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Committee on Financial Services

United States House of Representatives

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The Committee on Banking and Financial Services
U.S House of Representatives, 105th Congress
James A. Leach, Chairman

Phone: (202) 226-0471 Fax: (202) 226-6052 Internet: http://www.house.gov/banking

For Immediate Release                                              
Wednesday, July 9, 1997 Andrew Biggs 226-0471

Opening Statement
By Representative James A. Leach
Chairman, Committee on Banking and Financial Services
Markup of H.R. 1370
Reauthorization of the Export-Import Bank of the United States

The Committee meets today to consider the bill H.R. 1370, legislation to reauthorize the Export-Import Bank of the United States (Eximbank) for an additional four years. The bill as amended was favorably reported to the full committee by the Subcommittee on Domestic and International Monetary Policy by voice vote on May 8, 1997. Before I turn to Chairman Castle to describe the legislation, I would like to make a few remarks in support of reauthorizing Eximbank.

As Members are aware, emerging markets offer tremendous opportunities for American businesses. More than 40 percent of U.S. exports (worth about $180 billion) go to developing countries, and the amount is rising. The World Bank estimates that by the year 2010, these countries will consume 40 percent of all goods and services produced worldwide. From a Midwestern agribusiness perspective, exports, not only of crops, but of value-added products from processed pork to the refined steel of tractors and combines are in increasing demand. Any businessman or businesswoman will tell you that the competition is fierce in these emerging markets. So fierce, in fact, that foreign government offers of trade financing to U.S. competitors has grown almost as dramatically as have the commercial opportunities in emerging markets.

These facts illustrate not only the continuing need in the U.S. economy for the services that Eximbank is uniquely positioned to provide, but also the importance of maintaining a strong U.S. export credit agency to ensure that American companies are able to compete fairly on the basis of market factors like price, quality and service.

Eximbank is an independent U.S. government agency that operates under a renewable congressional charter that expires on September 30, 1997. The basic mission of the bank is to neutralize the predatory financing techniques used by foreign export credit agencies, and to finance U.S. exports of goods and services when adequate private financing is not available. It accomplishes this objective through a variety of loan, guarantee, and insurance programs.

Eximbank's most important mission is to ensure that a level playing field exists for U.S. exporters who face officially-financed competition. Indeed, the Bank estimates that in 1995 almost three-quarters of its activity was directed at leveling the playing field for American exporters, while the rest went toward making up gaps in private financing. Eximbank has also been a major positive force in multinational negotiations to reduce the trade-distorting activities of foreign export credit agencies. For example, "tied aid" export promotion offers by foreign governments have declined by 75 percent since 1991.

Eximbank supports roughly $15 billion in U.S. exports per year. Most of the exports financed by the Bank are capital goods going to fast-growing developing markets. More than 80 percent of Eximbank's transactions are for exports from small businesses, a dramatic increase from just a few years ago.

Interest rates on Eximbank's direct loans are priced at the cost of borrowing plus one percent. Guaranteed loans are priced by commercial banks at market levels. Eximbank also charges U.S. exporters exposure fees to cover the risk of loans. The Bank's annual program budget reflects the difference between these fees and losses which may be incurred on new business committed that year. This appropriation acts as a loan loss reserve. As a result of the Bank's requirement of a "reasonable assurance of repayment" for each transaction, losses on the approximately $125 billion of loans financed since 1980 are less than $2.5 billion - a loan loss ratio of 1.9 percent. This figure is superior to that of commercial banks lending to foreign governments. It should also be noted that the Bank is fully reserved against potential losses in its guarantee and insurance portfolio.

In closing, I would stress that Eximbank's role in U.S. trade finance reflects the almost instinctive American philosophical preference for open markets and open trade. The Bank is essentially a lender of last resort to American exporters. In 1995, for example, Eximbank supported only two percent of total U.S. exports. By contrast, Japan's export credit agencies supported 32 percent of Japanese exports that year and France officially supported 18 percent of its exports. But while Congress has mandated that Eximbank complement the market and not compete with the private sector, other well-supported export credit agencies have historically demonstrated less commitments to free markets or fair trade.

Without Eximbank, American exporters would be left defenseless in the face of aggressive officially-financed foreign competition. Congress needs to reauthorize Eximbank to help continue to reduce export credit subsidies and make international trade more market-oriented. I urge support for the legislation.

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