan to address the immediate impacts of PRC
actions against Lithuania and then consulted with the European Union,
Taiwan, and other allies and partners on ways to support Lithuania and
strategize on ways to prevent and respond to future cases of economic
coercion. As the PRC ratcheted up diplomatic and economic pressure, we
countered with a series of actions to demonstrate our support for
Lithuania and encouraged others to do the same.
To name just one example: After the PRC cancelled a 300 million
euro export credit facility to Lithuania (requiring Lithuanian
importers to pay in advance for PRC imports), we worked with the
Export-Import Bank (EXIM) to execute a Memorandum of Understanding
(MOU) with the Lithuanian Government to enhance economic cooperation by
deepening engagement on opportunities for U.S. exporters and Lithuanian
buyers. The MOU envisions making up to $600 million of financing
authority available to facilitate U.S. exports to Lithuania. In short,
the EXIM MOU was a tangible demonstration of U.S. support to Lithuania
as it stood up to the PRC.
We are also engaging allies and partners to explore options for
multilateral action on the broader issue of PRC economic coercion. The
State Department joined USTR in welcoming the EU's decision to bring a
WTO case against the PRC (for which the United States requested to join
the consultations, along with Japan, the UK, Canada, Australia, and
Taiwan). We would like to see more multilateral action of this nature
and are exploring options across a range of fora. We are also working
bilaterally with our allies and partners to help Lithuania replace
markets and supply chains cut off by the PRC, especially Taiwan, which
earlier this year agreed to provide Lithuania with a $1 billion export
credit facility.
Mr. Chairman, as you have mentioned, Lithuania was a test case to
combat the PRC's economic coercion, and I believe the United States and
our allies and partners rose to the occasion, allowing Vilnius to stand
strong, but we need to remain supportive of Lithuania and vigilant of
similar challenges from Beijing in the future.
working with allies and partners
As we've seen with Russia and the PRC, strong global partnerships
are force multipliers in advancing U.S. foreign policy priorities. The
Department of State is actively working on harmonizing efforts with our
sister agencies as well as foreign partners in formal settings such as
the U.S.-E.U. Trade and Technology Council (TTC), the U.S.-Japan
Economic Policy Consultative Committee (EPCC), and the India, Israel,
United Arab Emirates and United States initiative, or ``I2U2'', all
established in just the last year.
Since the inaugural U.S.-EU Trade and Technology Council (TTC)
ministerial in September 2021, the U.S. and EU, along with stakeholders
in business and labor, have worked together to demonstrate how
democratic governance approaches can deliver for our citizens and the
world. Under the TTC umbrella, 10 interagency, bilateral working groups
are developing a set of concrete deliverables in these and other areas
for our next ministerial meeting later this year.
And in many ways this partnership has already delivered in terms of
our Transatlantic approach to Russian and Belarusian export controls
and countering PRC coercion of Lithuania. In May 2022, the TTC
ministers reviewed work to address supply chain vulnerabilities,
including in the semiconductor industry, investment screening, export
controls, and coordination of standards for emerging technologies such
as artificial intelligence. As we do so, we are also mindful to avoid
creating unnecessary barriers to trade in the vibrant transatlantic
economy.
Secretary Blinken asked me last fall to lead the new Israel-India-
United Arab Emirates-United States (I2U2) grouping of like-minded
partners. We were very pleased the President elevated I2U2 to the heads
of state level, launching the initiative with his I2U2 counterparts
during his visit to Israel on July 14. I2U2 will deepen Israel's
economic integration within the Middle East and beyond to Asia and will
serve as a model for promoting trusted regional partnerships that can
collaboratively create commercial opportunities and good paying jobs in
countries that share our commitment to the region's peace, prosperity,
and stability. We are collaborating closely with interagency partners
on this initiative, including with the U.S. Trade and Development
Agency (USTDA), Commerce, EXIM, USDA, and others.
supply chains
Supply chains are a major focus of these and other regional and
bilateral initiatives, where we work with our partners and allies to
relieve supply chain bottlenecks and disruptions that add to
inflationary pressures. Even before the President issued his February
2021 executive order to secure U.S. supply chains in sectors critical
to our national and economic security, the State Department had a long
history of working closely with partners and allies to increase supply
chain resiliency against multiple vulnerabilities, and we regularly
benefit from reporting from our posts around the world on relevant
trends and host country views.
Our supply chain work has centered on promoting greater
transparency (better information sharing), diversification (promoting
investment and co-investment in critical supply chains), security
(improving cyber security and identifying and addressing common
threats), and sustainability (adhering to strong labor and
environmental standards and enforcement). In this effort, the
Department of State has ensured the participation of business, labor,
civil society, and academics. We also ensured the impacts of supply
chain disruptions on vulnerable populations are front and center for
the United States and our allies.
At the Leaders' Summit on Supply Chain Resilience in Rome in
October 2021, President Biden launched a global cooperative effort to
drive greater transparency, diversification, security, and
sustainability. Secretary Blinken and Commerce Secretary Raimondo
furthered these goals through a multi-stakeholder Ministerial Forum on
Supply Chain Resilience on July 19-20. The Department of State has
worked with our sister agencies to also advance these principles
through regional and sectoral engagement with key partners and allies,
including the U.S.-EU Trade and Technology Council, the Quad Critical
and Emerging Technologies Working Group, the Indo-Pacific Economic
Framework (IPEF), the Americas Partnership for Economic Prosperity
(APEP), the COVID-19 Pandemic Prioritized Global Action Plan for
Enhanced Engagement (GAP), the recently announced Minerals Security
Partnership, and a wide range of bilateral engagements. We are also
promoting these supply chain principles through our bilateral
dialogues, including with Japan, the Republic of Korea, and Taiwan.
Ensuring resilient supply chains also includes nearshoring in the
Western Hemisphere to minimize future disruptions. The supply chain
disruptions due to the pandemic have shown us that it is critical for
the private sector to diversify its supply chains, to the greatest
degree possible, away from single-sourcing and to create enhanced
resilience. Where appropriate, we will work with sister agencies, the
private sector and partners to coordinate efforts and potentially
leverage financial and development tools, including support for efforts
to move supply chains away from adversarial nations or locations with
unacceptable environmental or labor standards. Our efforts must ensure
that our partners uphold high environmental and labor standards and
have strong trade enforcement policies. We also seek to support
capacity building and provide technical assistance when needed to
improve environmental and labor standards and enforcement of them.
food security
The Department is also working to address acute and growing global
food insecurity and, as Secretary Blinken noted during the during the
May 18 Roadmap for Global Food Security--Call to action ministerial at
the United Nations, the drivers of which are climate change, COVID, and
now conflict caused by Russia's aggression. As part of our efforts, we
created a global roadmap that commits countries to take swift, concrete
steps to get food to people around the world who need it now, and to
build greater resilience to future shocks. Ninety-nine countries and
counting have signed on to that roadmap.
Our focus now is to turn those commitments through the roadmap and
other initiatives into concrete, immediate action, including through
the seven actions laid out by Secretary Blinken at the Roadmap for
Global Food Security ministerial--namely: (i) pressing countries to
step up with new substantial contributions to meet urgent humanitarian
needs; (ii) working with the United Nations to end Russia's blocking of
Ukrainian food exports through the Black Sea; (iii) closing the global
fertilizer gap by both producing more fertilizer and using it more
efficiently; (iv) urging governments not to impose restrictions on the
export of food and fertilizer; (v) increasing agricultural capacity and
resilience, including through our own Feed the Future initiative; (vi)
working with international financial institutions to cushion food
shocks; and (vii) promoting greater information sharing and
coordination, including through the Global Alliance for Food Security.
I would also like to close by highlighting one of the initiatives
that I have led since beginning my tenure at the State Department, the
Minerals Security Partnership, or MSP. It is an example of the work we
have been doing to advance many of the priorities I have outlined in my
statement today, including supply chains, collaborating with allies and
partners, and the clean energy agenda. As you know, many of the clean
energy technologies being deployed today, and those under development,
require a wide range of critical minerals and metals on a rapidly
accelerating pace. The world will need tremendous amounts of minerals
like cobalt and lithium, nickel, and rare earth elements, essential for
manufacturing photovoltaic solar panels and electric vehicle batteries,
let alone more copper to help further electrify our economies and
reduce the need for higher emitting sources of energy.
After hearing from our embassies and consulates overseas about the
need for a cohesive policy on global critical mineral supply chains, we
began to develop a global approach with our partners and allies on a
pathway towards meaningful progress in expanding access to critical
minerals extraction and production. That is why on June 14, the United
States and other partners moved forward with establishing the Minerals
Security Partnership, or MSP, that will seek to improve cooperation on
diversifying critical mineral supply chains and speed up the
production, processing, and recycling of critical minerals in a way
that helps countries realize the full economic development benefit of
their geological endowments. The MSP will focus on increasing public
and private investment, improving transparency, and promoting high
environmental, social, and governance (ESG) standards throughout
critical mineral supply chains. We want a race to the top, not the
other way around.
This is something that will be at the heart of the Administration's
work on critical minerals, and I want to thank you Mr. Chairman for
your leadership on this issue, and I pledge that I will continue to
work with you and this Committee to further develop the tools and
mechanisms needed to amplify the MSP and the work we are doing with our
partners on securing global critical mineral supply chains.
Mr. Chairman, Ranking Member Risch, let me conclude by saying that
I look forward to working with you both as well as the Members of this
committee in the years to come on the initiatives I have described
today, and the challenges and opportunities we are sure to face in the
years to come. I look forward to your questions.
The Chairman. Thank you. State Department has not taught
you how to use all your time. It is very amazing. I appreciate
it. A full minute almost back.
Ms. Ebong.
STATEMENT OF HON. ENOH T. EBONG, DIRECTOR, U.S. TRADE AND
DEVELOPMENT AGENCY, WASHINGTON, DC
Ms. Ebong. Thank you, Chairman Menendez, Ranking Member
Risch, and distinguished members of the committee. Thank you
for inviting me to testify today on the U.S. Trade and
Development Agency's role in the U.S. Government's economic
statecraft.
USTDA's mission is to support the development of high-
quality infrastructure in emerging economies while creating
U.S. export opportunities to the projects that we support.
Emerging economies desire partnership with the United States
because we offer positive alternatives for their development.
In fact, USTDA offers a stark alternative to China's predatory
practices. We build partnerships based on mutual benefit and
trust, and we utilize our project preparation and partnership-
building tools to advance the shared priorities of our overseas
partners and U.S. industry.
USTDA engages in the most strategically important stage of
the infrastructure development cycle, when the technical and
design options for projects are being defined. U.S. companies
perform all USTDA-funded activities. This is critical to
American competitiveness. If we do not define the requirements
for these projects, then our competitors certainly will.
USTDA's tools are essential for structuring bankable
infrastructure projects for international financial
institutions. Our engagement with them increases the likelihood
of implementation for projects into which U.S. goods and
services may be exported.
Around the world, USTDA coordinates with like-minded
partners to present positive economic development alternatives
to those offered by China. For example, our partnership with
Australia's Department of Foreign Affairs and Trade has
expanded our portfolio across the Pacific Islands, including in
Papua New Guinea, the Solomon Islands, and Tonga.
Of course, one of the best economic statecraft tools we
have is the U.S. private sector, whose high-quality solutions
are widely sought, but often come at a higher up-front price.
When international tender is used, lowest price is the primary
deciding factor for award, countries like China benefit. This
practice has long plagued emerging economies, leading to failed
infrastructure projects and harmful development outcomes.
In response, USTDA established the Global Procurement
Initiative, or GPI, to train public officials on integrating
lifecycle cost analysis and best value determinations into
their procurement decisions. GPI programs are increasingly
sought by countries that want to acquire sustainable, high-
quality infrastructure. Under the GPI, we are changing the
rules of the game and promoting transparency.
In the course of our work, USTDA sees first-hand the
increasingly fierce competition from China. In recent years, we
have leveraged our tools, including training grants, to help
level the playing field for U.S. companies. For example,
China's HMN Technologies, formerly Huawei Marine Networks,
recently made an offer to build a new sub-sea fiberoptic cable
system, that will carry large volumes of data from Singapore to
France. Their main competition was New Jersey-based SubCom,
LLC. USTDA offered training assistance to the five countries
involved in the selection process on the condition that they
select SubCom. Their offer helped the company win a $600
million contract. Their technology will be manufactured in New
Hampshire and provide a trusted new route for high-speed
connectivity for countries in Africa, Asia, and Europe.
USTDA's project preparation and partnership-building
activities are critical to our long-term competitiveness in the
world's most strategically important markets. As a government,
we can optimize our economic statecraft through a holistic
approach, where the value of our assistance is not solely
measured by investment dollars. We must level the playing field
so that U.S. companies can compete, we must partner with like-
minded allies, and together we must lead the development of
infrastructure for the benefit of billions of people around the
world. This is how we can win.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Ebong follows:]
Prepared Statement of Ms. Enoh T. Ebong
Chairman Menendez, Ranking Member Risch, and distinguished Members
of the Committee: Thank you for inviting me to testify today on the
U.S. Trade and Development Agency's (USTDA) role in the U.S.
Government's economic statecraft.
ustda's unique dual mission
USTDA is the only foreign assistance agency that has a mandate to
support U.S. jobs through exports. Our role is to support the
development of sustainable, high-quality infrastructure in developing
and middle-income economies, while creating U.S. export opportunities
related to the infrastructure projects that we support. This unique
dual mission places us at the leading edge of U.S. economic statecraft
in emerging economies around the world.
ustda's strategic toolkit
USTDA engages at the most critical and strategically important
stage of the infrastructure development cycle. We provide grant-based
funding to overseas project sponsors for project preparation activities
such as feasibility studies, technical assistance, and pilot projects.
U.S. companies perform these activities, which include the definition
of technical and design options for infrastructure projects in sectors
including clean energy, information and communications technology,
transportation, healthcare infrastructure, and agribusiness. This is
critical to American competitiveness; if we do not define the
requirements for these projects, then our competitors certainly will.
USTDA's tools are essential for structuring infrastructure projects
that can be financed, implemented, and sustained. Our work helps to
build a pipeline of bankable infrastructure activities for U.S.
Government agencies, such as the Export-Import Bank of the United
States (EXIM) and U.S. International Development Finance Corporation,
and trusted international financial institutions including multilateral
and regional development banks, and private banks. These partners
increase the likelihood of implementation of infrastructure projects--
both public and private sector in nature--into which U.S. goods and
services may be exported.
In addition to project preparation assistance, USTDA's toolkit also
includes partnership-building activities that connect overseas project
sponsors to U.S. financiers, suppliers, and regulatory and policy
experts, with the goal of sharing knowledge, building relationships,
and finding solutions for the challenges that our partners face.
This strategic toolkit allows USTDA to uniquely contribute to U.S.
Government priorities such as the Partnership for Global Infrastructure
and Investment (PGII), which G-7 leaders launched in June. PGII will
deliver game-changing projects to close the infrastructure gap in
developing countries, strengthen the global economy and supply chains,
and advance U.S. national security. The initiative will mobilize
hundreds of billions of dollars and deliver quality, sustainable
infrastructure that will make a difference in people's lives around the
world while creating new opportunities for American workers and
businesses. Many of the projects that USTDA has funded in the past year
and will fund moving forward align with PGII's overall objectives.
measurable results
USTDA's work has produced excellent results. In addition to
developing high-quality, sustainable infrastructure in emerging
economies, the Agency currently generates an average of $117 in U.S.
exports for every $1 invested in its programming. USTDA has supported
more than $76 billion in U.S. exports since our founding in 1992. These
exports have benefited U.S. companies across the United States,
including small businesses from more than 370 communities.
USTDA has generated these results with a modest budget, including a
budget of $79.5 million in fiscal year 2022. The President's Fiscal
Year (FY) 2023 Budget Request for USTDA of $98 million, which
represents a $18.5 million increase from FY 2022, will allow the Agency
to build upon these proven results and track record of successfully
supporting U.S. jobs and fostering economic growth in its partner
countries.
emerging economies want u.s. partnership
As the U.S. Government's overseas project preparation agency, USTDA
sees firsthand the increasingly fierce competition for strategically
important infrastructure projects from government-backed firms. For
example, the People's Republic of China (PRC) often heavily subsidized
and opaque financing practices pave the way for PRC-associated
companies to prepare and develop infrastructure projects, foreclosing
export opportunities for U.S. businesses and harming American
competitiveness in global infrastructure development.
U.S. exporters are increasingly requesting USTDA intervention to
compete in markets where they face unfair competitive practices. At the
same time, emerging economies desire partnership with the United States
because we offer positive alternatives for their economic development,
as well as access to a private sector whose innovation and creativity
are second to none.
USTDA offers a stark alternative to China and others predatory
development practices. The premise of our program is partnerships that
are based on trust, mutual benefit, and collective prosperity. Our
approach is effective because it is based on the shared priorities of
our overseas partners and U.S. industry. Moreover, USTDA is able to
advance these shared priorities because of its unique set of project
preparation and partnership-building tools, as described in the
following examples.
training grants: countering prc competition
Subsea fiber optic cables are an essential component of the world's
telecommunications infrastructure. In recent years, USTDA has leveraged
tools including the Agency's training grants to help ensure these new
cable systems are built with U.S. technology. One of the most
significant cable systems now under development is the Southeast Asia-
Middle East-Western Europe 6 (SMW6) subsea fiber optic cable system,
which will link Singapore to France over a distance that exceeds 10,000
miles. The scale and importance of this project drew the attention of
global technology providers and the support of their governments,
including China's HMN Technologies Co., Ltd. (formerly Huawei Marine
Networks Co., Ltd.).
