“Unleashing the Power of America’s Private Sector”: U.S. Development Policy and Sustainable Development Financing – Opinio Juris

Report on United States Foreign Economic Policy and its Implications for the Sustainable Development Goals

1.0 Introduction: Policy Shifts and Development Financing

Recent shifts in United States foreign economic policy, notably cuts to the United States Agency for International Development (USAID) and proposed taxes on remittances, are creating significant challenges for lower-income countries. These measures constrain essential financial inflows, compelling these nations to increase their reliance on Foreign Direct Investment (FDI). This report analyzes how this forced pivot towards FDI diverges from the diversified financing principles of the 2030 Agenda for Sustainable Development and poses a substantial risk to the achievement of the Sustainable Development Goals (SDGs).

2.0 Impact on Key Sources of Development Finance

2.1 The Role of Remittances, Aid, and FDI

For many lower-income countries, external financial flows are critical for national budgets and economic stability. The primary sources are:

• Official Development Assistance (ODA): Government aid that funds critical infrastructure and services, directly supporting SDG 3 (Good Health and Well-being), SDG 4 (Quality Education), and SDG 6 (Clean Water and Sanitation).
• Remittances: Money sent by migrants that provides a vital lifeline for households, contributing to SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities).
• Foreign Direct Investment (FDI): Cross-border corporate investment intended to establish lasting interest and control in an enterprise.

The curtailment of ODA and remittances forces an over-reliance on FDI, altering the landscape of development finance in a manner inconsistent with the multi-source approach advocated by the 2030 Agenda.

3.0 Foreign Direct Investment and its Conflict with Sustainable Development Goals

3.1 FDI in International Development Frameworks

The Addis Ababa Action Agenda, an integral part of the 2030 Agenda, acknowledges FDI as a potential tool for financing sustainable development. It can facilitate the transfer of technology and know-how, contributing to SDG 9 (Industry, Innovation, and Infrastructure). However, the Agenda also stresses the necessity of diverse financing streams, recognizing the inherent risks of depending solely on FDI.

3.2 Risks of FDI Over-Reliance to SDG Achievement

An enforced dependency on FDI presents direct threats to multiple Sustainable Development Goals. To attract and retain investment, governments may be pressured to adopt policies that undermine sustainable development, including:

1. Erosion of Decent Work (SDG 8): Governments may weaken labor protections, suppress wages, and permit poor working conditions to create a more attractive environment for foreign corporations.
2. Environmental Degradation (SDGs 12, 13, 14, 15): FDI, particularly in extractive industries, can lead to the rapid depletion of natural resources and the relaxation of environmental standards, directly contradicting goals for responsible consumption, climate action, and biodiversity.
3. Increased Inequality (SDG 10): FDI can crowd out domestic investment and concentrate economic power in foreign firms, while tax breaks offered to investors reduce public revenue available for social programs.
4. Neglect of Social Infrastructure (SDGs 3, 4, 6): FDI is typically concentrated in production-oriented sectors like mining and manufacturing, diverting focus and resources away from essential public services such as health, education, and sanitation.

4.0 Analysis of U.S. Policy and the “Project 2025” Agenda

4.1 A Strategic Shift Towards Commercial Interests

The “Mandate for Leadership” agenda (Project 2025) explicitly reframes U.S. development policy as a tool for advancing domestic economic interests. Its stated purpose for USAID is to “promote American prosperity” by expanding markets for U.S. businesses. This strategy aims to “unleash the power of America’s private sector” by using private capital investment as the primary instrument for engagement with lower-income economies. This approach promotes deregulation, tax reductions, and labor reforms in recipient countries, suggesting that the erosion of protections aligned with SDG 8 is an intended outcome, not an accidental byproduct.

4.2 Contradiction with Global Partnerships for Sustainable Development (SDG 17)

This policy framework is in direct opposition to the spirit of SDG 17 (Partnerships for the Goals), which emphasizes international cooperation, fulfillment of ODA commitments, and support for domestic resource mobilization. By transforming development assistance into a mechanism for commercial expansion, the policy undermines the principles of partnership and mutual accountability that are foundational to the 2030 Agenda.

5.0 Case Study: Mozambique

5.1 From Development Aid to Resource Extraction

The situation in Mozambique exemplifies this policy shift in practice. Key developments include:

• Broad cuts to U.S. development aid programs, despite the country facing armed conflict, climate disasters, and disease outbreaks.
• The simultaneous approval of a $4.7 billion U.S. government loan to a fossil gas project operated by a foreign corporation, with contracts awarded to U.S. companies.

5.2 Detrimental Impacts on SDGs

This dual approach has severe consequences for Mozambique’s ability to achieve the SDGs:

• Undermining Climate Action (SDG 13) and Clean Energy (SDG 7): The investment entrenches fossil fuel dependency, directly contradicting global climate goals.
• Threatening Peace and Justice (SDG 16): The gas plant’s operation has been linked to serious human rights abuses, including killings and sexual violence, destabilizing the region and weakening institutions.
• Prioritizing Foreign Profit over Local Welfare: The policy prioritizes U.S. economic interests over the sustainable development, human rights, and environmental well-being of the Mozambican population.

