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EXIM Defends Itself Against Defunding Campaign

EXIM Defends Itself Against Defunding Campaign

Washington, DC – With talk of defunding its operations circulating on Capitol Hill, the US Export-Import Bank (EXIM) has released its latest Annual Competiveness Report to Congress in an effort to “underscore the need for continued EXIM support for American exporters to help level the playing field in an increasingly competitive global marketplace.”

According to the report, while for decades, global export competition was governed by international standards put in place to ensure that companies could compete on free-market factors like price and quality rather than on aggressive government financing, today the global marketplace is changing.

“While 100 percent of official support for trade operated under these international rules 15 years ago, today that number has plummeted to 34 percent. Currently Russia, China and other countries offer subsidies and financing terms – including support of their state-sponsored companies – that threaten American jobs and export opportunities,” it said.

The report also stated that “the rapid growth of export financing from three Asian competitors: Korea, Japan and China.”

Those countries, it added, “provided significantly more export-credit support to their respective domestic companies and industries than did the United States in 2013.”

“Unregulated Competition is Expanding”

In addition, the report asserts that unregulated competition is expanding and commercial banks have largely withdrawn from pockets of the export-finance arena, including providing support for small businesses.

“The United States faces more robust competition from export-credit agencies offering terms that are not regulated by the Organization for Economic Co-operation and Development (OECD), which encourages global export competition based on free-market principles and mutually agreed-upon standards,” it said.

For example, EXIM support for all of its $15 billion in medium- and long-term financing was regulated by the OECD Arrangement, but other OECD member countries offered more than $60 billion alone of unregulated export financing support (on top of $83 billion in export financing governed by the OECD Arrangement).

“Nations that are not subject to the OECD framework, including Brazil, Russia, India and China, provided $115 billion in trade-related financing,” according to the study.

Unregulated support, it said, totaled substantially more than all OECD-regulated support, “a trend the report expects to continue and one which is poised to place US exporters at a competitive disadvantage absent the tools made available by EXIM.”

The report also stated that “the appetite of commercial banks for long-term projects continued to diminish” since the implementation of Basel III and other banking reforms.

“As liquidity sources for certain projects remain scarce, export-credit agency support has become more necessary to fill gaps in the trade finance marketplace and ensure that American exporters remain competitive,” it said.

“Consequently, US exporters will continue to rely upon EXIM support as they seek to take advantage of emerging economies and the 95 percent of consumers that live abroad.”

In the statement accompanying the report, EXIM Chairman and President Fred P. Hochberg, said, “There is no stronger brand in the world than ‘Made in America,’ but the increasingly aggressive approach by some foreign competitors in the export financing marketplace presents an ever-growing threat to US jobs.”

The bank’s job, he said, “is to back American workers and ensure that US exporters, especially small businesses, remain competitive and have the support they need to export their products and create jobs here at home.”


Export-Import Bank Reauthorization Endangered

Washington, DC – The Export-Import Bank of the US (EXIM) is in danger of extinction as incoming House Majority Leader Kevin McCarthy (R-California) has said that he would not support reauthorizing its charter once it expires in September.

McCarthy, speaking on a Sunday news program, said he felt EXIM’s role in guaranteeing loans made to help US companies export their goods “is something that the private sector can be able to do.”

His comments echoed critics of the bank who say the bank creates too much interference in private markets.

According to McCarthy, “One of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do. That’s what the EXIM does.”

If the bank’s charter isn’t reauthorized, it could continue servicing the loans it already has made and backed, but it wouldn’t be able to authorize new loans.

The bank, created 80 years ago, borrows money from the Treasury Department and pays interest on the funds to the Treasury. It then lends that money out and charges a higher interest rate, plus a fee, that generate its revenue.

EXIM has been technically self- sustaining since fiscal 2008, though Congress provides funding for the bank’s Office of Inspector General and sets the bank’s lending limit.

In 2012, lawmakers raised the bank’s lending limit to $140 billion from $100 billion. In fiscal 2013, the bank authorized $27 billion to support an estimated $37.4 billion in US export sales.

EXIM also sent $1.06 billion to the US Treasury, money it earned from interest and fees it charged its customers.

The White House has said that EXIM is critical to helping sustain US exports. Close to 60 other countries have agencies to help finance exports, and supporters of the bank have said that ending the Export-Import Bank would put U.S. companies at a competitive disadvantage.

A number of organizations including the National Association of Manufacturers, the Business Roundtable and the US Chamber of Commerce, as well as a number of large- and small-sized US exporters that have been assisted by the bank are joining forces to push for its reauthorization.