Emergency Committee For American Trade - Publications

Export Promotion and Financing

U.S. export credit agencies are critical to promoting U.S. export growth and creating export-related jobs. The Export-Import (Ex-Im) Bank, the Overseas Private Investment Corporation (OPIC), and the Trade and Development Agency (TDA) have distinct and important export-promotion functions. Ex-Im Bank provides financing to respond to market distortions that would put U.S. exports at a competitive disadvantage. It played a significant role in promoting the recovery of Asian economies. OPIC and TDA encourage trade and investment by providing investment insurance and feasibility-study financing for overseas development projects with potential to benefit U.S. trade. The outlook for funding for each of these agencies is described below.

Ex-Im Bank

The Ex-Im Bank is an independent federal agency that is chartered by Congress. The bank’s current charter will expire in September 2001. The bank was established in 1934 as the official export credit agency of the United States government. It promotes exports by providing short- and long-term export financing to small, medium-size, and large U.S. exporters. It provided $12.6 billion in export financing in FY 2000, supporting $15.5 billion in U.S. exports. Eighty-six percent of the bank’s transactions last year were with small and medium-size exporters, up 13 percent from FY 1999. Exporters pay fees, interest and premiums for the use of Ex-Im’s financing. Fees typically range from 5 to 17 percent of the financing obtained.

Although the United States is continuing its effort to discourage the use of export-finance subsidies by foreign governments, their use remains widespread. Ex-Im Bank financing is one of the few tools available to counter such foreign government financing and enable U.S. companies to remain competitive. More than 80 countries provide financial assistance to their exporters. Japan, Canada, and many European countries supplement their export credit assistance with foreign assistance funds that allow them to offer financing at low rates with favorable terms. The most recent international data show that total export credit agency activity reached almost $500 billion in 1998, accounting for 8 percent of the $6.5 trillion in global export flows. Of that, the Ex-Im Bank ranked seventh (behind the Netherlands), providing only $13.5 billion or 2.7 percent of the total. Other countries’ support for export credit is also increasing; between 1993 and 1998, export credit by major trading countries increased 19 percent according to Berne Union data. A 1999 International Monetary Fund study reported an even higher increase -- 22 percent -- over the same period.

Foreign government export financing on favorable terms is causing U.S. companies to lose business. A U.S. government study tracking 200 projects over eight years found that foreign government financing played a role in diverting $25 billion in contracts away from U.S. companies.

Ex-Im Bank financing has been especially critical to the ability of U.S. exporters to gain access to developing country markets. In FY 2000, the bank authorized more than $3.1 billion in support of U.S. exports to Latin America, $3 billion for U.S. exports to Asia, $733 million for U.S. exports to Africa, and $213.7 million to Russia. In previous years, the bank played an important role in keeping U.S. exports flowing to Asian and Latin American markets during the Asian financial crisis. The bank was insurer of last resort in Korea, insuring more than 2,400 export transactions to that nation worth more than $1 billion. The bank played a similar role in Brazil, Thailand, and Mexico in 1999.

The Bush Administration’s FY 2002 budget blueprint, released on February 28, 2001, proposes a 25 percent cut in Ex-Im’s funding, from $927 million in FY 2001 to $699 million in FY 2002 (comparable to funding levels 10 years ago). Such a cut would likely reduce Ex-Im’s financing capability from $12.6 billion to $6.5 billion. ECAT and other business groups have strongly opposed such cuts in financing and will work with the Administration and Congress to ensure the Ex-Im receives the necessary funding.

In 2000, some concern was raised over Ex-Im funding to certain projects in Russia. In 2001, concerns have already been raised over Ex-Im’s financing support for refurbishing a steel plant in China, which some may use to push for a reexamination of Ex-Im’s procedures to determine the economic impact of financing on domestic industry interests. These and other issues are likely to be raised as Congress considers reauthorizing Ex-Im’s charter before it expires in September 2001.

Overseas Private Investment Corporation

OPIC was founded in 1971 to sell risk insurance and provide loans to help American companies compete in emerging markets. OPIC insurance covers political risks such as currency inconvertibility, expropriation, and political violence. It also provides loans and loan guarantees that would otherwise be unavailable or only available at a large cost in high-risk emerging markets. In 1999, OPIC’s charter was extended for four more years.

