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July 10, 2013

53 export credit programs operate worldwide.

By Edward Gresser

THE NUMBERS: Export credit programs* 2012 –

World ~$300 billion
China: ~45-$70 billion
Japan $45 billion
Germany $39 billion
U.S. $31.3 billion
India $10.6 billion
Brazil $6 billion

*  $120 billion in regulated OECD, $108 billion in unregulated OECD, and roughly $70-$80 billion in major emerging-economy programs.

WHAT THEY MEAN:

A small but important task for Congress this month: The Export-Import Bank needs to get its President confirmed. Mr. Hochberg’s four-year term is running out, and he requires a vote to stay on the job. Without it, the Bank will lack a quorum of Directors and go into a sort of ‘sleep mode,’ able only to approve loans whose value is too small to require Board approval. A policy statement from abroad – by Philippe Rosler, Germany’s Minister of Economics and Technology – offers a useful point of departure for discussion of the topic:

Export finance is gaining ever more importance as a competitive factor [and] is often the precondition for the realization of an export deal. … State export credit insurance must today be seen in its international context. The goal of the [German] Federal Government remains a level playing field. This has already been achieved t the level of the Organization of Economic Coordination and Development (OECD) with great success in the OECD Consensus. … The growing competition from non-OECD states [ed. – meaning in particular China, India, & Brazil] remains a crucial challenge. It is therefore a central concern to formulate global standards – both in respect of financing conditions and the consideration of sustainability aspects.

The American Ex-Im Bank – a 79-year-old agency employing 395 people – joins Rosler’s Exportkreditgarantieren der Bundesrepublik Deutschland among 53 national export credit agencies worldwide. Together they provide about $300 billion worth of loans, credit guarantees, and other forms of support a year, equivalent to 2.5 percent of the $11.5 trillion in manufacturing exports. Chinese export-credit programs are poorly documented but seem to be the world’s largest; the $45 billion Japanese program second. Ex-Im’s $31.3 billion ranks fourth (just below Germany’s 29 billion euros) with a symmetrical 2.5 percent of world export finance commitments. Canada, France, the Netherlands, and Korea also run big export-finance programs.

Export-credit agencies are most active in large, long-term manufacturing sales and infrastructure projects, in which buyers are willing, returns to commercial banking low, and values well above $10 million. Recent American case Ex-Im projects, for example, include sales of cable-TV satellites to Vietnam, locomotives to the Mexican rail system, drinking water pipes to Sri Lanka, and planes and parts to Ethiopian Airlines. Brazil’s BNDES (“Banco Nacional de Desinvolvimento Economico y Social”) likewise put last year’s largest commitments behind Embraer aircraft sales, urban infrastructure and power projects in Angola, and buses for Bogota’s mass transit system. Germany’s, covering 169 countries with especially large commitments in Russia, China, and Turkey, supports projects ranging from a hydro-power plant in Iceland through wind-turbine sales to South Africa, a brewery in Brazil, and a steel mill in Korea.

Ex-Im has recently acquired a set of conservative critics, who make a case against the agency as an impermissible intervention in markets. This isn’t quite right – Ex-Im loans and guarantees are available only when commercial credit is unavailable, or to counteract below-market credit from commercial rivals – and in any case, de-activating the Bank would not end the intervention but simply reduce the number of active agencies from 53 to 52. As Rosler suggests, some peer-economy agencies do support negotiated limits on credit, but even they have no interest in leaving the business. Rather their hope is to bring large developing countries into an existing system of transparency rules and financial limits agreed upon by the OECD in 1998. In this environment, to let the Bank go dark changes no imperfection in markets, but simply withdraws the United States.

FURTHER READING:

The Ex-Im Bank –

Hochberg on American exporting, the bank’s role today, and its ideas for the future: http://www.exim.gov/newsandevents/events/speechesandtestimony/Jobs-Ahead-The-Next-Four-Years-of-the-Export-Import-Bank.cfm

Comparisons – Ex-Im’s 2012 Competitiveness Report examines the U.S. program in relation to its own goals and to the programs run by other big exporting nations (see pp. 17 and 144 for comparative statistics): http://www.exim.gov/about/library/reports/competitivenessreports/upload/US-Ex-Im-Bank-2012-Competitiveness-Report-to-Congress-Complete.pdf

And a look at the small-business side of export finance: http://www.exim.gov/newsandevents/releases/2013/Los-Angeles-Company-becomes-ExIm-Banks-2500th-New-Small-Business-Customer.cfm

And its peers –

Philippe Rosler on Germany’s export credit program as of 2012: http://www.agaportal.de/en/aga/downloads/jahresberichte.html

(… or direct to pdf at http://www.agaportal.de/pdf/berichte/e_jb_2012.pdf)

Brazil’s BNDES: http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/The_BNDES_Abroad/internationalization.html

Japan’s Nippon Export and Investment Insurance Agency: http://www.nexi.go.jp/topics/en/

China’s Export-Import Bank: http://english.eximbank.gov.cn/

And Harvard Business School’s list of export credit agencies around the world, with links: http://www.people.hbs.edu/besty/projfinportal/ecas.htm

International context –

The OECD reviews and compares export credit agencies: http://www.oecd-ilibrary.org/trade/export-credit-financing-systems-in-oecd-member-countries-and-non-member-economies_17273870

And the Export Credit Arrangement with its text and updates, 1998-2012: http://www.oecd.org/tad/xcred/theexportcreditsarrangementtext.htm