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66–869 PDF 2011

LEGISLATIVE PROPOSALS ON SECURING 

AMERICAN JOBS THROUGH EXPORTS: 

EXPORT-IMPORT BANK REAUTHORIZATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 24, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–31 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

GARY G. MILLER, California, Chairman 

ROBERT J. DOLD, Illinois, Vice Chairman 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

BILL HUIZENGA, Michigan 

CAROLYN MCCARTHY, New York, Ranking 

Member 

GWEN MOORE, Wisconsin 

ANDRE ́ CARSON, Indiana 

DAVID SCOTT, Georgia 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

May 24, 2011 ..................................................................................................... 1 

Appendix: 

May 24, 2011 ..................................................................................................... 43 

WITNESSES 

TUESDAY, MAY 24, 2011 

Alexander, Donna K., Chief Executive Officer, BAFT-IFSA ................................ 18 

Gratacos, Osvaldo Luis, Inspector General, Export-Import Bank of the United 

States .................................................................................................................... 22 

Hardy, John, President, The Coalition for Employment Through Exports 

(CEE) ..................................................................................................................... 23 

Hochberg, Fred P., President and Chairman, Export-Import Bank of the 

United States ........................................................................................................ 5 

Lee, Thea Mei, Deputy Chief of Staff, American Federation of Labor and 

Congress of Industrial Organizations (AFL-CIO) .............................................. 20 

Slaughter, Matthew J., Associate Dean and Signals Companies’ Professor 

of Management, Tuck School of Business, Dartmouth College ........................ 25 

APPENDIX 

Prepared statements: 

McCarthy, Hon. Carolyn .................................................................................. 44 

Alexander, Donna K. ........................................................................................ 45 

Gratacos, Osvaldo Luis .................................................................................... 60 

Hardy, John ...................................................................................................... 69 

Hochberg, Fred P. ............................................................................................. 74 

Lee, Thea Mei ................................................................................................... 84 

Slaughter, Matthew J. ..................................................................................... 88 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Miller, Hon. Gary: 

Joint written statement of the American Apparel & Footwear Association 

(AAFA), the National Cotton Council (NCC), and the National Council 

of Textile Organizations (NCTO) ................................................................. 94 

Written statement of the U.S. Chamber of Commerce .................................. 97 

McCarthy, Hon. Carolyn: 

Written responses to questions submitted to Donna K. Alexander .............. 105 

Written responses to questions submitted to Osvaldo Luis Gratacos .......... 106 

Written responses to questions submitted to Fred P. Hochberg .................. 109 

(1) 

LEGISLATIVE PROPOSALS ON SECURING 

AMERICAN JOBS THROUGH EXPORTS: 

EXPORT-IMPORT BANK REAUTHORIZATION 

Tuesday, May 24, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INTERNATIONAL

MONETARY POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:55 p.m., in room 

2128, Rayburn House Office Building, Hon. Gary Miller [chairman 

of the subcommittee] presiding. 

Members present: Representatives Miller of California, Dold, 

Manzullo, Huizenga; Moore, and Scott. 

Chairman MILLER OF CALIFORNIA. This hearing is called to order. 

Today, we are having a discussion hearing on a discussion draft 

on the Export-Import Bank. 

Ranking Member McCarthy’s sister has passed away, so she is 

not able to be here today. We are praying for her family. It is a 

difficult time for them. Mr. Scott will be sitting in in her place. 

Vice Chairman Dold will be here today, too, and other members of 

the subcommittee. 

I would like to welcome you to this hearing on legislative proposals to reauthorize the Export-Import Bank. The hearing today 

will focus on a discussion draft—and I quote ‘‘discussion draft’’— 

I put forward which seeks to ensure that the Export-Import Bank 

has the tools it needs to help U.S. companies to maintain and create jobs in the United States and contribute to a stronger national 

economy through exports of their goods and services. 

For this reauthorization of the Export-Import Bank, we are focusing on domestic job creation. Job creation is the key to our Nation’s economic recovery. At a time when the national debt is surpassing $14 trillion, and the Federal Government is borrowing 40 

cents on every dollar spent, it is imperative that we stop spending 

taxpayer dollars and really start focusing on ways to grow the 

economy. Federal Chairman Ben Bernanke has said that we need 

to have a sustained period of strong growth creation to establish 

a true economic recovery, and that is the focus of this committee. 

The discussion draft is intended to ensure that Ex-Im Bank can 

help create U.S. jobs by supporting American companies seeking to 

export their goods. When American companies export, American 

workers work. During the reauthorization process, we are looking 

for ways to better the Bank’s ability to serve U.S. companies, large 

2 

and small, so they can prevail against foreign competitors and, as 

a result, create U.S. jobs. 

We have watched China grow incredibly large in recent years. It 

is hard to detail exactly how they are doing it, but their export programs are highly competitive with other countries and their financing exceeds ours in many ways. We are trying to make sure U.S. 

companies have an opportunity to compete in that marketplace. 

The Ex-Im Bank’s products make it possible for American companies to compete in developing world markets, helping them secure 

footholds to expand sales. Half of the global economic growth is in 

developing world countries; 9 of the largest emerging market countries are expected to invest $3 trillion in infrastructure development over the next 5 years, presenting a tremendous export opportunity for U.S. companies. Ex-Im ensures American companies can 

ensure sales in these markets by making sure financing terms are 

not undercut by aggressive foreign creditor agencies. 

To get our economy back on track and create jobs, we must ensure American companies are competitive with foreign companies 

and have access to affordable export credit. We want to ensure the 

Bank is well-positioned to continue to contribute to the employment of U.S. workers who finance exports of U.S. goods and services. 