In the face of this competition, USTDA helped New Jersey-based
SubCom, LLC, win this $600 million contract by offering specifically
designed training assistance to five of the countries involved in the
selection process. Our offer was conditioned on their selection of
SubCom's technology, which is manufactured in New Hampshire. Thanks in
part to a whole-of-government effort, including support at the tender
stage from EXIM, SubCom won the contract and will be the trusted vendor
on a project that will transmit large volumes of data across almost
half of the world.
reverse trade missions: introducing overseas partners to u.s. solutions
Reverse trade missions (RTMs) are another strategic component of
USTDA's toolkit. RTMs bring overseas decision-makers to the United
States to introduce them to the design, manufacture, and operation of
U.S. goods and services. These RTMs build and deepen long-term
commercial partnerships between foreign buyers and American exporters,
while showcasing the technological edge and Made-in-the-USA quality and
reliability that U.S. companies offer. RTMs are targeted toward
specific opportunities and are timed for the critical point when
foreign procurements are imminent or being structured.
In South America, USTDA organized an RTM to introduce Chilean and
Ecuadorian telecommunications operators to U.S.-centric solutions for a
subsea fiber optic cable to connect South America to Asia. USTDA's
engagement was in direct response to a proposal from China's Huawei for
a transpacific cable that would have routed all of its cable traffic
through China. USTDA's RTM engaged Chile on the routing, cybersecurity,
and technology implications of pursuing a China-focused approach. The
RTM also addressed the policy, regulatory, and financial considerations
for implementing projects of this nature. By familiarizing the
telecommunications officials with U.S. subsea and land-based fiber
optic cable technologies and related infrastructure solutions, USTDA's
efforts, and engagement by U.S. industry, helped in re-designing the
cable routing through Australia.
partnering to help u.s. small businesses compete against china
USTDA's tools are also effective at helping U.S. small businesses
compete and win in emerging economies overseas. Under the U.S.
Government's Power Africa initiative, USTDA was part of a whole-of-
government effort to help Illinois-based small business Weldy-Lamont
Associates win a major rural electrification project in Senegal against
a PRC-led consortium.
USTDA funded an RTM to the United States to introduce Senegalese
power officials to U.S. solutions and offered specialized training
assistance if they selected Weldy-Lamont for their project. USAID
initiated the U.S. Government's support by referring Weldy-Lamont to
USTDA. The U.S. Departments of Commerce and State strongly advocated on
behalf of the company to the Senegalese Government. When Weldy-Lamont
was ultimately selected, EXIM approved $97.7 million in financing for
the project, which is supporting approximately 500 U.S. jobs in nine
U.S. states. This is a great example of how USTDA works with its
interagency partners to support U.S. companies facing steep competition
overseas.
promoting trusted regional partnerships
USTDA also contributes to the development of trusted regional
partnerships that serve our government's broader economic statecraft
goals. This includes advancing the U.S. Department of State's work to
harmonize U.S. Government efforts on priorities such as the India,
Israel, United Arab Emirates and United States initiative, or ``I2U2.''
During the I2U2 leaders meeting held earlier this month, President
Biden highlighted a USTDA-funded feasibility study that will advance a
$330 million hybrid renewable energy project in India's Gujarat State
consisting of 300 megawatts (MW) of wind and solar capacity
complemented by a battery energy storage system. The I2U2 group will
work together to promote business and investment opportunities related
to the project, which will contribute to India's goal of achieving 500
gigawatts of non-fossil fuel capacity by 2030.
Such projects have the potential to demonstrate the value of
partnership with the United States and its allies on economic
development solutions that are innovative, creative, and built on a
foundation of trust and collective prosperity.
USTDA coordinates with like-minded partners to present positive
economic development alternatives to those offered by China. In the
Indo-Pacific region, our partnership with Australia's Department of
Foreign Affairs & Trade has built USTDA's Pacific Islands portfolio to
include U.S. private sector-led studies that support the digital
transformation of the Central Bank of Solomon Islands, strengthen
electricity access for Papua New Guinea's 9 million citizens, and
increase renewable power generation in Tonga.
In partnership with the U.S. private sector and our allies, USTDA
is helping these island countries define the technical and financial
requirements for high-quality infrastructure that will last a
generation and contribute to their long-term economic resilience.
partnering on quality infrastructure
One of the best economic statecraft tools is the U.S. private
sector itself. Their high-quality solutions are sought by USTDA's
overseas partners, but often come at a higher up-front price. This is
problematic when international tenders use ``lowest price'' as the
primary deciding factor for award. In our experience, this practice has
long plagued emerging economies, leading to failed infrastructure
projects and harmful development outcomes.
To address this issue, USTDA established the Global Procurement
Initiative, or ``GPI,'' to train public officials on practices and
policies that integrate life-cycle cost analysis and best-value
determinations into their procurement decisions.
This initiative is popular with our partners. In fact, USTDA has
partnered with Japan's Ministry of Economy, Trade and Industry (METI)
to strengthen procurement capacities in the Indo-Pacific region. To
date, USTDA and METI have collaborated on a number of joint
procurement-related training activities, including clean energy in
Indonesia and transportation in Vietnam.
The GPI now has 15 partner countries, and its programs are
increasingly being requested by countries that want to move beyond low-
cost, low-quality solutions. The GPI is a highly innovative tool of
economic statecraft that is helping our partners acquire high-quality,
sustainable infrastructure with overall savings to their government.
global economic statecraft
Initiatives such as the GPI demonstrate USTDA's global reach and
ability to creatively tailor its project preparation and partnership-
building toolkit to the needs of emerging economies. This programmatic
flexibility and nimbleness allow the Agency to contribute to U.S.
economic statecraft in many of the fastest-growing and strategically
important countries in the Indo-Pacific; Latin America and the
Caribbean; Middle East, North Africa, Europe, and Eurasia; and sub-
Saharan Africa. Many of USTDA's activities have important national
security implications for the United States and its overseas partners.
For example, USTDA is tackling the climate crisis at home and
abroad through initiatives such our Global Partnership for Climate-
Smart Infrastructure. Just over a year since its launch, our initiative
has already funded more than two dozen project preparation and
partnership-building activities in the clean energy and transportation
sectors that are designed to help unlock more than $50 billion in
climate finance and support more than $12 billion in U.S. exports.
USTDA's investments in climate action have spurred projects of
global significance. In Morocco, a USTDA-funded study led to the
development of the $877 million third phase of the world's largest
concentrated solar power plant, the 510 MW Noor/Ouarzazate Solar Power
Station, which became operational in December 2021. This plant is
reducing carbon emissions by an estimated 760,000 tons per year while
enhancing regional energy security. A U.S. company supplied cooling
systems to the project.
In Eastern Europe, USTDA is building on its legacy of promoting
energy security through project preparation. In Lithuania, a USTDA-
funded study led to the development of the Klaipeda liquefied natural
gas (LNG) import terminal, which began operations in 2014 and helped
secure the country's energy independence from Russia. This investment
is facilitating a significant volume of U.S. LNG exports to Lithuania,
which has become a regional LNG hub. The country is now supplying gas
to Estonia and Latvia, and recently opened a new pipeline connection to
Poland, enabling the countries to share gas. USTDA's investment in the
Klaipeda LNG import terminal was a mere $826,000, whereas the return on
investment to European and American national security interests is
incalculable.
USTDA is currently working with our U.S. industry and Eastern
European partners to advance the region's energy security using
innovative clean U.S. technology. In particular, USTDA is laying the
groundwork for the deployment of U.S. small modular reactors (SMR) in
Romania, where a USTDA-funded siting study and technology assessment
led to Romania's selection of Oregon-based NuScale Power, LLC, to build
an SMR plant on the site of a shuttered coal-fired power plant. This
would be the first deployment of U.S. SMR technology to Europe.
USTDA is also working with NuScale in Ukraine, where the Agency is
funding a licensing gap analysis to create the appropriate regulatory
environment to support the future deployment of U.S. SMR technology.
conclusion
USTDA's project preparation and partnership-building activities are
critical to U.S. economic statecraft in the 21st century and to our
long-term competitiveness in the world's fastest-growing and most
strategically important markets. As such, USTDA will continue its
steadfast support of U.S. industry interests while advancing the
sustainable infrastructure development priorities of our overseas
partners.
The Chairman. Thank you.
Mr. Baukol.
STATEMENT OF ANDY BAUKOL, COUNSELOR TO THE SECRETARY AND
PERFORMING THE DUTIES OF THE UNDER SECRETARY FOR INTERNATIONAL
AFFAIRS, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC
Mr. Baukol. Thank you, Chairman. Thank you, Ranking Member.
Thank you other members of the committee for the opportunity to
discuss Treasury's international economic tools alongside my
colleagues from the State Department and USTDA.
Let me state at the outset that the Administration stands
firmly with the people of Ukraine. We are holding the Putin
regime accountable for its war against Ukraine and will
continue to confront Russia at every turn.
We are at a key juncture for economic statecraft. Together
with our allies we have leveled some of the strongest sanctions
in history, and the Russian economy has been significantly
impacted. We are also working with the G7 and other partners to
explore our price cap on Russian oil, to curb revenues to
Putin's regime.
We are leading the way among our partners, thanks to action
by Congress, in delivering support to Ukraine's economy. U.S.
funds have been critical to maintaining basic services in
Ukraine, including education and health care.
Five months in, Russia's war has created significant
economic and humanitarian challenges for Ukraine and beyond.
Higher commodity prices are feeding into global inflationary
pressures, with knock-on effects to energy and food security,
trade flows, external balances, adding to social pressures in
many countries. Treasury has been focused on supporting
countries as they weather the shocks of COVID-19 and the
fallout from Russia's war. Stronger, more stable growth abroad
means a stronger economy here at home, and the international
financial institutions are critical to this effort.
Over the last 2 years, the international financial
institutions have led the way in helping low-income and
developing countries fight the pandemic and stabilize their
economies. These institutions are vital to responding to food
and energy shocks and the refugee crisis in Europe. They will
also be essential in rebuilding Ukraine.
The Administration is seeking authorization from Congress
to provide up to $21 billion to two IMF facilities targeted at
the poorest and most vulnerable countries, the Poverty
Reduction and Growth Trust, and the newly created Resilience
and Sustainability Trust. Through the PRGT, the IMF provides
zero-interest financing to the world's poorest countries. A
record $19 billion in disbursements during COVID has left the
PRGT in need of additional funding going forward.
Through the Resilience and Sustainability Trust, the IMF
will provide countries with targeted financing alongside IMF
programs to increase their resilience to energy shocks,
pandemics, and climate change. These IMF trust funds provide
critically needed financing and help countries undertake
reforms to promote long-term growth, consistent with the IMF's
core mission. We look forward to working with this committee on
this important request so that the United States can continue
to lead in the global economy.
U.S. leadership is needed to tackle serious long-term
challenges to the international order, including those posed by
China, as referenced by the chair and ranking member. The
international financial institutions offer a high-quality
alternative to China's development financing, which is opaque
and non-concessional. We are engaging the multilateral
development banks directly to step up their support for
infrastructure development, in line with the ambitions of the
Partnership for Global Infrastructure Investment.
Treasury is also working to enhance debt transparency and
sustainability. Around 60 percent of low-income countries are
at high risk or already in debt distress. Our efforts will help
facilitate debt restructurings and prevent future debt crises.
We continue to call for full and timely cooperation from all
official creditors, including China, to help low-income
countries that are requesting relief.
Treasury is helping the international financial
institutions adapt to the 21st century challenges. Pandemics,
climate change, fragility, migration, refugee flows--these
challenges cross borders and disproportionately affect the poor
and vulnerable. We need development finance to better mobilize
private capital and finance solutions at scale.
At the Inter-American Development Bank Group, for example,
we are ready to begin negotiations on providing additional
capital to IDB Invest, the group's private sector financing
arm, in line with a broader reform agenda for the group.
Finally, Treasury provides technical assistance to help
developing and transitional economies build capacity, a
flagship tool that delivers mightily on every taxpayer dollar
invested.
I look forward to working with you, Chair, and the
committee to continue to advance U.S. international economic
leadership abroad and create opportunities for Americans at
home. Thank you.
[The prepared statement of Mr. Baukol follows:]
Prepared Statement of Mr. Andy P. Baukol
Chair Menendez, Ranking Member Risch, and Members of the Committee,
thank you for the opportunity to discuss the Department of the
Treasury's international economic tools.
Let me state at the outset that the Biden administration stands
firmly with the people of Ukraine as they defend their lives, their
homes, and their country. We are resolute in our commitment to hold the
Putin regime accountable for its unprovoked and unjustified war against
Ukraine and the atrocities it has committed. America and our allies
will continue to confront, condemn, and constrain Russia at every turn.
This hearing occurs at a key juncture for economic statecraft.
Together with our allies, we have leveled some of the strongest and
most effective sanctions in history--and the Russian economy has been
left reeling. Just last month, Russia's Central Bank Governor said
Russia's economy ``won't be as it was before'' because of the strength
of our unified sanctions. The IMF projects Russia's economy to contract
by about 6 percent this year. Critically, due to our collective work to
deny Russia key technologies for its armaments industry, we've been
able to significantly weaken Russian military capabilities on the
battlefield--resulting in the shuttering of tank factories and Russian
frontline troops using increasingly outdated equipment and weaponry. We
are also working with the G7 and other partners around the world to
explore a price cap on Russian oil that would limit revenue used by
Putin's war machine while preventing price spikes in global oil
markets. Our multilateral response demonstrates that the international
financial system and economic marketplace are not open to those who
violate the core principles of territorial integrity and self-
determination.
And we are leading the way among our partners--thanks to action by
Congress--in delivering the financial support needed to sustain
Ukraine's economy. Already, the U.S. Government has disbursed $4
billion in direct budget support to the Government of Ukraine and aims
to disburse an additional $4.5 billion by the end of September. These
funds are critical in maintaining basic government functions, including
the provision of education and health care.
Five months in, Russia's illegal war against Ukraine has created
significant global economic and humanitarian challenges. We are seeing
higher commodity prices feed into global inflationary pressures and
pose threats to energy and food security, trade flows, and external
balances across many countries. Just yesterday, the IMF again cut its
forecast for global growth this year, citing spillovers from Russia's
war against Ukraine as a principal reason. Emerging market economies
and low-income countries are particularly vulnerable to the fallout.
These shocks are stretching already thin public balance sheets,
increasing their borrowing costs, and exacerbating their pre-existing
debt vulnerabilities with direct impacts on the most vulnerable
households in these countries. The sooner Russia puts an end to this
unnecessary war, the sooner we can stem the damage to the U.S. and
global economy.
At Treasury International Affairs, much of our focus over the last
2 years has been on how we can better support developing countries as
they weather the pandemic and now the spillovers of Russia war on
Ukraine. These global crises have clearly underscored that the
international financial institutions (IFIs) are essential complements
to U.S. foreign policy. The multilateral development banks (MDBs) have
approved around $130 billion in financing to address the pandemic's
health, economic, and social impacts, and the International Monetary
Fund (IMF) has approved $220 billion in financial support to help low-
income and developing countries stabilize their economies in the face
of these two global shocks. The IFIs are playing vital roles in
responding to food and energy shocks and addressing a growing refugee
crisis in Europe. They will be essential, too, in helping to rebuild an
independent Ukraine.
As Chair Menendez's Economic Statecraft for the 21st Century Act
highlights, the IFIs are a force-multiplier for our values and
interests. Stronger, more stable growth abroad means a stronger economy
here at home. As other economies prosper, demand for U.S. exports of
goods and service increases, creating U.S. jobs. Treasury is committed
to working with Congress, IFI managements, and likeminded shareholders
to enhance the IFIs' responsiveness to U.S. priorities.
In the current crisis, we are asking the IFIs to step up their
efforts to help Ukraine and to respond to the devastating global
economic impacts of Russia's war. The most vulnerable economies will
need support from the international community to fill their financing
gaps, address their heightened debt risks, and undertake the needed
adjustments and reforms to recover. We are also deeply concerned about
the impact of Russia's war on food and fertilizer prices and supply,
particularly on poor households. This spring, Secretary Yellen convened
the IFIs for a call-to-action to redouble their efforts in tackling
food insecurity. As a result of that meeting, the IFIs released an
Action Plan and are directing significant funding to tackle the short-
term shocks as well as address the underlying vulnerabilities in food
systems. We continue to engage the IFIs and encourage them to surge and
scale their activities in response to rising food insecurity.
The IMF will play a critical role in helping vulnerable countries
stabilize their economies, particularly in the face of elevated food
and energy prices, heightened financial risks, and rising debt levels.
In the Fiscal Year 2023 Budget Request, the Biden administration is
seeking Congressional authorization to provide up to $21 billion in
financing to bolster two critical IMF facilities that will support the
poorest and most vulnerable countries through these exceptional global
shocks: the Poverty Reduction and Growth Trust, or PRGT, and the newly
created Resilience and Sustainability Trust, or RST.
