EXIM Bank - Open for Business?

Last week “The Citizen” announced that China’s EXIM Bank has secured a $7.6 billion loan to upgrade the Central Railway Line in Tanzania from narrow to standard gauge. EXIM’s President Liu Liang praised the Tanzanian government for reconstruction of the 2,190-kilometre railway promising that the bank would ensure a timely completion of the project. As a matter of fact, last year China’s EXIM Bank funded over 1,000 projects in 49 countries for a total of $80 billion. China’s Belt and Road initiative seeks to advance international trade between nations in Asia, Europe and Africa by funding projects in transportation, electricity, resources, telecommunication and industrial parks. Aggressive lending will in turn build strong trading partners for Chinese exports. The 2015 EXIM Competitiveness Report noted that, among the strongest world lenders, China, Germany, Korea, and Finland ranked the highest respectively in terms of volumes of new major medium- and long-term official export credit (in billions USD). The United States placed fifth. EXIM’s ability to support a healthy U.S. export program was severely limited last year when the bank’s congressional authority to authorize new transactions lapsed from July 1st until December 4th. This year, while money is available to fund large projects, which would significantly enhance American jobs and the American export market, EXIM Bank is faced with another dilemma. The bank requires authorization by its board of directors for transactions in excess of $10 million. At present, EXIM’s board does not have the requisite three members to reach the necessary quorum to authorize these larger transactions. In January 2016, President Obama nominated the Honorable J. Mark McWatters of the National Credit Union Administration to join the EXIM board to enable the bank to once again completely fulfill its commitment to the American Exporter. To date, the Senate has yet to move the nomination forward. Bank officials have indicated that it’s like competing with one hand tied behind their back. To paraphrase remarks from EXIM’s Chairman Fred P. Hochberg, world governments are placing greater reliance on exports to pick up the slack in their economic development. As a result more and more countries are turning to their national export credit agencies (ECAs) as a viable alternative to boost growth in their export sectors. American exporters and the American workforce which supports its need for an ECA which can match the competition while maintaining transparency within a rules-based frame work across global credit agencies. It is hoped that the Senate will soon confirm Mr. McWatters and that EXIM Bank again will be in a position to approve the larger transactions to enable the American export community to compete on a global scale. EXIM Bank is currently authorized by Congress to continue operating through September of 2019. Will 2016 be the year in which EXIM’s board will be restored to its full capacity? Or will American exporters continue to be at a serious disadvantage when faced with intense foreign competition?