We have a great witness today, Mr. Hochberg. 

We have to look at the future of this country. This is not the 

same world we were in 20 years ago; it is not the same world we 

were in 30 years ago. We need to look at the reauthorization period 

for the first time that helps us really compete globally. 

Content guidelines is an issue we need to look at; export financing for services; information technology upgrades; and accountability. And accountability is, above all, paramount in reauthorization. We want to make sure that the American people understand 

that is, first of all, a priority and something we are really going to 

look at. 

At this time, I would like to yield to the ranking member, Mr. 

Scott. 

Mr. SCOTT. Thank you very much, Mr. Miller. 

And this is, indeed, a very timely hearing and one that comes at 

a time when our Nation is at a crossroads, quite honestly, in terms 

of what we are going to do and what we need to do to accomplish 

two important things that certainly reflect the future of our country and the greatness of our country: one, to get more Americans 

working at American jobs in America; and two, to make sure that 

we are coming back to recapture our legacy and our position, which 

we lost, as the world’s leader in manufacturing. We cannot really 

look toward improving our unemployment situation as long as we 

continually lose out on making things in America. 

So we look forward to this hearing to explore that and to make 

sure that we move forward with a clear understanding, to point out 

what are the merits of domestic content versus the merits or demerits of foreign content. 

This is serious for the future of this country. We have lost our 

leadership in the world of making things. And we want to certainly 

recapture that and to stop the outsourcing and to keep jobs in 

America for Americans and making things in America. 

3 

So I want to thank you, Chairman Miller, for holding this important legislative hearing on the reauthorization of the Export-Import 

Bank. And I look forward to the opportunity to discuss proposals 

for securing American jobs through exports with each of the witnesses who are here today. 

Today’s hearing is the second Ex-Im hearing this year. And I am 

pleased that our subcommittee is giving appropriate consideration 

to the reauthorization of Ex-Im’s charter, which expires this September. 

The Export-Import Bank is a self-sustaining agency that plays a 

valuable role in promoting jobs for U.S. workers in America 

through the exports it helps finance. And to meet its objectives, to 

create and sustain U.S. jobs, the Bank uses its resources to finance 

U.S. exports in circumstances when private-sector financing is not 

available or to provide financing to support the competitiveness of 

U.S. exporters in circumstances when foreign governments extend 

export financing to their firms. 

Reauthorizing the Bank’s charter will allow the Bank to continue 

helping the United States reach the goal outlined in the President’s 

national export initiative, to double U.S. exports by 2015, and create and sustain millions of American jobs in America. 

The Bank’s most recent annual report shows the demand for the 

Bank’s support remains high, with 2010 being a record-breaking 

year of $24.5 billion in export financing, which is up 70 percent 

from Fiscal Year 2008. And I believe reauthorization of the ExportImport Bank is a critical component of the strategy to support jobs 

for U.S. workers in America. 

But I am concerned that the approach taken in the Republican 

discussion draft before us with respect to the Bank’s content policy 

is likely to undermine the Bank’s primary purpose: to contribute to 

the employment of United States workers in the United States. ExIm Bank’s content policies— 

Chairman MILLER OF CALIFORNIA. Is the gentleman ready to conclude? 

Mr. SCOTT. Yes, I am ready to conclude, if I could ask for 1 

minute—for medium- and long-range programs, which account for 

the majority of the Bank’s financing, allows the Bank to finance 

only the U.S.-made portion of an export up to the OECD agreement 

to a maximum of 85 percent. This policy ensures that content 

serves as a proxy to evidence support for U.S. jobs, which is, again, 

the mission of the Bank. 

Limiting the Bank’s support to domestic content for medium- and 

long-term programs also provides valuable incentives for companies 

seeking Ex-Im financing to seek and support domestic supply 

chains as opposed to using foreign components from foreign workers. 

And while I support a transparent and open process for how the 

Bank determines its domestic content requirement, in my view, 

each of the required considerations in the Republican draft focus 

solely on Ex-Im Bank’s competitiveness with other countries’ export 

credit agencies and ignore the possible negative— 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired by 21⁄2 minutes. I am going to have to— 

4 

Mr. SCOTT. I am wrapping up now—that could have on the 

Bank’s primary objective to maintain increasing employment of 

U.S. workers. 

So I look forward to everyone’s comments. 

And, Chairman Miller, I appreciate your courtesy in letting me 

getting my full statement out. 

Chairman MILLER OF CALIFORNIA. Mr. Dold, you are recognized 

for an opening statement. 

Mr. DOLD. Thank you, Mr. Chairman. 

I want to thank Chairman Miller for his great work and leadership on this committee in general and on Export-Import Bank reauthorization in particular. 

And, Mr. Hochberg, I certainly appreciate you taking your time 

to be with us here today. We certainly look forward to your testimony and answering questions. 

I am a small business owner, and I can personally appreciate the 

importance of ensuring that responsible credit is available to all 

businesses, especially small businesses and exporting businesses. 

Without an adequate credit supply, small businesses and other 

businesses are frequently unable to invest in research and development, growth, sales, innovation, and ultimately, and most importantly, in job creation. 

Since coming to Congress, my focus has been and remains on job 

creation and growing our economy. One of the most important and, 

I would argue, most effective actions that we can take to support 

job creation and the economy, without increasing our paralyzing 

national debt, is to reauthorize the Export-Import Bank. 

The Export-Import Bank serves a critical function: providing 

credit to directly and indirectly support exports by small, medium, 

and large exporting businesses. These activities directly facilitate 

job creation right here in the United States. More American exports translates directly into more American jobs. In Fiscal Year 

2010 alone, the Bank supported approximately 227,000 American 

jobs at over 3,300 different companies, helping to finance exports 

to over 175 different countries around the world. 

