U.S. Ex-Im – Closed for Business?

By Alexander Gordin, March 10, 2012
It is with great horror and consternation that I read the post published couple of days ago in the Inside U.S. Trade blog titled “House GOP Leadership Proposes Long-Term Phaseout of Ex-Im Financing.” It is another example of how bloated and uncompetitive corporations, rather than shape up and cut costs, use lobbying to accomplish their goals while creating economic havoc around them.
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 Earlier this year we reported at length in this publication about several U.S. airlines that, through their lobbying group The Air Transport Association of America Inc. (now called Airlines for America), have been trying to stop sales of U.S. Ex-Im financed planes to Air India. The group has waged a massive public relations campaign, followed by a legal challenge (Air Transport Association of America Inc. v. Export-Import Bank of the United States, 11-cv-2024, U.S. District Court, District of Columbia [Washington]), and now followed by congressional blackmail and an outlandish proposal to phase out the U.S. Export-Import bank and other Export-Credit Agencies (ECA’s) for developed countries, which are part of OECD.
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With Congress trying to tie long-term phase out of ECA’s as a condition of short-term reauthorization for the U.S. Ex-Im bank, once again we have  a case of a reactionary bandaid measure being proposed instead of a fundamental strategic look at improving and reforming of ECA operations, as ECAs are among the most effective and fundamental tools of international trade finance and credit insurance.  A rash call for ECA phaseout is not only impractical, but it will serve to make the U.S. and other OECD countries much less competitive on the world stage, as non OECD emerging market countries such as China, Brazil, Russia will move in to fill the void with their ECA’s  offering subsidized financing for their goods and services and further crippling exports for U.S. and other developed nations.
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U.S. Ex-Im and other ECAs are not perfect, but they serve a tremendous economic function and help facilitate hundreds of billions of dollars of international trade. They help American businesses grow, create American jobs, and help mitigate risks that oftentimes hamper cross-border trade.  Yet in this political quagmire, two things are distinctly absent – a plan for Delta, and other U.S. airlines that are attacking Ex-Im to reform themselves and become more globally competitive, and a call by lawmakers to examine how U.S. Ex-Im’s operations can be adjusted and streamlined to make the bank more competitive, more efficient and better positioned to support our nation’s industries and service providers for years to come.  Both of these things are not only possible, but sorely needed. The financial and political capital that is being spent to wage this nasty reauthorization battle should be directed toward constructive actions and solutions.  Yet, I guess it is easier to shift the blame, sling dirt and use lobbying to protect unsustainable economic positions.

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House GOP Leadership Proposes Long-Term Phaseout of Ex-Im Financing

Posted: March 8, 2012 in Inside U.S. Trade blog

In the negotiations to break a deadlock over legislation to reauthorize the Export-Import Bank, the House Republican leadership is pushing for a reauthorization bill that aims to phase out official export financing in general, and specifically for commercial aircraft, according to informed sources.

The leadership is seeking to include language into the bill requiring the president to initiate negotiations with major exporting countries to end export financing programs. It is also demanding language to reduce export financing for aircraft with the goal of ultimately eliminating such financing.

This language is part of a draft bill dated March 2 that the House GOP leadership circulated to stakeholders for feedback earlier this month, sources said. A copy of the draft bill was obtained by Inside U.S. Trade.

Conservative Republicans in both chambers — and conservative groups such as the Club for Growth — object to Ex-Im reauthorization because they consider the bank to provide “corporate welfare” that distorts the free market. At the same time, House Republicans are under pressure from Boeing and business groups, including the U.S. Chamber of Commerce, to approve a long-term reauthorization of the bank.

A GOP leadership aide would not comment on the March 2 draft bill because negotiations are still ongoing. The aide said the office of House Majority Leader Eric Cantor (R-VA) is still in talks with House Democrats to come to an agreement on Ex-Im legislation. Cantor hopes to consider a bill on the floor by the end of March, according to the aide.

The aide said the leadership wants a reauthorization bill that would “begin to set a long-term policy goal to eliminate these [financing] subsidies going forward.”

In addition, the March 2 draft bill would extend the bank’s charter by one year and increase Ex-Im’s lending authority to $113 billion from the current level of $100 billion. That gives the bank less leeway than draft legislation agreed upon late last year by the House and Senate committees of jurisdiction, which would have extended the Ex-Im charter by four years and raised the exposure cap to $135 billion (Inside U.S. Trade, Dec. 23).

An Obama administration official said the House GOP draft bill appears aimed at constraining and undermining the bank’s ability to operate. He noted that the bank currently has deals in the pipeline worth more than the $32 billion in support it committed last year, meaning it would reach a $113 billion cap “in a matter of months.”

The Obama administration, which had initially requested an increase to $140 billion, has said Ex-Im is expected to reach its current $100 billion exposure cap by the end of March (Inside U.S. Trade, Feb. 24).

The administration official said requiring the president to enter into negotiations to end export credit financing ignores the fact that the administration cannot force other countries such as China and Brazil to agree to such a deal.

Major developed economies already have non-binding guidelines governing the provision of official export credit negotiated in the Organization for Economic Cooperation and Development (OECD). Countries also have specific guidelines dealing with export financing for aircraft under the Aircraft Sector Understanding (ASU), which is also housed in the OECD.

The opposition to Ex-Im reauthorization has been partially fueled by a fight in which Delta Airlines and other U.S. airlines have charged that Ex-Im financing for Boeing aircraft exports to India and other countries has led to a persistent oversupply of airline seats that has harmed their business.

These airlines have filed a legal challenge against Ex-Im in a bid block loan guarantees to Air India, although a judge earlier this year rejected the airlines’ move for a preliminary injunction (Inside U.S. Trade, Feb. 10).

“Our position is that we do not oppose the bank’s reauthorization — we just want to ensure that Delta’s employees are treated fairly in the process,” Delta spokesman Trebor Banstetter said in an e-mailed statement.

Ex-Im’s charter is set to expire on May 31. The Export-Import Bank Reauthorization Act of 2006 authorized the charter through Sept. 30, 2011, and since then Congress has extended it three times on a short-term basis without changes.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

2 Responses to U.S. Ex-Im – Closed for Business?

  1. clement miller says:

    It would help Exim`s case in Congress if Boeing and other large exporters could better quantify the value of labor and tax revenue which they and their sub-suppliers generate on each export transaction as well as forgone on each lost transaction. I think the discussion would be much more productive if such data were available.

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