Thank you for the opportunity to appear before you today. As Vice Chairman of the Export-Import Bank, I also serve as Vice Chairman of the Trade Promotion Coordinating Committee (TPCC), the body designated by Congress to coordinate interagency efforts on trade promotion.
Working in partnership with business and labor, we support exports in order to create and sustain jobs here in the United States. That means the Bank must be in tune with the Administrationís trade and foreign policy objectives, as well as the needs of U.S. companies to compete abroad
I appreciate the efforts of all the agencies represented here today, in addition to others both inside and outside the government, who contributed time and energy in pursuit of our common goal -- to make U.S. trade promotion efforts second to none by being effective, coordinated and user-friendly.
In keeping with the Administrationís firm commitment to free and fair trade, the Export-Import Bank (Ex-Im Bank) of the United States assists U.S. exporters in competing fairly and successfully in the world marketplace. Participation in foreign trade is a critical component of the nationís economy. In 2001, exports represented about 10% of the nationís GDP and supported approximately 12 million jobs (Department of Commerce, U.S. Trade Facts), including one-in-five manufacturing jobs. Moreover, medium- and small-sized companies represented 97% of U.S. exporters. These companies are an important source of U.S. employment. Moreover, as jobs in the export sector on average pay wages that are 13 to 18 percent higher than the national average of non-export jobs (Department of Commerce, U.S. Trade Facts).
Market imperfections and trade distorting subsidies frustrate U.S. exportersí ability to compete and win business in new markets. The Ex-Im mission is to meet both of these challenges head-on. When foreign governments subsidize the financing of products and services sold by their companies, we step in to level the playing field. These unfair practices distort free trade, and we are committed to providing the U.S. exporters a competitive environment where the market drives the process; in other words, the best product at the best price wins the sale, and not government-subsidized financing. Eventually, the hope and the efforts are to eliminate any government trade distorting subsidies.
Capital always moves to its best risk-adjusted rate of return. Especially in dynamic emerging markets, capital tends to be jittery even during the best of times. When these markets begin to slow or experience difficulty, capital flight is swift and can be crippling. Sometimes, especially in the short-term, this phenomenon is counter to the Bankís broader, long-term financing strategy. These sharp market movements most affect small companies. South Koreaís economic turmoil during the Asian Financial Crisis was a good example of this phenomenon. When the private market collapsed in 1997-1998, Ex-Im Bank stepped up to the plate and supported almost $2 billion dollars in exports during that critical period. The Bank didnít lose taxpayer dollars, and in fact Ex-Im Bank played a role in keeping trade relations and businesses open for U.S. exports. Now that the economy has stabilized in South Korea, the private sector has re-entered the market, and the Bank has appropriately scaled back its support. What was Ex-Im Bankís role? The Bank stepped into the breach and covered appropriate short-term risk. We to some degree insulated against potential financial contagion from that crisis.
In carrying out its mission in 2001, Ex-Im Bank supported approximately 4% of all U.S. exports to emerging markets and 6% of all U.S. capital goods exports to emerging markets. One of Ex-Im Bankís missions in this changed world is to take the lead in the U.S. commercial effort to penetrate risky emerging markets.
The Bank also steps up in times of crisis -- as Ex-Im Bank did during the 1997-98 Asian financial crisis, and as the Bank did this past fall through supporting the airline industry in the wake of the September 11 attacks. In this case, Ex-Im Bank has decided not to exercise its requirement that airlines have third party war risk insurance coverage, in coordination with the U.S. government and other nations, to keep the airlines of the world flying, until such time as the airline industry is able to secure a solution that will reinstate liability insurance. The process was successful, and international commerce continued without any hitches, as aircraft were not grounded. In so doing, not only did the Bank increase U.S. exports, but also fostered stability and economic growth at home and abroad.
Last year alone, Ex-Im Bank supported $12.5 billion worth of U.S. exports. Of all Bank transactions, 90% were in direct support of small businesses, representing $1.65 billion or 18% of the US exports by dollar volume supported. In fact, 383 new small businesses utilized the Bank for the first time last year to support their exports. Ex-Im Bank is proud of its record and intends to continue these efforts.
At the same time, the Export-Import Bank has several other mandates, as stated in our charter:
Ex-Im Bank Acts
Ex-Im Bank promotes private sector financing. Where there is not a private sector alternative and there is a creditworthy transaction, the Bank steps up and ensures that U.S. exporters can compete and are not at a disadvantage. In short, Ex-Im Bankís role is to provide official financing support that levels the playing field for U.S. exporters until agreements can be reached to eliminate market-distorting practices.
Ex-Im Bank does not perform this vital job in a vacuum. The Bank works closely with other United States government agencies to capture possible efficiencies and to protect the interests of the taxpayer. The TPCC plays a critical role, as illustrated by the recommendations in the National Export Strategy Report.
Allow me to briefly review some of the prior TPCC initiatives involving Ex-Im Bank and our sister trade agencies and what Ex-Im Bank is already doing to address some of these key needs.
National Export Report
Turning to the National Export Report, these recommendations were developed in close coordination among TPCC agencies and with significant input from the U.S. export community. The TPCC listened to the concerns of our customers, U.S. exporters. The TPCC listened to those that distribute and market our services, trade finance lenders. From this dialogue, the TPCC developed the recommendations continued in the report.
Highlights of the recommendations that pertain to the trade finance arena include:
Since October, when the TPCC agencies collectively last testified before this committee, we have been working hard to identify innovative ways to serve Ex-Im Bankís customers -- the nationís exporters. And now, I look forward to working with you and the other TPCC agencies in implementing these critical steps to improve U.S. exporter competitiveness.
Mr. Chairman, throughout my 34 years in banking, I have always tried to make decisions on whatís right for the customer. In the private sector, it was a matter of survivaló aligning your organization around your customers needs, expanding your services through strategic alliances - these were and still are one of the best ways for companies to expand market share. In the public sector, the principles of the TPCC are fundamentally issues of efficiency and providing our exporters the best unified and simplified government support possible. Especially in these tough times, our exporters need the best their government can offer. The best will only be realized collective and coordinated actions. While the TPCC has made progress in the past few years, we recognize we have more to do in several areas. The TPCC is committed to this effort. Thank you for your leadership on these issues, and I am nowpared to answer any questions you may have. Thank you.
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