Mr. Chairman, Members of the Committee:
I am James Harmon, President and Chairman of the Export Import Bank (Ex-Irn Bank), the official export credit agency of the United States Government. I would like to thank you for inviting me to appear before you today with my distinguished colleagues to discuss the Fifth Annual Report of the Trade Promotion Coordinating Committee (TPCC).
As you know, I was recently confirmed by this Committee as President and Chairman of Ex-Im Bank. Since having taken the helm at Ex-Im Bank, I have learned a great deal about the goals, objectives and requirements this Committee placed on the trade agencies when the legislation establishing the TPCC was enacted. I have also learned about the accomplishments of the TPCC to date, and wish to congratulate the visionaries on this Committee who conceived the TPCC, as well as our predecessors for having created the framework and provided the leadership that has yielded many worthy accomplishments by all trade agencies involved in making US companies competitive in the international arena over the past years.
Building upon these achievements, it is clear that the TPCC must now focus on how it can use its export development resources more effectively to counter the export promotion activities of our foreign government counterparts. Our competitors from Europe and Japan are dedicating more resources and operating with less restrictions than we do. Yet, all of the necessary "pieces" to our export promotion engine are there; we now need to make sure that they are well greased, locked in, fueled up, and aimed at the right target. This type of streamlined and finely honed capability has become more important because we have learned even more about how effectively our competition delivers export development assistance. And while our foreign government counterparts devote relatively more resources to this effort, we too can take what resources we have and use them in a more timely and effective manner. Thus, the real challenge for the TPCC is to work even more closely than ever before so that the US government can provide a competitive seamless web of services to our exporting community by offering support earlier with greater strength, intensity, and endurance. In this regard, the TPCC with the leadership of the Office of Management and Budget, will use, as tools, the GPRA- required agency Strategic Plans as the first step in evaluating and more closely aligning TPCC agency resources with priorities. Through this process and with the dedicated support of all agencies, the ability of the TPCC to offer a cohesive, comprehensive and competitive export support system to the US exporting community will be greatly enhanced.
What this means in terms of specific TPCC goals for the next several years is ensuring that our programs are properly focused on meeting the competition in markets throughout the world. We at the TPCC agencies believe that our new regional focus will enable all TPCC agencies to bring their technical expertise to bear in a cohesive and continuous form of support at all stages of a contract in areas such as technical assistance, standards, feasibility study funding, export and investment finance, advocacy and small business where our foreign competitors are winning important contracts. To this end, each of the Regional Working Groups will identify those specific areas where foreign government practices are unfairly disadvantaging US companies. The Working Groups will oversee implementation of the steps we have outlined to counter these unfair practices and to help foster an environment in which purchase decisions can be based on market forces such as price, quality and service -- where our exporters excel -- and not on the basis of special concessions offered by our competitors. As part of the new regional focus, the TPCC will expand its efforts in the Big Emerging Markets (BEMs). Ex-Im Bank in particular expects to see an intense and sowing demand for competitive export financing as these markets represent the highest growth and most competitive markets well into the next century. In addition to providing competitive financing for US exporters in these markets, Ex-Im Bank has assigned a loan/business development officer in the US Embassy in China on a short term basis. We plan to explore similar assignments in other regions, such as Russia, Africa, and Latin America with the Department of Commerce and other trade finance agencies.
Responsibility for leading this regional strategy is being shared by several agencies with support from all TPCC agencies. With my full support, Ex-Im Bank will do its part not only as Chair of the Asia Working Group, but also as an active member on the other Working Groups. To further support the ongoing efforts of the TPCC to more closely coordinate activities, Ex-Im Bank has begun to build closer working relationships with its sister finance agencies, OPIC and the Trade and Development Agency (TDA). In particular, George Munoz and I have embarked on an experiment whereby we and staff members of each agency are discussing issues of common interest; we are planning joint trips together; and we are gaining a more in depth understanding of where we can assist one another by building a solid base of mutual trust and support. Our future plans call for personnel sharing, developing joint marketing plans, cooperating more closely on project finance transactions, monitoring credit exposure, and sharing of outside advisors.
Joe Grandmaison, Director of TDA, and I have also had similar preliminary discussions to develop and identify ways in which we can work more closely together on areas of mutual interest. TDA's support to US engineering and design firms often can make the difference between US manufacturers obtaining follow-on sales for projects of all sizes, especially when faced with foreign governments are providing feasibility study support at low or no cost. Currently, Ex-Im Bank and TDA regularly share information regarding projects in which feasibility study funding has been requested and where Ex-Im Bank follow-on financing support is likely to be needed to conclude the actual contract award -- the beginnings of a continuous web of support so necessary to win overseas contracts. This "early warning" system has assisted in alerting each agency of the potential need for financing arising from future transactions.
Additional plans to work more closely with the Department of Commerce and SBA are also slated. Notwithstanding these plans, however, is the fact that Ex-Im Bank, Commerce and in particular the Advocacy Center, and SBA have, over the past year, undertaken efforts to more closely collaborate. Ex-Im Bank and the Advocacy Center recently instituted an automated information sharing program regarding transactions that have requested advocacy support. ExIm Bank can now augment Advocacy Center information with information on competitor financing offers so that the Advocacy Center recommendations fully reflect the competitive situation on any given deal. In addition, this new information exchange will also enable both agencies to identify trends in competitor practices ranging from technical assistance support, feasibility study funding, and export and investment fiance -- analysis that will be useful in predicting and countering competitors' behavior, particularly in the context of the Regional Working Groups. Over time, more agencies such as the Departments of State, Transportation, TDA, OPIC, and the Agency for International Development will be linked into the Advocacy Center database. This expanded capacity will further enhance the TPCC's access to more detailed and accurate information that can be used to save US jobs in a time sensitive manner by proactively countering foreign government activities.
