EXIM 2019 Advisory Committee Statement on Competitiveness Report

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EXIM 2019 Advisory Committee Statement on Competitiveness Report

Washington, D.C. – Today, the 2019 Advisory Committee of the Export-Import Bank of the United States (EXIM) submitted to the U.S. Congress its statement on EXIM’s Report to the U.S. Congress on Global Export Credit Competition (Competitiveness Report), which was issued in June 2019 and covers global official export credit activities during the calendar year 2018.

At the time of publication, EXIM’s Competitiveness Report did not include comments from an advisory committee because the agency had been unable to appoint one due to the lack of a quorum on EXIM’s board of directors until May 2019. In July 2019, the EXIM board appointed members of the 2019 Advisory Committee, as well as the 2019 Sub-Saharan Africa Advisory Committee. Both committees held their first meetings at EXIM headquarters on September 11.

The EXIM 2019 Sub-Saharan Africa Advisory Committee also issued a statement on EXIM’s Competitiveness Report, at the request of Advisory Committee Chairman Stevan Pearce. Both statements are available on EXIM’s website.

The EXIM 2019 Advisory Committee Statement on the 2018 Competitiveness Report is as follows (full text):

“The U.S. Congress, in the EXIM Charter, called for the creation an advisory committee to comment on the findings of the agency’s Competitiveness Report and submit those comments to Congress. Members are mandated to comment on the extent to which the report accurately depicts the global competitive landscape for export finance and the extent to which EXIM is meeting its mandate to help grow United States exports, and to offer suggestions for improvement. On September 11, 2019, the newly reconstituted EXIM Advisory Committee considered these matters and herein provides our report.

First and foremost, our main conclusion is that the findings outlined in the 2018 report unequivocally encapsulate our collective observations of the export finance market. Specifically:  

  • A fully authorized EXIM is essential to allow U.S. exporters to effectively compete in an increasingly competitive and complex world economy.
  • Countries including China have reshaped the worldwide export market and effectively limited U.S. opportunities for major trade and procurement around the globe.
  • A fully authorized EXIM is essential for long-term U.S. national security.
  • A fully authorized EXIM would begin to level the playing field for U.S. companies that confront many impediments to exporting and growing their businesses abroad.
  • EXIM supports American workers by supporting deals with a high composition of domestic, made-in-the-USA content.
  • EXIM is significantly hampered from meeting its export-promotion mandate by the lack of certainty over its pending reauthorization.
  • There is an inseparable link between a U.S. exporter and its supply chain, meaning thousands of U.S. businesses can be impacted when a single large contract is lost to a foreign competitor.
  • Finally, we support efforts to reform, modernize, and improve EXIM.

Based on a review of the overall landscape, it is clear that the export credit environment has undergone a fundamental change in a short period of time. There are significant new state actors multiplying the range of financing options being offered to exporters and buyers. 

In particular, the Advisory Committee concurs with and would draw attention to the report’s findings regarding the aggressive growth of Chinese export credit agencies (ECAs) activities. In 2018 alone, it is estimated that China provided more than $500 billion of export credit—in just one year approaching the $610 billion that EXIM has financed in its entire 85-year history, in nominal value. In fact, China’s export finance activity is larger than all the other export credit agencies in the G7 combined. And in the larger picture, China today is the world’s largest official creditor, possessing a portfolio more than twice the size of the World Bank and IMF combined.

The Council on Foreign Relations (CFR) calls China’s BRI (Belt and Road Initiative) “the most ambitious infrastructure investment effort in history.” This effort involves “creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward…”i

China’s overall ambition for the BRI is staggering. To date, more than 60 countries—accounting for two-thirds of the world’s population (4.4 billion people with a combined GDP of $23 trillion)—have signed on to projects or have indicated an interest in doing so.

CFR also point out that the BRI developments have major implications for national and international security, including claims of jurisdiction over vast areas of oceans, control of major shipping lanes, and major changes in the global balance of power.

The Advisory Committee was struck by the changes occurring in Chinese export credit activity that have fundamentally transformed the nature of official export credits, stimulating other export credit providers to broaden their offerings of unregulated and other, more opaque forms of support.

EXIM’s Competitiveness Report accurately documents how extensively foreign ECAs have expanded programs aimed at embedding their small- and medium-sized exporters into the global supply chain to the detriment of U.S. exporters, particularly small businesses.

Indeed, the world economy is four times the size of the U.S. economy. To ignore this development is to resign ourselves to a reduced presence in world geopolitical affairs and accept a lower standard of living for Americans in the long-term future.

Export promotion now also has become a critical lever for macroeconomic growth for many governments. Other governments are strategically using ECAs to influence procurement decisions in ways that hinder the participation of U.S. firms.

The responses to the congressionally mandated survey of exporters, lenders, and stakeholders also support these findings. For example, U.S. exporters said they have shifted supply-chain sourcing to other countries with functioning ECAs because they were more reliable partners. Others pointed out the lack of a strategy in the United States, compared with that of other countries, to integrate export finance into our trade-promotion approach.

While a fully authorized EXIM is necessary to meet these challenges, it is also clear that improvements can be made in terms of:

  • Transparency
  • Strengthening taxpayer protections
  • Mitigating domestic impacts from EXIM financing
  • Facilitating and not supplanting private financing options
  • Working to reduce reliance on ECAs globally 

The bank should make more diligent efforts to support small- and medium-sized businesses, including those attempting to enter the export market and those that make up the critical supply chains of larger U.S. exporters.

These are important goals, and we share them.

However, the current posture of uncertainty by the United States is also not a viable option. Already, EXIM can only fill export financing gaps when the private sector is unable or unwilling to do so. Yet, increasingly, contracts require that officially supported export loans, guarantees, or insurance must be available in order for businesses to even be considered for major opportunities. As a result, without a fully authorized EXIM, we are literally giving away hundreds of billions of dollars in business to foreign competitors.

In summary, the Advisory Committee believes that the report substantiates the need for a robust EXIM that can support the interests of the United States in the many situations where an ECA is required. It all comes down to who wins these opportunities—U.S. workers or those in other countries. We should want the recipient of the contract to be a U.S. business. This is exactly where EXIM plays an essential role, one that other governments increasingly recognize as well.

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