OPIC is financially self-sustaining and operates at no cost to taxpayers. In 2000, OPIC earned a profit of $185 million and had reserves of about $4 billion. Since its founding, OPIC has supported $138 billion worth of investments and generated $63.6 billion in U.S. exports, which supported 250,000 jobs. In 2000, OPIC invested $318 million in 154 projects, with 37 percent of the projects in South America, 17 percent in the Asian-Pacific countries, 13 percent in the New Independent States, 11 percent in Europe, 9 percent in the Caribbean and Central America, and 6 percent in sub-Saharan Africa.

Previous proposals to privatize OPIC have been demonstrated to be costly and self-defeating. A 1997 J.P. Morgan study revealed that privatizing OPIC would result in a net loss to the U.S. government and deprive the government of an important source of funding to offset foreign assistance spending. The study also found that private banks and insurance companies could not duplicate OPIC’s leverage in recovering insurance claims, ensuring that overseas projects produce U.S. benefits, and maintaining U.S. investor confidence.

Along with Ex-Im Bank financing, OPIC insurance is critical to the ability of U.S. exporters to take advantage of opportunities in high-risk emerging markets. OPIC has played a major role in supporting infrastructure projects in Russia and Eastern Europe, as well as in Asia. It also has had a prominent role in project finance in Latin America, particularly in the power and telecommunications sectors to help economic rehabilitation following Hurricane Mitch.

In January 2001, OPIC and the Inter-American Agency for Cooperation and Development (IACD) (established by the Organization of American States) joined as partners to promote U.S. investment in the Western Hemisphere.

The FY 2002 Budget Blueprint proposes no new funding for OPIC, but would allow OPIC to use unexpended loan-loss funds from previous years. ECAT will work with the Administration and Congress to ensure that OPIC is fully funded.

Trade and Development Agency

The U.S. Trade and Development Agency (TDA) of the U.S. Department of Commerce plays a significant role in promoting the international competitiveness of U.S. firms by enabling them to be involved in the initial development stage of major infrastructure projects in emerging markets. Through this work and additional advocacy, TDA helps U.S. companies compete effectively for foreign procurement contracts. TDA also provides technical training and assistance in the use of U.S. technologies and equipment in overseas projects. TDA exposes foreign government officials to U.S. technologies and products during "reverse" trade missions that provide them the opportunity to meet with American companies and learn about their products. TDA also provides companies new to exporting with a single point of contact in the U.S. government for counseling and assistance. The Advocacy Center supports the efforts of small, medium and large U.S. companies.

Foreign government financing of feasibility studies and advocacy for procurement contracts is far more extensive than U.S. funding. This further disadvantages U.S. exporters competing against foreign firms that benefit from subsidized export financing.

Since 1981, TDA programs have helped to promote over $16 billion in U.S. exports. For FY 2001, Congress appropriated $64.6 million for TDA, including additional funding to support TDA’s export database. The FY 2002 Budget Blueprint does not provide details on the Administration’s budget proposals for TDA, although the FY 2002 Budget Blueprint proposes an overall $300 million cut for the Commerce Department.

Compliance Initiatives

For FY 2001, the Clinton Administration proposed and Congress partially supported new funding for the Department of Commerce and the Office of the United States Trade Representative (USTR) to bolster U.S. compliance efforts. A significant part of this funding was directed at efforts to ensure China’s implementation of its new commitments when it enters the World Trade Organization. In particular, FY 2001 appropriations provided $3 million for the USTR and over $13 million for Commerce Department monitoring by Market Access and Compliance and Import Administration.

The FY 2002 Budget Blueprint does not provide details on the Bush Administration’s budget proposals for the compliance initiative, although it does propose an overall $300 million cut for the U.S. Department of Commerce. ECAT believes that continuing compliance funding in FY 2002 and beyond is critical to help ensure that the United States realizes the benefits of the trade agreements it negotiates. It is also essential for rebuilding support for further trade liberalization -- which can only be achieved if we are able to demonstrate that the United States is benefiting from the agreements it has already negotiated.

Multilateral Development Banks and International Monetary Fund

ECAT believes that the United States should meet its commitments to support international lending agencies. U.S. support of international lending agencies is a vital part of maintaining U.S. leadership in promoting global growth and stability. It is also critical to ensuring the growth of U.S. exports and the expansion of world export markets. The multilateral development banks also represent another avenue for the United States to help promote trade and investment liberalization. For example, the World Bank has played a valuable role in providing technical assistance to countries during previous WTO sector-specific services negotiations and the Inter-American Development Bank is currently providing assistance to the negotiations to form a Free Trade Area of the Americas.

