ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—Âȱ
ÂŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
‘Š¢Ž›Š‘ȱ •’Šœȱ
—Š•¢œÂȱ’—ȱ —ÂŽ›—ŠÂ’˜—Š•ȱ›ŠÂŽȱŠ—Âȱ’—Š—ŒŽȱ
Š›Œ‘ȱŗÅǰȱŘŖŖşȱ
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ÅȬśÅŖŖȱ
   ǯŒ›œǯ˜Ÿȱ
şŞȬśŜŞȱ
ȱŽ™˜›Âȱ˜›ȱ˜—›Žœœ
Pr
epared for Members and Committees of Congress
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
ž––Š›¢ȱ
The Export-Import Bank (Ex-Im Bank) is the chief U.S. government agency that helps finance
American exports of manufactured goods and services with the objective of contributing to the
employment of U.S. workers. (For additional information, see the Bank’s Internet site:
http://www.exim.gov.) With an annual budget of around $200 million, the Bank finances less than
1% of U.S. exports a year. Ex-Im Bank provides loan guarantees, working capital 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.
On December 20, 2006, President Bush signed P.L. 109-438, to reauthorize the Bank’s authority
through September 30, 2011. Since the FY2008 appropriations, the Ex-Im Bank has been a “self-
sustaining†agency for appropriations purposes. The Bank funds it administrative and program
costs through fee income generated from its financing programs.
On March 11, 2009, President Obama signed the Omnibus Appropriations Act of 2009 (P.L. 111-
8), which authorized a limit of $41 million on the total amount that the Bank can spend on its
loan, guarantees, and insurance programs and a limit of $82 million for the Bank’s administrative
expenses. In addition, under the legislation, offsetting collections of up to $75 million above the
approved spending levels are to be available for use in the following three fiscal years. This
report will be updated as events warrant.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
˜—ÂŽ—Âœȱ
Background ..................................................................................................................................... 1
Programs.......................................................................................................................................... 2
Direct Loans .............................................................................................................................. 3
Export Credit Guarantees and Insurance................................................................................... 3
Working Capital Guarantee Program ........................................................................................ 4
Bank Program Authorizations ................................................................................................... 4
Recent Developments...................................................................................................................... 4
International Agreements................................................................................................................. 6
Legislative Issues ............................................................................................................................ 7
Export-Import Bank Debate ............................................................................................................ 8
The Global Financial Crisis and Demand for Ex-Im Bank Services............................................... 9
Š‹•Žœȱ
Table 1. Budget of the Export-Import Bank .................................................................................... 2
˜—ŠŒÂœȱ
Author Contact Information .......................................................................................................... 10
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Śȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
ŠŒ”›˜ž—Âȱ
The Export-Import Bank (Ex-Im Bank) is an independent U.S. government agency that is charged
with financing and promoting exports of U.S. manufactured goods and services with the objective
of contributing to the employment of U.S. workers. To accomplish these goals, Ex-Im Bank 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; and assist U.S. exporters to meet foreign, officially
sponsored, export credit competition. The Bank operates under a renewable charter, the Export-
Import Bank Act of 1945, as amended, and has been authorized through September 30, 2011. The
charter requires that all of the Bank’s financing have a reasonable assurance of repayment and
directs the Bank to supplement, and to not compete with, private capital.
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.) Ex-Im Bank 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. Ex-Im Bank has not borrowed from the FFB after
FY1997.1 The Bank’s authority to lend, guarantee, and insure is limited to a total of $100 billion.
The outstanding principal amount of all loans made, guaranteed, or insured by the Ex-Im Bank is
charged at the full value against the $100 billion limitation.
The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) included two sections with
implications for the Export-Import Bank’s budget. Under the terms of the Budget Enforcement
Act of 1990 (Title XIII), 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. Under the Federal Credit Reform Act of 1990
(Title V), for a given fiscal year, the cost of federal credit activities, including those of the Ex-Im
Bank, is reported on an accrual basis equivalent with other federal spending, rather than on a cash
flow basis, as used previously. 2 The Bank’s estimates now allocate budgetary resources to reserve
against the estimated risk of loss to the Bank.
