EXIM Bank Quarter in Review - Summer 2016


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EXPORT-IMPORT BANK OF THE UNITED STATES QUARTER IN REVIEW VOLUME 7

 

// 07.21.2016

Message from the Chairman

At the end of June—amid continued global market uncertainty and Brexit—EXIM Bank released its annual Competitiveness Report. Mandated by Congress, the 2015 report illustrates the global competitive landscape of government-supported export finance, and places EXIM’s performance in a global context.

This year, the report reveals that EXIM medium- and long-term financing for American exporters declined more than 50 percent.  This was largely due to the lapse in authority that EXIM experienced from June 30-December 4, 2015.

Today, with global competition increasing and growth rates slowing, the report found that there was a slight decline in overall export credit support by governments.  The response: EXIM’s competitors became more and more versatile and aggressive in support of their exporters, while EXIM support for American exporters declined, largely due to the lapse.

In the first three quarters of this year, EXIM authorized more than $4 billion in financing that supported American exports and more than 37,000 jobs that depend on them.

In the first nine months of last year, by comparison, EXIM authorized more than $12 billion in financing for exports that supported more than 100,000 high-paying American jobs.

At the same time, the May 2016 U.S. International Trade in Goods and Services monthly data showed a slight decrease in U.S. exports of goods and services—to $182.4 billion from $182.7 billion in April.  In spite of that, the trade deficit has improved 3.5 percent over last year, and American exporters established new monthly export records in telecommunications and insurance services.

The prescription: we need a board quorum so that EXIM can continue to fight with both hands for American workers and the goods and services they export.

  • In 2015, nearly 70 percent of export credit agency activity worldwide fell outside of international frameworks—down from 100 percent in the late 1990s, and 50 percent just ten years ago.
  • Two Chinese export credit agencies were responsible for nearly ten times more medium- and long-term export credit support than EXIM—$51 billion compared to $5.1 billion.
  • In part following EXIM’s lead, virtually all ECAs now offer targeted programs for small- and medium-sized enterprises.

This comes at a time when governments around the world are shifting away from fiscal and monetary policy as a way to bolster economic growth—to a greater reliance on exports to pick up the slack.  However, in a period of sluggish global growth, we have also found that private banks are shrinking from cross-border sales financing.  As a result, a growing number of countries are turning to export credit agencies as profitable and versatile alternatives to boosting economic growth.  American workers and American exporters need an ECA that can match the competition while fighting for transparency and rules-based frameworks across ECAs globally.

On July 1, 2015—just a year ago—our authority to finance any new exports had lapsed.  At that time, President Obama said: “Every other advanced country on earth has a program like this in order to promote their businesses when they’re selling overseas, and for us to be the only country that leaves these outstanding companies high and dry makes absolutely no sense.”

The President’s words continue to resonate today.  Without a Board Quorum, EXIM is fighting with one hand tied behind its back—and businesses of every size are jeopardized, small and large.  Since 2009, roughly 40 percent of the companies that have directly benefitted from Board-approved transactions have been small businesses.

As I have continued to visit with exporters in our country and buyers around the world, I have only continued to learn about the outstanding work that we must be able to support.  In the middle of June, I traveled to Louisville, Kentucky, where I met with the top management of ISCO Industries.  “As a small business in Kentucky, we rely on the EXIM Bank to help keep us competitive in a global market,” said Tom O’Neill, Chief Sales Officer for ISCO, a high-density polyethylene (HDPE) pipe supplier headquartered in Louisville, Kentucky.  “We’re currently bidding on a project involving 17 African villages in need of new water distribution systems.  It is an $80 million project.  Private sector banks in the US will not finance it without the backing of EXIM. However, the $10 million limitation will not allow ISCO to offer competitive terms to our buyer.  On this project and many others, our growth is severely restricted without EXIM support.”

In order for EXIM Bank to support U.S. exporters like ISCO in their work to win opportunities abroad, we will need a quorum on our Board of Directors.  On January 11 of this year President Obama nominated J. Mark McWatters to join our Board so the Bank could again be fully operational.  Nearly 200 days later, his nomination has yet to move out of committee, though we are continuing to work with the Senate and the White House on his confirmation.  American workers and employers need to a fully functional export credit agency to sustain and create well-paying jobs.

The EXIM team supports American jobs and American small businesses every single day.  The Competitiveness Report that our Policy and Planning team put together clearly demonstrates that while we face challenges, we also look forward to unparalleled opportunity for U.S. exporters and American workers in the global marketplace.  I look forward to continuing our work together in support of American jobs, and the families and communities they support.

Best,
Fred

 


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