Mr. Chairman and distinguished members of the Committee, it is my pleasure to be here today to discuss how the Export-Import Bank of the United States works -- every day -- to create jobs here at home through exports abroad. Indeed, it has been my distinct honor, now as Under Secretary of State for Economic, Business and Agricultural Affairs, and formerly as Under Secretary of Commerce for International Trade, where I helped lead the Trade Promotion Coordinating Committee, to work closely with the staff of Ex-Im Bank. Ex-Im Bank is a key player in our effort to ensure the competitiveness of U.S. firms and workers in the often bruising global marketplace.
Let me say at the outset that the Administration strongly urges the Congress to support our trade finance and investment agencies. We believe it is absolutely vital that Congress reauthorize the Export-Import Bank, as well as the Overseas Private Investment Corporation; and fully fund the Trade and Development Agency. These three institutions provide a continuum of services that help U.S. businesses of all sizes win export sales and keep America competitive. In fact, since Ex-Im Bank was last rechartered five years ago, it has supported about $75 billion in U.S. exports, with appropriations of $3.7 billion. In other words, for every taxpayer dollar invested, Ex-Im Bank has leveraged approximately $20 dollars in exports -- supporting hundreds of thousands of jobs in virtually every state and community.
In light of this excellent track record, I welcome the opportunity to discuss with you the critical role that Ex-Im Bank plays in our National Export Strategy. As you know, the mandate of Ex-Im Bank is to create and support U.S. jobs through exports. Ex-Im Bank fulfills this mission by providing direct loans, guarantees and insurance in support of U.S. exports in markets where adequate private sector financing is not available, by neutralizing the competitive advantages arising from official export financing offered by our industrial country competitors, and by reducing the cost of official export credit agency support through multilateral negotiations. Ex-Im Bank only gets involved when the private sector won't, or where the competition is using foreign government-back financing. In an era in which the U.S. does not have a monopoly on technology, quality and service, the terms of financing are absolutely critical. To weaken or eliminate Ex-Im Bank would amount to unilateral economic disarmament.
Ex-Im Bank is the Vice Chair of the Trade Promotion Coordinating Committee (TPCC), an interagency team I helped lead during my 14 months as Under Secretary of Commerce. The TPCC is dedicated to maximizing the effectiveness of our export promotion and trade finance services. Together, the agencies of the TPCC work to provide the exporting community with a continuum of services aimed at ensuring that U.S. firms and workers have the tools they need to compete in world markets.
As Vice Chair of the TPCC, Ex-Im Bank has been instrumental in formulating and implementing the President's National Export Strategy. Since the TPCC began its work in 1993, Ex-Im Bank has not shied away from the tough issues facing U.S. exporters. Instead, it has confronted them head-on and devised proactive, cutting-edge initiatives like the Tied Aid Capital Projects Fund to deter the use of trade distorting tied aid by our competition.
Ex-Im Bank also plays a key role in our advocacy efforts. As a member of the interagency advocacy network, the Bank works closely -- often daily -- with the other TPCC agencies and with our Embassies abroad to "level the playing-field" for U.S. firms competing for overseas contracts. Ex-Im Bank works to ensure that American firms are not unfairly disadvantaged by the trade financing capabilities of some of our competitors, and steps in when necessary to match competitive financing offers and to fill the gap that the private sector cannot or will not fill.
Furthermore, I believe that some of the most noteworthy accomplishments implemented by the TPCC over the past five years could not have come to fruition without the expertise and direct involvement of Ex-Im Bank.
Ex-Im Bank is leading an interagency task force to develop a long-term commercial policy strategy for Asia. This is just one of six regionally focused working groups that the Bank suggested the TPCC establish to focus the government on long-term strategic and proactive measures which will ensure that U.S. firms remain competitive in emerging markets. We plan to report to the Congress on this effort when we release the 1997 National Export Strategy.
One of Ex-Im Bank's primary objectives is to deter the use of subsidized, below-market financing offered by other nations' export credit agencies to induce purchases of that country's products - tied aid. Such tied aid distorts trade because it results in purchase decisions made on the basis of factors other than the price and quality of the products offered. Ex-Im Bank, as the U.S. official export credit agency, falls under the OECD "Arrangement on Guidelines for Officially Supported Export Credits." The Arrangement is a "gentlemen's agreement" among OECD nations that seeks to ensure that buyer's decisions are influenced by market forces rather than by government provided financial inducements. Ex-Im Bank has played a central role in the effort to reduce levels of tied aid. Through the OECD, the United States works to deter the use of tied aid. In cases where a competitor has decided to go forward with tied aid, Ex-Im Bank can match the offer. In this way, Ex-Im Bank programs provide the U.S. with a critical "lever" to negotiate international reductions in official export financing subsidies by foreign governments, and help create a more level playing field for U.S. firms overseas.