As of FY2008, the Ex-Im Bank is now “self-sustaining†for appropriations purposes.3 In its
FY2008 and FY2009 budget requests, the Bush Administration requested appropriations for Ex-
Im Bank’s subsidy and administrative expenses, but stated that offsetting collections would count
against the appropriation from the General Fund and the appropriation is expected to be $0. In
1 Federal Financing Bank, Financial Statements, multiple years, http://www.ustreas.gov/ffb/financial-statements/.
2 CRS Report RL30346, Federal Credit Reform: Implementation of the Changed Budgetary Treatment of Direct Loans
and Loan Guarantees, by James M. Bickley.
3 Export-Import Bank of the United States, Annual Report 2008, Washington, DC, 2008, p. 3.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
ŗȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
essence, the Bush Administration requested approval for the level of expenses that Ex-Im Bank
would cover on its own. In addition, offsetting collections of up to $50 million above the
approved spending levels would be available for use in the following three fiscal years. As part
of the continuing resolutions passed by Congress and signed by President Bush (P.L. 110-329,
P.L. 111-6), Ex-Im Bank funding continued at 2008 levels until March 11, 2009.
On March 11, 2009, President Obama signed the Omnibus Appropriations Act, 2009 (P.L. 111-8),
which authorized a limit of $41 million on the total amount that the Bank can spend on its loan,
guarantees, and insurance programs and a limit of $82 million for the Bank’s administrative
expenses. Also under the legislation, offsetting collections of up to $75 million above the
approved spending levels are to be available for use in the following three fiscal years.
Table 1. Budget of the Export-Import Bank
(in millions of dollars)
FY03 FY04 FY05 FY06 FY07 FY08 FY09
Total Subsidy Requested
$541 $0 $126 $187 $26 $68
$41
Total Subsidy Appropriated
513 0 60 100 NA 68 41
Operating Expenses
433 583 661 353 366 622 140
-Direct Loan Subsidy
1
22
—
1
––
17
17
-Guarantee Loan Subsidy
317
247
227
185
51
36
37
-Loan Modifications
3
10
14
5
8
2
—
-Administrative
Expenses
68 73 73 73 73 78 82
-Re-estimates of Subsidy Costs
44
231
347
189
241
487
—
Budget Authority (gross)
622 306 477 198 341 609 124
-Appropriated
577 72 132 109 99 -25 —
-Other
45 234 345 89 242 634 124
Budget Resources
1,268 1,290 1,252 812 712 955 457
-Budget
Authority
(gross)
622 306 477 188 341 609 124
-Recoveries from previous years
89
149
70
22
—
—
—
-Unobligated resources start of year
557
835
705
592
371
346
333
-Unobligated resources end of year
835
705
591
371
346
333
317
Budget Authority (net)
621 305 476 198 340
462 -41
Outlays (net)
645 718 681 318 450 554 44
Source: Office of Management and Budget. Budget of the United States Government, various issues. Washington,
U.S. Govt. Print. Off.
Note: Data for FY2008 and FY2009 are requested, or estimated amounts.
›˜Â›Š–œȱ
Ex-Im Bank has four main financial products it uses to support U.S. exports: direct loans, loan
guarantees, working capital guarantees, and export credit insurance. The Bank’s financing
programs are used primarily to aid U.S. exporters in instances where they face a foreign
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Řȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
competitor that is receiving officially subsidized financing by a foreign government, or when
private sector financing is unavailable. 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.
’›ŽŒÂȱ˜Š—œȱ
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 level approved by the Congress for the
Bank’s direct lending were sharply reduced during the 1980s. The direct loans carry fixed interest
rates and generally are made at terms that are the most attractive allowed under the provisions of
international agreements. 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. In FY2008, Ex-Im
Bank made two direct loans, one to Brazil for helicopters ($11.8 million) and the other to Ghana
for equipment for a rural electrification project ($344.2 million). 4 In comparison, in FY2007, the
Bank made no direct loans, and in FY2006 it authorized three.
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 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. Applications for the tied aid fund are subject to review by
the Treasury Department. Since 2002, the Ex-Im Bank has authorized three tied aid transactions.
¡™˜›Âȱ›ŽÂÂ’Âȱ žŠ›Š—ÂŽŽœȱŠ—Âȱ —œž›Š—ŒŽȱ
Export credit 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 is more conditional than a guarantee. Insurance coverage carries
various conditions that must be met by the insured before the Bank will pay off a claim. In
contrast, a guarantee is a commitment made to a commercial bank by the Export-Import Bank
that promises full repayment with few, if any, conditions attached.