The Export-Import Bank supports both large businesses and 

small businesses. Small companies benefit from the Bank’s credit 

support in two, I would argue, distinct ways: first, small businesses 

directly receive support from 80 percent of the Bank’s transactions; 

and second, and less obviously but possibly even more importantly, 

small businesses indirectly benefit from large-company export credit support as subcontractors to the large-company exporters. When 

a large American company is effectively exporting millions of assembled individual parts when they export a locomotive, a commercial jetliner, or a wind turbine, many of these parts come from 

thousands of small- to medium-sized businesses. As a small business owner, I deeply appreciate these two very distinct ways in 

which the Bank supports small businesses, which are the main engine of job creation in our country. 

One of the most important reasons for reauthorizing the ExportImport Bank is that every major foreign exporting company receives very generous government-supported export credit facilities, 

most of which are on far more favorable terms to those foreign companies than those that the Export-Import Bank provides to AmerVerDate Nov 24 2008 17:51 Aug 16, 2011 Jkt 066869 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\66869.TXT TERRIE
5 

ican companies. Without the Export-Import Bank, the global competitive playing field would be more uneven and more unfair to 

American exporting companies, to the clear detriment of American 

jobs. 

To support American jobs without increasing our national debt, 

I hope that my colleagues on both sides of the aisle will join Chairman Miller and me in promptly reauthorizing the Export-Import 

Bank. 

Mr. Chairman, I ask unanimous consent to submit a longer 

statement for the record, if I may. 

Chairman MILLER OF CALIFORNIA. It is now my honor to introduce Mr. Fred P. Hochberg, chairman and president of the ExportImport Bank of the United States. 

Mr. Hochberg is chairman of this bank in the United States and 

one of the highest-ranking business leaders in the Obama Administration. Under his leadership, in Fiscal Year 2010, Ex-Im Bank approved more authorization to support U.S. exporters than in any 

year in its history. This included $24.5 billion in export financing, 

a 70 percent increase over the past 2 years, which supports $34.4 

billion worth of exports and 227,000 American jobs at more than 

3,300 U.S. companies. Of these authorizations, more than $5 billion 

was for small businesses, a record for the Bank. 

Mr. Hochberg, I look forward to your testimony. 

STATEMENT OF FRED P. HOCHBERG, PRESIDENT AND 

CHAIRMAN, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. HOCHBERG. Chairman Miller and distinguished members of 

the subcommittee, thank you for the opportunity to testify today 

about the Export-Import Bank and our reauthorization. 

Like you, Chairman Miller, I was a small business owner, and 

I have just completed my second year at the Bank. I have tried to 

focus the Bank to be ahead of our global competition and make 

sure that we think and run more like the businesses we serve. We 

are more customer-focused, with faster turnaround, creating new 

programs to meet the challenges of today. We are growing our 

small business portfolio, and we are moving government at the 

speed of business. And we continue to do this at no cost to the taxpayer. 

The Export-Import Bank is the official export credit agency of the 

United States, and we exist but with one purpose: to enable American companies, large and small, to compete for sales that help 

maintain and create U.S. jobs. And, as was noted, the competition 

has never been more fierce, be it China, Brazil, France, or other 

nations. American companies are competing for every sale, and ExIm is there when the private sector is unable or unwilling to provide support so we don’t lose export sales to foreign competitors 

due to a lack of financing. 

The Bank provides export financing through its loan, guarantee, 

and insurance programs. We level the playing field so that U.S. 

businesses compete based on the quality and price of their products 

and services and are not undercut by overly aggressive use of export financing. The ‘‘Made in America’’ brand is a strong selling 

point for U.S. companies competing overseas, and America makes 

what the world wants to buy. 

6 

Chairman Miller, as you noted, in our results for Fiscal Year 

2010, we did authorize $24.5 billion, a record, and created or sustained 227,000 jobs at 3,300 companies. We are now more than 

halfway through Fiscal Year 2011, and I am confident we will have 

another record-breaking year. 

As I mentioned earlier, we do this work at no cost to the American taxpayer. And, given the importance of lowering our Nation’s 

deficit, I am pleased to report that over the past 5 years, our agency has generated $3.4 billion for the U.S. Treasury. On top of that, 

Congress also rescinded $275 million for cuts in the Fiscal Year 

2011 continuing resolution. 

We have three congressional mandates. Let me talk briefly about 

them. They are: small business; renewable energy; and sub-Saharan Africa. 

More than 85 percent of all our transactions finance small companies who export their goods and services. Our totals for small 

business transactions have increased to $5.1 billion in 2010, a 

record. And that $5.1 billion authorization exceeds our 20 percent 

small business congressional mandate. In fact, in 43 of the 50 

States, we were well above the 20 percent small business mandate. 

Let me comment on one particular small business, a company 

that you are familiar with, Mr. Chairman, PacMin, which is just 

a few miles outside of your district. The formal name is Pacific 

Miniatures, and we have been working with this company since 

2005. They make model aircraft that they sell to airlines, airports, 

and other aviation customers around the world. They have 75 employees, and 35 percent of their business is now exports. Companies like PacMin need access to capital if they are to compete for 

global sales and continue to grow. 

In renewable energy exports, our authorizations have grown 

more than tenfold in the past 2 years to $332 million in Fiscal Year 

2010. We are on track to double that number this year. Two particular examples: Congressman Scott, in Georgia, we helped a company called Suniva that makes solar panels, and we also helped a 

company called Gamesa that makes wind turbines just outside of 

Philadelphia in Pennsylvania. 

