Order Code 98-568 E
Updated February 8, 2005
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 around $200 million, the Bank finances less than
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. In FY2005, Congress
appropriated $59.8 million to fund the Bank’s subsidy costs and $73.2 million in
administrative expenses through HR4818 (P.L. 108-477), the Consolidated
Appropriations Act, 2005. For FY2006, the President’s budget requests funding of
$186.5 million for the Bank’s subsidy costs and $73 million for administrative expenses
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.
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 $80 billion in
2002, but will increase by $5 billion a year to reach $100 billion in 2006. 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.
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

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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.
Table 1. Budget of the Export-Import Bank
(in millions of dollars)
FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
Total Subsidy Requested
$839
$963
$633
$541
$0
$126
$187
Total Subsidy Appropriated
865
865
727
513
0
60
NA
Operating Expenses
2,656
1,815
1,256
433
583
764
490
Direct Loan Subsidy
12
95
48
1
22
17
17
Guarantee Loan Subsidy
890
732
678
317
247
365
380
Loan Modifications
35
5
26
3
10
20
20
Administrative Expenses
55
62
63
68
73
73
73
Re-estimates of Subsidy
1,663
668
441
44
231
289
0
Costs
Budget Authority (gross)
2,474
1,848
1,182
622
306
422
261
Appropriated
865
928
740
577
72
132
260
Other
1,609
919
442
45
234
290
1
Budget Resources
2,999
2,331
1,838
1,268
1,290
1,177
719
Budget Authority (gross)
2,474
1,848
1,182
622
306
422
261
Recoveries from previous
45
118
118
89
149
50
45
years
Unobligated resources start
480
358
514
557
835
705
413
of year
Unobligated resources end
358
514
557
835
705
413
229
of year
Budget Authority (net)
2,474
1,847
1,181
621
305
421
260
Outlays (net)
2,539
1,655
1,245
645
718
881
434
Source: Office of Management and Budget. Budget of the United States Government, various issues.
Washington, U.S. Govt. Print. Off.
Note: Data for FY2006 are requested, or estimated amounts.
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

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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 October 2004, Eximbank Chairman Phillip Merrill announced that the Bank had
signed an agreement with the Iraqi Ministry of Finance that allows the Bank to provide
credit insurance coverage in support of U.S. exports to Iraq. In 2004, the Bank also
approved an updated version of its Environmental Procedures and Guidelines that make
the Bank’s environmental provisions consistent with the guidelines for evaluating the
environmental impact of projects that was adopted by the Organization for Economic
Cooperation and Development (OECD) in December 2003. President and Chairman of
the Bank Phillip Merrill, who was confirmed on November 14, 2002, saw his term and
that of two other Eximbank Board members (April H. Foley, and J. Joseph Grandmaison)
expire on January 20, 2005. The two other members of the Board are Max Cleland and
Linda Conlin. In addition, Commerce Secretary Donald L. Evans and U.S. Trade
Representative Robert B. Zoellick serve as ex officio members fo the Board. The terms
of Eximbank Board members can be extended up to six months until the members are
reappointed and reconfirmed or other members are appointed and confirmed.
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.
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,

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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
Congress does not directly approve individual Eximbank transactions, but has a
number of oversight responsibilities concerning the Bank and its activities. The Senate
confirms Presidential appointments to the Bank’s Board of Directors and Congress
authorizes the Bank’s legal charter for a period of time chosen by Congress. At times,
Congress has required an annual reauthorization of the Bank’s legal charter, and at other
times has authorized the Bank for periods that have varied from two to four years.
Congress also approves an annual appropriation for the Bank that sets an upper limit on
the level of the Bank’s financial activities. In addition, Congress can always amend or
alter the Bank’s governing legislation as it deems appropriate. Members of Congress and
Congressional Committees can request that the Bank’s President consult with them or
testify before committees, with some qualifications.
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. Two
of the most important provisions of the act include a sense of Congress that requires the
Bank to prepare a human rights impact assessment for any project over $10 million, and
a prohibition on supporting any project that is subject to import relief measures or
countervailing duty orders. In March 2003, the Bank published its final version of its
redrafted economic procedures that it will follow in order to abide by the provisions of
the act.
Other provisions of the Reauthorization Act include establishing the Office of
Inspector General within the Bank; designating assisting U.S. job growth as the main
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
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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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; and expanding the Bank’s authority to promote goods and
services related to renewable energy sources.
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.