Global Economy
September 17, 2014

60 export credit agencies operate worldwide.

By Edward Gresser

THE NUMBERS: Export credit, tied aid, & other export financing worldwide, 2013 –

World* ~$300 billion
U.S. Ex-Im Bank $14.5 billion

* Ex-Im Competitiveness Report 2013; $286 billion total for OECD members, China, India, Russia, and Brazil; no estimates available for export credit agencies in 25 smaller countries outside the OECD. Does not include all forms of public credit.

WHAT THEY MEAN:

Introducing the 2013 Annual Report of Germany’s export credit agency, Euler Hermes Gesellschaft, Economic Minister Sigmar Gabriel provides context for ProgressiveEconomy’s newest paper – a look by Executive Director Ed Gresser at the Congressional debate on whether to ‘reauthorize’ the Export-Import Bank of the United States. Here is Herr Gabriel:

“Exporting strength and competitiveness are central pillars of the German economy and guarantors of high employment. With its export credit scheme, the Federal Government provides an important contribution to safeguarding the success of Germany as a source of productivity and innovation.”

Gabriel’s Annual Report finds Hermes providing 28 billion euros in loans, insurance, and other forms of export credit – roughly $35 billion – in 2013 to support 866 transactions, including shipments of three petrochemical plants to Central Asia and the Middle East, four aluminum rolling mills to China, 96 airplanes, 12 cruise ships, a wind farm in Ireland, and much else. Hermes in turn is only one of 60 public export credit agencies around the world – every major economy runs one, as do Sri Lanka, Ecuador, Slovenia, Luxembourg, and so on more – which together provide $300 – $400 billion in export credit, tied aid, and investment financing per year. The Ex-Im Bank of China outdid Hermes with $45 billion; Japan’s rather different program accompanied $2.1 billion in credit with $33 billion in tied aid and investment finance; France’s program did $9.5 billion, and the U.S. Ex-Im Bank did $14.5 billion.

Gabriel is an advocate of better international rules to limit and regularize these agencies. (The OECD export-credit agreements, applying to Europe, Japan, Canada, Australia, Korea, and so on, do not cover the agencies run by China, India, Brazil, and other emerging economies). But he strictly rules out any German withdrawal from the field:

“The export guarantee scheme of the Federal Government is one of the main cornerstones in the promotion of trade by the Federal Republic of Germany.”

Against this crowded and complex backdrop, Congress is deciding the fate of the American Ex-Im Bank. An 80-year-old agency launched in tandem with Franklin Roosevelt’s “Reciprocal Trade Agreements Act” in 1934, Ex-Im employs 412 people and made 3,900 grants of loans, guarantees, and insurance last year, for projects ranging from a $400 textbook sale to Nigeria to multibillion dollar transactions in power, aviation, and subway systems comparable to (and often competing with) the German program. Its charter must periodically be renewed by Congress, with the next deadline coming in October. If it doesn’t happen, Ex-Im ceases operations.

Gresser’s paper observes that this debate is really less about whether a public role in export credit is a good thing per se, than whether the U.S. ought to drop out while other countries continue their programs. This noted, it argues for renewal of the charter on four grounds, viewing Ex-Im as:

(a) A useful support for export-based growth in the immediate future, with the U.S. economy continuing to need to tap foreign demand in the long recovery from the 2008-2009 financial crisis;

(b) An important means to support large-scale sales of power equipment, urban infrastructure, aviation, and other long-term contracts for developing countries where private credit is less easily available, and also a way to help introduce new exporters and smaller businesses to exporting – that is, under Ex-Im’s charter, “filling market gaps that the private sector is not willing or able to meet, such as volumes or length of repayment beyond the scope of commercial lender capacity and reasonable risks that the private sector is unable to cover.”

(c) A valuable lender-of-last-resort tool to be kept in reserve in the event of future financial crisis and sudden collapses of private credit; and

(d) A matter of legitimate national self-interest, ensuring that in a world of $300 billion or more in annual public credit, the agencies run by other governments do not place U.S.-based businesses and their workers at impossible disadvantages.

FURTHER READING:

Gresser on Ex-Im Bank renewal: http://progressive-economy.globalworksfoundation.org/2014/09/16/reauthorize-the-export-import-bank

Data –

Ex-Im Bank’s policy and financial commitments compared to institutions abroad (see pp. 17 and 107 of the 2013 Competitiveness Report for figures): http://www.exim.gov/about/library/reports/competitivenessreports/

Taking into account tied aid, investment promotion, and other forms of export credit, the Competitiveness Report estimates $286 billion for the OECD countries’ agencies plus those run by China, India, Brazil, and Russia. A quick table drawn from the report, limited to a very strict definition of export credit (i.e. without market window, untied loans, or investment support, and noting that Japan, Germany and others provide much of their support in these forms) finds $149 billion worldwide in new medium- and long-term credit coming from the 31 OECD members plus China, India, Russia, and Brazil in 2013. Ex-Im provides about 10 percent of this total:

Total OECD + BRIC $149 billion
China $45.5 billion
Germany $22.6 billion
Korea $14.8 billion
U.S. Ex-Im Bank $14.5 billion = 10%
France $9.5 billion
Italy $8.6 billion
India $5.1 billion
Sweden $4.2 billion
Brazil $4.1 billion
U.K. $3.9 billion
Denmark $3.8 billion
Netherlands $3.2 billion
Norway $2.8 billion
Japan $2.1 billion
Canada $1.9 billion

Perspectives –

Rep. Denny Heck (D-WA) suggests a larger credit authorization: http://dennyheck.house.gov/media-center/press-releases/democrat-proposes-lending-increase-for-export-import-bank-to-support-us

Rep. Jeb Hensarling (R-TX) proposes abolishing the Bank: http://hensarling.house.gov/media-center/press-releases/a-time-for-choosing-the-main-street-economy-vs-the-washington-crony

And Ex-Im President Fred Hochberg with the administration perspective: http://www.exim.gov/newsandevents/events/speechesandtestimony/2014-Export-Import-Bank-Annual-Conference.cfm

Comparisons –

Minister Gabriel introduces Germany’s annual export credit agency report: http://www.agaportal.de/en/aga/downloads/jahresberichte.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/tm/en-TCN/index_617.html

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

And the international context –

The OECD’s export credit rules: http://ww w.oecd.org/tad/xcred/eca.htm