Through the PRGT, the IMF has provided $19 billion in zero-interest
financing to the world's poorest countries over the last few years.
This unprecedented action by the PRGT has left it in need of additional
funding to be able to support the recovery of the poorest countries in
the future. Through the RST, the IMF will provide targeted financing
alongside IMF programs to support efforts by countries to increase
their resilience to the macroeconomic challenges posed by energy
shocks, pandemics, and climate change.
These IMF trust funds do not represent development aid. Rather,
they leverage the IMF's unique role and capacity to provide critically
needed financing, and help countries undertake reforms to address
governance weaknesses, promote growth, and improve macroeconomic
sustainability, consistent with the IMF's core mission. All other G7
partners and most of the G20 countries, including China, have already
provided financing to these IMF trust funds, which are undertaking
lending critical to supporting a global recovery. Treasury looks
forward to working with the Chair and Ranking Member and members of
this Committee on this important request so that the United States can
continue to lead in the global economy.
We are also working hard on how the IFIs need to continue to evolve
to meet the challenges of our times. Many of the biggest challenges in
our world today--such as pandemics and health, climate change,
fragility, migration and refugee flows--these challenges cross borders
and disproportionately affect the poorest, most vulnerable populations.
Going forward, we need the development finance system to better
mobilize private capital and finance solutions to these global
challenges at scale. And because the multilateral development banks
alone will never meet the scale of financing needed, we also need to
revisit our strategies for making capital markets work for people in
developing countries. At the Inter-American Development Bank Group, for
example, we are in the process of pursuing reforms at the institution
to drive climate ambition, digital technology, social inclusion, and
private sector development. We are also ready to support beginning
negotiations on providing additional capital for IDB Invest, the
Group's private sector financing arm, in line with a broader reform
agenda for the Group.
Bolstering the IFI system is also critical to tackle serious long-
term challenges to the international order--such as those posed by
China. For example, IMF financing through trust funds such as the PRGT
and RST, as well as MDB financing, provide credible high-quality
alternatives to China's approach to development financing, including
the Belt and Road Initiative. In contrast to non-concessional and
opaque Chinese official financing, these IFI instruments are
transparent and consistent with debt sustainability. Project loans
adhere to high quality infrastructure investment principles and include
social and environmental safeguards that promote long-term growth and
development in recipient countries. Enhancing U.S. leadership in the
IFIs is an important component in the U.S. economic toolkit to push
back against economic actors that can harm the United States and the
global economic system. Indeed, they have an important role to play in
delivering on the ambitions of the Partnership for Global
Infrastructure Investment (PGII), and Secretary Yellen has directly
engaged the MDBs to step up financing, policy dialogue and technical
assistance for infrastructure development. This requires meeting our
financial obligations to these institutions, providing new resources
when needed, and having confirmed Executive Directors.
In addition to promoting transparent and sustainable financing, we
need to respond in a timely and meaningful manner to requests for debt
restructuring from developing countries with unsustainable debt levels.
Around 60 percent of low-income countries are at high risk or are
already in debt distress. Three countries--Chad, Ethiopia, and Zambia--
have requested debt treatments under the G20 Common Framework. We could
see more requests for debt treatments as debt risks worsen among
developing countries. In Treasury's international engagements,
including at the G7 and G20, we are pressing all countries including
China to uphold their commitment to provide the necessary debt
treatments to the requesting countries as quickly as possible. Together
with our like-minded partners, we continue to reiterate that tackling
debt distress in low-income countries requires full cooperation from
all creditors, though that is currently not the case. Treasury is also
working through the IFIs and with like-minded partners to enhance debt
transparency and sustainability to help facilitate debt restructurings
and prevent future debt crises.
Finally, let me note a small, inexpensive, and effective bilateral
tool in Treasury's international economic toolkit that complements the
critical multilateral work of the IFIs. Treasury's Office of Technical
Assistance (OTA) deploys expert advisors to help developing and
transitional countries build their capacity to implement reforms in
support of transparency and accountability in government finances, debt
management, financing for infrastructure development, financial
inclusion, and combating economic crimes.
As Secretary Yellen highlighted in her speech at the Atlantic
Council in April, the world is evolving, and our tools of economic
diplomacy must evolve with it. I look forward to working with you to
continue to advance U.S. international economic leadership abroad and
create opportunities for Americans at home.
The Chairman. All right. Thank you all. We will start a
series of 5-minute rounds.
There are other agencies that are not even here at this
hearing--EXIM, DFC, others--and some suggest that our process
of economic statecraft is so fragmented that we cannot bring it
together in the powerful way that maybe others engage in. What
would you say to that, Mr. Secretary?
Mr. Fernandez. Well, thank you for the question, and it is
an issue that we discuss internally, and the interagency
discusses it quite often. I think both with USTDA and with
Treasury we work every day, and all of the time, as well as
with the Commerce Department, with our deals teams, to try and
promote U.S. exports and U.S. investments abroad. With USTDA,
we have worked with them in a number of cases where countries
are looking to export their products and need approvals. The
Secretary is the chair of the DFC and we vet their programs.
I will tell you that, for example, just recently, we
announced the I2U2 partnership, President Biden announced it,
in Israel. It is an effort by four countries--Israel, India,
the UAE, and ourselves--to work on projects. One of those
projects was an energy project, a solar and wind energy project
in India, where all four countries cooperated. That project
came from our friends at USTDA. They gave us the idea and we
made it a reality.
The Chairman. Well, I appreciate that. My question, since I
do not have unlimited time, is, are we really bringing all of
the elements of national powers to economic statecraft
together, or is it so disjunctive that the ability to bring all
of the benefits of it might be better resolved if housed under
one roof? That is a continuing issue, and I am sure there is an
interagency process, but I have seen those interagency
processes consider things to death. So it is something I want
to continue to explore.
I mentioned Lithuania, and in your written statement you
have Lithuania as a perfect example of what China does to
countries that ultimately do not bend to their will. The
European Union has been looking at creating some sort of
mechanism to have a combined approach against the sort of thing
we see China doing to Lithuania.
Earlier this summer, former NATO Secretary General Anders
Rasmussen released a report calling for the creation of an
economic version of the NATO Article 5 mutual defense pledge in
order to thwart commercial coercion by authoritarian states.
What is your view of something along those lines, of an
economic Article 5, or how do we deal with pushing back on the
economic coercion of a country like China against those who are
allied with us, have our values, and want to promote them?
Mr. Fernandez. Thank you for the question, and thank you
for your leadership on this issue. Many of the actions that we
have taken to help Lithuania came from conversations that our
office had with yours, so that is something we very much
appreciate.
When China decided to punish Lithuania for allowing Taiwan
to open a trade office, we decided that we had seen this
movement before and that China had done it with a number of
countries--Australia, Japan, Korea, and others. We decided to
take a two-pronged approach, first of all to support Lithuania
diplomatically, letting them know that they were not alone, and
letting them know that whatever their decision was, we would
support it as a sovereign decision, but also to try and help
them confront the economic fallout from China deciding not to
allow Lithuanian imports into China, from China cutting back on
export credits to Lithuania.
I can tell you that we found out that we had some tools
that in some ways we had not thought about. EXIM Bank doubled
the export credits that China had given to Lithuania. To give
one example, we have discussed, and I know it has been
discussed, the Article 5 idea. It is an interesting idea. I
think we are developing a playbook now, and it is something
that we will continue to consider going forward.
The Chairman. Well, I would like to see that.
Mr. Baukol, let me ask you. Should we not be using our
voice and our vote at these international financial
institutions in a more aggressive way? For example, we have
these countries that, yes, they want to meet their IMF
obligations, but they have the triple whammy of a pandemic, the
skyrocketing energy costs, and radically increased food costs.
Unlike the United States, they are not capable, necessarily, of
meeting that.
Shouldn't we be leading at the IMF to have a smoothing-out
period? That does not mean an absolution of whatever your
obligations are. It certainly means you have to still meet your
obligations, but a smoothing-out period so these countries can
get through a period of time in which there is not unrest. When
you are answering that could you also answer, many members of
the committee have had concerns about special drawing rights at
the IMF, and making sure that while we want to be helpful to
countries that need this type of help, that entities like
Russia, Belarus, Cuba, Iran, Venezuela do not get access to it.
Mr. Baukol. Thank you, Chair, for both those questions
which are very important. I think on the immediate impact of
COVID and the fallout from Russia's war in Ukraine on food
prices and energy prices, you have identified that the current
juncture is very difficult for many emerging markets and low-
income countries.
Over the last couple of years, in response to COVID in
particular, the IMF has disbursed significant volumes of
lending to its members, much of it early on in the COVID period
without significant conditionality as emergency support,
recognizing that COVID was impacting many economies very
detrimentally. The IMF over the last year and a half or so has
been shifting to more traditional lending programs for
countries that are based on standard conditionality, to help
countries adjust to the various shocks that are ongoing.
At the same time, I think the IMF is recognizing that the
social impacts of some of the price increases that we have seen
over the last year are also meaningful and need to be taken
into account as they work with their member countries.
Therefore, you have seen in a number of IMF programs that
subsidies for food or fuel are being accommodated to some
extent and addressed through other policy measures to keep
social unrest under control, recognizing that that is a
significant issue as we have seen in places like Sri Lanka.
On the issue of SDRs, very important question. We are very
focused on making sure that the general SDR allocation that the
IMF provided last summer to all of its members cannot be used
by bad actors who are members of the IMF. There are several
different categories here. Some bad actors do not have full
recognition of the membership of the IMF, so they are not able
to access their SDRs. Other bad actors, we and our allies would
agree not to convert their SDRs into usable currencies, and as
you know, Chairman, the SDR is not a currency itself. It is an
asset and a liability distributed by the IMF so it needs to be
converted to a usable currency to actually be used, and we
would not convert SDRs for a number of bad actors and neither
would our allies.
Then even if some bad actors are able to convert their SDRs
to usable currency, of course we have sanctions programs on a
number of countries, Russia most importantly, that would make
it extremely difficult for Russia to actually be able to use
the currencies that it gained from converting SDRs.
So this is something we are tracking very closely and doing
our best to make sure that no SDRs can be misused.
The Chairman. Senator Risch.
Senator Risch. Thank you, Mr. Chairman. Under Secretary
Fernandez, the Department recently announced the Mineral
Security Partnership to work with our partners on critical
mineral supply chains, and certainly that is an important
thing, an important start, but like the Chairman, I am
concerned with the fragmentation of our own government. I would
not say that industry is in a panic, but I would say that
industries, many of them, are deeply concerned about critical
minerals and their ability to get them. China has, as a policy,
it seems, to monopolize everywhere they can.
Now a good example of that is cobalt. I have got a piece of
cobalt right here, and it came out of the ground in Idaho. We
have got lots of cobalt in Idaho and would like to get it into
the process. The difficulty is the announcement that the
Mineral Security Partnership is to work with our partners, I
would really like to see the agencies in the United States
Government working together. When anybody tries to take this
cobalt out of the ground in Idaho, or any of the other critical
minerals we have, they are followed around by a parade of
bureaucrats trying to stop them from getting the minerals out
of the ground. It seems like nobody wants to get to yes.
Everybody wants to get to no.
What are you doing with our own agencies--forgetting about
our partners for a minute, other allies--what are we doing with
our own agencies to try to get this stuff out of the ground?
Mr. Fernandez. Thank you for your question, Mr. Risch. We
work with the Department of Energy. We work with a number of
the agencies. Our focus, at the State Department, has been with
our international partners. We share your concern. The Mineral
Security Partnership was a vehicle that we created together
with some of our closest allies and partners to deal with the
concern that you have raised, to promote responsible investment
in strategic countries while following the highest
environmental, social, and governance principles.
The reason we started this investment vehicle--and then we
have been getting great cooperation from a dozen countries that
are members--basically because they have the same concern.
Number one, we know that if we are going to have a clean energy
future, we are going to need to increase exponentially our
supplies of cobalt, lithium, and others. We also know that the
PRC controls many of these minerals, and sometimes they even
control 100 percent of the production of the mining or they
control all of the processing. That is a problem.
What we need to do is to get our companies and our agencies
to share information with our partners. Sometimes we are not
getting this information in time. We have already talked to
our, and we have demarched our posts to get us this information
when it is actionable. Then we are going to talk about, with
the private sector, with the financial institutions on
financing, and our proposition will be to the producing
countries is we are going to engage in a race to the top. Our
companies are not going to compete in a race to the bottom.
The Mineral Security Partnership could be extended as well
to the U.S., and that is something that obviously we will
consider. We are just starting. I think by the end of the year
my hope is that we will have some deals done and that we will
be able to try to expand that partnership.
Senator Risch. I appreciate that, and it is good to hear
that you are making efforts in this regard. Again, I come back
to we do not need to go to other places. We can focus right
here at home. I guarantee you that every ounce of this stuff
that is brought out of the ground in the United States of
America will be done so in a much more environmentally friendly
way than it is anywhere else in the world. So if we are
interested in seeing--we know we have to have these minerals. I
mean, that is an absolute given. Everybody preaches they want
electric cars. You cannot have electric cars without these
critical minerals, to say the least.
We really ought to be focusing more on that, and as the
Chairman indicated, we have this fragmentation between our
agencies, and we have agencies that are pushing for electric
cars and for a clean environment and everything else and yet we
have other agencies that are doing everything they possibly can
to frustrate the ability of the private sector in the United
States to take this stuff out of the ground and to process it
once it is out of the ground.
I appreciate your efforts with other countries. I would say
we need a diplomatic effort between your agency and other
agencies in the United States to get to the same place on that.
With that my time is up. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Cardin.
Senator Cardin. Thank you, Mr. Chairman, and let me thank
all of our witnesses for their service to our country and also
their appearance here today.
This hearing, the topic is extremely important to our
country, U.S. national security and economic statecraft,
ensuring U.S. leadership for the 21st century. We are taking a
step on that today in the United States Senate when we passed
the Chips and Science bill to ensure U.S. leadership in science
and recognizing the need for us to be able to manufacture our
own computer chips here in the United States.
China is trying to dominate. We know that. The United
States can stand up against China because of our economic
strengthen and our political strength, but so many countries
around the world cannot, and they depend upon U.S. leadership
in order to advance our national security through the economic
system, the global system, based upon market economy rather
than government-controlled decision-making.
Secretary Fernandez, I was not satisfied with your answer
to our chairman's question in regard to Lithuania. Let me
explain the reason why. The question is whether we need to take
a much more aggressive stand with institutional infrastructure
to deal with China's coercive policies. We know their One Belt
Road Initiative is to try to use their economic power to
intimidate countries to play according to China's rules rather
than the global market economic rules.
We have taken steps, and I must tell you, initiated by the
Legislative branch of government, on dealing with trafficking
in persons, to make it clear that the U.S. would stand up for a
leadership structure that every country in the world needs to
take steps to prevent modern-day slavery. We have taken
institutional steps to deal with individual corrupt players
that allow these autocratic countries to survive with the
Magnitsky-type sanctions, and that has been very effective.
This committee has passed a corruption index that would do this
for corruption, to use U.S. leadership.
I think the Chairman's question is do we need that type of
institutional protection against the coercive practices of
China, as we saw in Lithuania, so that, yes, you can respond to
what China does and try to help Lithuania through the economic
institutions that exist, but should we not have some type of
automatic mechanism that is available so China understands that
we will not tolerate that type of behavior of geopolitical
intimidation of another country as they did with Lithuania. I
think that was the question the Chairman was asking, and I did
not get really an answer to that question.
Yes, we have proposals that are going to be made by
Congress, but we need to get you engaged on the subject,
because if we sit back and say it is just business as usual, we
are using the bilateral mechanisms that we have, and we will
respond, and we will help you here and we will help you there,
China will continue their policies. Many countries will not
have that space to be able to operate while we try to figure
out how we can help them.
Do we not need some type of an institutional infrastructure
where America's strength can stand by those countries in the
world that want to exercise their independence, free from the
coercion and intimidation of China?
Mr. Fernandez. Thank you for your question, Senator. It is
something that we have discussed internally at the State
Department, and I agree with you that it is a concern. I will
tell you that from where I stand I think that it is something
we obviously will be willing to look at and consider, but at
the same time I do think we need the flexibility to be able to
adjust our actions to the specific circumstance. What worked in
Lithuania may not have worked in Japan. I do think we need that
flexibility in order to be able to do that.
I do share your concern that this is going to happen again.
It is something that China is doing over and over again. Other
countries have experienced it. I think looking at the situation
holistically is worth looking at.
Senator Cardin. I will just make this observation, Mr.
Chairman. If we would have waited for these negotiations to
take place, we never would have passed the sanction regime
against Iran. We never would have done the Magnitsky Sanctions.
We never would have done any of these issues because we always
get that response from the Administration--let's sit down and
talk. We are not talking about taking away your flexibility to
deal with individual circumstances. We are talking about making
it clear that the United States is standing up for global
leadership against this type of behavior. Unless we get greater
cooperation from an administration, it is going to be more
difficult for us to do. We will still do it, but in the
meantime China is going to act.
I would just urge you to understand the urgency of this
moment, what China is doing. We are taking action in Congress,
but we can certainly use your more enthusiastic cooperation
with us to give you the tools you need in order to respond.