Progress has been made in the last two years in funding the outstanding U.S. commitments to the multilateral development banks and development funds. As well, U.S. efforts to promote transparency and other U.S. objectives at the International Monetary Fund (IMF) have met with some success. A January 2001 study by the General Accounting Office (GAO), International Monetary Fund: Efforts to Advance U.S. Policies at the Fund, found that the Treasury Department had established a formal process to promote Congressionally-mandated policies at the IMF and had actively promoted legislation mandates, such as sound banking procedures and other issues.

The World Bank and the other international financial institutions should also play critical roles in helping to address human capital concerns in the areas of labor, the environment and health. Proposals have been made, for instance, to develop an international program to battle the HIV-AIDs crisis (and other health crises) in Africa through coordinated financial assistance for capacity building, prevention, and treatment. The World Bank and other institutions could play an important role in providing financial support, as well as coordinating and dispensing assistance to Africa and similar assistance to other parts of the world. Capacity-building programs regarding labor and environmental initiatives should also be pursued.

ECAT POSITION: ECAT supports the reauthorization of Ex-Im's charter this year and full funding of Ex-Im, at least at FY 2001 levels. Ex-Im Bank financing, for which U.S. companies already pay fees and interest, serves as a financial instrument of last resort and is especially critical to the ability of U.S. exporters to gain access to developing country markets and to compete with foreign companies, which benefit from much greater and more generous export credit assistance programs. Any decrease in Ex-Im Bank financing would undermine the competitiveness of U.S. companies, particularly as the United States' trading partners have continued to increase export credit assistance in recent years. ECAT also supports full funding for OPIC, TDA and a continuation of FY 2001 funding for U.S. efforts to ensure compliance with trade agreements. ECAT supports full funding for the multilateral development banks and development funds, as well as efforts to use these organizations to address human capital issues, including health, labor and environmental issues.