4 Export-Import Bank of the United States, Annual Report 2008, Washington, DC, 2008, pp. 22-23.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
řȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
˜›”’—ÂȱŠ™’Š•ȱ žŠ›Š—ÂŽŽȱ›˜Â›Š–ȱ
Ex-Im Bank also offers a working capital guarantee program that it uses to facilitate working
capital financing to 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. In FY2008, the Bank authorized $1.4 billion working capital
guarantees, of which $1.1 billion was for small businesses.5
Š—”ȱ›˜Â›Š–ȱžÂ‘˜›’£ŠÂ’˜—œȱ
In FY2008, the Bank authorized a total of $14 billion in loans, guarantees, and export credit
insurance to support an estimated $20 billion in exports. This represented an increase from
FY2007, during which the Bank authorized $13 billion in loans and guarantees to support an
estimated $16 billion in U.S. exports. The Bank approved 2,704 authorizations in FY2008,
compared to 2,793 authorizations in FY2008. By value, about 22% of the Bank’s authorizations
went toward assisting small businesses in FY2008, compared to 27% in FY2007. In contrast, by
number of transactions, about 86% of the Bank’s authorizations were directed toward support for
small business exporters in both FY2007 and FY2008.6
ŽŒŽ—ÂȱŽŸŽ•˜™–Ž—Âœȱ
In response to commercial and liquidity shortages associated with the global financial crisis, the
Export-Import Bank took several actions in November 2008 to assist U.S. exporters. Ex-Im Bank
took measures to expand coverage under and to provide flexible financing terms for its working
capital guarantee program. Additionally, in order to expedite U.S. exports to South Korea, the
Bank granted special delegated authority to help insure U.S. lenders’ confirmation of Korean
banks’ letters of credits.7
In February 2009, a settlement was reached in an environmental lawsuit brought by Friends of the
Earth, Greenpeace, and four cities (Boulder, Colorado and the cities of Arcata, Santa Monica, and
Oakland in California) against the Export-Import Bank and another U.S. government agency, the
Overseas Private Investment Corporation (OPIC), in 2002.8 In the lawsuit, the environmental
groups and cities alleged that Ex-Im Bank and OPIC provided more than $32 billion in financing
and insurance from 1990 to 2003, without assessing the extent to which the projects contributed
to climate change in the United States as required by the National Environmental Policy Act (P.L.
91-190). Under the settlement, Ex-Im Bank is able to continue funding fossil fuel projects, but it
must disclose the estimated carbon dioxide emissions from potential transactions for such projects
on its website; make public its determinations as to whether the National Environmental Policy
5 Export-Import Bank of the United States, Annual Report 2007 and Annual Report 2008, Washington, DC, p. 14.
6 Export-Import Bank of the United States, Annual Report 2007 and Annual Report 2008, Washington, DC.
7 Ibid.
8 Friends of the Earth v. Mosbacher, 488 F. Supp. 2d 889 (N.D. Cal. 2007).
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Śȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
Act applies to specific transactions involving fossil fuel projects and provide opportunity for
comment; develop and implement a carbon policy in cooperation with plaintiff representatives
that will include a $250 million renewable energy loan facility; and promote consideration of
climate change issues among export credit agencies with the Organization of Economic
Development (OECD).9 Observers point out that the Ex-Im Bank has had a track record of
promoting environmentally-friendly exports and assessing the environmental impact of its
projects since the early 1990s.
In November and December of 2008, two groups of Members of Congress sent letters to the
Export-Import Bank calling on the Bank to ensure that its projects do not conflict with national
security and to end loan guarantees to companies doing key business with Iran. The December
2008 letter requested the Bank to rescind loan guarantees worth $900 million made to the Indian
company Reliance Industries Limited (RIL) until the company agrees to stop exporting gasoline
to Iran. RIL is reported to provide Iran with up to 30% of its imports of gasoline.10 The Ex-Im
Bank authorized two loan guarantees to RIL, one in July 2007 for supporting the company’s
petroleum refinery equipment and services ($500 million) and the other in August 2008 for oil
and gas development and exploration in India’s Bay of Bengal region ($400 million).11 Members
raised concerns about the foreign policy and national security implications of providing loans to
RIL. Since the letter, in January 2009, RIL reportedly announced that it will terminate gasoline
sales to Iran once its current contractual obligations expire.12 The Bank is allowed to deny
applications for credit on the basis of non-financial and non-commercial considerations in cases
where the President, in consultation with the House Financial Services Committee and Senate
Banking, Housing and Urban Affairs Committee, determines that the denial of such applications
would advance U.S. national interests.13
In 2007, several individuals were charged with scheming to defraud Ex-Im Bank. In one case, an
exporter, buyer, and broker all allegedly conspired to misappropriate loan proceeds from an Ex-
Im Bank-supported loan.14 Convictions were obtained in 2008 for some individuals charged in
connection with fraud schemes.15 Fraud can waste Bank resources and undermine the Bank’s
programs. In response to concerns about fraud, Ex-Im Bank adopted new guidelines for its
transaction partners (lenders, brokers, and exporters) in January 2008 to reduce the risk of fraud,
“Transaction Due Diligence Best Practices.†These guidelines consist of a series of questions to
help transaction partners undertake effective due diligence and assess the risk of fraud in their
transactions. Applicants for Ex-Im Bank assistance are under no legal obligation to follow the
9 "Lawsuit Forces U.S. Financing Agencies to Account for Climate," Environment News Service, February 7, 2009.