In sub-Saharan Africa, Ex-Im Bank expects for the first time to 

top $1 billion in authorizations in Fiscal Year 2011. An example of 

that is we have financed $41 million for 121 firefighting trucks and 

equipment that are being shipped to Ghana. These trucks are being 

manufactured and creating jobs in Wisconsin, Pennsylvania, Iowa, 

Illinois, Virginia, and Nebraska. 

Let me talk briefly about our legislative proposal. Our proposal 

extends Ex-Im Bank’s authorization to September 30, 2015, and it 

gradually increases our exposure cap from $100 billion to $140 billion over 4 years. This will help us meet the President’s National 

Export Initiative of doubling exports by 2015 and enable us to continue to support U.S. jobs and grow small business. 

In conclusion, the ‘‘Made in America’’ brand is as strong as ever, 

and we are committed to making sure that we do government at 

the speed of business and to continue to do that at no cost to the 

taxpayers. 

Thank you, and I await your questions. 

7 

[The prepared statement of Mr. Hochberg can be found on page 

74 of the appendix.] 

Chairman MILLER OF CALIFORNIA. We seem to be having a problem with the microphones. Let’s try this. 

I was trying to tell you, if you needed more time for your opening 

statement, you could have as much as you wanted. We seem to 

have ample time at today’s hearing. 

We were talking about increasing exposure limits, and, as we 

could figure out, you are going to be capped at $100 billion probably by 2012. Do the Bank activity levels warrant an increase in 

exposure caps, from your perspective? 

Mr. HOCHBERG. Mr. Chairman, yes, they do. We are seeing an 

increase in exports. Exports are up 16.7 percent in 2010. We are 

seeing a strong growth in exports. You commented on the amount 

of infrastructure that is being built globally. So between that and 

the continued reluctance of some financial institutions to be lending, particularly to emerging economies, we do see a need for an 

increase. 

Chairman MILLER OF CALIFORNIA. If you raise the caps, it 

doesn’t mandate that you do anything; it just gives you the ability 

and the authority to do that. Without those increases, what position do you think you would be in, in 2 or 3 years? 

Mr. HOCHBERG. Without an increase, we would be very hampered. We are approaching $80 billion right now, and we are going 

to exceed $80 billion before the end of this year. It would clearly 

hamper our ability to create jobs and to help support U.S. exports. 

Chairman MILLER OF CALIFORNIA. I put some language in there 

to require you to report on content. It wasn’t a mandate. The priority in the language was to take into consideration, above all, 

American jobs. 

Can you detail the current process you have in place that arrives 

at content standards? 

We are in a different situation than Europe, for example. The 

way Europe does it is, if Germany is bidding a product, the products can be made in France and Belgium, Austria, around there, 

and yet it looks like the contents are made in Germany because 

they use a different—it is like the ‘‘United States of Europe’’ compared to what we do here in this country. 

What position does that put American companies in, where, for 

an example, you could have a German company bidding electric 

generation facilities and they are lending 85 percent, yet only 50 

percent of the actual content was made in Germany but they are 

acting as if they can meet the 85 percent standard? How does that 

impact American companies, if we are not creative? 

Mr. HOCHBERG. We exist to help U.S. companies compete for 

both sales and jobs. As you noted, our volume is up 70 percent in 

the last 2 years, so we have clearly stepped up to the plate. 

In the case of small business, which is 85 percent of the transactions, maybe 20 percent of the dollars but 85 percent of the 

transactions, we expanded the eligibility for content. We left it at 

51 percent, 50 percent for small business, but we expanded what 

is included in that number. 

8 

So we have been looking at finding ways to make sure that 

American companies can compete, get a competitive edge, and 

make sure that they don’t lose sales due to financing. 

Chairman MILLER OF CALIFORNIA. But in that process, we have 

created two standards, one for small businesses and one for large 

businesses. Many of your large business sectors, if they don’t hit 

85 percent, the guarantee decreases according to content. Small 

businesses can have 51 percent, yet qualify for the 100 percent 

guarantee instead of 85 percent, is that not the current— 

Mr. HOCHBERG. The small business actually refers to— 

Chairman MILLER OF CALIFORNIA. And I applaud you for that. 

That is not a criticism. 

Mr. HOCHBERG. It is particularly for small businesses and it applies to short-term transactions, less than a year. 

The company I mentioned that is just outside of your district, 

PacMin, they use our insurance and our short-term policy. So they 

have an advantage now, that they can include more of their costs 

to meet that more than 50 percent criteria. 

Chairman MILLER OF CALIFORNIA. And some of the comments by 

some of my good friends from the other side have made it appear 

that I put a requirement in here that decreases the standard, or 

encourages decreasing of the standard, and more of an inclusion of 

products made in other countries. But if you read the language, it 

is quite the opposite. I repeatedly stated in there that, first of all, 

you must take into consideration the impact on American jobs and 

the creation of American jobs. 

But knowing that the world changes, my language in there told 

you to come back with what you perceived to be the proper approach we should take and to report to Congress on that so we 

have something in writing and a clarification for what you are 

doing. Currently, Ex-Im Bank has the authority to go down to 25 

percent if you so choose. There is no mandate by Congress that 

says you must be 85 percent. 

I want my colleagues to clearly understand that my language did 

not say, drop it below a standard that we have mandated, because 

we have never mandated a standard. It said that when you do develop a standard, please report back to Congress what that is. But 

I clearly stated in the language that a company could not modify 

their content to compete globally to qualify for Ex-Im financing if 

they dropped their standards below what they are currently, using 

the American product. 