The Chairman. Thank you, Senator Cardin. Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman.
Secretary Fernandez, a couple of things. This week Gazprom
announced that it was reducing the supply of gas to Europe
through the Nord Stream 1 pipeline to just 20 percent of the
capacity. Russia already had cut the flow of gas through Nord
Stream 1 to 40 percent of capacity. They did that in June.
Facing a Russian-made energy crisis, the European Union member
states took action on Tuesday. They agreed to cut gas use by 15
percent between August and March, compared with the same period
of the previous year.
The European Commission president said this: ``Russia is
blackmailing us. Russia is using energy as a weapon. Therefore,
in any event, whether a partial major cutoff of Russian gas or
a total cutoff of Russian gas, Europe needs to be ready.'' The
New York Times had a story, July 26, ``Facing Putin's Energy
Blackmail.''
Is Russia engaged in blackmail and using energy as a
weapon?
Mr. Fernandez. Thank you for your question. The answer is
yes, Russia is weaponizing oil, and our job is to help our
allies and partners to protect and reach energy independence.
That is something that we are doing every day.
Senator Barrasso. United States has the energy resources
needed to help our allies reduce their dependence on Russian
energy. Our nation should be a strategic energy supplier to
Europe. American natural gas is reliable, affordable, abundant.
It is an important energy solution for those who want to keep
the lights on without empowering Russia. President Biden said
that we will sell American LNG to help our allies.
Do you support increasing efforts--does the State
Department support efforts to export U.S. LNG to help our
allies and partners escape their dependence on Russia?
Mr. Fernandez. Thank you for your question, Senator. I
think an unspoken success here is how our oil and gas producers
have stepped up to the plate to help Europe deal with the
energy crisis. Our oil production, this year and next year,
will exceed the records of 2019. We are right now the largest
LNG supplier to the Europeans. Seventy-five percent of its
imports are from the U.S., of LNG exports.
I think it is a success story and we will do all we can to
try and wean Europe from Russian oil and gas, and we have to
continue to expand exports, not just from the U.S., but from
other allies and partners, and that is something we are trying
to do every day as well.
Senator Barrasso. I am curious where this stands now in
terms of U.S. exports. What countries are you meeting with to
discuss increasing exports of American LNG to help them out?
Mr. Fernandez. Well, I have met with a number of European
countries that are looking to expand their imports of U.S. LNG.
We are working, as well, on infrastructure in Europe to try and
build the kinds of facilities that will accept LNG exports.
Senator Barrasso. It seems we have infrastructure
restraints at home by the Administration, delaying the permits
for the finding, using, exploring, transporting, consolidating,
and then shipping overseas LNG. Has the State Department
weighed in on those other policies of the Administration which
seem to be crippling our opportunities to develop more LNG?
Mr. Fernandez. Senator, thank you for that. We are right
now the largest LNG exporter in the world. We have tripled--
just this year, tripled our exports to Europe. I am sure we
could do better on our infrastructure. Something that I raise
all the time with the U.S. companies is I am proud of what they
have been able to do to help Europe meet its energy needs this
year.
Senator Barrasso. Let me move to nuclear power. I am
concerned that the Biden administration is failing as a partner
in terms of important international energy projects. Uganda,
for one, is looking to build a 2,000-megawatt nuclear power
facility by 2023. It would be East Africa's first nuclear power
plant. In May, Uganda acquired land for the construction.
Yesterday, the Ugandan president met with the Russian foreign
minister--the Russian foreign minister. Uganda asked Russia for
help in developing the nuclear power plant.
Given the extensive expertise that we have in the United
States in nuclear energy, why isn't our nation partnering with
Uganda on this project, and would be the negative implications
that could result from this sort of partnership between Uganda
and Russia?
Mr. Fernandez. Thank you, Senator. I will need to get back
to you on the Uganda example. I am not familiar with it. I will
tell you this, though, and we stated it often. We believe that
nuclear power is vital to achieving the climate goals and the
energy transition. Just yesterday, I met with the Minister of
Energy from Romania. They are looking for U.S. small nuclear
reactors. We are working with them to bring those to Romania.
I am not familiar with the Uganda example, but I will tell
you that we support large- and small-scale nuclear reactors,
and we are working with a number of countries in Europe on this
score, one of them being Romania and the other one being
Poland.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman, and thank you to
each of you for your testimony this morning.
Director Ebong, I would like to begin with you, because
Senator Portman and I last year introduced the Transatlantic
Telecommunications Security Act, and I was interested in doing
that because we have done everything we can to discourage our
European allies from using China's telecommunications sector,
Huawei and others, because of concerns about what that means
for security.
Now what we did in the Telecommunications Security Act was
to authorize the Development Finance Corporation to invest in
trusted telecommunications projects in Eastern Europe, where we
are encouraging countries to get off that Chinese
telecommunications, but we are not providing any real help for
them. Now, sadly, that legislation has gotten hung up in a
philosophical debate about what the mission of the Development
Finance Corporation should be.
What kind of help does your agency have to address that
concern among our Eastern European allies?
Ms. Ebong. Thank you very much, Senator, for that question.
We are absolutely seeing China's push to foreclose systems and
close integrated solutions that encourage Chinese company end-
to-end solutions, which are bad for security and bad for
competition. So what we have done is to work through a series
of workshops, reverse trade missions, and projects that can
introduce regulators in our partner countries, procurement
officials in our partner countries to the solutions that the
U.S. provides.
It is very important for them to be able to see the
options, to familiarize them with our technologies, and to do
so hand-in-hand with our colleagues at DFC, so that we
coordinate closely with DFC, with the Export-Import Bank, and
the Department of Commerce, because there is an ecosystem that
follows the early project preparation to financing.
So often we will convene, through our workshops and our
reverse trade missions, where we are bringing delegations to
the United States, and we will develop projects that can speak
to our partners' ability to have choice and to understand that
there is more security to be had, more openness in competition
if they follow the United States' solutions.
Senator Shaheen. Are we being successful at that?
Ms. Ebong. I think we are, Senator. We are seeing, and just
yesterday I welcomed a delegation from Malaysia full of
telecommunications regulators, where they expressed their
openness, they expressed an understanding of what they might
need to look at to address these issues. Because we are in the
early stages of planning and preparation, it does take time to
see the change, but I do see a great willingness in partners to
attend to the expertise that we are able to provide.
Senator Shaheen. Thank you. This question is really for all
three of you, because as we talk about economic statecraft and
our ability to provide assistance in economic areas to address
concerns that countries are having, developing countries in
particular, one of the aspects of that that we do not talk much
about is how do we get the message out about what we are doing?
Right now I think both China and Russia are eating our lunch in
terms of the ability to spread inaccurate information about the
United States and what we are doing. They have done it very
successfully in terms of what is happening with food insecurity
because of the war in Ukraine, which Russia is responsible for
and yet in countries in Africa and the Middle East they see the
United States as being the problem here.
So how do you see information and getting information out
about what we are doing as critical to the other work that you
are doing in the economic area? I will start with you first,
Secretary Fernandez.
Mr. Fernandez. Thank you. Thank you, Senator. I think you
are right in that both Russia and China are engaging in a
disinformation battle. They have blamed the U.S. for the food
insecurity caused by Russia's invasion of Ukraine. Something we
are doing at the State Department is focusing on that
misinformation and getting out the message that our sanctions
expressly carve out oil and gas exports. They expressly do not
affect food, do not affect fertilizers.
Senator Shaheen. I do not want to interrupt you, but are
you working with the Global Engagement Center at the State
Department?
Mr. Fernandez. Yes, we are.
Senator Shaheen. Is there a plan for how we are responding?
Mr. Fernandez. There is a plan. There is a plan.
Senator Shaheen. Can that be shared with this committee?
Mr. Fernandez. Well, of course. Of course. We are engaged
every day in addressing the misinformation. It is hard because,
frankly, the Russians and the PRC are good at this. We have got
to up our game, but I think there is certainly a strategy to do
that, and we have been doing that in the last few months.
Senator Shaheen. Thank you. I know I am out of time, Mr.
Chairman, so I will send questions for the record to all of you
in response to this question because I think it is something
that we have got to get much better at and get very specific
about how we are responding.
Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Portman.
Senator Portman. Thank you, Mr. Chairman, and I was
interesting in Senator Shaheen's question with regard to Global
Engagement Center. I continue to have a deep concern that we do
not have somebody there on a permanent basis leading that
organization at a time when its mission is so important. I hope
you will take that message back, Mr. Secretary. Leah Bray is
the Acting, but Senator Shaheen, can you think of a more
important time for us to actually coordinate our efforts in
terms of----
Senator Shaheen. Absolutely.
Senator Portman. --fighting back against this
disinformation. The fact that the State Department cannot do
the simple step of appointing somebody permanently to that and
giving it a higher status at a time where we are trying to get
more funding into that agency is a mystery to me. It is not a
confirmed position.
So Secretary Fernandez, Senator Shaheen and I were just at
your alma mater for a reunion, and she spoke eloquently about
the issues in Ukraine, and I tried to keep up, but there was a
lot of interest. Everybody showed up because this is the crisis
of our times in terms of the ability to defend democracy and
freedom against tyranny and authoritarianism, and in this case,
a brutal conquest. It is a time where the economic statecraft
is mixed with the diplomacy that we are normally more engaged
in.
Specifically, right now the U.N. has worked out this
arrangement with Turkey and Russia and Ukraine, apparently, to
be able to allow some of this grain to be able to go, including
to places like Africa, where people are literally starving with
this global food crisis. Yet within 12 hours of that agreement
being penned, which said that Russia would not attack any
export facilities at any of the Ukrainian ports that were under
discussion, they bombed Odessa with four missiles, two of which
got through. Yesterday, the night before last, I was on the
floor of Senate with a photograph showing the bombing and the
impact of it. So obviously not to be trusted, and that is the
kind of message we need to get out to ensure people do not
believe the Russian disinformation in places like Africa.
Do you have any update on that, Secretary Fernandez? Where
we are with regard to stopping the Russian attacks on the
ports, certainly, but then more importantly, getting this grain
out to the rest of the world?
Mr. Fernandez. Thank you, Senator, and I am glad you
mentioned our alma mater.
Look, Russia is using food as a weapon--we know that--and
it is blaming the U.S. for the consequences. The U.N. tells us
since the invasion of Ukraine, we have got an additional 70
million people around the world that are falling into poverty.
We welcomed the agreement. At the same time, we just do not
trust Putin. I think the event that you described shows that we
have to be careful.
What we have done on food security is, we provided almost
$5 billion worth of food aid around the world. We have convened
the Food Security Ministerial which attracted over 100
countries, to talk about what we are going to do to try and
deal with this crisis. Every day I tell people that I wake up
thinking about Ukraine, I go to sleep thinking about Ukraine,
and in between we try and help Ukraine.
The food security issues goes beyond Ukraine, and it shows,
and this goes to the misinformation point, that this is not
just a European problem. The effects of Putin's invasion and
brutality in the Ukraine affects the entire world, and you see
it in Africa as well.
Senator Portman. Well, I agree. My time is limited here so
let me get into another result of what Russia chose to do, and
it was a war of choice, this brutal invasion, and that is on
the energy front. You are right--it is affecting the entire
globe in terms of energy prices, but specifically our European
allies.
Those in the region--I was in Moldova and Romania
recently--the biggest issue they raised with me, apart from the
Russian invasion generally, is energy. My understanding is that
despite some good work USTDA has done, Director Ebong, that the
Development Finance Corporation, as an example, has self-
imposed restrictions that hinders their efforts to work on all
energy sectors, including liquefied natural gas. Is that
possible?
I mean, we are telling Europeans to stop depending on
Russia for your liquefied natural gas and instead we will
provide you some, and some of our agencies are being told that
they cannot work on liquefied natural gas because it is a
fossil fuel, even though it is cleaner than the alternative and
even though we are begging the Europeans to do the right thing
and stop feeding the war machine with sending $870 million a
day, which is roughly what they send for oil and gas? Is that
true? Can I hear from either one of you about that?
Mr. Fernandez. I will take it. Look, let me be clear. DFC
is not prohibited--not prohibited--from these kinds of
projects. What we have done is instituted an additional review
for any carbon-intensive projects. The answer to your question,
Senator, is no, there is no prohibition.
I will tell you this, and this is something I said earlier.
We are now the largest exporter of LNG to Europe. We have
tripled our exports this year. Seventy-five percent of our----
Senator Portman. Well, let me ask you this. Are they
allowed to work on nuclear power, or is that also subject to
restrictions and further review? I mean, I am in Romania and
they are begging for us to help them with these SMRs, with
these small nuclear reactors. They want the Export-Import Bank,
which is not represented here today, as DFC is not,
unfortunately, because I would like to talk to both of them,
but we have got to help Romania with this, and it is absolutely
essential to Moldova also, which is obviously in a very
vulnerable position.
Anyway, I appreciate the testimony today and echo the
comments of some of my colleagues in terms of us having a more
aggressive and realistic economic aspect to our diplomacy.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Coons.
Senator Coons. Thank you very much, Chairman Menendez,
Ranking Member Risch, and our panel of witnesses. Chairman
Menendez, I am very encouraged by your focus on economic
coercion, your legislative leadership on this, and I look
forward to working with you closely on it. I think you have
brought a real focus in the work on this committee to not just
studying or thinking about what we need to do strategically and
what tools we need, but then delivering those results so that
we can strengthen the hand of our partners, diplomatics,
development professionals. I am excited to work with you on
your Economic Statecraft for the Twenty-First Century Act.
I have recently introduced a bill, the Countering Economic
Coercion Act, with Senator Young. I view them as complementary,
and I am very hopeful that we can work together to move both of
these pieces of legislation.
We have both seen ways in which Russia and China and other
states deliberately inflict economic damage, economic harm on
some of our partners and allies and countries that are at an
uncertain point. They use economic power to punish or bully or
influence sovereign states in our hemisphere and around the
world, sometimes through informal pressure, intimidation of
threats, and sometimes through formal actions. It harms our
national security interests, our economy, and undermines
international rules.
The chairman's bill would establish an interagency task
force to develop a strategy to counter economic coercion, and I
enthusiastically support that. My bill would provide the
President with new tools to offer rapid and, I would argue,
effective economic support to our partners targeted by economic
coercion. For example, many of us have offered our support for
Lithuania in recent months. President Biden has voiced support
for Lithuania. The bill I am trying to move forward would add
tools to the President's toolkit to make such support not just
in words, but in deeds, by targeting specific tariff
reductions, by expediting decisions on relaxing import
restrictions or export restrictions, offering greater
flexibility for export financing.
So my question for all three panelists today would be, what
additional tools and authorities would help your agencies to
respond effectively and quickly, to support countries that have
been targeted with economic coercion?
If you would, please, Mr. Fernandez.
Mr. Fernandez. Thank you for your question, Senator. I will
defer to our legislative colleagues in terms of comments on the
bill, but----
Senator Coons. Were you unaware that I was going to ask you
about this in today's hearing?
Mr. Fernandez. I was not, but I will tell you that we have
been working on economic coercion. I personally have been to
Lithuania. We have supported Lithuania. We have developed
tools. I think we need a discussion on what tools----
Senator Coons. Well, I am interested in more than a
discussion. I would like to hear what additional tools you
think are necessary, please.
Mr. Fernandez. I will tell you what we did, if I may.
Number one is, together with our colleagues at EXIM, we doubled
the credit financing that China took away from Lithuania,
number one. We brought business delegations, several business
delegations, to Lithuania, looking for more investment from the
U.S. that we're interested in, for example, in lasers. That is
something Lithuania is very keen on.
They wanted to export agricultural products. We have talked
to USDA about finding ways to expedite some of those reviews
without endangering, obviously, the American people. There are
things we could do.
I think we have to have a discussion on what additional
tools we have. I will tell you we know we have some existing
tools now that we did not know we could use. I think this is a
discussion that will continue because, as I have said earlier,
the economic coercion will happen again. It has happened before
and this is a tool that the PRC will continue to use.
Senator Coons. I would argue, I agree with you. They have
been. They are. They will. Russia is using economic coercion
right now as a tool of its unprovoked and immoral aggression
against Ukraine. The cut in Nord Stream 1 volume. There are a
lot of different ways where they are using food as a weapon of
war, energy as a weapon of war. The example of Lithuania, I
think, is a poignant one, but I look forward to hearing from
you, concretely and specifically, what additional tools you
think the Administration needs.
Ms. Ebong, if you would, on behalf of USTDA.
Ms. Ebong. Thank you, Senator. I would take, in Lithuania,
just a quick example to get to that answer, which is USTDA did
the project preparation work, the feasibility work, for the
Klaipeda LNG import terminal. We did that in 2009. It came on
board in 2014, and is now supplying other countries in the
region. We could do that then because Lithuania is a middle-
income country. To the degree that it is a high-income country,
USTDA is not authorized to work there.
So that would be an example of, given the geostrategic
considerations, something that we might look at with respect to
USTDA's authorities.
More broadly, USTDA is seeing far more demand than we can
respond to. I think that in the other category of the agency's
needs, the response to the President's ask for our 2023 budget
would allow us to avoid the situation that we are in now, where
in July we are saying to very good projects that should be
stood up, we cannot do that until the next fiscal year. Thank
you.