	Export Promotion and Financing U.S. export credit agencies are critical to promoting U.S. export growth and creating export-related jobs. The Export-Import (Ex-Im) Bank, the Overseas Private Investment Corporation (OPIC), and the Trade and Development Agency (TDA) have distinct and important export-promotion functions. Ex-Im Bank provides financing to respond to market distortions that would put U.S. exports at a competitive disadvantage. It played a significant role in promoting the recovery of Asian economies. OPIC and TDA encourage trade and investment by providing investment insurance and feasibility-study financing for overseas development projects with potential to benefit U.S. trade. The outlook for funding for each of these agencies is described below. Ex-Im Bank The Ex-Im Bank is an independent federal agency that is chartered by Congress. The bank’s current charter will expire in September 2001. The bank was established in 1934 as the official export credit agency of the United States government. It promotes exports by providing short- and long-term export financing to small, medium-size, and large U.S. exporters. It provided $12.6 billion in export financing in FY 2000, supporting $15.5 billion in U.S. exports. Eighty-six percent of the bank’s transactions last year were with small and medium-size exporters, up 13 percent from FY 1999. Exporters pay fees, interest and premiums for the use of Ex-Im’s financing. Fees typically range from 5 to 17 percent of the financing obtained. Although the United States is continuing its effort to discourage the use of export-finance subsidies by foreign governments, their use remains widespread. Ex-Im Bank financing is one of the few tools available to counter such foreign government financing and enable U.S. companies to remain competitive. More than 80 countries provide financial assistance to their exporters. Japan, Canada, and many European countries supplement their export credit assistance with foreign assistance funds that allow them to offer financing at low rates with favorable terms. The most recent international data show that total export credit agency activity reached almost $500 billion in 1998, accounting for 8 percent of the $6.5 trillion in global export flows. Of that, the Ex-Im Bank ranked seventh (behind the Netherlands), providing only $13.5 billion or 2.7 percent of the total. Other countries’ support for export credit is also increasing; between 1993 and 1998, export credit by major trading countries increased 19 percent according to Berne Union data. A 1999 International Monetary Fund study reported an even higher increase -- 22 percent -- over the same period. Foreign government export financing on favorable terms is causing U.S. companies to lose business. A U.S. government study tracking 200 projects over eight years found that foreign government financing played a role in diverting $25 billion in contracts away from U.S. companies. Ex-Im Bank financing has been especially critical to the ability of U.S. exporters to gain access to developing country markets. In FY 2000, the bank authorized more than $3.1 billion in support of U.S. exports to Latin America, $3 billion for U.S. exports to Asia, $733 million for U.S. exports to Africa, and $213.7 million to Russia. In previous years, the bank played an important role in keeping U.S. exports flowing to Asian and Latin American markets during the Asian financial crisis. The bank was insurer of last resort in Korea, insuring more than 2,400 export transactions to that nation worth more than $1 billion. The bank played a similar role in Brazil, Thailand, and Mexico in 1999. The Bush Administration’s FY 2002 budget blueprint, released on February 28, 2001, proposes a 25 percent cut in Ex-Im’s funding, from $927 million in FY 2001 to $699 million in FY 2002 (comparable to funding levels 10 years ago). Such a cut would likely reduce Ex-Im’s financing capability from $12.6 billion to $6.5 billion. ECAT and other business groups have strongly opposed such cuts in financing and will work with the Administration and Congress to ensure the Ex-Im receives the necessary funding. In 2000, some concern was raised over Ex-Im funding to certain projects in Russia. In 2001, concerns have already been raised over Ex-Im’s financing support for refurbishing a steel plant in China, which some may use to push for a reexamination of Ex-Im’s procedures to determine the economic impact of financing on domestic industry interests. These and other issues are likely to be raised as Congress considers reauthorizing Ex-Im’s charter before it expires in September 2001. Overseas Private Investment Corporation OPIC was founded in 1971 to sell risk insurance and provide loans to help American companies compete in emerging markets. OPIC insurance covers political risks such as currency inconvertibility, expropriation, and political violence. It also provides loans and loan guarantees that would otherwise be unavailable or only available at a large cost in high-risk emerging markets. In 1999, OPIC’s charter was extended for four more years. OPIC is financially self-sustaining and operates at no cost to taxpayers. In 2000, OPIC earned a profit of $185 million and had reserves of about $4 billion. Since its founding, OPIC has supported $138 billion worth of investments and generated $63.6 billion in U.S. exports, which supported 250,000 jobs. In 2000, OPIC invested $318 million in 154 projects, with 37 percent of the projects in South America, 17 percent in the Asian-Pacific countries, 13 percent in the New Independent States, 11 percent in Europe, 9 percent in the Caribbean and Central America, and 6 percent in sub-Saharan Africa. Previous proposals to privatize OPIC have been demonstrated to be costly and self-defeating. A 1997 J.P. Morgan study revealed that privatizing OPIC would result in a net loss to the U.S. government and deprive the government of an important source of funding to offset foreign assistance spending. The study also found that private banks and insurance companies could not duplicate OPIC’s leverage in recovering insurance claims, ensuring that overseas projects produce U.S. benefits, and maintaining U.S. investor confidence. Along with Ex-Im Bank financing, OPIC insurance is critical to the ability of U.S. exporters to take advantage of opportunities in high-risk emerging markets. OPIC has played a major role in supporting infrastructure projects in Russia and Eastern Europe, as well as in Asia. It also has had a prominent role in project finance in Latin America, particularly in the power and telecommunications sectors to help economic rehabilitation following Hurricane Mitch. In January 2001, OPIC and the Inter-American Agency for