Don't Clear-Cut the Forest Of Corporate Subsidies
"Enough is enough, and too much stinks," my grandmother used to say when talking about government taxation of her meager Social Security and state-issued Supplemental Security Income checks once a month. The same can be said for plans of the "Stop Corporate Welfare" coalition, which proposes to eliminate a number of government programs that provide subsidies for American corporations, especially in the area of international trade.
There is much to be reformed in the way of US government subsidies, and many, if not most, of the likely targets are those that inure to the benefit of large corporations with deep pockets. But before congressional reformers become too intoxicated with their power, they should lay down their budget-cutting axes long enough to take a broader view of what is at stake.
For programs in international affairs such as the Overseas Private Investment Corporation (OPIC) and the International Monetary Fund's General Agreements to Borrow and its Structural Adjustment Facility, government support is a sine qua non for worthwhile American participation in developing countries. In more ways than one, these programs provide security, leverage, and guarantees for American companies that the US is committed to trade and investment throughout the globe. As US commitment to foreign assistance declines fiscal year after year because of domestic budgetary pressure, the preservation and expansion of US trade and economic interests become more compelling than ever before.
Beyond this, there is a more fundamental principle at stake: The US can't have it both ways. During the late 1980s and early 1990s, American firms and even the US government put much emphasis on the notion of "global competitiveness." Resources have been devoted to the long-term objective of making US exports competitive and to prying open hitherto closed foreign markets in what was formerly known as the third world. American companies and sympathetic government officials belly-ached about the undue advantage European and Asian companies had over American firms because of the subsidies provided by France, Germany, Great Britain, Japan, Korea, Taiwan, and other governments seeking footholds in foreign markets.
To its credit, the US government responded admirably by creating or empowering a number of specialized agencies and programs to help American companies gain or regain a competitive edge in targeted foreign markets. US exports have grown steadily from $62 billion in 1994 to more than $72 billion in 1996. The Trade and Development Agency, OPIC, and the Market Promotion Program, among others, assisted US companies in financing, marketing, and insuring their products, services, and investments abroad. OPIC supported more than $12 billion worth of projects in 50 countries. In Africa, OPIC supports close to $200 million of US investments that wouldn't happen without such assistance. These programs also help create jobs and economic growth at home. It seems that these are just the types of government-private partnerships and subsidies that the US should be fostering.
Now comes a well-intentioned but slightly misdirected reform movement that threatens to clear-cut the forest of corporate subsidies without regard for preserving the few saplings that make long-term economic sense. Amid the spirit of long-overdue individual welfare reform, Congress has become enamored with its capacity to forge large, bipartisan coalitions. While it has been easy to rally support to eliminate foreign aid and corporate subsidies, Congress hasn't assembled a viable bipartisan spirit on grander issues such as health care, campaign finance, and tort/product liability, where reform is equally compelling.
Another troubling aspect of the reform effort is that it takes the US away from significant international engagement. Large corporations with key interests in emerging markets could go it alone without government support, but why should they? If, as Congress and the president occasionally remind us, a competitive and aggressive trade policy is central to America's national and foreign-policy interests, then such a worthwhile policy objective should not be derailed by short-term political considerations that smack of reform for the sake of reform. A more prudent and compromising approach on the part of the "Stop Corporate Welfare Coalition" would be to target big-ticket demonstration projects and the district-specific pork-barrel projects.
In the interim, if Congress insists on eliminating effective trade enhancement programs, it should be prepared to lose ground in the international marketplace. If those stakes are too high, the US should play by the rules established by its Asian and European competitors, who subsidize and underwrite the export activities of their companies. If we choose to stay in the game, we might as well play to win.
* Adonis Hoffman is a senior associate at the Carnegie Endowment for International Peace in Washington.