Order Code 98-568 E
Updated June 14, 2001
CRS Report for Congress
Received through the CRS Web
Export-Import Bank:
Background and Legislative Issues
James K. Jackson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
The Export-Import Bank is the chief U.S. government agency that helps finance
American exports.1 With a budget of nearly $1 billion, the Bank finances around 2% of
U.S. exports a year. Eximbank provides guarantees and insurance to commercial banks
to make trade credits available to U.S. exporters. The Bank also offers direct financing
to U.S. exporters on a limited basis, primarily to counter subsidized trade credits offered
to foreign exporters by their governments. Such government-sponsored trade financing,
however, has long been controversial, especially when Congress looks for ways to pare
back federal spending. President Clinton’s budget for FY2001 requested $963 million
in subsidy costs and $63 million in administrative expenses for the Bank. President
Bush’s budget, however, proposes reducing the subsidy cost of the Bank’s program to
$633 million, or 25% below the amount appropriated in FY2000. Eximbank’s authority
expires September 30, 2001, which will require Congressional reauthorization prior to
that date. This report will be updated as events warrant. Additional information on this
and other trade-related issues is available from the CRS Electronic Briefing Book on
Trade at: [http://www.congress.gov/brbk/html/ebtra1.html].
Background
The Export-Import Bank (Eximbank) is an independent U.S. government agency that
is charged with financing and promoting exports of U.S. goods and services. To
accomplish these goals, Eximbank uses its authority and resources to: assume commercial
and political risks that exporters or private financial institutions are unwilling, or unable,
to undertake alone; overcome maturity and other limitations in private sector export
financing; assist U.S. exporters to meet foreign, officially sponsored, export credit
competition; and provide guidance and advice to U.S. exporters and commercial banks and
1 For additional information, see the Bank's Internet address: [http://www.exim.gov]
Congressional Research Service ˜ The Library of Congress

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foreign borrowers. The Bank operates under a renewable charter, the Export-Import
Bank Act of 1945, as amended, and has been authorized through September 30, 2001.
When it was initially established, the Bank was capitalized by an appropriation of $1
billion from the U.S. Treasury. The Bank also is authorized to borrow up to $6 billion
directly from the Treasury, and it may draw upon a substantial line of credit with the
Federal Financing Bank (FFB). (The Federal Financing Bank is a part of the Department
of the Treasury and obtains its funds from regular Treasury issues.) Eximbank uses its
Treasury borrowings to finance its short-term needs, and repays the Treasury quarterly
from loan repayments and by borrowing from the FFB on a medium- and long-term basis.
The Bank’s authority to lend, guarantee, and insure is limited to a total of $75 billion.
Eximbank’s direct loans are charged at their full value against the $75 billion limitation,
while only 25% of guarantees and insurance are charged against the limit.
Before the Budget Enforcement Act of 1990, Congress set annual authorization limits
on the maximum amount of new loans, insurance, and guarantees the Bank could extend,
and appropriated funds only for Eximbank direct credits. Under the terms of the new
budget rules imposed by the 1990 Act, Congress appropriates the estimated amount of
subsidy the Bank expects to expend throughout all of its credit programs, including direct
loans, guarantees, and insurance, as indicated in Table 1. Congress no longer sets
separate limits on the amount of loans, guarantees, and insurance the Bank can authorize,
but the Bank continues to provide estimates of the amounts of activity it expects to
undertake.
Programs
Eximbank has three main programs it uses to finance U.S. exports: direct loans,
export credit guarantees, and export credit insurance. Prior to 1980, the Bank’s direct
lending program was its chief financing vehicle, which it used to finance such capital-
intensive exports as commercial aircraft and nuclear power plants. Both the budget
authority requested by the Administration and the limitation approved by the Congress for
the Bank’s direct lending were sharply curtailed during the 1980s. Budget data indicate,
however, that the Bank and the Administration expect the direct lending program to
expand.
Eximbank’s direct lending program is used primarily to aid U.S. exporters in instances
where they face a foreign competitor that is receiving officially subsidized financing by a
foreign government. These loans carry fixed interest rates and generally are made at terms
that are the most attractive allowed under the provisions of international agreements.
They are made primarily to counter attempts by foreign governments to sway purchases
in favor of their exporters solely on the basis of subsidized financing, rather than on market
conditions (price, quality, etc.), and to enforce internationally agreed upon terms and
conditions for export financing. The Bank also has an Intermediary Credit Program it uses
to offer medium- and long-term fixed-rate financing to buyers of U.S. exports, but U.S.
exporters also must face officially subsidized foreign competition to qualify for this
program.