Cooperation and Development (IACD) (established by the Organization of American States) joined as partners to promote U.S. investment in the Western Hemisphere. The FY 2002 Budget Blueprint proposes no new funding for OPIC, but would allow OPIC to use unexpended loan-loss funds from previous years. ECAT will work with the Administration and Congress to ensure that OPIC is fully funded. Trade and Development Agency The U.S. Trade and Development Agency (TDA) of the U.S. Department of Commerce plays a significant role in promoting the international competitiveness of U.S. firms by enabling them to be involved in the initial development stage of major infrastructure projects in emerging markets. Through this work and additional advocacy, TDA helps U.S. companies compete effectively for foreign procurement contracts. TDA also provides technical training and assistance in the use of U.S. technologies and equipment in overseas projects. TDA exposes foreign government officials to U.S. technologies and products during "reverse" trade missions that provide them the opportunity to meet with American companies and learn about their products. TDA also provides companies new to exporting with a single point of contact in the U.S. government for counseling and assistance. The Advocacy Center supports the efforts of small, medium and large U.S. companies. Foreign government financing of feasibility studies and advocacy for procurement contracts is far more extensive than U.S. funding. This further disadvantages U.S. exporters competing against foreign firms that benefit from subsidized export financing. Since 1981, TDA programs have helped to promote over $16 billion in U.S. exports. For FY 2001, Congress appropriated $64.6 million for TDA, including additional funding to support TDA’s export database. The FY 2002 Budget Blueprint does not provide details on the Administration’s budget proposals for TDA, although the FY 2002 Budget Blueprint proposes an overall $300 million cut for the Commerce Department. Compliance Initiatives For FY 2001, the Clinton Administration proposed and Congress partially supported new funding for the Department of Commerce and the Office of the United States Trade Representative (USTR) to bolster U.S. compliance efforts. A significant part of this funding was directed at efforts to ensure China’s implementation of its new commitments when it enters the World Trade Organization. In particular, FY 2001 appropriations provided $3 million for the USTR and over $13 million for Commerce Department monitoring by Market Access and Compliance and Import Administration. The FY 2002 Budget Blueprint does not provide details on the Bush Administration’s budget proposals for the compliance initiative, although it does propose an overall $300 million cut for the U.S. Department of Commerce. ECAT believes that continuing compliance funding in FY 2002 and beyond is critical to help ensure that the United States realizes the benefits of the trade agreements it negotiates. It is also essential for rebuilding support for further trade liberalization -- which can only be achieved if we are able to demonstrate that the United States is benefiting from the agreements it has already negotiated. Multilateral Development Banks and International Monetary Fund ECAT believes that the United States should meet its commitments to support international lending agencies. U.S. support of international lending agencies is a vital part of maintaining U.S. leadership in promoting global growth and stability. It is also critical to ensuring the growth of U.S. exports and the expansion of world export markets. The multilateral development banks also represent another avenue for the United States to help promote trade and investment liberalization. For example, the World Bank has played a valuable role in providing technical assistance to countries during previous WTO sector-specific services negotiations and the Inter-American Development Bank is currently providing assistance to the negotiations to form a Free Trade Area of the Americas. Progress has been made in the last two years in funding the outstanding U.S. commitments to the multilateral development banks and development funds. As well, U.S. efforts to promote transparency and other U.S. objectives at the International Monetary Fund (IMF) have met with some success. A January 2001 study by the General Accounting Office (GAO), International Monetary Fund: Efforts to Advance U.S. Policies at the Fund, found that the Treasury Department had established a formal process to promote Congressionally-mandated policies at the IMF and had actively promoted legislation mandates, such as sound banking procedures and other issues. The World Bank and the other international financial institutions should also play critical roles in helping to address human capital concerns in the areas of labor, the environment and health. Proposals have been made, for instance, to develop an international program to battle the HIV-AIDs crisis (and other health crises) in Africa through coordinated financial assistance for capacity building, prevention, and treatment. The World Bank and other institutions could play an important role in providing financial support, as well as coordinating and dispensing assistance to Africa and similar assistance to other parts of the world. Capacity-building programs regarding labor and environmental initiatives should also be pursued. ECAT POSITION: ECAT supports the reauthorization of Ex-Im's charter this year and full funding of Ex-Im, at least at FY 2001 levels. Ex-Im Bank financing, for which U.S. companies already pay fees and interest, serves as a financial instrument of last resort and is especially critical to the ability of U.S. exporters to gain access to developing country markets and to compete with foreign companies, which benefit from much greater and more generous export credit assistance programs. Any decrease in Ex-Im Bank financing would undermine the competitiveness of U.S. companies, particularly as the United States' trading partners have continued to increase export credit assistance in recent years. ECAT also supports full funding for OPIC, TDA and a continuation of FY 2001 funding for U.S. efforts to ensure compliance with trade agreements. ECAT supports full funding for the multilateral development banks and development funds, as well as efforts to use these organizations to address human capital issues, including health, labor and environmental issues. ECAT - Homepage About ECAT \| Hot Issues \| ECAT Positions Press Releases \| Trade Resources \| Key Trade Votes \| Publications Steel \| CAFTA \| Search \| Members Only Copyright 1999-2002, the Emergency Committee for American Trade