Export-Import Bank (Ex-Im) Chairman Fred Hochberg highlighted the important role his agency plays in supporting U.S. exporters in a speech to the Center for American Progress (CAP) this week. In the process, he also rebutted the philosophical arguments against renewing the Bank's charter, which have become newly resurgent among conservatives in Congress.
On its surface, Ex-Im would seem to be an agency that lawmakers from both sides of the aisle could support. The bank operates independently, fills in gaps in private export financing, breaking records for both total authorizations and small-business export sales in Fiscal Year 2012, and, most importantly, turns a profit for the American taxpayer, generating $1.6 billion since Fiscal Year 2008.
But free market advocates have long argued that Ex-Im should be shuttered, and their case against the bank has recently entered the political mainstream. For example, in a May hearing, Senate Committee on Banking, Housing and Urban Affairs Ranking Member Mike Crapo (R-ID) voiced concerns that Ex-Im exists only to provide "welfare to some of America's largest corporations."
Crapo was also one of 19 republicans to vote against the reauthorization of Ex-Im's charter in 2012, an ongoing effort driven by fiscally conservative groups like the Club for Growth that most recently manifested itself in a push to block Hochberg's approval for another term as Ex-Im chairman. Hochberg was saved by an 11th hour Senate deal on filibuster reform, but had he not been approved by July 20, Ex-Im wouldn't have had the three-board-member quorum its charter requires to approve transactions, and therefore would've been forced to shut down.
In his remarks to CAP, delivered in conjunction with Ex-Im's release of its annual Competitiveness Report, Hochberg focused on the threats facing U.S. exporters abroad, particularly from the increasingly aggressive policies of some of the United States' biggest competitors. "In this year’s competitiveness report, we found that China, Korea, Japan and others are ramping up government export support," Hochberg said. "Yet, here at home, Congress has required the Treasury Department to begin negotiations with our competitors to end export credits. To end export credits when our competitors are playing by a completely different set of rules…this would be a self-inflicted wound our economy cannot sustain."
Ex-Im's Competitiveness Report found that U.S. exporters often compete in markets and sectors that other countries have targeted as a "national interest," making them the focus of policies designed to maximize the flow of benefits to the state and making it harder for U.S. exporters to compete with foreign companies receiving state-backed sweetheart export financing deals. Moreover, the Report argued that financing is increasingly being offered outside of Organization of Economic Cooperation and Development (OECD) guidelines, expanding beyond low interest rates to include loan arrangements aimed at attracting buyers.
Exporters worldwide have also been forced to contend with a decline in commercial bank capacity and appetite for trade financing, placing a greater burden on state-affiliated export credit agencies like Ex-Im. "Make no mistake, foreign governments would love to see Ex-Im go out of business and swoop in and snatch the $50 billion worth of exports we financed last year. They would love to have those 255,000 American jobs for themselves," Hochberg warned. "Failing to reauthorize our charter next year is a particularly bad idea in light of the growth of the global middle class and the unprecedented competition America faces from Asia and Russia, among many others."
A full copy of Ex-Im's Competitiveness Report is available here.
- Jacob Barron, CICP, NACM staff writer