A good example, let’s use Boeing for an example. A Boeing 37, 

I don’t believe they can get above 82 percent content in any way. 

They are stuck at 82 percent. So another country could finance 

them at 85 percent. Or, in the case of China, they could be financed 

at 100 percent; we don’t know. 

But my goal in that language was to say, we need to be creative. 

If an American company creates a product and their content happens to be 65 percent, and because of the nature of the economy 

and it is a global economy and free-trade agreements, they cannot 

increase their American portion above 65 percent, should they necessarily be penalized to the point where American workers are not 

working? 

9 

And that is what I think we need to report back to Congress on. 

I would like to hear your side of that. 

Mr. HOCHBERG. Mr. Chairman, when you mentioned the exposure cap at $100 billion, that presumes that we are financing just 

the American portion of those sales. 

Chairman MILLER OF CALIFORNIA. Correct. 

Mr. HOCHBERG. So if we were to adjust content, it would also 

have an effect on the amount of exposure we might have to do because we might be financing more foreign goods and foreign services in that number. 

That has not been our policy up to now. With 9 percent unemployment, we are focused on doing whatever we can to create more 

encouragement to onshore manufacturing versus offshore manufacturing. 

Chairman MILLER OF CALIFORNIA. And I totally agree with the 

approach you are taking. My concern is, we are trying to put people 

back to work. And let’s say there is a company out there that produces a good or they have a service and the maximum content of 

American product they can arrive at is 65 percent and there is no 

way of getting around that. But in that is 65 percent of American 

jobs. 

If that company cannot compete globally because other countries 

are financing their product at a better rate, I think that is something that Ex-Im should look at and say, the company has made 

the best-faith effort they could, their product percentage cannot get 

above 65 percent. So should we be punishing American workers by 

excluding them from the process? That is something I think we 

need to look at. 

I am not looking at an opportunity for American companies to 

decrease their percentage. I am saying, let’s look and say if we are 

going to bring this economy back, we have to put American workers back in the workplace. And if by doing that, we have to look 

at some companies who might only meet 65 percent compared to 

competing with a German company who might only have a 50 percent content yet is receiving full funding from Germany, that is 

something I would like to have looked at in a report. 

I recognize Mr. Scott for 5 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

The unfortunate problem here is that the proposed legislation alters the Bank’s procedures for establishing domestic content guidelines in a way that definitely weakens content requirements and 

undermines the mission of the Bank, which is getting U.S. jobs, 

manufacturing jobs in this country. 

So let me ask you about Section 5, if you could work with me on 

that for a moment, and especially with the language in there that 

says ‘‘required considerations.’’ Do you feel that, with Section 5 in 

there, with that language, ‘‘required considerations,’’ do you feel it 

allows you to continue carrying on the Bank’s mission of supporting 

export financing while creating or sustaining U.S. jobs? 

Mr. HOCHBERG. Congressman Scott, I have been at the Bank for 

2 years; I was in business for 20 years. I have had more time in 

business than at the Bank. I have not found that we have been 

hampered or held back by the current way the charter operates. 

10 

And it is why we proposed a clean charter, with the exception of 

raising the exposure cap. 

So the existing guidelines we have, content rules have been left 

out of the charter, out of legislation, to give the Bank’s chairmen, 

from time to time, the ability to make their adjustments as they 

see fit. So I am comfortable with the existing language and the language that we proposed to the committee. 

Mr. SCOTT. ‘‘Required consideration,’’ you concur with that? 

Mr. HOCHBERG. I concur with the language that we have sent up 

to Congress, which is essentially a clean authorization. 

Mr. SCOTT. Not Section 5? 

Mr. HOCHBERG. Not Section 5. 

Mr. SCOTT. Okay. Very good. That is very important to get clear. 

Currently, what percentage of the Bank’s transactions involve 

foreign content? And what percentage of those transactions were 

below the 85 percent content requirement, meaning that they 

didn’t qualify in full funding? 

Mr. HOCHBERG. As you rightly noted, about 40 percent of the 

transactions that go through the Bank have some degree of foreign 

content. And we allow 15 percent foreign content in a transaction 

that is medium or long term and in the case of small businesses, 

for less than a year up to 49 percent. 

But 40 percent has some foreign content. However, when it 

comes to actually funding, only about between 13 and 15 percent 

of transactions were not able to get their full 85 percent role in medium and long term. They got proportionately less than what was 

commensurate with the amount of U.S. content. 

Usually, Congressman, to solve that, we have worked on co-financing. Air Tractor was a company that testified in March. They 

purchased their engines from Canada. We worked with the Canadians so there is one loan, one package. We financed the American 

portion; the Canadian export credit agency financed the Canadian 

portion. 

Mr. SCOTT. And let me ask you about the whole meaning of the 

words, ‘‘Made in the USA.’’ In terms of your standards, do they reflect what the FTC’s understanding is of ‘‘Made in America?’’ 

For example, for a product to be called ‘‘Made in the USA’’ or 

claim to be of domestic origin, without qualifications or limits on 

the claim, the product must be all or virtually all made in the 

United States. And ‘‘all or virtually all’’ means that all significant 

parts and processing that go into the product must be of U.S. origin. That is, the product should contain no negligible foreign content—manufacturing costs, parts, components, materials, supplies 

for all its transaction. 

Is that solid, is that concurrent with your understanding of 

‘‘Made in the USA?’’ 

Mr. HOCHBERG. Yes, that is. And, as you also know, we can finance the U.S. content. So if an export has 15 percent foreign content, which is paid by the buyer as a downpayment, then we finance the full American portion. 