6.0 Conclusion

The reorientation of U.S. development policy from a model based on aid and multilateral cooperation to one centered on promoting FDI serves domestic economic interests at the expense of global development commitments. This shift pressures lower-income countries into a development model that risks increasing inequality, environmental harm, and the erosion of labor rights. This trend runs counter to the integrated and indivisible nature of the Sustainable Development Goals and warrants close scrutiny by the international community to ensure that development financing genuinely supports the principles of the 2030 Agenda.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 1: No Poverty
   • The article discusses financial inflows like foreign aid, which are critical for “poverty alleviation in many lower-income nations.” The reduction of these funds directly impacts efforts to end poverty.
2. SDG 7: Affordable and Clean Energy
   • The case study of Mozambique highlights a “$4.7 billion loan to a fossil gas project.” This investment in fossil fuels is contrary to the goal of promoting clean and sustainable energy.
3. SDG 8: Decent Work and Economic Growth
   • The article extensively discusses how attracting Foreign Direct Investment (FDI) can lead to “weaker labour protections, or relaxed environmental standards or poor working conditions.” It also questions whether FDI truly advances “overall economic growth.” This directly relates to the goal of promoting inclusive and sustainable economic growth and decent work for all.
4. SDG 10: Reduced Inequalities
   • The article addresses policies affecting financial flows between countries, such as cuts to foreign aid for lower-income countries and taxes on remittances. It notes that the 2030 Agenda envisioned “fiscal, wage and social protection policies to achieve greater equality,” which are threatened by the policy shifts discussed.
5. SDG 12: Responsible Consumption and Production
   • The analysis points out that increased reliance on FDI may lead to the “depletion of natural resources,” which is a direct challenge to the goal of ensuring sustainable consumption and production patterns.
6. SDG 16: Peace, Justice and Strong Institutions
   • The Mozambique case study provides a stark example of the negative consequences of certain FDI projects, linking the operation of a gas plant to “serious human rights abuses, including abductions, sexual violence, and killings of civilians.” This undermines the goal of promoting peaceful and inclusive societies.
7. SDG 17: Partnerships for the Goals
   • This is a central theme of the article. It analyzes the interplay between three key sources of development finance: official development assistance (foreign aid), remittances, and FDI. The article discusses the shift in U.S. policy away from aid and towards private investment, fundamentally altering the nature of the global partnership for development.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 1.a: Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions.
   • The article discusses the reduction of two key financial sources (foreign aid and remittances), which directly impacts the mobilization of resources for poverty alleviation programs.
2. Target 8.8: Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, particularly women migrants, and those in precarious employment.
   • The article explicitly states that to attract FDI, lower-income countries may be pressured into adopting “weaker labour protections” and allowing “poor working conditions,” which is in direct opposition to this target.
3. Target 10.b: Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest.
   • The article discusses the shift in U.S. policy, where financial flows are being redirected to serve U.S. economic interests rather than being allocated based on development needs.
4. Target 10.c: By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent.
   • The mention of a “tax on remittances under the ‘Big Beautiful Bill’” directly contradicts this target by increasing the transaction costs for migrants sending money home.
5. Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources.
   • The article warns that a greater reliance on FDI, particularly in production-oriented industries like mining, “may also lead to an increase in the depletion of natural resources.”
6. Target 16.1: Significantly reduce all forms of violence and related death rates everywhere.
   • The article’s reference to “killings of civilians by military personnel associated with the facility” in the Mozambique gas project directly relates to this target.
7. Target 17.2: Developed countries to implement fully their official development assistance commitments.
   • The article’s focus on “cuts to USAID” shows a failure to meet this target, as the U.S. reduces its financial commitments to development assistance.
8. Target 17.3: Mobilize additional financial resources for developing countries from multiple sources.
   • The article analyzes the dynamic between three major sources of external finance (aid, remittances, FDI) and how policy shifts are forcing a reliance on one (FDI) at the expense of others, affecting the diversity of financial mobilization.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicator 10.c.1: Remittance costs as a proportion of the amount remitted.
   • The article directly implies a negative trend for this indicator by mentioning the U.S. policy of imposing a “tax on remittances,” which would increase the cost of sending money.
2. Indicator 17.2.1: Net official development assistance (ODA) as a proportion of the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee donors’ gross national income (GNI).
   • The discussion of “cuts to USAID” and European states “dismantling the financial commitments to sustainable development” directly implies a reduction in this indicator, showing that developed countries are decreasing their ODA contributions.
3. Indicator 17.3.2: Volume of remittances (in United States dollars) as a proportion of total GDP.
   • The article states that remittances “can make up a significant portion of a nation’s GDP,” directly referencing the metric used in this indicator. The tax on remittances could potentially affect this volume.
4. Indicator 7.a.1: International financial flows to developing countries in support of clean energy.
   • The article provides a counter-example to this indicator by citing the “$4.7 billion loan to a fossil gas project in Mozambique.” This represents a significant financial flow towards non-clean energy, undermining progress.
5. Indicator 8.8.2: Level of national compliance with labour rights (freedom of association and collective bargaining) based on International Labour Organization (ILO) textual sources and national legislation.
   • The article implies a potential decline in this indicator, suggesting that countries might weaken labor laws and protections (“weaker labour protections,” “erosion of labour protection frameworks”) to attract FDI.

SDGs, Targets, and Indicators Analysis

Source: opiniojuris.org