Hillary Clinton's Business Legacy at the State Department
On her 79th and probably last overseas trip as secretary of state, Hillary Clinton made a pit stop in the Czech Republic. One purpose of the 11-hour visit on Dec. 3, squeezed between NATO talks on the future of Afghanistan and the Syrian civil war, was to make a personal appeal to Czech Prime Minister Petr Nečas on behalf of Westinghouse Electric, which is vying for a contract to build a nuclear power plant there. The company is locked in a $10 billion bidding war with a state-owned Russian energy giant, and Clinton pressed the Czech officials about the wisdom of depending on Vladimir Putin’s Russia for something as essential as electricity. Westinghouse Chief Executive Danny Roderick, who’s still awaiting a decision, says Clinton’s intervention made a big impression on the Czechs: “I was proud that she was in the trenches with me.”
In four years as the nation’s top diplomat, Clinton, who is expected to step down this month, has made dozens of similar sales pitches on behalf of U.S. companies. In 2009 she toured a Boeing plant in Moscow and met with Foreign Minister Sergei Lavrov to persuade state-owned Russian Technologies to buy 50 Boeing 737s instead of jets made by Airbus. That $3.7 billion deal was one of several large contracts Clinton helped clinch for Boeing. In December 2011, Lockheed Martin announced a $7.2 billion deal to upgrade Japan’s aging fighter jet fleet, beating out Eurofighter. Clinton advocated for the contract with her Japanese counterpart at the United Nations General Assembly. In February 2012, Space Systems/Loral, which builds communications satellites in Palo Alto, won a contract for equipment to create a national broadband network in Australia. Clinton met with former Foreign Minister Kevin Rudd several times to press for the deal. Last summer, Clinton’s undersecretary for economic growth, Robert Hormats, a former Goldman Sachs vice chair, took executives from Google, MasterCard, and Dow Chemical to Myanmar to network with government officials, the first such meeting since sanctions against the country were lifted in 2012.
More than her predecessors, Clinton has argued that commercial diplomacy and the promotion of trade, long the neglected stepchildren of the foreign policy establishment, are central to U.S. strategic interests. In a hectic four years punctuated by one international crisis after another—the Arab Spring, Iran’s nuclear schemes, the killing of the U.S. ambassador to Libya—her work as a spokeswoman for American business is a less visible part of her legacy. Yet it may be the most durable. “Those countries that were customers are now competitors,” says Roderick. “Dynamics have changed in the international marketplace that have brought us into needing the government in more areas.”
There’s no doubt Clinton has had success using her personal clout to help a handful of companies close a handful of deals. The question now is whether she’s attained her more ambitious goal: reorienting the priorities of the State Department toward business in a way that will allow her successors to continue exerting Hillary-style influence long after she has left the building.
When Clinton took office, she saw foreign heads of state routinely going to bat for corporations based in their countries. On one recent trip to China, German Chancellor Angela Merkel brought along a delegation of nearly two dozen German executives, including the chiefs of Siemens and Volkswagen. The U.S. government has traditionally left that kind of advocacy to the Department of Commerce, a third-tier agency without much pull. (It’s been without a permanent leader since June.)
“One of the things I heard when I was a senator, and I heard it in the beginning of my tenure as secretary, was that American companies had just stopped competing for deals because they thought the deck was stacked against them,” says Clinton, sitting on the couch in her spacious seventh-floor office, which overlooks the Lincoln Memorial. In two interviews—in Cambodia in July and Washington in August—she talked about her efforts to expand the brief of the State Department to emphasize economic statecraft. “If you can’t compete fairly, honestly, effectively, no government should intervene,” she says. “Now, some governments do. They prop up failing industries. They give a lot of support to individual businesses that should not be given that kind of government imprimatur. All I’m asking for is that level playing field. I’m asking that no country interfere in the marketplace or in the commercial relationship in a way that disadvantages an American company and American workers.”
Hillary Clinton is very aware of the advantages of being Hillary Clinton, and didn’t seek permission when she not-so-subtly encroached on the Commerce Department’s turf to install herself as the government’s highest-ranking business lobbyist. On her scores of overseas trips—at 956,733 miles and 401 days on the road, she is the most-traveled secretary of state—she’s made pitching U.S. companies part of her routine.