Gerald Karey, "ExIm Bank, OPIC agree to provide $500 mil for renewable energy," Platts Commodity News, February
6, 2009. Meeting with Export-Import Bank officials, March 9, 2009.
10 "Rep. Sherman Issues Statement on Reported RIL Decision to Stop Selling Refined Petroleum to Iran," US Fed
News Service, January 7, 2009.
11 Export-Import Bank of the United States, Annual Report 2008 and Annual Report 2007, Washington, DC.
12 "Reports of Indian Company's Decision to Halt Gas Shipments to Iran Welcomed by Sherman," International Trade
Daily, January 8, 2009.
13 Export-Import Bank, The Charter of the Export-Import Bank of the United States, as amended through P.L. 109-438,
December 20, 2006, pp. 10-11.
14 “Eight Charged in Connection with $80 million Scheme to Defraud Ex-Im Bank,†U.S. Fed News, October 11, 2007.
15 Export-Import Bank, "California Man Sentenced to Six Months in Prison in Connection With ," press release, July
18, 2008.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
śȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
guidelines, but they are written to help the applicants prevent financial and legal losses as well as
to help Ex-Im Bank prevent fraud. In addition to reducing the risk of fraud, these guidelines aim
to decrease the processing time for applications, which has been a concern in the business
community.
—ÂŽ›—ŠÂ’˜—Š•ȱ›ŽŽ–Ž—Âœȱ
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 U.S. foreign assistance funds are spent by the recipients 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 more closely
reflect market levels.
The primary agreement governing export credits is the OECD “Arrangement on Officially
Supported Export Credits†(the “OECD Arrangementâ€), which was concluded in November 1991
and has been revised. Participants agreed to tighten further restrictions on the use of tied-aid. The
participants agreed that projects would be financially viable, and commercial credits would 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 set 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. In addition to
agreements on credit terms, OECD member countries have agreed to other guidelines for official
export credit. In 2007, OECD member countries agreed to revise guidelines on environmental
procedures, referred to as “Common Approaches on Environment and Officially Supported
Export Credits†(the “Common Approachesâ€). These environmental guidelines call for member
governments to review projects for potential environmental impacts and to assess them against
international standards, such as those of the World Bank. They also call for more public
disclosure for environmentally sensitive projects. The OECD also adopted new guidelines on
sustainable lending principles that aim to help developing countries avoid a renewed build-up of
debt after receiving debt relief.
Another issue of concern is that some countries outside of the OECD, such as China, are
becoming major providers of official export credit finance. To the extent that these countries’
export credit agencies provide financing on terms that are more advantageous than those allowed
within the OECD Arrangement, the Ex-Im Bank and other OECD export credit agencies may find
it difficult to compete with such export credit programs.
U.S. exporters and others also 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
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Ŝȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
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.16
ÂŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
Congress does not directly approve individual Ex-Im Bank 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 five 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.