In the small business area, Ex-Im Bank and SBA explored the remaining differences between our pre-export working capital programs. It was determined that there are a few existing differences between the two programs that are necessary given the different segments of the small business population each is intended to serve. In the meantime, I think it is important to recognize the progress both agencies have made in increasing the export working capital support provided to small business. In FY 97, Ex-Im Bank provided 332 working capital guarantees valued at $443 million -- an increase of 17 percent in dollar amounts and increase of 14 percent in number of transactions over FY 96. In FY 97, SBA provided 401 working capital guarantees valued at $140 million -- an increase of 44 percent in dollar amounts and an increase of 48 percent in the number of transactions.
The success of Ex-Im Bank's working capital program is attributable to our partnerships with over 80 private lenders in more than twenty states acting with delegated authority, our City/State relationships in 33 locations, and finally, a highly competent staff at Ex-Im Bank. Overall, small business support at Ex-Im Bank during FY 97 represented roughly 82% of total transactions and roughly 20% of total authorizations.
Despite these successes, we at Ex-Im Bank believe that the potential of the small business community has not been fully tapped or recognized for a number of reasons. Our end goal is to move to a situation where the private sector develops an ever increasing level of familiarity with, and engagement in export lending. Ex-Im Bank will work hard to facilitate such development by continuing to explore ways with our TPCC partners in which more creative mechanisms to stimulate private sector financing can be generated to support small and medium sized exporters who need this type of assistance at the various stages of an export transaction. The private sector has shown encouraging signs, with the private export credit insurance industry as a prime example. We hope to facilitate this and other forms of private sector involvement yet at the same time, ensure that our programs are readily available so that when the private sector is not a willing partner, Ex-Im Bank is able to step in and assist when necessary.
Ex-Im Bank will also be working with Commerce and SBA as we undertake an evaluation of the US Export Assistance Centers (USEACs) to identify strengths, weaknesses, and ways in which our co-located experts can better respond to and proactively meet the changing needs of the small and medium sized exporting community -- the intended target of the USEACs. Part of that evaluation will focus on ways in which the USEACs can work more effectively with private sector partners such as area chambers of commerce, trade advisors, and consultants. In addition, we have agreed to once again cross-train staff members at the USEACs, recognizing that new programs have been created, existing ones have been modified, and staff changes have occurred over the past several years. Our USEAC evaluation, combined with staff training, will improve the TPCC's ability to reach, educate and deliver our export support programs to an even greater number of small and medium sized exporters across the US.
In other areas of agency cooperation, I would be remiss if I did not mention the significant progress made this year in the OECD Export Credits Group. The US Government represented by Treasury and Ex-Im Bank, successfully forged a new OECD Agreement on Fees, the last major area of potentially undisciplined subsidy in official export credits. This accomplishment occurred only through the persistent and dedicated efforts by both agencies dating back three years. Specifically, the agreement among the 23 member countries of the OECD who offer long term official export credit have developed new rules for exposure fees charged on term credit risk. This agreement offers a framework within which Ex-Im Bank can achieve improved competitiveness on behalf of US exporters; budget savings; the disciplines necessary to preclude deterioration in fee levels; and finally, a mechanism for applying pressure for greater progress toward a market-based fee system. This new agreement will be in place by April 1999. In the meantime, Ex-Im Bank, with the guidance of the exporting community, will be investigating the need for a long-term insurance product that is comparable to products offered by our export credit agency counterparts. The availability of this option (and perhaps others) should allow US exporters the ability to compete on equal terms without being disadvantaged by differences in fee structures.
Ex-Im Bank has also actively participated in the TPCC Environmental Trade Working Group. In this capacity, Ex-Im Bank has worked closely by participating in the development of the private/public partnerships, environmental technologies trade missions, and the environmental technologies export market plans. Ex-Im Bank has also developed successful export financing programs aimed at providing enhanced support to the environmental technologies industry. In this area, we must continue to work through the OECD toward the development of common environmental guidelines for all export credit agencies to ensure that US exporters can compete on a level playing field and that projects are done in an environmentally responsible manner.
Finally, Ex-Im Bank is also developing an Africa program as part of the Administration's Initiative in this area. I would to approve our first limited recourse project finance deal in Subsaharan Africa in the next year.
The goal of working closely with 20 agencies can be a daunting endeavor, and there will always be room for improvement. But the need to provide a competitive and seamless web of export assistance programs for the US exporting community has never been greater. As we enter the 21st century, the export battles that matter the most will be in the emerging markets. Foreign governments are forcefully supporting their exports in market after market at every stage of the exporting process, beginning with technical assistance, followed by feasibility study funding at low or no cost, and finally high level advocacy, export promotion and competitive export finance at the contract award stage. It is in the national interest to ensure that US companies are provided the necessary tools and fair trade environment in which to compete so as to preserve and create US jobs. We at the TPCC are turning an important comer in building the level of support necessary to accomplish these goals. I am convinced that our new TPCC team has the will and commitment necessary to implement this new strategy to move our export support to this higher level. During my leadership, I am will be dedicated to ensuring that Ex-Im Bank contributes fully to this end and openly welcome the challenges and the rewards that are likely to follow.
Thank you for the opportunity to testify today.
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