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Table 1. Budget of the Export-Import Bank
(in millions of dollars)
FY96
FY97
FY98
FY99
FY00
FY01
FY02
Total Subsidy Requested
737
737
632
808
839
963
633
Total Subsidy Appropriated
787
773
683
765
865
865
NA
--
--
--
--
--
--
--
Operating Expenses
1,180
885
775
727
2,656
1,995
818
Direct Loan Subsidy
69
44
16
53
12
29
37
Guarantee Loan Subsidy
771
767
701
603
890
965
696
Loan Modifications
297
30
12
21
35
19
19
Administrative Expenses
43
43
46
50
55
62
65
Re-estimates of Subsidy Costs
--
--
--
--
1,663
919
--
Budget Authority (gross)
1,031
773
732
825
2,474
1,844
698
Appropriated
787
773
683
765
865
963
--
Other
244
---
49
60
1,609
881
--
Budget Resources
1,526
1,217
1,155
1,207
2,999
2,292
1,085
Budget Authority (gross)
1,031
773
732
825
2,474
1,844
698
Recoveries from previous years
78
103
124
48
45
90
90
Expired resources
-2
-3
-46
--
--
--
--
Unobligated resources start of year
415
344
299
334
480
358
297
Unobligated resources end of year
344
332
334
480
358
297
267
Budget Authority (net)
1,031
773
732
825
2,474
1,844
698
Outlays (net)
707
934
686
746
2,539
1,695
765
* Indicates requested, or estimated amount
Source: Office of Management and Budget. Budget of the United States Government, various issues.
Washington, U.S. Govt. Print. Off.
As part of its direct lending program, the Bank has a tied aid “war chest” it uses to
counter specific projects that are receiving foreign officially subsidized export financing.
Tied aid credits and mixed credits are two of the primary methods whereby governments
provide their exporters with official assistance to promote exports. Tied aid credits
include loans and grants which reduce financing costs below market rates for exporters
and which are tied to the procurement of goods and services from the donor country.
Mixed credits combine concessional government financing (funds at below market rates
or terms) with commercial or near-commercial funds to produce an overall rate that is
lower than market-based interest rates and carries more lenient loan terms. The United
States does tie substantial amounts of its agricultural and military aid to U.S. goods, but
it generally has avoided using such financing to promote American capital goods exports.

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Funds for the tied aid war chest are available to the Bank from the Treasury
Department and are subtracted from the Bank’s direct credit resources. As part of its
“Reinventing Ex-Im Bank” process, the Bank has become more aggressive in matching
foreign tied aid credits in foreign markets and in offering greater choices of financing for
exporters to counter foreign offers of tied aid. Under this initiative, the Bank intends to
intervene at an earlier stage in the negotiating process to counter financing offers made by
foreign competitors. The Bank has also extended its tied aid support to help small
businesses that face foreign tied aid competition.
Guarantees and insurance are the main programs the Bank uses to assist American
exporters. Both programs reduce some of the risks involved in exporting by insuring
against commercial or political uncertainty. There is an important distinction, however,
between the two programs. Insurance coverage carries with it various conditions that
must be met by the insured before the Bank will pay off a claim. A guarantee is an
ironclad commitment made to a commercial bank by the Export-Import Bank that
promises full repayment with few, if any, conditions attached. In addition, Eximbank has
a Working Capital Guarantee Program that it uses to aid small- and medium-sized
businesses. Businesses that qualify have exporting potential but need working capital
funds to produce or market their goods or services for export. Guarantees are offered to
qualified lenders (primarily commercial banks) in order to facilitate loans to small
businesses.
Recent Developments
In May, 2000, Eximbank Chairman, James A. Harmon, announced that he had asked
the Council on Foreign Relations and the Institute for International Economics to
undertake independent studies of the Bank’s programs and its competitive position relative
to similar export credit agencies around the globe. The report is expected to be released
in 2001as President Bush and the 107th Congress begin deliberations on renewing the
Bank’s charter.
Chairman Harmon also announced that he asked for a review of U.S. sanctions
policies and an assessment of the impact such policies have on U.S. exports as part of the
overall review. The review will also examine the impact of the Chaffee Amendment (P.L.
95-630), which allows the President or the Secretary of State to stop an export transaction
for non-economic reason. Harmon also expressed concern over the tenure of office of the
Chairman of the Bank, who serves at the discretion of the President, with approval of the
Senate. As a result, when Congress considers renewing the Bank’s charter, it may also
request that Congress consider fixing the length of the chairman’s term of office.
International Agreements
The United States generally opposes subsidies for exports of commercial products.
(Nevertheless, like most countries, the United States has in place procurement policies that
seek to assure that most foreign assistance funds are spent on U.S. goods and services.)
Since the 1970s, the United States has led efforts within the Organization for Economic
Cooperation and Development (OECD) to adopt international protocols which reduce the
subsidy level in export credits by raising the interest rates on government-provided export
credits to market levels.