President Bush signed P.L. 109-438, the Export-Import Bank Reauthorization Act of 2006, on
December 20, 2006. This act reauthorizes the Bank through September 30, 2011. Among its
provisions, the act created a Small Business Division within the Bank that is responsible for
conducting research, tailoring products to small business needs, and increasing loans to small
business concerns. The measure also extends the authority of the Advisory Committee on Sub-
Saharan Africa through FY2011. In addition, the measure directs the Bank to submit annually to
Congress a list of U.S. commercial sectors and products that could suffer “adverse economic
impact†due to Ex-Im Bank support of projects abroad. The measure encourages the Bank to
make greater use of its “tied aid†facility, but also provides a mechanism for the Secretary of the
Treasury to oppose decisions made by the Bank’s board of Directors to match an offer of tied aid
by a foreign entity. The measure also requires that the Bank determine whether an entity receiving
Ex-Im Bank support could produce goods other than those specified on its application in order to
circumvent prohibitions on supporting projects abroad that could compete with U.S. firms.
Three bills were introduced in the 110th Congress which would affect the Export-Import Bank if
they were passed. The New Apollo Energy Act of 2007 (H.R. 2809), introduced on June 21, 2007,
would require Ex-Im Bank to limit its support for fossil fuel-related projects to less than 85%, and
increase its support for renewable energy and energy efficiency projects to at least 15% of its
available resources for supporting transactions. This bill would also create a commission and an
Office of Renewable Energy Promotion within the Bank to help achieve these targets. Ex-Im
Bank also would be required to report to Congress on its energy efficiency activities and its
overall effect on greenhouse gasses. S. 876, introduced on March 14, 2007, would prohibit the
Export-Import Bank from providing services to any individual who has invested $1 million or
more in any project that contributes to enhancing Cuba’s ability to develop petroleum resources
off its northern coast. A similar bill, H.R. 1679, was introduced in the House on July 26, 2007.
H.R. 1886 was introduced on April 17, 2007, and it would prohibit the Export-Import Bank from
providing its services to any activity connected with an oil or gas project.
16 Competitor’s Tied Aid Practices Affect U.S. Exports. General Accounting Office. Report No. GGD-94-81. May
1994. p. 19-21.
˜—›Žœœ’˜—Š•ȱŽœŽŠ›Œ‘ȱŽ›Ÿ’ŒŽȱ
Åȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”DZȱŠŒ”›˜ž—ÂȱŠ—ÂȱŽÂ’œ•ŠÂ’ŸŽȱ œœžŽœȱ
ȱ
¡™˜›ÂȬ –™˜›ÂȱŠ—”ȱŽ‹ŠÂŽȱ
One rationale for the Export-Import Bank is the acknowledged competition among nations’
official export financing agencies. Some Ex-Im Bank 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.
However, among some critics of the Bank, there is doubt that a nation can improve its welfare or
level of employment over the long run by subsidizing exports. Economists generally maintain that
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. As a result,
they hold that subsidizing export financing merely shifts production among sectors within the
economy, but does not add to the overall level of economic activity, and subsidizes foreign
consumption at the expense of the domestic economy. From this point of view, promoting exports
through subsidized financing or through government-backed insurance and guarantees will not
permanently raise the level of employment in the economy, but alters the composition of
employment among the various sectors of the economy.
In response, some supporters highlight that the Bank is required by its charter to provide U.S.
exporters with financing terms that are “fully competitive†with those offered by other 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.
Some opponents also argue that, by providing financing or insurance for exporters that the market
seems unwilling, or unable, to provide, Ex-Im Bank’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 opposition argument 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. Critics assert that this crowding-out effect might nullify
any positive impact subsidized export financing may have on the economy. For critics of the Ex-
Im Bank, another argument is that federal government spending on export promotion programs
cuts against the interest of taxpayers and is tantamount to “corporate welfare.â€
Supporters point out that the FY2008 Consolidated Appropriation Act (P.L. 110-161) made the
Ex-Im Bank “self-sustaining†for appropriations purposes. While the Bank’s Office of the
Inspector General receives federal funding, the FY2008 appropriation authorized the Bank to use
the fees collected from its clients to fund operations, that is, to support the Bank’s loan loss
reserves and administrative expenses. This results in “the final fiscal year appropriation from the
General Fund estimated at $0†for the Bank. In FY2008, the Bank collected $122.8 million in
offsetting collections which were used to pay the Bank’s credit-related administrative expenses
($78.9 million) and those credit program costs where the fees charged to clients were insufficient
to cover expected losses ($25.4 million).17
17 Export-Import Bank of the United States, Annual Report 2008, Washington, DC, 2008, p. 57.
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Another point of contention is the risk to taxpayers imposed by the Bank’s activities. Opponents
argue that because the Bank’s loans are backed by the full faith and credit of the U.S.