These multilateral negotiations have not only been effective in helping U.S. exporters compete fairly for foreign contracts -- they have had a positive impact on the federal budget by limiting the need for appropriations. When combined with Ex-Im Bank's Tied Aid Capital Projects Fund, these efforts have succeeded in reducing potentially trade distorting subsidies -- used by foreign governments to help their firms win critical contracts -- from nearly $10 billion in 1992 to less than half that amount in 1996. Without Ex-Im Bank, the U.S. would lose an effective tool to further reduce subsidies.
It is important to understand not only what Ex-Im Bank does, but why it is so necessary. Today, trade is vitally important to the U.S. economy. The time has long since passed when American companies bought and sold most of their products here at home. Workers, students, entrepreneurs and families must understand that their prospects are enhanced, not diminished, by exporting. It is critical that all Americans realize that as markets grow overseas, becoming ever more sophisticated, they will generate greater demand for goods and services -- American goods and services. This means that here at home, U.S. firms and workers will prosper, American jobs and paychecks will grow, and every American community will reap rewards if America is engaged in global commerce, meeting the growing worldwide demand for the high quality goods and services for which our workers are famous.
What this means to the average American is that his or her company will perform better if that company makes a commitment to export. Not only do these firms pay higher wages -- 13-18 percent more -- but recent studies have shown that exporting firms experience 20 percent faster employment growth and are 9 percent less likely to go out of business. The lesson is clear, the more our economy shifts into exporting sectors, the more prosperous our companies and workers will be.
We expect that global demand for American goods and services will accelerate. Political change over the past decade has allowed many nations around the world to embrace democratic institutions and free market reforms. In turn, citizens in these countries are demanding more and better services. Due to these changes, we believe that we have seen only the tip of the iceberg for global trade opportunities. Over the next decade, we fully expect that world trade will grow at three times the rate of the U.S. economy. Ninety-five percent of the world's customers live outside the United States. To give just one example of the potential that exists, consider this -- it is estimated that more than half of the world's population still lives a two-day walk from a telephone. Imagine the kinds of opportunities this bodes for the U.S. telecommunications industry alone. Developing nations represent our fastest growing export opportunities. Last year, the developing world imported more than $1 trillion in manufactured goods from industrialized countries. As infrastructure needs in these nations grow, the demand for U.S. capital goods will grow as well. The World Bank estimates that $2 trillion in infrastructure will be built in Asia and Latin America alone over the next decade. Indeed, demand by the Big Emerging Market (BEMs) countries is growing faster than we had previously estimated.
Even as American firms and workers look to take advantage of the tremendous opportunities presented by the global economy, they are confronted by foreign competition which can be unfair and trade distorting. Let me be clear, the competitive global economic environment can be a brutal one because so much is at stake. Foreign companies recognize, as do American firms, that their future prosperity and the prosperity of their workers rests on their ability to win these important overseas contracts. They recognize, as do we, that getting in on the ground floor will help them ensure a dominant market presence, leading to large long-term downstream exports.
Competition for these lucrative infrastructure projects is likely to become increasingly fierce. Because large infrastructure projects require enormous amounts of capital, government-supported financing will remain a critical factor in determining success in emerging markets.
That is why Ex-Im Bank's programs are so critical. Indeed, all of our industrialized competitors heavily utilize official export credit and financing institutions like our Ex-Im Bank. Through their official export credit agencies, the Japanese support almost one third of their total exports; France supports almost one-fifth of its exports and Spain about a tenth. In comparison, Ex-Im Bank supports only about 3 percent of our exports and ranks seventh out of seven export credit agencies in terms of national exports supported. The Japanese extend 12 times as much export credit support as Ex-Im Bank.
Although Ex-Im Bank supports a relatively small percentage of our annual exports, this help can make a huge difference in high-growth developing markets. In these markets, Ex-Im Bank is responsible for providing long-term financing for 10 to 40 percent of all U.S. capital goods in crucial sectors like telecommunications, major construction projects and power. In markets like China, where the Bank supported more than $1.5 billion in U.S. exports last year, American businesses consistently tell us that without Ex-Im Bank financing, they could not compete. Any limitation on Ex-Im Bank financing to China would have very negative impacts on U.S. jobs and exports without in any way advancing our human rights efforts.
Ex-Im Bank's importance to our exporters in developing markets is exemplified by the huge increase in demand the Bank is facing from exporters selling to the states of the former Soviet Union and other emerging markets. The unprecedented number of requests for financing in these markets has led to a serious shortfall in Ex-Im Bank's program budget for FY 1997 and FY 1998. The Administration is very concerned about this shortfall and will be working closely with the Bank and consulting Congress to seek long-term solutions.
In today's global economy, success in overseas markets translates directly into jobs here at home. Ex-Im Bank plays a vital role in keeping U.S. exports competitive -- particularly in the fastest-growing developing countries. Without Ex-Im Bank, the U.S. could stand to lose up to $15 billion in existing exports annually. This reduction of exports would have a negative multiplier effect throughout the U.S. economy and reduce economic growth.
In conclusion Mr. Chairman, the Administration strongly supports the reauthorization of Ex-Im
Bank -- it is an indispensable component of our efforts to increase exports and create jobs at
home, a very effective tool in our effort to reduce worldwide export subsidies, and an excellent
investment for the American people.
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