Thank you for inviting me to testify as the Vice-Chairman of the Trade Promotion Coordinating Committee (TPCC) and as Chairman of the Export-Import Bank of the United States (Ex-Im Bank). While other agencies unite American exporters and foreign buyers, the Export-Import Bank provides the financing to generate successful transactions in emerging markets. Other agencies provide aid to needy countries. We attempt to level the playing field for US businesses by ensuring that buying decisions are made on the basis of normal market forces and not on the basis of market imperfections such as financial support from official foreign credit agencies. We consider this institution a valuable part of the overall US economic arsenal.
As directed by our Charter, Ex-Im Bank only approves transactions for which we can conclude that there is a "reasonable assurance of repayment". The word is in our name, but let me reiterate that we are the Export-Import Bank of the United States. We work to preserve the competitiveness of US exporters against foreign competition, but we also watch over the taxpayer dollars. We donít compete with commercial banks. We help them go where they are unable to go without the backing of the US government.
Because this Bank works in partnership with business and labor, because it keeps exporters competitive, and because it helps create good jobs for US workers, Congress and the Executive Branch have recognized the continuing need for a vigorous Ex-Im Bank. Ex-Im, and the other agencies represented here today, are working hard to align institutional goals and processes with the new global economic environment. While the trade promotion coordination effort is not new, it should be renewed. Thus, Secretary Evans and I, and the other distinguished members of this panel, are committed to a plan of cooperative action that will deliver tangible results.
Now let me talk about Ex-Imís role in this new effort. My vision, like all of those officials represented here, is to use the TPCC as a management vehicle to ensure that the appropriate resources of the US Government can be in the right place, at one time, and coordinated to meet the needs of consumers and customers. Ex-Im Bank is working with all the members of the TPCC on the benchmarking survey and strongly supports this effort. Secretary Evans explained what we plan to achieve with the benchmarking survey. Let me outline what Ex-Im Bank, and US companies, are up against in terms of foreign competition, and why we believe we need this survey as part of the National Export Strategy.
In general, wages for jobs supported by exports pay 13 to 16 percent more than the national average. This applies to both skilled and unskilled labor, and to both small and large firms. Employment in exporting firms grows 15 to 40 percent faster than in non-exporting firms. And exporting firms are 9 percent less likely to fail in any year than comparable firms that do not export. This is something of the global reality we are now facing.
Most of our G-7 competitors have fundamentally changed their approach to providing "a competitive edge" and reoriented their organizations to focus on that edge. While in the 70s and 80s the key competitive tool was cost (interest rates, fees, etc.), by the late 90s the key was to find that one aspect of financing in which a country or a company has a comparative advantage and magnify its role (more of a quality differential). A core mission of all our major competitors is to not just to promote exports, but also to promote exports from small companies.
As Secretary Evansí mentioned, the TPCC is reaching out to small-and medium-sized companies in the United States through a survey that seeks to identify obstacles to exporting. Ex-Im Bank is an active participant in this survey process. We have provided specific survey questions related to trade finance issues, and we have identified survey participants whose experiences will add value to the body of knowledge in this area. The information gathered by this survey will equip TPCC agencies to better handle the specific challenges exporting presents to this largely untapped pool of potential exporters. Our task is to turn that information into programs and policies that address the needs our customers have identified. This exercise is a prime example of how a coordinated interagency process can leverage resources and tackle several issues with a single tool.
That said, I must urge everyone here today not to lose sight of the increasingly coordinated efforts other countries have made in terms of their trade promotion. Foreign export credit agencies have been more aggressive in developing programs to assist their exporters. US trade agencies must be aware of these efforts so that they do not lag behind others in an increasingly competitive global landscape.
As part of fulfilling a TPCC initiative to identify the "best practices" of trade promotion exhibited by competitor governments and the private sector, Ex-Im Bank has reviewed the activities of other ECAs around the world. Of all the countries we face, Ex-Im Bankís stiffest competition is from Canada, Germany, Japan and the United Kingdom.
Canada has become more proactive and aggressive regarding its trade promotion and exports. They have changed their focus from the creation of domestic jobs to assisting the exporting company itself. Canada has structured its export credit agency (EDC) to become an active banker in a transaction, encouraging more foreign buyers to purchase Canadian products. They have developed an essentially commercial, market-oriented agency, called a market window, regarding fees and foreign content in which the Canadian government pushes aside its own banks and directly competes with our commercial banks as well as with Ex-Im Bank. But this is a government agency, and obtains money at sovereign cost and pays no taxes or dividends.
Germany is another country that has changed its approach to export promotion. The key to the German approach is their export credit agency Kreditanstalt fur Wiederaufbau (known as KfW). Up until the mid 1990s, KfW acted solely as Germanyís aid agency. The German government then decided to assign an export objective to KfW, and to make those export financing activities self-supporting, although KfW does benefit from tax and cost-of-funds similar to those of the Canadian export credit agency. In the last five years, KfW has become perhaps the largest medium/long-term export credit provider in the world, with most of this business conducted outside of OECD controls. Using KfW, Germany can give special support to targeted sectors such as aircraft, and operate in areas where export agencies are constrained. Germanyís current strategy is to find ways to expand the utility of KfW while protecting it from OECD control.
In addition to the Market Windows of Canada and Germany, Ex-Im Bank must face competition from Japan through its tied-aid transactions. The Japanese export credit system is the least like Ex-Im Bank in terms of mission, legislative oversight, transparency and sensitivity to external concerns such as the environment, human rights, and so on. In response to the Japanese recession and the Asian economic crisis, Japan has adopted an aggressive strategy of increasing its disbursement of tied aid. In 1992, Japan provided $190 million in tied aid support. By the year 2000, this support had increased to $4 billion. These numbers, and continued concern that Japan operates its "untied" aid program so that much of it is de facto tied, push the envelope on international rules governing government aid programs.
Finally, in the United Kingdom, Ex-Im faces competition from the Export Credit Guarantee Department (ECGD). The ECGD is the export credit agency most like Ex-Im Bank in terms of its basic mission, legislative oversight, transparency, and sensitivity to current political events. However, the ECGD has recently remodeled itself to be a customer-driven ECA, aggressively responding to the changing export environment by positioning itself to be a "one stop shop" and is entering co-financing arrangements with other ECAs. Lately, other credit agencies such as Hermes of Germany and COFACE of France, have entered into similar reinsurance agreements based on the ECGD model.
Ex-Im Bank will continue to watch the practices of other ECAs and the trade promotion activities of other nations. We will continue to engage intermediaries involved in international trade and improve our export promotion programs to better compete with other exporting nations. In addition, we will continue to think and act creatively to respond to the rapidly changing patterns of global trade and to provide US exporters with the support they need to succeed in this dynamic environment. TPCC coordination will be at the center of these efforts.
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