government, taxpayers are potentially burdened if the Bank’s projects fail. Supporters argue that
the Bank’s credit authorizations are required to have a reasonable assurance of repayment and that
the Bank monitors credit and other risks in its portfolio. In addition, the Bank maintains reserves
at the U.S. Treasury.18
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Beginning with the collapse of the U.S. housing market in October 2008, the international
financial crisis has caused turmoil in the financial markets of both developed and developing
countries. It also has been coupled with a global economic turndown. U.S. exporters have been
affected by a contraction in the global demand for exports and a tightening of private sector credit
and insurance.19 Given the far-reaching effects of the financial crisis, the Export-Import Bank
may be affected. As of September 30, 2008, the Bank has noted an increase in requests for Ex-Im
Bank support, but reports that its current portfolio has not experienced any significant negative
effects stemming from the crisis.20 However, many experts believe that the full reverberations of
the crises have yet to be felt.21 Because the international financial crisis is a recent and ongoing
development, its full impact on Ex-Im Bank is unknown. Nevertheless, there are several possible
scenarios that may emerge.
One possibility is that there will be reduced demand for Ex-Im Bank’s services by U.S. business
businesses. The Bank largely is a demand-driven agency; U.S. businesses turn to the Bank when
private sector lenders and insurers are unwilling or unable to provide financial services necessary
for them to conduct business abroad. Given that the financial crisis has been coupled with a
broader economic downturn, U.S. businesses ultimately may be less inclined or less able to
export.
A second scenario is that certain factors will fuel increased demand for the Ex-Im Bank’s
services. The international financial crisis has spurred liquidity problems for the U.S. financial
sector, leading to a contraction of credit and insurance available in private markets. For U.S.
companies that continue to be interested in exporting, they increasingly may solicit the Bank’s
services. Consistent with this scenario, Ex-Im Bank officials currently project an uptick in
customer demand for its financial products, including in overseas markets considered credit-
worthy prior to the financial crisis.22
18 Ibid, p. 53.
19 For a thorough background and analysis of the international financial crisis, see CRS Report RL34742, The U.S.
Financial Crisis: The Global Dimension with Implications for U.S. Policy, coordinated by Dick K. Nanto.
20 Export-Import Bank of the United States, Annual Report 2008, Washington, DC, 2008, p. 40.
21 CRS Report RL34742, The U.S. Financial Crisis: The Global Dimension with Implications for U.S. Policy,
coordinated by Dick K. Nanto.
22 Meeting with Export-Import Bank officials, March 9, 2009.
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The Bank also may witness increased demand for its services due to rising political instability in
countries experiencing the fallout from the international financial crisis. According to recent
testimony for the Senate Intelligence Committee, “The primary near-term security concern for the
United States is the global economic crisis and its geopolitical implications.â€23 Countries
previously considered politically risky investments may now pose greater risks. Some experts
speculate that there is an increased likelihood for radicalization and terrorist activities in
developing countries.24 Other countries considered relatively safe prior to the crises may be
viewed as political risks now.25 Consequently, private sector companies may be more reluctant to
provide insurance for business activities in these regions and demand for Ex-Im Bank services
may increase. Given the greater political risks of doing business in economically troubled areas,
some raise concerns about the implications for the Bank’s exposure to credit risk and insurance
liability.26
Another possibility is that international financial and economic crisis will have a net-neutral
effect on the Bank’s activities significantly. The factors contributing to a change in demand, such
as lack of private sector credit and insurance, may be offset by a change in supply, such as project
cancellations or postponements.
žÂ‘˜›ȱ˜—ŠŒÂȱ —˜›–ŠÂ’˜—ȱ
Shayerah Ilias
Analyst in International Trade and Finance
silias@crs.loc.gov, 7-9253
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23 U.S. Congress, Senate Select Committee on Intelligence, Annual Threat Assessment of the Intelligence Committee
for the Senate Select Committee on Intelligence, Dennis C. Blair, 111th Cong., 1st sess., February 12, 2009.
24 "Terrorism and Political Risks in Asia - Still a Threat," Asia Insurance Review, December 1, 2008.
25 Jelena Vukotic, "Political Unrest on the Rise in Economic Troubled Hotspots," RGE Monitor, February 3, 2009.
26 Adam S. Posen, Financial Hybrids Do Not Work, Peterson Institute for International Economics, Op-ed in the
Börsen-Zeitung for the series "Jeneseits der Krise", August 7, 2008.
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