Mr. SCOTT. So you believe that any suggestion—those were direct 

costs that I mentioned. Do you believe that any suggestions to you 

and the Bank to include indirect costs in calculating the domestic 

content, do you believe that they should be outright rejected? 

11 

Mr. HOCHBERG. In most companies, there are both direct and indirect costs. We do include as eligible the full cost of producing a 

product. That could be costs associated with marketing, design, 

legal fees, copyright, patents. All of those contribute to the manufacturing of a good and service. And particularly, as we build an 

innovative and competitive economy, we need to make sure our 

products have the highest product attributes. So it includes the full 

cost. 

Mr. SCOTT. But you are careful to know that they won’t dilute— 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. SCOTT. I beg your pardon, sir? 

Chairman MILLER OF CALIFORNIA. Mr. Huizenga, you are recognized for 5 minutes. 

Mr. HUIZENGA. Thank you, Mr. Chairman. I appreciate the opportunity. 

And Mr. Hochberg, I am glad you could be here. 

I just want to sort of preface this. Having served in the Michigan 

legislature, I experienced a number of these types of programs 

where we, as a State, were trying to be competitive. And I am wondering—first, I wanted to take a little broader view and have a conversation about some of the criticism and I wanted you to address 

that, whether it is Heritage or Cato, a number of those organizations have called for the ending of the Export-Import Bank. And 

those are the same types of discussions that we had back in Michigan at the time, as well. What is the most effective way of supporting our manufacturers, supporting our businesses? 

And I first kind of wanted to start there, and then see if you 

could address a little bit of some of the charges that what we are 

doing somehow violates international agreements for unfair practices on our end. And then I have a couple of other things, but I 

thought I would just start there with you. So, thanks. 

Mr. HOCHBERG. In fact, there is a great Michigan company that 

sells firefighting equipment to Istanbul. And what makes their firefighting equipment unique is that it is tolerant of earthquake zones 

and so forth. So these are some of the kind of manufacturing jobs 

we are helping to sustain and helping make those exports to foreign markets. 

We also provided a working capital loan for Ford Motor Company 

to enhance their exports of American-made cars to Canada and 

Mexico. So those are two examples. 

In terms of unfair competition, a portion of that is from nonOECD countries, countries that are not in compliance with the 

rules and regulations, the arrangements that look to make sure 

that products compete fairly on their attributes and services and 

price, not on financing. 

China has been one violator of that. In one case, we have two 

American companies bidding against a Chinese manufacturer. We 

have been working with the Administration, and the OECD in one 

specific transaction are now matching those Chinese financing 

terms to make sure that we don’t lose American jobs due to financing. 

12 

Mr. HUIZENGA. And, pretty clearly, I think everybody has seen 

the aggressive stance that China, especially, has taken, whether it 

is in Africa or in Asia or the Middle East or wherever else. 

But I guess, again, trying to—I will go at it a little differently. 

How do you respond to the charge that if these companies, which 

are great Michigan companies or great companies in California 

and—since we are the only 2 up here, I will exclude all the other 

48 States—there are just great companies in Michigan and California, right, Mr. Chairman? 

But how do you respond to the charge that, if these companies’ 

projects aren’t bankable, why should the American Government be 

coming and trying to make them bankable? In other words, if they 

couldn’t go get that loan for that deal in Istanbul, why should we 

be doing that? 

Mr. HOCHBERG. I think that, Congressman, much of global trade 

has moved to emerging markets be that Turkey, India, or South Africa. And, candidly, after the financial crisis in particular, banks 

are more reluctant to lend to those parts of the world. And sometimes if they are lending, they may have reached their exposure 

cap prematurely in those markets because they are growing so 

much faster than the developed world. 

So we really act as a lender of last resort. We act when commercial banks are unwilling or unable to provide financial support, we 

will look at it. We make sure there is a reasonable assurance of repayment. And in those cases, we have been able to step in where 

the private sector is not able to provide financing. 

Mr. HUIZENGA. And your default rates are what? 

Mr. HOCHBERG. Our default rates are in the 11⁄2 percent range. 

Mr. HUIZENGA. Which is far lower than conventional banks even. 

Mr. HOCHBERG. Yes, it is. 

Mr. HUIZENGA. And then, how do you view the appropriate role 

for Congress, as we are going through this as well? Are there other 

things that we need to be doing in addition to just reauthorizing 

the Ex-Im Bank? Especially whether it is content issues that have 

been brought up and other things. But what are some of those 

other things that we can be doing to help? 

Mr. HOCHBERG. This isn’t an authorization committee issue. But 

our appropriation is one way that the Congress can help. The 

President asked for an increase in our budget in 2011, and again 

in 2012. We are trying to reach more small businesses, in particular, and improve our information technology. So those are two 

areas that would make us more competitive, enable us to help more 

American companies to export and compete. 

Mr. HUIZENGA. And in my remaining closing seconds here, are 

there specific—you were talking about technology. Are there specific programs or types of things that you need to put in? Whether 

it is equipment or computer programs that are going to allow— 

Mr. HOCHBERG. It is mostly in the area of programs, software. 

Most of our IT equipment dates from the 1990s. It is somewhat antiquated. It is not customer-friendly. I would like to be able to— 

so that a customer could place an application for a loan, track their 

loan with us the way they track it with UPS or FedEx. There are 

a number of areas where we could be far more customer-focused 

13 

and really help our customers get information and get them answers fast. 

The other thing I am working to do with our limited resources 

is just to speed turnaround time. We need to get our exporters answers and get them fast answers so that they can compete and 

complete their orders. 