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Countries that signed the OECD Arrangement (all OECD countries except Turkey
and Iceland) on export finance, concluded in November 1991, agreed to tighten further
restrictions on the use of tied-aid. The participants agreed that projects that would be
financially viable with commercial credits will be prohibited from using tied or partially
untied aid credits, except for credits to the least developed countries where per capita
income is below $2,465. Moreover, the agreement sets up tests and consultation
procedures to distinguish between projects that should be financed on market or official
export credit terms, and those that legitimately require such aid funds. Conditions under
which tied aid could be provided to these countries include the unavailability of
commercial export-import bank financing, or a case where a project lacks the capacity to
generate sufficient income to cover its costs at market prices.
U.S. exporters and others have expressed doubts about the effectiveness of the
OECD agreement. The agreement has a number of limitations, including: the difficulty of
defining commercially viable projects; and the presence of an “escape clause” that allows
countries to proceed with a tied aid offer, despite objections by other participants, if that
country claims that the project is in its national interest. Moreover, the Agreement
contains no explicit enforcement mechanism. The effectiveness of the Agreement also
depends on the accuracy and openness of tied aid offers reported to the OECD, but the
OECD does not confirm or verify the accuracy of the data provided by its members.2
Legislative Issues
In the 107th Congress, some Members have expressed their desire to reexamine the
Bank’s charter and its programs. While some Members have expressed their opposition
to the Bank, in part because they argue that it is no longer necessary, others have indicated
their willingness to support the Bank, but they believe Eximbank’s charter should be
amended to focus the Bank’s activities more narrowly. Other Members have expressed
their support for the Bank and argue that it fills an important gap in the export credit
market. H.R. 375, sponsored by Representative Royce would assess the consolidation of
OPIC and EXIM Bank. In H.R. 918, sponsored by Representative Tony Hall, EXIM
would be prevented from guaranteeing, insuring, or extending credit in connection with
the export of any good to a country for use in an enterprise involving mining, polishing or
other processing, or sale of diamonds in a country that uses such diamond sales to “finance
military activities, overthrow legitimate governments, subvert international efforts to
promote peace and stability, and commit horrifying atrocities against unarmed civilians.”
H.R. 1779, sponsored by Representative Lantos, would encourage EXIM to support
projects in Tibet and S. 494, sponsored by Senator Frist, would establish EXIM offices in
Zimbabwe. H.R. 1690, sponsored by Representative Waters, would prohibit EXIM from
assisting in the export of any good or service to or by any country that is challenging an
intellectual property law or government policy of a developing country, which regulates
and promotes access to HIV/AIDS pharmaceutical or medical technology.
2 Competitor’s Tied Aid Practices Affect U.S. Exports. General Accounting Office. Report No.
GGD-94-81. May 1994. p. 19-21.

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Eximbank Debate
Eximbank’s government-sponsored finance programs have long been controversial.
One rationale for the Export-Import Bank is the acknowledged competition among
nations’ official export financing agencies. Most economists doubt, however, that a nation
can improve its welfare over the long run by subsidizing exports. Economic policies
within individual countries are the prime factors which determine interest rates, capital
flows, and exchange rates, which, in turn, largely determine the overall level of a nation’s
exports. This means that, at the national level, subsidized export financing merely shifts
production among sectors within the economy, rather than adding to the overall level of
economic activity, and subsidizes foreign consumption at the expense of the domestic
economy. This also means that promoting exports through subsidized financing or
through government-backed insurance and guarantees will not permanently raise the level
of employment in the economy, but it will alter the composition of employment among the
various sectors of the economy.
Some Eximbank opponents argue that the Bank’s programs serve only to aid the
richest American firms. For example, some critics have derisively called the Bank,
“Boeing’s Bank.” Eximbank data indicates that it has stepped up its efforts to aid aircraft
exports because of estimates that there is a growing market among third world countries
for aircraft. Nevertheless, the Bank also is attempting to make its programs more
accessible to small businesses, which account for 12 to 15% of the Bank’s total
authorizations.
Some opponents further argue that, by providing financing or insurance for exporters
that the market seems unwilling, or unable, to provide, Eximbank’s activities draw from
the financial resources within the economy that would be available for other uses. Such
“opportunity costs,” while impossible to estimate, could be potentially significant. Another
consideration is that subsidized export financing raises financing costs for all borrowers
by drawing on financial resources that otherwise would be available for other uses, thereby
possibly crowding out some borrowers from the financial markets. This crowding-out
effect might nullify any positive impact subsidized export financing may have on the
economy.
Some Eximbank supporters maintain that the Bank’s programs are necessary for U.S.
exporters to compete with foreign subsidized export financing and also to pressure foreign
governments to eliminate concessionary financing. As a result, Eximbank is required in
the Bank’s Act to provide U.S. exporters with financing terms that are “competitive” with
those offered by other official trade financing institutions. These, and other supporters of
the Bank, also stress that deficiencies in financial markets bias those markets against
exports of high value, long-term assets.
It is difficult to assess precisely the effect Eximbank programs have on deterring other
nations from engaging in tied aid activities or other forms of subsidized financing to
support their exports. Recent OECD data raise doubts about the effectiveness of
international agreements to stem the use of subsidized trade financing to promote exports.
Additionally, subsidized trade financing likely has a small overall effect on the U.S.
economy, given the small size of total Eximbank activities relative to the magnitude of
U.S. exports.