Senator Coons. Well, I appreciate your advocacy for your
agency's budget request and look forward to hearing from you in
specific ways about both how raising the income threshold might
allow a more timely response to coercion.
If I could, Mr. Chairman, the last witness, briefly? Mr.
Baukol, if you would, briefly, on behalf of Treasury, anything
about additional tools, and then I will conclude.
Mr. Baukol. Thank you, Senator. I fully agree that this is
a very important topic. We are engaged in conversations with a
number of our partners and allies on this issue, and I think as
a result of those discussions may come back to you with ideas
for additional tools.
At the current time, of course, we have some carrot-and-
stick tools at Treasury. The stick, of course, is largely
involving sanctions, and I think our authorities there are
pretty robust at the moment. On the carrot side, we work
through, of course, the international financial institutions to
support countries that are friends as much as possible, as well
as through other agencies, including DFC and others. Thank you.
Senator Coons. Thank you. I will submit questions for the
record and look forward to a prompt response.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Van Hollen.
Senator Van Hollen. Thank you, Mr. Chairman. I thank all of
your for your testimony. Very briefly I would like to second
what Senator Coons said about needing a strategy. Whether we
need additional tools, we hope you will get back to us about,
but we need to send a very clear signal to countries around the
world that when they are pressured by China, Russia, or other
adversaries and those countries are trying to put demands on
them that those countries do not want to meet, that in addition
to the possibility ability of a stick on those that are putting
pressure on, we want a carrot so that those countries can know,
in advance--and in advance is an important part of it--that
there will be help from the United States and others, a
multilateral group, because that will strengthen their resolve
in resisting coercion.
Let me just turn to how we approach some of the economic
statecraft from a budget perspective in terms of government
spending. Decades ago, if you looked at our portfolio of
international assistance, it would have included a lot of
infrastructure projects. You go around the world, you could see
dams, you could see schools, you could see visible
manifestations of the United States' commitment.
Understandably, and there are good reasons, we have moved
toward other approach overall, meaning we have very robust
public health programs--that is a good thing--in Africa and
other parts of the world. We have a lot of focus on education.
That also is a good thing. So I am not talking about displacing
those programs, but it does seem to me that when we are looking
at countries like China that are deploying infrastructure, for
example, Huawei deploying 5G in places like Africa, we need to
get much more in the game on that kind of infrastructure.
I am surprised. Maybe it came up. I did not see it in any
of the written comments, but the President just made a major
announcement about the Partnership for Global Infrastructure
and Investment. My understanding is that is the Biden
administration's proposal for multilateral action. I am a
little surprised that we have not heard more about it here this
morning. Six-hundred billion dollars over the next 5 years,
designed to do, I think, exactly the kind of things we are
talking about, which is to make investments in countries around
the world where that investment is called for and needed.
So Under Secretary Fernandez, can you talk a little bit
about how this is going to be implemented, when it is going to
be implemented, where the resources are today?
Mr. Fernandez. Thank you for your question. On Lithuania,
if I may, just because you mentioned it, I forgot to mention
that we are conducting an interagency review of what we did in
Lithuania. We will have conclusions on it, and I would be a
happy to brief you and others on the conclusions that we come
up with.
On infrastructure, you are right. The PRC and others are,
in many ways, have been eating our lunch on infrastructure
around the world, and oftentimes on my travels I will go to a
country in Africa and the Chinese will be there, the Turks will
be there, others will be there, and no U.S. companies. We have
got to get in the game.
The Partnership for Infrastructure Investment is the
President's plan to do exactly that, $600 million. It is going
to be coordinated from the State Department. We are working as
we speak right now. We are looking at a number of investments
in Africa. Right now the DFC head is in Africa, looking at
projects. I think you will see an emphasis on this going
forward in the near future. We have to engage in a race to the
top, which means that our infrastructure offer has to be
something that is better than what the Chinese and others
offer.
Senator Van Hollen. Yes. I think it is $600 billion over 5
years is the goal, together with some of our G7 and European
partners. Have we been working already with our European
partners as to how this joint infrastructure facility is going
to be deployed in the near term?
Mr. Fernandez. Yes, we have. It has been part of the G7
discussions that have taken place for several of those meetings
in the last year.
Senator Van Hollen. If you could just follow up by
providing me, other members of the committee that are
interested, with a much more detailed report about how this
fund, which, as I understand it, is a big part of the answer to
the questions that I think are raised by this hearing, how this
fund is going to be assembled and deployed, and not just in
concept, but in reality, on the ground, and what the timetable
is.
Thank you, Mr. Chairman.
The Chairman. Thank you. Senator Kaine, my apologies. I was
looking at Senator Van Hollen and did not see you come back to
your seat.
Senator Kaine. No worries. I always enjoy hearing Senator
Van Hollen.
The Chairman. Okay.
Senator Kaine. It is good to have the witnesses here.
I want to just dig into probably some issues mostly in the
Western Hemisphere, which is a passion of mine. I visited with
a number of senators, Senator Lasso--President Lasso in Ecuador
last July, shortly after he had become president, the
government was new. One of the things he said is, after about
30 years of having a government that was very oriented toward
China, the Ecuadorian people in elections basically said,
``They are ripping us off.'' There were infrastructure projects
that were bad. There was environmental defoliation in the
Amazon. There was illegal fishing around the Galapagos, which,
as you know, is part of Ecuador.
The Ecuadorian people decided we want to change direction,
and they embraced a president who was very favorable to the
United States, and they also turned out 70 percent of the
national assembly.
We asked him how could we be helpful and he said, ``One of
the things you could most do to be helpful would be to allow
Ecuador to come into a trade deal with the United States. For
example, could we be an add-on to the trade deal that the U.S.
has with Columbia?'' He said that he had made that request of
the Administration as well.
Are we doing anything, a year later, to think about
incorporating Ecuador into any trade agreements that the U.S.
has in the hemisphere?
Mr. Fernandez. Thank you for your question. I share your
passion as well. I speak to the Ecuadorians all the time. In
fact, I met with their new minister of economy last week. They
are interested in investment. At the Summit of the Americas,
President Biden announced America's Partnership for Economic
Prosperity, APEP, which is going to be our signature framework
to help investment and trade and improve our economic relations
with not just Ecuador, but with the region as well.
We have got a number of issues that go beyond trade. I
think all of the countries, many other countries in the region
suffer from high inequality, issues of corruption, low tax
rates that do not allow them to have a functioning government
at times. I think we are going to work on infrastructure. We
are going to work on dealing with some of the issues that were
unveiled by COVID. The fact that, for example, the public
health frameworks are weak, the fact that many of the----
Senator Kaine. I am all for public health. I am completely
into that. The question that I really want to dig into is, it
seems to me that the Administration is sort of against trade
deals. I am a pro-trade guy. I am from a state that has one of
the largest ports on the East Coast. I am from a state that has
gone from bottom quartile per capital income to top quartile
per capita income in my lifetime, and it has largely been
because we have embraced immigration and we have embraced trade
and used assets like our port and Dulles to connect with the
world.
In the first year and a half of the Administration, it just
seems like trade is not a priority. In the past, nations like
China just beat us on infrastructure deals, so I am not sure we
are ever going to be able to put enough dollars on the table to
match up with them. What we have done is we have leveraged our
private economy and tried to do trade in order to improve
relationships. This is what Ecuador is asking for. This is what
Uruguay is asking for.
You can do trade deals the right way. We renegotiated NAFTA
after 20 years. It got a huge bipartisan vote in the Senate, in
the House, and was approved. The standards that were okay 20
years ago are not okay now so we upped them. We could do the
same thing with existing trade deals.
I am just puzzled that when we have deals like this on the
table--we have a trade deal with Chile. President Boric, I was
with the Chilean ambassador yesterday. We would really like to
get into that trade deal and make it better.
I hope we do not unilaterally disarm in an area where we
have traditionally had an edge over China and others in trade,
with our robust private sector. I hope we do not just kind of
leave that undone when we have allies who need our help who are
asking precisely for that, and they say that is what could help
them be successful for their populations.
Now, to a positive, the Alliance for Democracy and
Development, which was announced months ago by Dominican
Republic, Panama, and Costa Rica, three nations saying, ``Look,
there is democratic backsliding in our region. We want to be
pro-democracy and forward learning.'' Ecuador has recently
announced that they are joining the alliance. It might have
been 2 days ago the Department of State announced the U.S.-ADD
Consultative Dialogue on Supply Chains and Economic Growth to
look at supply chain resiliency, near-shoring. This is an
exciting opportunity, and I am really excited to see like-
minded democracies in the region come together to promote
democracy and also promote economic growth for their people.
Could you talk about this particular initiative and how the
State Department and the U.S. might use this framework to
advance economic prosperity in these countries?
Mr. Fernandez. Thank you for your question, Senator, and
thank you for the compliment. I signed that MOU. I have been
working on that for a year. Originally, it was just an idea on
the part of the three original countries--Costa Rica, Panama,
and the Dominican Republic--to work together on supply chains.
Every day I get a call from somebody in Latin America that
says, ``We can be your supply chain partner.'' The challenge is
to make that a reality.
What we have done is, together with the Chamber of
Commerce, we are identifying specific products where those
products would come from Asia and be manufactured or assembled
in different places in Latin America.
The ADD program is one that has another benefit, which is
they would cooperate. These are countries that typically have
not cooperated. They have competed with each other, but they
have not cooperated. This is a two-way benefit, both on the
supply chain nearshoring and on their cooperation.
I am very excited about it. Our hope is that by the end of
the year we will have identified specific projects, and they
have created a business council that will come up with ideas. I
am very hopeful and I am, frankly, very proud of the work that
the State Department has done on that.
Senator Kaine. Excellent. Excellent. Thank you. I yield
back.
The Chairman. Thank you. The distinguished junior Senator
from New Jersey, Senator Booker.
Senator Booker. I am very grateful, Mr. Chairman. I know
you have already discussed it a little bit, but I would like to
jump back to issues of food insecurity globally.
Russia has been insidiously strategic in how they have been
working to disrupt global food supplies, and as you know,
Ukraine and Russia, before this conflict have been major
supporters of some 38 countries. In fact, 38 countries rely on
Russia and Ukraine for about 30 percent of their wheat imports
alone. Some of these countries are very reluctant, in fact, to
criticize Russia because of their deep dependence.
I am wondering if you all might be willing to sort of talk
a little bit more in depth about what economic tools the United
States has to incentivize a lot of these mid- and low-income
countries who have been relying on Russian imports to diversify
their agricultural and energy supplies, and what economic tools
do we have to help develop really strong local, internal food
systems so their reliance is not there in the future.
Maybe Director Ebong?
Ms. Ebong. Thank you, Senator, for the question. At USTDA,
we are focused on strengthening and developing infrastructure
so that we can export U.S. goods and services to the
infrastructure that we helped developed. In the food and
agriculture space that really pertains to, it might be port
infrastructure, so that countries can export, or perhaps cold
chain food supply so that agricultural products and produce can
get to the ports.
Our engagement in this space is ancillary to food
production and food supply, but absolutely focused on being
able to facilitate countries' movement of their produce and
their supplies once they get to that point.
Senator Booker. Okay. Mr. Secretary Fernandez, what about
your thoughts?
Mr. Fernandez. Thank you for your question. My office has
been deeply involved on the food security crisis, and you are
right, it is not surprising that we have a food security crisis
when Russia and Ukraine accounted for 10 to 15 percent of
agricultural exports around the world. Russia's misinformation
is succeeding at blaming the U.S.
What are we doing about it? First of all, as I mentioned
earlier, we have provided almost $5 billion worth of food aid.
In May, Secretary Blinken convened a ministerial of over 100
countries to work on food security issues and put it on the
agenda and also talk about what we are going to do in terms of
making sure that there are no export restrictions on food and
that we are helping countries go forward.
USAID is deeply involved. They are not here today, but they
are deeply involved in the food security space as well, and in
our own Feed the Future program, and we have an agricultural
office at the State Department that I oversee----
Senator Booker. Mr. Secretary, if you will allow me to
interrupt. So no, I have met with Ambassador Power and with a
number of people from this committee. We met yesterday, talking
with other ambassadors from other countries about upping their
aid.
I guess really what I am trying to drill down on is that we
have a bit of a crisis, number one with the capacity of a lot
of these mid-level economies. We have other countries now that
are trying to shut down their exports. India's decision is only
going to contribute to that. I am wondering, what other tools
besides the billions of dollars that we worked on the Senate
side very hard to make sure that we were upping our aid, in and
of itself, I am just wondering what other tools should we be
looking at that can help to deal with what a crisis, that I see
spiraling.
You have got a fertilizer crisis, which does not just
implicate now. It implicates next year. You have got other
countries beginning to hoard their own resources. This crisis
is going to get worse before it gets better. The $5 billion
that we put in is significant. We are trying to get our other
allies to do the same, but I see humanity really never have
faced the kind of crisis we could face over the coming 2 years.
Mr. Fernandez. Thank you. I share your concern, and I think
we have got to do more on working against export bans. We have
got to do more to promote agriculture. In Africa, for example,
we are working on a program on seeds that would be climate
resistant, that would deal with climate change.
So there is more than we could do.
Senator Booker. Yes, and I will ask a question for the
record.
The Chairman. Senator Booker, I see Mr. Baukol is looking
to help in answering your question.
Senator Booker. I did not see that, sir. Thank you very
much. The eagle eye of my senior Senator. Please.
Mr. Baukol. Thank you, Chair, and thank you, Senator, for
this question. I think we share your deep concerns about food
insecurity at this time.
I just wanted to flag that Secretary Yellen, early this
spring, had a meeting with the heads of the international
financial institutions, including all the multilateral
development banks, and asked them to come up with ideas to
address this issue. They have all provided action plans to us,
which we are happy to share with you, that aim to provide some
immediate financing so that people do not go hungry in the near
term, but also make investments for the medium term to help
promote production in Africa and other places. We are very
focused on following up on those action plans to make sure they
get implemented.
Senator Booker. That is tremendous. I would love to follow
up on that and hear any other ideas of things that this body
can work on to help support. So thank you very much. Mr.
Chairman, thank you as always.
The Chairman. Thank you, Senator Booker.
I have one or two final questions. Mr. Baukol, we talked a
little bit about SDRs before. As I understand it, the United
States is leading a push around the world for richer countries
to transfer their extra SDRs to the IMF. Are other countries
considering making contributions to these facilities at the
IMF?
Mr. Baukol. Yes, thank you, Chair. Yes. At the present
moment, my list of countries that are planning to channel
resources to the IMF for either the Poverty Reduction Growth
Trust, so the low-income window, or the new Resilience and
Sustainability Trust, there is a list of a little over a dozen
countries, including all the other G7 countries, including a
few other Europeans, including Spain and Netherlands,
Australia, as well as a couple of emerging markets--China,
Saudi Arabia, Singapore. Total amount of commitments from these
other countries is on the order of $58 billion or so for these
two trust funds.
The Chairman. Is there an urgency for the United States to
quickly authorize this transfer on our part?
Mr. Baukol. Indeed, I would say there definitely is. We
have been trying to lead at these institutions, including the
IMF, on things like the design of this new Resilience and
Sustainability Trust, which aims to help countries deal with
the balance of payments impacts of investments in pandemic
resiliency, in energy security, including the impacts of
climate. We, in order to maintain our leadership role, really
need to authorize our loans to the IMF as soon as we can.
The Chairman. Well, I have included this authorization in
the two economic statecraft bills that I mentioned earlier, and
I hope the committee can find a way to pass this critical
authorization quickly so we can continue to lead in the global
economy.
I have one other question for you. In South Asia we see two
different stories playing out right now. In Sri Lanka, the
government has defaulted on $50 billion in loans to
international creditors. Now it is trying to negotiate a long-
term loan from the IMF while also figuring out how to pay for
daily food and fuel. By contrast, Pakistan just concluded a
staff-level agreement with the IMF that lets the government
begin to pay down its debt despite recent political turmoil.
What can we learn from these two cases about how the IMF is
thinking about systemic debt risk in the developing world?
Mr. Baukol. Thank you, Chair. That is an interesting
question. The IMF takes a case-by-case approach on debt issues,
recognizing that not one size will fit all for all countries,
and we generally support that approach. In the case of Sri
Lanka, Sri Lanka's debt sustainability is seriously in
question, and as part of an IMF program in the coming weeks and
months we expect that some debt treatment will be necessary to
put debt back on a sustainable basis. That will mean working,
of course, with other major creditors, which will include
China, which will be a challenge, and we will be pressing China
to respond quickly to requests for debt relief in this case. It
will require working with other creditors as well.
In the case of Pakistan, their debt situation is more
manageable. As you mentioned, they are, under their program,
going to be able to pay down debt over time. That seems
appropriate for now.
The Chairman. I understand that not one size fits all, but
it would be of value to have a global vision of the IMF as to
how it is going to deal with the challenges that developing
nations have in the midst of the triple whammy that they are
facing.
Finally, at the G7 last month, as has been referenced,
President Biden touted the rollout of the Partnership for
Global Infrastructure and Investment, a value-driven, high-
impact transparent infrastructure partnership to meet the
enormous infrastructure needs of low- and middle-income
countries and support the U.S. and its allies' economic and
national security plans. I support the President's global
infrastructure plan. I look forward to findings ways to assist
in its success.