Clinton has directed a lot of her attention to opening new markets for the U.S. in the developing world, where China is establishing a significant presence. Chinese companies have poured capital into poor regions of Africa where foreign aid from Washington once gave the U.S. leverage. In resource-rich countries such as Turkmenistan and Afghanistan, U.S. companies have recently lost major contracts to state-subsidized Chinese outfits.
In the global economic order that emerged after World War II, the U.S. and its allies took American dominance for granted. They “did not envision China as the second-biggest economy in the world,” Clinton says. She doesn’t think there’s anything wrong with China’s desire to extend its reach. “I don’t hold that against them,” she says. “I just hold it against us if we’re not out there pushing back.”
She’s pressed the case for U.S. business in Cambodia, Singapore, Vietnam, Indonesia, and other countries in China’s shadow. She’s also taken a leading part in drafting the Trans-Pacific Partnership, the free-trade pact that would give U.S. companies a leg up on their Chinese competitors. The State Department even has had limited success in prying open Chinese markets to U.S. companies. In 2011, after extensive haggling with U.S. Ambassador to China Gary Locke, the Chinese government allowed Titanic 3D and other Hollywood movies to be shown in Beijing theaters. And that same year, after talks with Clinton, the Chinese relaxed so-called indigenous innovation rules that kept U.S. companies from competing for government technology contracts there. “Not that they would ever admit that the Americans—that the secretary—said this, and therefore [they] changed,” says Clinton, who’s been careful not to brag too loudly about these deals. “A lot of this you cannot claim, because then you kind of force the people on the other side to lose face.”
For U.S. companies overseas, a personal appeal from Clinton opens doors and unravels red tape. “We’re working in countries where the government plays a significant role in the local marketplace, so the counterparties in our deals expect—even require—that we demonstrate backing from our government,” says Gabriel Schulze, CEO of Schulze Global Investments, a U.S. private equity firm in Beijing. Companies hoping to win that backing apply for help through Commerce’s Advocacy Center, a process that can take from days to months to complete. General Electric, Lockheed, Boeing, and other large companies have full-time staffs to manage it. Among other things, the companies must show the contract will benefit U.S. workers. And federal rules prohibit the government from helping a U.S. company if doing so could give it an advantage over an American competitor. If two or more U.S. firms are competing for an overseas contract, they can expect little backing from Washington.
If the application is approved, U.S. embassy officials overseas lobby foreign governments. A lucky few of these applications find their way to Clinton’s desk. As she prepares for an overseas trip, ambassadors in the region flag high-profile contracts U.S. companies are trying to win. Neither Commerce nor State will say how she decides which ones to bring up in her talks with foreign dignitaries, though they tend to be big deals on behalf of big companies. Executives often find out only after the fact that Clinton made their case with a head of state. Westinghouse CEO Roderick learned of her involvement when a Google News alert popped up on his iPhone.
Although Clinton’s corporate cheerleading has won praise from business groups, including the U.S. Chamber of Commerce, “there’s been a certain amount of resistance” within the Commerce Department, says Edward Alden, a trade specialist at the Council on Foreign Relations. “There are concerns about why the State Department is doing this.” Jake Sullivan, Clinton’s director of policy planning, says he hasn’t heard any complaints from CEOs. “None of these business leaders are saying, ‘Wait! You’re not the Commerce Secretary. What are you doing here?’ ” (Clinton and Commerce officials say there is no tension between the agencies.)
To ensure the State Department keeps its business focus, Clinton has tried to change the way the 69,000-person global bureaucracy operates. In one directive, which she calls the “Ambassador-as-CEO” memo, she ordered U.S. embassies to make it a priority to help U.S. businesses win contracts. Science officers now extoll American clean-tech companies. Military affairs officers promote U.S. fighter planes.
Clinton has also increased the profile and prestige of State’s economic affairs department. She created a chief economist’s office headed by Heidi Crebo-Rediker, a former Lehman Brothers banker, and ordered promotions for embassy economic officers who act as State’s liaisons to business—a once-lowly assignment. “We’ve looked at every aspect of our operations,” says Clinton. “Suppose you were in an economic track in the foreign service. What were your chances of advancing up the ladder? Not very good.”
None of this tinkering will amount to much unless John Kerry, Clinton’s likely successor, shares her enthusiasm for the cause. “If the secretary is not personally committed to this, the things that State can do at the mid-levels of the bureaucracy are very few,” says Alden. No one knows this better than Clinton. “I wish it would move faster,” she says. “But until that day dawns, then we have to take the world as it is and exercise the leverage we can.”
— With assistance by Indira Lakshmanan