Mr. HUIZENGA. I know my time is up. Thank you, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. For point of clarification, I 

would like to read ‘‘Content Guidelines for the Provision of Financing’’ so everybody clearly understands the intent I had in the language: 

‘‘(1) In General.–The Bank shall, after notice and comment, establish clear and comprehensive guidelines with respect to the content of the goods and services involved in a transaction for which 

the Bank will provide financing, which shall be aimed at ensuring 

that the Bank enables United States companies to maintain and 

create jobs in the United States and contribute to a stronger national economy through the export of their goods and services. 

‘‘(2) Required Considerations.– 

‘‘(A) In General.–In establishing the guidelines, the Bank shall 

take into account such considerations as the Bank deems relevant to meet the purposes described in Paragraph (1), including the following:’’ 

Everything I have in ‘‘the following’’ says you have to go back to 

(1) to figure out it has to be to produce jobs. 

I yield 5 minutes to Ms. Moore. 

Ms. MOORE. Thank you, Mr. Chairman. 

I yield 2 minutes to Mr. Scott. 

Mr. SCOTT. Thank you very much. I didn’t get to the other part 

of my question. I wanted to come back to that. 

This area between indirect and direct costs, I want to—and in 

terms of the definition of what is domestic content. It just seems 

to me that the language in the legislation could be interpreted— 

I want your opinion—as encouraging you and the Bank to include 

indirect costs explicitly in the calculation of domestic content, 

when, in fact, that should not be the case. 

Domestic content should be calculated based solely on the production costs, not the marketing, not the CEO’s pay and bonuses, 

because I think these factors could be manipulated by some of the 

exporters, enabling them to produce a greater percentage of their 

product in other countries without decreasing the domestic content 

that they currently claim for their products. 

So I do think we need to get a little clarity on direct and indirect 

so we can make sure that we don’t go down the road of including 

these indirect costs in the definition of the domestic product. 

Mr. HOCHBERG. I think that, if I understand Congressman Scott 

and Chairman Miller, I think we all have the same objective, and 

that is to increase U.S. employment and to create jobs in the 

United States. 

I would be happy to work with you and your staff to understand 

some of those definitions, to make sure there is clarity on them, 

and make sure that they actually benefit American workers. So I 

would be happy to do that. 

14 

Chairman MILLER OF CALIFORNIA. Would the gentleman yield if 

I grant you an additional opportunity to— 

Mr. SCOTT. Yes. 

Chairman MILLER OF CALIFORNIA. I believe indirect costs are already there. A CEO’s costs are already part of the company’s costs 

that—part of the American jobs. So that is nothing new being 

added that is not already being included in the process. Those indirect costs, those overheads, the CEO pays, the salaries are all part 

of their costs in the American content side. 

So it is not being added; it is already there. So even if they include it, they are already including it today. So we are not asking 

that they include anything that is not already part of the calculation today. 

And I will give you an extra 30 seconds. I didn’t take that much, 

but— 

Mr. SCOTT. I appreciate that, Mr. Chairman. And I am not belaboring the point here, but I think that these are some very serious concerns that people in the community have, to make sure that 

we are doing everything we can. 

Chairman MILLER OF CALIFORNIA. If the gentleman will yield, I 

agree with you 100 percent. What I would like to have, and I am 

asking him to give us, is guidelines we don’t have today. 

Mr. SCOTT. Right. 

Chairman MILLER OF CALIFORNIA. I am asking him to put those 

in writing, taking everything in the global economy into consideration and coming back to Congress and say, this is what it is and 

why. And that is what I am asking. I am not asking him to drop 

it to 25 percent or 40 percent. 

I am saying that—and I repeatedly emphasize ‘‘jobs’’ in here. 

And I want to work with you on that. We are saying that we want 

to maintain and create American jobs. We want to know how they 

go about the process of determining the type of loans they make, 

what percentages they are, the content. And I would like to have 

that brought back to us. Currently, they can do anything they want 

to. We would like to know what that is. 

Mr. SCOTT. Right. 

Chairman MILLER OF CALIFORNIA. I yield back. 

Mr. SCOTT. All I am saying is that—we are all certainly on the 

same page. I just want to make sure—we are at a very critical 

point in American history, quite honestly. And if we don’t do everything we can to use every tool we can to re-establish the position 

of the United States of America as the leader of the world in manufacturing, in making things here—I see this as an opportunity to 

move us closer to that, if we are careful and keep our eye on the 

ball and make sure that people cannot wiggle in and use this effort 

to channel any more money to—any of our funds into the foreign 

content but to keep the emphasis on— 

Chairman MILLER OF CALIFORNIA. Would you yield a second? 

My language says that. It says they cannot decrease content in 

order to qualify for the financing. It is very specific. And if they determine that they have, they are disqualified. 

So I am agreeing with you 100 percent. I have accountability in 

here, saying we need to look and say what situation are they in, 

how do we make sure we ensure competitiveness on the part of 

15 

American companies, which creates American jobs. And anybody 

who wants to modify the content to get an advantage is disqualified. So I put that language in there. 

Mr. SCOTT. That is fine. 

Chairman MILLER OF CALIFORNIA. Ms. Moore, you have another 

minute and a half, even though it says 30 seconds. I will grant you 

a little extra time there. 

Ms. MOORE. Okay. Thank you, Mr. Chairman. 

And thank you. So nice to see you, Mr. Hochberg. We have had 

a good chance to talk on the phone several times. 

You say that the Ex-Im Bank now reviews all transactions for 

economic impact, first analyzing whether the export being financed 

will result in the production of an exportable good that could compete with a U.S.-like product. 