Director Ebong, what role will the U.S. Trade and
Development Agency play in ensuring this program is beneficial
to everyday Americans, and Secretary Fernandez, what role will
the State Department play in developing this new partnership?
Ms. Ebong. Thank you, Chair. It is very critical that we
focus on our role of preparing projects that will help to
support jobs and create exports in the United States. The
Partnership for Global Infrastructure and Investment, or PGII,
allows us very much the platform to do that.
Projects that we have already worked on in the last year
and that we will be working on in the future very much feed
into the President's pledge and commitments in PGII. So we will
be able to bring that angle of projects that are implementable,
but that will also benefit everyday Americans because they will
be projects that U.S. goods and services can be exported to,
therefore support jobs in this country.
The benefit also that PGII is going to bring is additional
sources of financing. That will speed the implementation of
projects. Again, that will go down to the benefit of Americans
because we will, in USTDA's projects, be making sure that they
can result in U.S. exports, and therefore jobs.
Mr. Fernandez. Well, the first thing we have to offer is
our embassies and our economic offices around the world that
will have their ear to the ground and projects that are needed
in countries around the world. We are also working with the
DFC, as I mentioned. The Secretary Chair is the board of the
DFC, and we will continue to work with them to finance projects
oftentimes. That is the obstacle, that our companies cannot get
financing, and so we will continue to work on that, and also
with the private sector. That is something that I am personally
involved in, in reaching out to our banks, and letting them
know about the opportunities that exist for infrastructure
around the world.
Obviously, with the G7 partners, it is something that has
been discussed and continues to be discussed. We coordinate
with the Europeans, part of the Trade and Technology Council.
There are a number of fora where we will coordinate to make
sure that we are not stepping over each other and that we are
able to use our resources wisely.
The Chairman. Well, we look forward to working with you in
ways to effectuate some of the goals the President announced.
One final question to you, Senator Fernandez. Different members
have talked a little bit about nearshoring. I see this as an
incredible opportunity to create more diverse, resilient, and
secure supply chains. I also see it as an incredible
opportunity to develop economies in our Southern Hemisphere,
which inures to our benefit, better economies, it means greater
stability, less likely people moving and fleeing from their
countries. The ripple effect, from so many dimensions, is so
significant.
What exactly is our vision on nearshoring? What specific
details on the specific steps are you and the Administration
taking to actually make this concept a reality?
Mr. Fernandez. Senator, thank you. That is the challenge.
That is the challenge. We have great intentions, but we have
got to make them a reality. Right now we have, as part of the
President's announcement on APEP, we are looking at specifics.
For example, the IDB has come out with a study on specific
products. The three countries that I just mentioned earlier,
the ADD countries, they will come up with a list of products.
We need to come up with products that can be moved from Asia
nearer to us and that the Latin American nations can
contribute. For example, COVID vaccines. Brazil is a place that
we have been looking at. With Mexico, semiconductors.
So we have got to get specific, and that is what we are in
the process of doing now. I will be happy to provide you more
information on that as we work towards identifying specific
products and the specific ways to incentivize the production of
those products in the Western Hemisphere.
The Chairman. Yes, I would be very interested in some of
your follow-up, and we may have our own ideas.
As a closing comment, I do hope that we will more robustly
use the IDB. You have an executive director who actually has
marginalized the Chinese. The Chinese had the IDB being used as
their sales agent in the Western Hemisphere--mind-boggling. The
IDB used to have trade shows for the Chinese in the Western
Hemisphere. The IDB allowed China to basically run across the
hemisphere, to the detriment of our national interests, our
national security, and our national economy.
I must say, this executive director has largely
marginalized the Chinese in the IDB. He has taken a lot of heat
for it, but it is the right thing to do, because they are not
good players.
Yet, for some reason the Administration seems reticent,
even though this executive director has been forthcoming, got a
whole plan, probably has more insights because nobody spends
more time in Latin America specific than the IDB, with an
agenda that generally I think the Administration would embrace.
I just hope we can get past the personalities and start
thinking about what is in our interests. It certainly is not in
our interest to go back to the days where China was basically
using the IDB, which we largely fund, by the way, to their
advantage and to our detriment. So that should be heralded, but
most importantly, the entity should be used.
With that and the appreciation of the committee for your
appearance and testimony today, this record will remain open
until the close of business tomorrow, and this hearing is
adjourned.
[Whereupon, at 11:23 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Mr. Jose W. Fernandez to Questions
Submitted by Senator Robert Menendez
Question. Europe Energy Security: Russia is using energy as a
weapon to manipulate and harm our allies and partners not only in
Europe, but also around the globe.
How are you using economic statecraft tools to promote the energy
security of our European allies as Russia continues to use natural gas
exports as a weapon?
Answer. The United States and the EU are working in concert to
support efforts to strengthen European energy security and to diversify
liquefied natural gas supplies (LNG) in alignment with climate
objectives, including through the U.S.-EU Joint Task Force on Energy
Security. We are collaborating with clean and renewable energy
technology providers to help reduce overall natural gas demand in
Europe, including through deploying technologies such as smart
thermostats, efficient grid technologies, and energy efficiency and
productivity improvements. We also are working to accelerate deployment
of clean and renewable energy solutions, such as offshore wind, heat
pumps, nuclear energy, and clean hydrogen.
Question. Similarly, how are you using the same set of tools to
help our allies in Asia, the Western Hemisphere, and Africa who are
suffering deeply with exorbitant energy and food costs?
Answer. We continue to advocate for policies that better enable
global markets to address food insecurity, such as reducing trade
barriers and increasing the transparency of agricultural trade data. At
the June 26-27 G7 Summit, President Biden and our partners announced
more than $4.5 billion to address global food security, with more than
half of that pledge coming from the United States. Through ongoing
releases from our Strategic Petroleum Reserve and diplomatic outreach,
we continue to work to increase the supply of oil and natural gas in
the near term to stabilize global energy markets, while enabling
countries in these regions to make the transition to clean, affordable,
and reliable energy that will increase their energy security going
forward.
Question. Supply Chains/Critical Minerals: Undersecretary
Fernandez, as we turn to new technologies like electric vehicles to
address the worsening climate crisis, we face new security risks as
China controls significant parts of clean energy supply chain. I am
especially concerned about critical minerals in countries like the DRC,
as I outlined in the letter I sent you back in January.
What has State done to address the issues outlined in the letter I
sent you in January about concerns with Chinese monopolization of
critical minerals in the DRC?
Answer. The Department shares your concerns regarding the issues
identified in your letter. In June, the United States and a group of
likeminded countries established the Minerals Security Partnership to
build diverse and secure critical mineral supply chains. This State
Department-led initiative also aims to ensure that critical minerals
are produced, processed, and recycled in a way that supports countries
taking advantage of their geological endowments to support their
economic development. In the Democratic Republic of the Congo,
Secretary Blinken is planning a trip to discuss governance in August
and our Embassy in Kinshasa is engaged with President Felix
Tshisekedi's administration in support of anti-corruption efforts and
mining-sector reform.
Question. U.S. Leadership in the Digital Economy: During your
confirmation hearing in April last year, you testified that ``U.S. tech
companies face increasing challenges in maintaining U.S. preeminence in
cutting-edge science and technology.
Under your leadership, how has the E/B Bureau engaged with industry
stakeholders and our international partners to maintain our
competitiveness in the development of emerging technologies? What has
been working, and where have we been falling short?
Answer. The Department of State has made advancing U.S. leadership
on emerging technology issues a key priority. Under my leadership, we
have partnered with U.S. industry stakeholders and international
partners to promote a connected, dynamic, and secure innovation
ecosystem that maintains U.S. competitiveness in the development of
technology and reflects our shared interests and values. The newly
established Bureau of Cyberspace and Digital Policy (CDP) coordinates
the Department's work to comprehensively address the national security
challenges, economic opportunities, and human rights elements present
in cyberspace, digital policy, telecommunications, and digital
technologies in close partnership with the Bureau of Economic and
Business Affairs.
Question. How has the E/B Bureau worked with our partners abroad to
promote fair and transparent standards for critical and emerging
technologies?
Answer. The United States, in part through the State Department,
including the Economic and Business Affairs Bureau and the new
Cyberspace and Digital Policy Bureau, preserves and promotes an open,
consensus-based, and private sector-led approach to standards
development, and this includes standards for critical and emerging
technologies. The United States works with partners and allies to
ensure standards development processes are led by technical experts
from the private sector, academia, and government and are open to all
interested stakeholders. The United States also uses bilateral and
multilateral discussions to facilitate information exchange and
coordination to address specific standards issues, including within the
Quadrilateral Security Dialogue and the U.S.-EU Trade and Technology
Council.
Question. U.S. Leadership in the Digital Economy: During your
confirmation hearing in April last year, you testified that ``U.S. tech
companies face increasing challenges in maintaining U.S. preeminence in
cutting-edge science and technology.''
Under your leadership, how has the E/B Bureau engaged with industry
stakeholders and our international partners to maintain our
competitiveness in the development of emerging technologies? What has
been successful, and where should we be focusing more of attention?
Answer. The State Department has made advancing U.S. leadership on
emerging technology issues a key priority. Under my leadership, we have
partnered with U.S. industry stakeholders and international partners to
promote a connected, dynamic, and secure innovation ecosystem that
maintains U.S. competitiveness in the development of emerging
technologies and reflects our shared interests and values. The newly
established Bureau of Cyberspace and Digital Policy (CDP) coordinates
the Department's work to comprehensively address the national security
challenges, economic opportunities, and human rights elements present
in cyberspace, digital policy, telecommunications, and digital
technologies in close partnership with the Bureau of Economic and
Business Affairs.
Question. EU-Data Privacy Agreements and Digital Infrastructure:
Trans-Atlantic Data Privacy Framework: In March this year, the Biden
administration announced that the United States and the European
Commission had reached a ``deal in principle'' for a new Trans-Atlantic
Data Privacy Framework to foster and safeguard commercial, Trans-
Atlantic data flows, and that this framework would be finalized by the
end of 2022.
What is the current state of negotiations for the Trans-Atlantic
Data Privacy Framework, and when can we expect the Administration to
issue an executive order for the EU's review?
Answer. Since the announcement of the deal in principle in March,
the Administration has made significant progress in finalizing the U.S.
commitments under the deal, which will take the form of an Executive
Order and implementing regulations issued by the Attorney General. We
defer any questions on the specific timeline of when the Executive
Order and implementing regulations may be issued to the White House and
Department of Justice.
Question. What is the likelihood that an executive order on data
privacy, instead of federal legislation, is insufficient for the EU?
Answer. The U.S. interagency negotiating team has worked closely
with the European Commission to ensure the Trans-Atlantic Data Privacy
Framework will meet our shared goal of providing a durable and reliable
basis for transatlantic data flows. We are confident the Trans-Atlantic
Data Privacy Framework fully addresses concerns outlined by the Court
of Justice of the European Union in the Schrems II decision.
Question. Providing Secure Digital Infrastructure in Latin America:
The establishment of the U.S.-EU Trade and Technology Council (TTC)
last year was a welcome step towards working with our European partners
on market-oriented approaches to trade, technology, and innovation. The
Council's work will remain vital in our efforts to counter
authoritarian governments in the digital and emerging technology arena,
which will involve establishing technology standards, combatting global
disinformation, and developing trustworthy artificial intelligence.
After the most recent TTC meeting in May, the United States and the EU
announced a commitment in principle to work together to provide secure,
digital infrastructure in developing countries based on principles of
good governance, transparency, and accountability. Latin America and
Africa, two critical regions where the People's Republic of China has
been making the most inroads on providing digital infrastructure, were
identified as priority regions for this new initiative.
How do you envision the United States and the EU working together
to provide critical digital infrastructure to the Western Hemisphere?
Answer. At the May 2022 U.S.-EU Trade and Technology Council
Ministerial, the United States and the European Union launched a joint
U.S.-EU taskforce to promote the use of trusted suppliers for digital
and telecommunications projects in third countries, including those in
the Western Hemisphere. The taskforce will work with partner countries
and development finance organizations to utilize trustworthy suppliers
from countries that practice good governance, transparency, and
accountability.
Question. U.S. Leadership in International Standards-Setting
Bodies--International Telecommunications Union (ITU): I included a
provision in my Economic Statecraft bill that would establish an
interagency working group dedicated to enhancing U.S. leadership and
representation at international standards-setting bodies such as the
International Telecommunications Union (ITU), which establishes
international standards that are fundamental to the operation for
today's information and communications technology networks. In the
upcoming fall 2022 ITU Plenipotentiary Conference, two candidates, one
from the United States and one from Russia, are running for the
position of ITU Secretary General, and represent fundamental
differences in their views on digital governance.
What is the Administration doing to ensure that the United States
is represented not only in top-level positions at standard setting
bodies such as Secretary General, but also at the ITU's lower-level
workshops, seminars, and study groups, which is where recommendations
and resolutions are sent up to the larger ITU body for votes and where
China currently sends the largest delegations?
Answer. Responsible, forward-looking, and transparent leadership of
the ITU and other standards bodies is vital to the U.S.
telecommunications industry and our national security and foreign
policy interests. Nominating Doreen Bogdan-Martin as ITU Secretary-
General is a critical step towards ensuring strong leadership at the
ITU. Ms. Bogdan-Martin has spent the last 28 years in the ITU, working
her way up the ranks, demonstrating how support for candidates at all
levels is a winning strategy. I will continue to work with our
colleagues from the Bureau of International Organization Affairs to
ensure continued coordination with likeminded partners in promoting
leadership candidates at all levels to promote fair, transparent, and
consensus-based approaches to the ITU's work on spectrum, standards,
and telecommunications development. The Department, recognizing that
vote splitting contributes to undesirable results, coordinates with
allies and partners to maximize our chance of electoral victory.
Question. The Quad: Joint Investment in Artificial Intelligence
(AI): During the Quad leaders' summit in May this year, the Quad
reaffirmed its interest in collaborating on critical and emerging
technologies such as artificial intelligence (AI). However, similar to
the challenges we face with our European partners, differences on
national data sharing and data privacy laws may stymie our joint
initiatives.
What other obstacles to collaboration do the United States and its
Quad partners face in collaborating on artificial intelligence R&D,
developing Open Radio Access Network (O-RAN), and bolstering
cybersecurity?
Answer. This Administration remains committed to international
cooperation on critical and emerging technologies, such as artificial
intelligence (AI), Open Radio Access Networks (Open RAN), and
cybersecurity. Harmonizing regulatory and investment policies across
four major economies is a complicated and time-consuming effort.
However, all members of the Quad continue to pursue our shared
objectives--as demonstrated by the Memorandum of Cooperation on 5G
Supplier Diversification and Open RAN recently signed by all Quad
partners. The CHIPS Act is a practical measure that provides funding to
will support our international efforts. We also appreciate
Congressional efforts to streamline DFC and EXIM funding requirements.
Question. Under Secretary Fernandez, you traveled to Zambia in
June. How is the United States helping President Hichilema (Hee-chee-
LAY-muh) as he attempts to address debt to China that was accrued by
his predecessor's administration?
Answer. We continue to engage the People's Republic of China (PRC)
and other bilateral creditors of Zambia through the G20 Common
Framework for Debt Treatments beyond the Debt Service Suspension
Initiative (DSSI) as we negotiate a coordinated debt treatment for
Zambia. This process, combined with Zambia's IMF program and ambitious
fiscal and structural reforms, will restore economic stability and debt
sustainability. On July 18, official creditors--including the PRC and
the United States--provided financing assurances to the IMF. This
action allowed for approvals of a new IMF program for Zambia and
unlocked further financing from the World Bank. Work remains for the
creditor committee to agree on technical aspects of the debt treatment,
but we will continue to press all parties to reach a mutual agreement
that will expeditiously resolve Zambia's debt crisis.
______
Responses of Ms. Enoh T. Ebong to Questions
Submitted by Senator Robert Menendez
Question. USTDA Development Finance: U.S. industry is stellar at
developing the next generation of technologies--such as offshore wind
in New Jersey--to mitigate climate change. The market has never been
stronger.
How is USTDA working to promote U.S. businesses and manufacturers,
while simultaneously helping our partners meet their energy needs
abroad?
Answer. USTDA's role is to support the development of sustainable,
high-quality infrastructure in developing and middle-income economies,
while creating U.S. export opportunities related to the infrastructure
projects that we support. The Agency's toolkit includes project
preparation and partnership-building activities.
U.S. companies carry out the Agency's project preparation
activities, which include the definition of technical and design
options for infrastructure projects. This is critical to U.S.
competitiveness and the deployment of U.S. technologies to priority
infrastructure projects in emerging economies. These activities are
also essential for structuring infrastructure projects that can be
financed, implemented, and sustained.
USTDA has a very robust clean energy and climate portfolio. As of
the end of FY 2021, USTDA had more than 80 low-emissions or emissions-
neutral energy activities underway, reflecting the mutual priorities
that U.S. industry and their overseas project sponsors have
established. These activities support the deployment of a wide range of
cutting-edge U.S. technologies, including renewable energy with energy
storage, smart grids, and advanced nuclear generation, for example.
