Order Code 98-568 E
Updated June 18, 2002
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 about $700 million, the Bank finances around 1%
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. President Bush’s budget for
2003 proposes appropriating $541 million for the Bank’s subsidy costs, or 25% below
the $727 million appropriated in FY2002. The Bank’s authority was renewed through
September 2006 when President Bush signed P.L. 107-189 on June 14, 2002. 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 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, 2006.
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
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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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.
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)
FY97 FY98
FY99
FY00
FY01
FY02
FY03
Total Subsidy Requested
737
632
808
839
963
633
541*
Total Subsidy Appropriated
773
683
765
865
865
727
NA
–
–
–
–
–
–
Operating Expenses
885
775
727
2,656
1,815
1,533
726



Direct Loan Subsidy
44
16
53
12
95
34
30
Guarantee Loan Subsidy
767
701
603
890
732
972
605
Loan Modifications
30
12
21
35
5
19
19
Administrative Expenses
43
46
50
55
62
65
70
Re-estimates of Subsidy Costs
–
–
–
1,663
668
346
–
Budget Authority (gross)
773
732
825
2,474
1,848
1,234
612
Appropriated
773
683
765
865
928
792
611
Other
–-
49
60
1,609
919
441
–
Budget Resources
1,217
1,155
1,207
2,999
2,331
1,838
1,007
Budget Authority (gross)
773
732
825
2,474
1,848
1,234
612
Recoveries from previous years
103
124
48
45
118
90
90


Expired resources
-3
-46
–
–
–
–
–
Unobligated resources start of year
344
299
334
480
358
514
305
Unobligated resources end of year
332
334
480
358
514
305
281
Budget Authority (net)
773
732
825
2,474
1,847
1,233
611
Outlays (net)
934
686
746
2,539
1,655
1,044
664
* 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.
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

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“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. A report by the Institute was
released in early 2001. The report was generally favorable to the Bank and analyzed in
detail a number of issues facing the Bank, such as market windows. A report released
March 12, 2002 by the CATO Institute is not as favorable. It concluded that the Bank
“has little relevance” and that its overall impact is “at best negligible, and probably
harmful.”
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 Chafee 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.
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.
U.S. exporters and others have expressed doubts about the effectiveness of
international efforts to stem officially subsidized trade financing. While the OECD
agreement appears to be reducing most direct government subsidies to trade financing,
a number of countries have found a way around the agreement through market windows,
or subsidized trade financing through ostensibly private financial institutions that are not
subject to the agreement. The agreement also 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
On June 14, 2002, President Bush signed P.L. 107-189 , the Export-Import Bank
Reauthorization Act of 2002. In contrast to attempts during previous Congresses to
eliminate the Bank, the 2002 Act likely will strengthen the Bank in a number of ways and
increase its role, both domestically and internationally, in promoting U.S. exports. Major
provisions of the Act include: designating assisting U.S. job growth as the purpose of the
Bank’s programs; extending Eximbank’s authority through 2006; authorizing the
appropriation of $80 million in administrative expense to upgrade the Bank’s
technological infrastructure; increasing the Bank’s overall credit limitation; extending the
Office on Africa through September 30, 2006; requiring the Bank to coordinate with the
Secretary of the Treasury to adopt a set of principals for approving uses of its tied aid
fund, with transactions subject to review by the President; expanding the Bank’s authority
to use its tied aid fund to counter untied aid and market windows activities; directing the
Secretary of the Treasury to explore international negotiations on untied aid and requiring
an assessment of the impact of market windows and prospects for negotiations within the
OECD; increasing from 10% to 20% the share of Bank financing for “socially and
economically disadvantaged” small businesses; clarifying the Bank’s definition of human
rights to include the Universal Declaration of Human Rights adopted by the United
Nations General assembly; in considering an application for Eximbank programs the Bank
can consider the extent to which a nation has been helpful in eradicating terrorism;
appointing an Inspector General; and expanding the Bank’s authority to promote goods
and services related to renewable energy sources.
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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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.
Eximbank Debate
One rationale for the Export-Import Bank is the acknowledged competition among
nations’ official export financing agencies, but most economists doubt that a nation can
improve its welfare or level of employment 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, and 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 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.

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