From shipping to staffing, the Chamber and its partners have the tools to save your business money and the solutions to help you run it more efficiently. Join the U.S. Chamber of Commerce today to start saving.
There’s good news and bad news on the U.S. Export-Import Bank (EXIM). The good news is that, thanks to Senate confirmation of several board members in May, the bank is up and running again. The bad news is that its charter will lapse at the end of September.
Congress, most notably the House Financial Services Committee, has begun work to reauthorize EXIM. It’s vital that legislators move this work forward expeditiously.
EXIM provides financing and guarantees for U.S. exports that directly support American jobs at no cost to the taxpayer. It’s one of the smallest and leanest of government agencies.
EXIM was a contentious issue in 2015, when it was last up for reauthorization. However, after a long debate, its charter was reauthorized with two-thirds majorities in both chambers of Congress voting in favor. Common sense won the day.
The Senate took an important step toward supporting the bank in May when it confirmed Kimberly Reed to serve as Chairman and President of EXIM, and Judith Delzoppo Pryor and Spencer Bachus to serve as directors on its board. As in 2015, large majorities in the Senate voted to confirm the nominees.
Thanks to this action, a board quorum was restored for the first time since mid-2015. During this interim, the bank was unable to extend loans or guarantees in excess of $10 million.
For a window into the implications of a lapse in EXIM’s authorization or a lapse in its board quorum, it’s worth looking at EXIM’s June 2019 Report to the U.S. Congress on Global Export Credit Competition (the bank’s annual, congressionally-mandated “competitiveness report”).
It’s a stark picture. Without a board quorum, “EXIM was not a significant provider of medium- and long-term (MLT) official export credit in 2018,” according to the report. “EXIM authorized $301 million of MT transactions in calendar year 2018,” and no long-term financing or guarantees.
By contrast, China has “the world’s largest [export credit agency] ECA system, with its official ECAs — Sinosure and China EXIM — providing almost $65 billion per year of MLT export and trade-related activity around the world in 2018,” the report finds.
The competitiveness report shows that China is providing 130 times as much MLT export credit support to its exporters as EXIM provides to U.S. exporters.
But it isn’t just China. Many countries continue to be extremely active with fully empowered and well-funded export ECAs. “By today’s count, there are a total of 113 ECAs (including EXIM) or other official entities providing some form of export credit support globally,” the competitiveness report indicates.
As a result, U.S. exporters have been competing at a sharp disadvantage in key markets. The competitiveness report notes: “As of December 31, 2018, there was nearly $40 billion in transactions in EXIM’s pipeline that require a vote by EXIM’s Board of Directors.”
With a board quorum restored in May, the bank is now working its way through this backlog. This is welcome news for many exporters, including thousands of small business suppliers that are helped when EXIM finances major purchases from larger companies like airplanes and construction equipment. But if EXIM’s charter lapses on October 1, this work will again come to a halt.
One area of ongoing disagreement over the EXIM reauthorization bill involves a proposal that would limit EXIM support for exports to Chinese state-owned enterprises. Appropriately, Congress has enacted laws creating a vigorous system of export controls and sanctions that addresses national security concerns and prohibits the export of some cutting-edge products.
However, it is unclear why Congress would want to limit the sale of made-in-America products to a lucrative market for ordinary goods and services that pose no national security concern. Such limits would simply cede this large market to firms in other countries that benefit from ECA support, thus sending jobs overseas.
Members of Congress should bear in mind that EXIM is indispensable in some circumstances. EXIM is necessary because ECA support is often required even to bid on a wide variety of foreign business opportunities. This includes requests for tender from both public and private sources, including opportunities as diverse as infrastructure projects, nuclear reactors, and contracts to provide medical equipment to hospitals.
In addition, EXIM is necessary because it is par for the course for expensive capital goods such as aircraft, turbines, and locomotives to be sold worldwide with unashamed ECA backing. ECA support can make or break a deal.
Far from being a burden on the taxpayer or a subsidy for corporations, EXIM charges fees for its services that generate billions in revenue for the U.S. Treasury above and beyond funds it received in appropriations. “The Bank sent more than $500 million per year, on average, to the Treasury during the last five years in which it was fully operational,” according to EXIM’s 2018 competitiveness report.
EXIM enables U.S. companies large and small to turn export opportunities into real sales that support U.S. jobs as well as contribute to a stronger national economy.
President Trump has explained the value of EXIM, and is quoted in The Hill saying:
It turns out that, first of all, lots of small companies will really be helped, the vendor companies. But also maybe more important, other countries give [assistance]. When other countries give it we lose a tremendous amount of business.
That’s exactly right. Congress needs to reauthorize EXIM before its charter expires on September 30.
The alternative? In the president’s words: Americans will “lose a tremendous amount of business.” With jobs and competitiveness at stake, it’s time to act.