USTDA has accelerated this work under its signature climate
initiative, the Global Partnership for Climate-Smart Infrastructure,
which President Biden launched in April 2021. A little more than 1 year
later, USTDA has funded more than 30 new project preparation and
partnership-building activities around the world that are designed to
help unlock more than $64 billion in climate finance and $12 billion in
U.S. exports of low-carbon and climate-resilient solutions in the
energy and transportation sectors.
USTDA is also actively contributing to the Partnership for Global
Infrastructure and Investment, which President Biden and the G-7
leaders launched in June, to deliver game-changing projects to close
the infrastructure gap in emerging economies. USTDA is part of a whole-
of-government approach including project preparation, mobilizing
finance, and building partnerships with the private sector to support
the development of billions of dollars of high-quality, sustainable
infrastructure, especially in the clean energy sector.
In Morocco, a USTDA-funded study contributed to the development of
the world's largest concentrated solar power plant, the 510 MW Noor/
Ouarzazate Solar Power Station, which became operational in December
2021. USTDA's study supported the third phase of the project, focusing
on the development of a 150 MW utility-scale power tower system, which
subsequently obtained $877 million in climate financing. This plant is
expected to reduce carbon emissions by an estimated 760,000 tons per
year while enhancing regional energy security. A U.S. company supplied
cooling systems to the project.
In Eastern Europe, USTDA is building on its legacy of promoting
energy security through project preparation. In Lithuania, a USTDA-
funded study led to the development of the Klaipeda liquefied natural
gas (LNG) import terminal, which began operations in 2014 and helped
secure the country's energy independence from Russia. This investment
is facilitating a significant volume of U.S. LNG exports to Lithuania,
which has become a regional LNG hub. The country is now supplying gas
to Estonia and Latvia, and recently opened a new pipeline connection to
Poland, enabling the countries to share gas. USTDA's investment in the
Klaipeda LNG import terminal was a mere $826,000, whereas the return on
investment to European and American national security interests is
incalculable.
USTDA is currently working with our U.S. industry and Eastern
European partners to advance the region's energy security using
innovative clean U.S. technology. In particular, USTDA is laying the
groundwork for the deployment of U.S. small modular reactors (SMR) in
Romania, where a USTDA-funded siting study and technology assessment
led to Romania's selection of Oregon-based NuScale Power, LLC, to build
an SMR plant on the site of a shuttered coal-fired power plant. This
would be the first deployment of U.S. SMR technology to Europe. USTDA
is also engaged in a licensing gap analysis to facilitate the
introduction of SMR technologies to Ukraine, and stands ready to work
with the country to support their recovery and meet their energy and
infrastructure needs in the years to come.
Question. Indo Pacific Strategy and Digital Infrastructure: The
Indo-Pacific Strategy released by the Biden administration this
February contains a core line of effort that seeks to support ``open,
resilient, secure, and trustworthy technologies'' in the Indo-Pacific
region.
How has the USTDA prioritized projects in the Indo-Pacific region
to promote ``secure and trustworthy digital infrastructure'' as
outlined in the Indo-Pacific Strategy? What, if any, coordination is
being done so that USTDA's efforts in the Indo-Pacific region are
aligned with the Indo-Pacific Strategy?
Answer. USTDA was closely involved in the development and drafting
of the Indo-Pacific Strategy and coordinates closely with the National
Security Council (NSC) and interagency partners to ensure the Agency's
programming is well aligned with the Strategy. This coordination
includes regular participation in NSC and interagency meetings,
providing updates on the Agency's program in the Indo-Pacific, and
developing projects that advance U.S. interests for key engagements in
the Region, including the ASEAN and the Quad forums.
USTDA prioritizes digital infrastructure projects that promote U.S.
technology, allowing overseas partners to choose secure and trustworthy
U.S. solutions.
In addition to feasibility studies, technical assistance, and pilot
projects, USTDA's toolkit also includes partnership-building activities
that connect overseas project sponsors to U.S. financiers, suppliers,
and regulatory and policy experts, with the goal of sharing knowledge,
building relationships, and finding solutions for the challenges that
our partners face.
USTDA has utilized Indo-Pacific Strategy transfer funding from the
U.S. Department of State to expand its portfolio of projects in a wide
range of digital infrastructure areas including connectivity, smart
cities, smart grid, 5G and next generation networks, cybersecurity,
disaster response and public safety applications, and cloud computing
projects. Pursuant to the Indo-Pacific Strategy, USTDA's activities are
designed to promote secure, trustworthy, resilient, openness, and
interoperable digital infrastructure.
All of these engagements have facilitated the growth of a robust
portfolio of digital infrastructure activities that are aligned with
the Administration's Indo-Pacific Strategy.
In the area of 5G and next generation networks, USTDA has leveraged
its training grant tool to support U.S. companies facing unfair
competition in the digital infrastructure space. In the Philippines,
Chinese Government-backed Huawei recently made an offer to help Smart
Communications, Inc. (Smart), a subsidiary of the Philippines' largest,
fully integrated telecommunications company PLDT Inc., advance its
plans to expand 5G services to 96 percent of the country's population.
USTDA offered training assistance to Smart if it selected U.S.-based
Cisco Systems as its technology supplier. USTDA's offer helped Cisco
win this major contract, which will deliver better cloud-based products
and services to Smart's customers across the Philippines while training
Smart's staff on U.S. technology and best practices in the digital
infrastructure space.
USTDA has also funded a series of partnership-building activities
to introduce Indo-Pacific project sponsors to the policies and trusted
U.S. technology partners for their digital infrastructure priorities.
For example, USTDA funded a reverse trade mission to the United States
for Malaysian telecommunications leaders to meet U.S. technology
providers and become more familiar with U.S.-based 5G ecosystems. USTDA
also hosted workshops to advance 5G and Open Radio Access Network (O-
RAN or Open RAN) solutions in Indonesia; promote next generation Wi-Fi
technology in Thailand by adopting best practices for 6 GHz spectrum
band allocation; and support cybersecurity and data protection
standards in Thailand.
Under the Indo-Pacific Strategy, USTDA has also developed a robust
portfolio of smart cities activities that are a critical component of
U.S. Government interagency engagement under the U.S.-ASEAN Smart
Cities Partnership. USTDA's ongoing smart city projects across the
region include technical assistance for Iskandar, Malaysia, to develop
a comprehensive information technology system that will allow this
vital trade and commercial hub of more than 1.8 million people to
leverage advanced data analytics to enhance regional planning,
development, and management. USTDA is also supporting smart cities in
Vietnam, including assistance to help develop an eco-friendly smart
community for more than 180,000 residents and an Integrated Operations
Center (IOC) for Ho Chi Minh City that would help the city manages its
daily operations through advanced data analytics. These smart city
activities advance secure and trustworthy solutions and best practices
for urban infrastructure challenges in Southeast Asia.
USTDA's digital infrastructure portfolio in the Indo-Pacific also
includes technical assistance to support the modernization of the
Central Bank of Solomon Islands' ICT infrastructure; a roadmap to help
Bangladesh implement a smart grid; technical assistance to support the
migration of the Philippines' public sector to cloud computing; and
technical assistance to help modernize and integrate the core IT
systems of the Philippines Bureau of Internal Revenue. In sum, USTDA's
program is directly aligned with the goals of the Administration's
Indo-Pacific Strategy.
______
Responses of Mr. Andy P. Baukol to Questions
Submitted by Senator Robert Menendez
Question. IDB Invest Capital Increase: Mr. Baukol, as I mentioned
in my opening statement, I have been working for the last 2 years to
push for additional resources for the Inter-American Development Bank.
Given the tremendous impact of the pandemic on Latin America and the
Caribbean and the myriad challenges that the region faces today, I was
pleased to see that President Biden expressed support for a capital
increase for IDB Invest, the IDB's private sector lending arm, while he
was at the Summit of the Americas. I also appreciate the increasing
support the Treasury Department has provided for my legislation.
Can you please talk about the importance of the capital increase
for IDB Invest as part of our economic statecraft in the Western
Hemisphere and lay out next steps in this process?
Answer. The Inter-American Development Bank Group plays an
important role in promoting strong, sustainable, inclusive growth in
Latin America and the Caribbean, and in boosting cooperation between
the United States and the region. And we thank you Senator for your
strong support for the region and for the IDB.
The United States is committed to promoting democratic governance
and transparency, and supporting policy reform, growth, and sustainable
and inclusive development throughout Latin America and the Caribbean.
Treasury has engaged vigorously with other shareholders and IDB
management to secure IDB management's commitment to implement a set of
priority reforms to improve the relevance and development impact of the
IDB in the region.
At the Summit of the Americas, President Biden also indicated
openness to a possible capital increase for the private sector arm of
the IDB--IDB Invest--to promote private sector-led growth in the
region. Sustainable growth in the region requires a vibrant private
sector that can play a greater role in developing quality
infrastructure, particularly for climate, equality, digital technology,
food security and health.
Treasury staff are currently engaging with IDB Group management and
other shareholders in assessing the Group's proposed reform strategy
and timeline, as well as IDB Invest's new business model--to include
resource implications. Treasury staff will be happy to keep you and the
Committee updated on the work as it develops.
Question. G20 Common Framework: Zambia became the first country to
default on its foreign loans during the pandemic era. Roughly a third
of its debt is owed to China. Now, China is co-chair of the creditor
committee overseeing Zambia's debt restructuring under the G20 Common
Framework. China is not a member of the Paris Club, and it historically
has pursued limited debt restructuring through opaque, bilateral
processes.
Do we view China's role as co-chair of the creditor committee
overseeing Zambia's debt as positive or negative? Does this suggest
that China wants to play a more productive, cooperative role in global
debt issues writ large?
Answer. To date, sovereign debt restructuring under the Common
Framework has moved much more slowly than we would like. We have been
concerned about delays and the ability of creditors to provide timely
assistance to countries requesting debt treatments. This is due in
large part to non-Paris Club creditors like China being unwilling to
move quickly to provide financing assurances or to finalize debt
treatments.
In the Zambia case, the Creditor Committee was formed 6 months
after Zambia reached staff-level agreement with the IMF on a reform
program in December 2021, which delayed the process and made Zambia's
difficult situation worse. After the Creditor Committee finally formed
in June, the creditors agreed to provide financing assurances in July.
This will allow the IMF to bring the program to the Executive Board by
September.
In my view, China's role as co-chair in the Common Framework
process for Zambia led China to provide its assent to the financing
assurances needed for the IMF program to move forward. However, it
remains to be seen if China's role as co-chair will facilitate
agreement on debt restructuring for Zambia, including on China's loans.
It is also unclear if China will play a more productive and cooperative
role in global debt issues more broadly.
Treasury, together with our partners at State, will continue to
play a constructive role in the Zambia Creditor Committee and work
through the G20, G7, and Paris Club to push to quickly provide
assistance to low-income and middle-income countries in debt distress.
Question. What is the United States doing to engage with China on
issues related to issuing, restructuring, and relieving debt to
developing countries?
Answer. Treasury, together with our partners at State, is working
with like-minded countries in the G7, G20, and Paris Club, as well as
bilaterally, to pressure China to live up to its commitments under the
Common Framework. We also continue to press the IMF and World Bank
leadership to directly engage with the Chinese leadership on debt-
related issues. In addition, we continue to push for greater debt
sustainability and transparency in various international fora,
particularly at the IMF and the World Bank. Finally, we continue to
advance Treasury's strategy and efforts to limit the risk of China
getting repaid at the expense of other creditors.
______
Responses of Mr. Jose W. Fernandez to Questions
Submitted by Senator James E. Risch
Question. What is the State Department doing to provide training
and other opportunities to retain experienced economic officers, so
that we do not lose them to the private sector?
Answer. The State Department strives to ensure our economic
officers have the tools they need for successful and rewarding service
in a changing global environment. The Foreign Service Institute (FSI)
offers a wide range of training, including the foundational ``Economic
Tradecraft'' course as well as over two dozen specialized courses on
commercial diplomacy, energy diplomacy, environment and global health
policies, emerging and cyber technology, trade agreements, intellectual
property rights, digital economies, terror finance and sanctions, among
others. A full list of FSI courses is publicly available at the
following link: https://fsitraining.state.gov/. FSI has also expanded
commercial diplomacy training for senior leadership and is completing a
needs-based assessment for climate policy and additional commercial
diplomacy training to inform the development of future curricula.
Separately, the Global Talent Management (GTM) Bureau's
Professional Development Unit offers many detail assignments to
organizations and federal agencies outside the Department of State.
These include opportunities in Congressional offices and committees and
other USG agencies such as USTR, Commerce, Treasury, and the
International Development Finance Corporation. Foreign Service
employees, particularly Economic Officers, are also offered 1-year
fellowships in private sector companies, allowing them to acquire
first-hand knowledge of U.S. business operations. Likewise, many may
also take advantage of numerous masters-conferring training
assignments. All these opportunities aim to enable employees to expand
their skills and share their expertise.
GTM's Retention Unit (RU) is taking a holistic look at retention
issues across our workforce. The unit is analyzing data from a wide
variety of sources, including from Exit Surveys, Exit Interviews, and
focused discussions with a wide range of the workforce, including
economic officers. The RU's extensive data collection and analysis
effort, which includes both quantitative and qualitative data, will
help pinpoint retention challenges and inform the Department's first
comprehensive retention strategy.
Question. The Department recently announced the ``Minerals Security
Partnership'' to work with partners on critical mineral supply chains.
This is an important start, but there is more to be done.
Do we need a more formal legal mechanism that creates ways to
jointly pool financial and other resources to bid for, secure, and
develop these minerals located in third party countries?
Answer. During the process of establishing the Minerals Security
Partnership (MSP), my team consulted with relevant bureaus, offices,
and interagency partners, as well as with our foreign negotiating
partner countries, on the benefits and drawbacks of developing a formal
mechanism for pooling financial and other resources to achieve MSP
objectives. After thorough discussion and analysis, the Department
decided that a less formal approach would allow for greater speed and
flexibility in implementing the MSP. As the initiative evolves, the
Department will continuously evaluate how to improve the mechanism.
Question. What about an agreement to coordinate best practices and
information sharing among partners for developing these resources?
Answer. Under the Minerals Security Partnership (MSP) Terms of
Reference, MSP countries are already sharing information and best
practices for developing robust, reliable critical mineral supply
chains that adhere to high environmental, social, and governance (ESG)
standards. MSP partners are continuously looking at ways to improve the
flow of pertinent information.
Question. The President just announced the Project on Global
Infrastructure and Investment (PGII).
What is PGII's purpose? Is it meant to better use of U.S.
Government resources for strategic competition with our adversaries on
infrastructure?
Answer. PGII aims to meet the infrastructure needs of low- and
middle-income countries--and to do so in such a way that advances our
economic and national security goals, including with regard to
strategic competition with adversaries. As the infrastructure gap
widens and governments seek to deliver for their citizens, many find
themselves at risk of being exploited by other nations. Some of the
leading financing options open to these countries saddle them with
long-term problems such as crushing debt traps and limited development
progress, as donor countries seek to use development finance as a tool
of influence.
PGII is designed to better enable the U.S. to compete by offering
viable alternatives to these exploitative options. PGII will deliver a
more coordinated and comprehensive approach to international
infrastructure investment by 1) better aligning and applying U.S.
Government resources towards these strategic ends, and 2) marshaling a
wider coalition with further resources to join us in these efforts,
including from G7 and like-minded partners, multilateral development
banks, and the private sector. With these resources, we will focus our
investments across the four PGII pillars, as well as focus on hard
infrastructure and transportation projects, like railroads and ports,
that are key to unlocking development progress and which may have
outsized strategic impact to the United States. Doing this work
requires tracking and anticipating where countries like the PRC or
Russia are strategically investing, and working to block those deals
and present other credible options to the host country. In partnership
with our allies, the private sector, international financial
institutions, and more, PGII will leverage our combined resources to
provide real development gains while securing our supply chains and
furthering our economic and national security in an increasingly
contested strategic environment.
Question. How will PGII and the E family interact? Is PGII going to
subsume responsibilities of the E family?
Answer. The PGII Special Presidential Coordinator (SPC) interacts
very closely with the E family in order to make PGII a success. Both
entities have distinct roles: the SPC has a coordinating function, both
within the USG and with external partners, whereas E family bureaus
have management functions, which are longstanding and well established.
These two complementary roles will enable the SPC and E family to work
together to maximize the strategic impact of USG approaches, including
by ensuring better coordination of E efforts with other departmental
and foreign counterparts.
______
Responses of Mr. Andy P. Baukol to Questions
Submitted by Senator James E. Risch
Question. What steps is the Administration taking--working with the
IMF, World Bank, the OECD, and our friends and allies--to reveal the
scope of and curb predatory lending by China?
Answer. Treasury is working with our like-minded partners in the
G7, G20, and Paris Club, as well as bilaterally, to pressure China to
live up to its commitments under the Common Framework. Treasury is also
continuing to press the IMF and World Bank leadership to directly
engage with the Chinese leadership on debt-related issues. In addition,
Treasury is continuing to push for greater debt sustainability and
transparency in various international fora, particularly at the IMF and
the World Bank. Finally, Treasury continues to advance our strategy and
efforts to limit the risk of China getting repaid at the expense of
other creditors.
Question. In 2021, the World Bank discontinued the ``Doing
Business'' report after credible allegations emerged that World Bank
leadership manipulated the outcome to make China look better.
Does the Administration support bringing back the ``Doing
Business'' report? Or is it officially dead as China wanted?
Answer. We believe the World Bank should continue to provide tools
and research to analyze and compare countries' investment climates,
which can help spur private entrepreneurship and job creation. We are
working with the Bank and other shareholders on developing a suitable
replacement for the Doing Business report focused on what constitutes a
sound business enabling environment. A sound investment climate is key
to attracting private investment, which in turn can drive job creation
and spur growth.
Further, in response to audits of the data manipulation, we are
closely tracking the stronger controls for data integrity that the
World Bank has already started implementing. We will continue
emphasizing the need to implement strong safeguards for Doing Business'
successor report, the Business Enabling Environment report, as well as
other World Bank data collection and reporting.
______
Responses of Mr. Jose W. Fernandez to Questions
Submitted by Senator Jeanne Shaheen
Question. Russia, and China, are leading successful disinformation
campaigns in the Horn of Africa, in the Middle East, in Latin America
and in other regions vulnerable to food insecurity to push their
narratives that the U.S. is to blame for grain shortages.
What evidence of these disinformation campaigns, and their
effectiveness, is there in Eastern Europe, Africa and Latin America,
and what specific steps is the U.S. taking to implement policy
responses to this disinformation threat?
Answer. Russia and the People's Republic of China (PRC) are engaged
in concerted campaigns to spread disinformation about the cause of food
insecurity around the world. The Department is analyzing how successful
these narratives are, working with like-minded partners to counter
them, and using research to inform our messaging. In August, Secretary
Blinken, Ambassador Linda Thomas-Greenfield, and I will visit Africa to
amplify our messages on food security. Where appropriate, the
Department is publicly exposing disinformation efforts. For example,
the Department's Global Engagement Center (GEC) published a Kremlin
food insecurity bulletin on its Disarming Disinformation webpage, which
the media amplified and the Department translated into nine languages.
Question. Disinformation campaigns threaten U.S. diplomacy,
development and trade around the world, both in our efforts to combat
food insecurity and in other sectors.
Why has the West, including the U.S., had such a difficult time
responding to and negating disinformation? How critical is it to get
accurate information out about the work of the United States? How is
your office coordinating with the State Department's Global Engagement
Center to execute a plan to respond to disinformation threats?
Answer. Highlighting the positive impact of U.S. support of and
engagement with communities globally is central to countering
disinformation and propaganda. We collaborate across the Department,
interagency, and with international partners and allies to proactively
address information manipulation campaigns that undermine U.S.
interests abroad, and we continuously refine our messaging and
coordination mechanisms to improve their nimbleness and effectiveness.
Where appropriate, we expose foreign malign actors' propaganda and
disinformation efforts with the Global Engagement Center (GEC). Related
to the People's Republic of China (PRC), we work closely with GEC to
address Beijing's information manipulation efforts on everything from
critical resources to untrusted vendors in 5G networks.
______
Responses of Ms. Enoh T. Ebong to Questions
Submitted by Senator Jeanne Shaheen
Question. Russia, and China, are leading successful disinformation
campaigns in the Horn of Africa, in the Middle East, in Latin America
and in other regions vulnerable to food insecurity to push their
narratives that the U.S. is to blame for grain shortages.
What evidence of these disinformation campaigns, and their
effectiveness, is there in Eastern Europe, Africa and Latin America,
and what specific steps is the U.S. taking to implement policy
responses to this disinformation threat?
Answer. The U.S. Trade and Development Agency (USTDA) is deeply
concerned about the Chinese and Russian disinformation campaigns
pertaining to grain shortages in emerging economies. While we are aware
of these campaigns and their serious implications, the Agency and its
main stakeholders have not directly faced these campaigns in the course
of our regular business. Nonetheless, USTDA's work in the agribusiness
sector can provide examples of U.S. foreign assistance activities that
could help counter some of the disinformation.
USTDA's mission is to help companies create U.S. jobs through the
export of U.S. goods and services for priority infrastructure projects
in emerging economies. The Agency places particular emphasis on vital
economic sectors including clean energy, information and communications
technology, transportation, healthcare infrastructure, and
agribusiness.
USTDA's focus on agribusiness includes the export of U.S.
irrigation, production, and storage technologies, in support of the
food security objectives of our overseas partners, who are primarily
focused on growing food domestically. The Agency's portfolio is
flexible enough to accommodate a variety of agribusiness activities
that support U.S. exports and host country development impacts.
For example, in 2021 USTDA funded a feasibility study in Cote
d'Ivoire to support the development of a port-based grain terminal to
store bulk U.S. exports of rice and grains for local mill processing.
This project has the potential to open a new market for U.S. exports of
agricultural products while providing food for local consumption and
export to neighboring countries. Also in 2021, USTDA funded a
feasibility study in neighboring Ghana to support the development of
temperature-controlled logistics infrastructure for the safe
distribution of food. Support for these kinds of activities
demonstrates the U.S. commitment to food security for our partners in
emerging economies and can help counter the false narrative that the
United States is to blame for grain shortages.
Of the Agency's five priority sectors, agribusiness is the
smallest, as it is challenging to identify commercially viable projects
of a scale similar to those in USTDA's clean energy, transportation,
and information and communications technology portfolios. USTDA has a
statutory requirement to support infrastructure projects with ``special
emphasis on economic sectors with significant United States export
potential.'' As a result, USTDA is continually balancing demand for its
program among different economic sectors to ensure it is best achieving
its statutory mission.
Question. Disinformation campaigns threaten U.S. diplomacy,
development and trade around the world, both in our efforts to combat
food insecurity and in other sectors.
Why has the West, including the U.S., had such a difficult time
responding to and negating disinformation? How critical is it to get
accurate information out about the work of the United States? How is
your office coordinating with the State Department's Global Engagement
Center to execute a plan to respond to disinformation threats?
Answer. USTDA agrees that it is absolutely critical to communicate
accurate information about the work of the United States and to respond
forcefully to disinformation threats. USTDA understands the State
Department's Global Engagement Center plays a leading role in
coordinating the U.S. Government's response to foreign disinformation.
Our Agency works across the U.S. Government, including with the State
Department's Bureau of Global Public Affairs, Office of International
Media Engagement, to ensure accurate messaging related to our trade and
development related results in emerging economies around the world.
One recent example of this effort took place at the U.S.-Africa
Business Summit (Summit) in Marrakech, Morocco, which was hosted by the
U.S.-based Corporate Council on Africa. The Summit included public and
private sector stakeholders who are committed to building stronger U.S.
and Africa trade, investment, and commercial ties. It was attended by
several high-level African officials, including heads of government,
numerous ministers, leading global financiers of infrastructure, and
African and U.S. business leaders.
The U.S. Government was heavily engaged in the Summit, which was an
important vehicle for advancing the Prosper Africa initiative to
increase trade and investment between African nations and the United
States. I was proud to represent USTDA and the U.S. Government along
with others including Alice P. Albright, Chief Executive Officer of the
Millennium Challenge Corporation.
USTDA and other participating agencies closely coordinated with
USAID's Prosper Africa Secretariat and the State Department's Africa
Regional Media Hub to ensure accurate, consistent messaging about the
U.S. Government's trade and development efforts across the continent.
The coordination included staff from the White House, U.S. Embassy
Rabat, and 10 U.S. Government agencies.
The U.S. Government's coordinated messaging efforts spurred more
than 400 international articles with a potential media reach of more
than 200 million print readers across Africa and around the world. An
early analysis also suggests that the U.S. Government's 300 social
media posts pertaining to the Summit had a reach of nearly 10 million.
The Africa Regional Media Hub's whole-of-government approach to
communications is an excellent example of how to elevate the work of
all U.S. Government agencies and communicate positive messages
regarding our results and impact so that the United States can remain
the development partner of choice to emerging economies around the
world.
______
Responses of Mr. Andy P. Baukol to Questions
Submitted by Senator Jeanne Shaheen
Question. Russia, and China, are leading successful disinformation
campaigns in the Horn of Africa, in the Middle East, in Latin America
and in other regions vulnerable to food insecurity to push their
narratives that the U.S. is to blame for grain shortages.
What evidence of these disinformation campaigns, and their
effectiveness, is there in Eastern Europe, Africa and Latin America,
and what specific steps is the U.S. taking to implement policy
responses to this disinformation threat?
Answer. The Treasury Department is actively working to counter
disinformation from Russia and other foreign adversaries, particularly
about Russia's unprovoked and unjustified war against Ukraine and the
spillover effects of the war. Treasury has diligently worked to counter
Russian disinformation that incorrectly claims Western sanctions are
responsible for growing food insecurity. In reality, Putin's war has
strangled food and agriculture production, and he has used food as a
weapon of war by destroying agricultural storage, processing, and
testing facilities; stealing grain and farm equipment; and effectively
blockading Black Sea ports. Treasury has partnered with the State
Department to clarify that agricultural commodities, agricultural
equipment, and medicine are not the target of U.S. sanctions on Russia,
including through a fact sheet from Treasury's Office of Foreign Assets
Control (OFAC) and issuance of a broad general license.
OFAC has sanctioned Russian disinformation outlets, and individuals
and entities that support the Kremlin's global misinformation,
disinformation, and propaganda operations. Similarly, OFAC has
designated Iranian individuals and entities that have disseminated
disinformation. Treasury would recommend that the Senator engage with
the State Department or the Office of the Director of National
Intelligence for further information on the Administration's response
to disinformation campaigns.
Question. Disinformation campaigns threaten U.S. diplomacy,
development and trade around the world, both in our efforts to combat
food insecurity and in other sectors.
Why has the West, including the U.S., had such a difficult time
responding to and negating disinformation? How critical is it to get
accurate information out about the work of the United States? How is
your office coordinating with the State Department's Global Engagement
Center to execute a plan to respond to disinformation threats?
Answer. The Treasury Department is actively working to counter
disinformation from Russia and other foreign adversaries, particularly
about Russia's unprovoked and unjustified war against Ukraine and the
spillover effects of the war. Our work with the State Department
includes clarifying that agricultural commodities, agricultural
equipment, and medicine are not the target of U.S. sanctions on Russia,
including through a fact sheet from Treasury's Office of Foreign Assets
Control (OFAC) and issuance of a broad general license. In addition,
OFAC has sanctioned Russian disinformation outlets, and individuals and
entities that support the Kremlin's global misinformation,
disinformation, and propaganda operations. Similarly, OFAC has
designated Iranian individuals and entities that have disseminated
disinformation. The Administration will continue to pursue avenues to
disrupt and counter disinformation and misinformation propagated by
Russia and other foreign adversaries.
______
Responses of Mr. Jose W. Fernandez to Questions
Submitted by Senator Mitt Romney
Question. The Administration is prioritizing the adoption of
cleaner electric vehicles, yet battery production for EVs is located in
China.
How does this administration plan to make sure that its climate
goals, in particular EV adoption, is not dependent on Chinese
production lines?
Answer. Recent and proposed legislation--including the Inflation
Reduction Act of 2022, the CHIPS and Science Act of 2022, and the
Bipartisan Infrastructure Law (BIL)--contain significant incentives to
support the development of a domestic manufacturing base for EV
batteries and precursor materials. These incentives should position the
United States to meet domestic demand for batteries with domestic
production. To complement our domestic efforts, we are working with key
partners and allies to develop secure, diverse, and resilient battery
supply chains located outside the People's Republic of China.
Question. How does the Administration view the order of operations
for transitioning to EV adoption? The outward push has been on charging
stations and tax credits. Is it fair to say we're much farther ahead on
the final products than we are on battery production and supply chain
independence?
Answer. Tax credits for electric vehicle adoption play an important
role in accelerating consumer purchasing behavior as the cost of EVs
continues to decline. Tax credits are an important means of encouraging
U.S.-based battery production to expand and enable U.S. companies to
effectively compete with low-cost producers, such as in the People's
Republic of China. We are committed to using our diplomatic
engagements, including through the Minerals Security Partnership (MSP),
to drive expansion and diversification of the global supply chain for
batteries to complement our efforts to increase domestic production.
Question. If we transitioned 50 percent of the cars and trucks on
the road to being EVs by 2030, how much of this would be a result of
lithium and other critical mineral manufacturing in China?
Answer. Critical mineral supply chains are expected to expand and
diversify rapidly in the next decade and beyond as more countries,
including the United States, prioritize critical minerals production,
processing, and recycling. Through the Minerals Security Partnership
(MSP), the Department of State is leading the U.S. Government's
international efforts to ``friendshore'' critical mineral supply chains
that are essential to electric vehicle battery production. This will
diversify these supply chains and decrease the PRC's ability to
dominate them. EV battery chemistries are evolving rapidly and
uncertainty exists about future requirements for various minerals. This
may be advantageous in establishing new, secure critical mineral supply
chains.
______
Responses of Mr. Jose W. Fernandez to Questions
Submitted by Senator Bill Hagerty
Question. Global Energy Crisis & American LNG: Do you support LNG
infrastructure projects, such as the East Med pipeline and the Mid-
Catalonia pipeline, which could carry American LNG from Lisbon,
Portugal to the European continent? The Trump administration repeatedly
warned our European allies and partners about their energy dependence
on Russia. Unfortunately, many Western European countries chose to
depend on Russian natural gas. A few days, Vladimir Putin threatened to
cut off approximately 20 percent of Russian natural gas exports to
Europe. In response, many European governments are racing to secure
fossil fuel from alternative sources, including from Nigeria and
Mozambique. Yet, many of these same European governments have pursued a
green agenda that has made it difficult for these developing countries
to finance the development of their fossil fuel energy production. Your
statement discussed some measures that the Biden administration
believes it has taken ``to enhance Europe's energy security'', and you
described the Administration's efforts as ``an unstated success'' in
your back-and-forth with Senator Barrasso. It is also clear that the
Biden administration's measures are not sufficient to obviate Putin's
energy coercion threats. The United States could significantly assist
these European governments in improving energy security, but that would
require the Biden administration to change course and support the
global infrastructure to handle natural gas, including American
exports.
Answer. Europe's efforts to reduce dependence on Russian fossil
fuels are critical to regional and national security. The need to
promote near-term solutions in parallel with longer-term clean and
renewable energy projects is clear. Since December 2021, the United
States has been the largest LNG supplier to the EU and the UK. From
January to April 2022, we exported 74 percent of our LNG to Europe,
compared to a 2021 average of 34 percent. Projects like the Eastern
Mediterranean Gas Pipeline--discussed for many years but not yet
built--would not contribute to European energy security in the near-
term. While the specifics of any pipeline project are unique, decisions
related to financing are for the EU and potential investors to make.
Question. The Blue Dot Network and the Clean Network Initiative:
Can you provide updates on the status of the Blue Dot Network and the
Clean Network Initiative in the Biden administration? During your
confirmation process, you and I discussed the continuation of the Blue
Dot Network and the Clean Network Initiative that both began under the
Trump Administration.
Answer. The Blue Dot Network (BDN) can help raise infrastructure
standards globally. Under a State Department contract, and in
consultation with a wide range of stakeholders, the OECD developed
options for a certification methodology and assessment framework for
BDN. The next phase of work with OECD will calibrate the BDN
methodology through pilot projects.
The Clean Network Initiative helped raise awareness of 5G security
globally. New, more affordable approaches like Open RAN, allow us to
pivot to advocating for open, interoperable, reliable, and secure
communications technology infrastructure through the National Strategy
to Secure 5G and active diplomatic engagement with allies and partners.
______
Responses of Mr. Andy P. Baukol to Questions
Submitted by Senator Bill Hagerty
Question. Fossil Fuel Energy at the Multilateral Development Banks:
At the start of the Biden administration, the Treasury Department
issued a ``Guidance on Fossil Fuel Energy at the Multilateral
Development Banks.'' This guidance instructs the U.S. Executive
Directors to oppose any project related to coal, any oil-based project,
upstream natural gas projects, and midstream and downstream natural gas
projects--unless they meet strict conditions, and to oppose any policy
reforms that would support fossil fuel activities. This guidance is
preventing developing countries from getting much-needed capital to
expand their energy infrastructure, causing them to seek funding from
alternative sources such as China. However, as President Biden's recent
trip to Saudi Arabia showed, the current global energy crisis can only
be alleviated by more energy production, particularly fossil fuel
production.
Will the Treasury Department rescind the ``Guidance on Fossil Fuel
Energy at the Multilateral Development Banks,'' which will allow
developing countries to have access to the capital needed to bolster
their energy infrastructure?
Answer. Treasury's guidance urging the MDBs to limit their support
of fossil fuel projects is consistent with the Biden-Harris
administration's approach towards supporting energy security and more
sustainable growth. Importantly, the guidance includes some exceptions,
with a focus on low-income countries, that would allow the MDBs to
support some fossil fuel projects where there are no viable energy
alternatives. Treasury continues to work with MDB management to help
developing countries expand energy access and energy security in as
clean and sustainable a manner as possible. This includes investments
in renewable energy, policy engagement to unlock opportunities for
private sector financing, and investments in innovations related to
battery storage and other new, American-engineered technologies.
Treasury also works in areas of bilateral economic diplomacy to support
vulnerable countries' energy and climate mitigation needs, with a focus
on eliminating barriers to financing sustainable energy projects.