I am wondering if your assessment goes further to try to—what 

evidence do you have that changing the content standards, raising 

them or lowering them, would have an impact on competitiveness 

with U.S. products? 

Mr. HOCHBERG. I think, if I understand your question correctly, 

in terms of— 

Ms. MOORE. I am sorry. It was not very well put. I guess I should 

say more simply, we have a current content standard that, even 

though the OECD recommends that it is an internally designed 

standard, on what basis was the 85 percent—give us a little history 

of how that standard was developed and why you thought that that 

would be appropriate to make sure that U.S. content was protected. 

Mr. HOCHBERG. The 85 percent level was established in 1987, 

and it was established in part to be consistent with the OECD. 

Since the OECD requires 15 percent of the purchase price to be 

paid for by the buyer and up to the balance can be financed by an 

export credit agency such as the Export-Import Bank, we complied 

with that standard and said we would accept up to 15 percent foreign content, which is paid for by the buyer as a downpayment, 

and thereby we only finance the U.S. portion. 

Ms. MOORE. Okay. And I know I have a little extra time, so could 

you just go on to explain why you think that, 24 years later, that 

is still an appropriate standard? What evidence or what indicators 

do you have that is still an appropriate standard? 

Mr. HOCHBERG. I believe it is a good standard partly. As you all 

know, we are all wrestling with high unemployment; we are dealing with 9 percent unemployment. You and I spoke about a transaction from Bucyrus. For them to get U.S. Ex-Im Bank financing 

required a high level of content. I believe that was some incentive, 

not the only incentive, but some incentive to make sure those jobs 

were created in your district in the State of Wisconsin. So that the 

content policy is an incentive for companies to onshore more manufacturing and doesn’t provide an opportunity to offshore. 

To the extent that there are some components, some larger companies that need to source both in the United States and outside, 

we do a lot of co-financing. And a portion of our work we co-finance. I mentioned Air Tractor, which testified at the March 10th 

hearing. The Canadian export credit agency financed the engines; 

we financed the balance of the plane, about 65 percent. Canada has 

16 

35 percent. And we worked to make that seamless for the exporter, 

as best we could. 

Ms. MOORE. Thank you so much. 

I yield back. 

Chairman MILLER OF CALIFORNIA. I yield 5 minutes to the vice 

chairman, Mr. Dold. Good timing, Mr. Dold. We waited for you. 

Mr. DOLD. I appreciate that, Mr. Chairman. 

Chairman Hochberg, in your recent Senate testimony, you made 

the following statement when asked about adjusting domestic content for the United States to remain competitive. You said, ‘‘The 

content rules, as we currently enforce them, are the best way to increase employment.’’ And I appreciate that. 

Are you speaking from data, a feeling, a gut reaction? Do you 

have any studies to support that statement? 

Mr. HOCHBERG. Congressman, we use content as a proxy for 

American labor. It is very difficult to precisely calculate what the 

actual exporter company is buying a lot of components from other 

suppliers in the supply chain. So it is very hard to get precise labor 

content data if you only go to the direct exporter. 

By using a content policy of 85 percent—and our engineering department can verify that the money we spend at the Export-Import 

Bank goes to finance overseas purchases, buyer financing, is going 

directly to American workers. 

Mr. DOLD. Domestic content, in your competitiveness report, is 

identified as the number-one competitive policy issue of the Bank 

by bankers and exporters. And yet, from recent testimony before 

this committee, both large and small businesses have cited this as 

a major concern. 

And in just talking to businesses—and this is where you can help 

me out on this—they say that the higher the rate, they are going 

to go to other places in order to source, as opposed to if that high 

content is strictly enforced, it may actually have the opposite effect 

of creating American jobs, it actually may hurt American jobs. 

What do you say to them? 

Mr. HOCHBERG. I think there are two questions. One, the other 

export credit agencies, up until very recently, frankly, were frequently not about job creation as the United States Export-Import 

Bank is. Our purpose is solely about job creation, not national interest. 

To give you an example, the Canadian export credit agency finances BlackBerrys, which all of us reluctantly carry. And they 

aren’t made in Canada. The research is done in Canada, but all the 

manufacturing is done globally. They have a different approach to 

job creation than we do at the Export-Import Bank. 

The 85 percent content rule, in a number of cases, and particularly with large companies, encourages them to purchase goods and 

services from American companies so that they do qualify for our 

financing. I have heard from a chorus of small businesses saying, 

if you lower the content, it will be harder for me to maintain those 

supply-chain jobs, as they have in the past. 

Mr. DOLD. Okay. I appreciate that. And we appreciate the cellular phones and all that sort of stuff that you mentioned before. 

Mr. Huizenga was talking before about jobs from Michigan and 

California. We were watching. We want Illinois jobs, as well. 

17 

If I can, just—if a product cannot be entirely made in the United 

States because of development partnerships as we become far more 

of a global economy—so, development partnerships or patents, supply-chain constraints—would the Bank ever consider waivers with 

regard to the content requirement at such a high level? 

Mr. HOCHBERG. Congressman, what we do now is we provide cofinancing. So, we had a transaction, I believe it was with General 

Electric, selling turbines to Turkey. Some were sourced in the 

United States, some in France, some in Denmark. And we put together a seamless co-financing agreement so that the three export 

credit agencies supported that export. So no jobs were lost and no 

Export-Import Bank resources went to finance foreign sales. 

Mr. DOLD. I appreciate that. And I again want to thank you for 

taking the time. 

People have been knocking on our door and asking, why does 

Germany, for instance, have a threshold of 50 percent? Aren’t we, 

in essence, putting American businesses at somewhat of a disadvantage? What would you tell them, in terms of, why are we not 

marking it closer to what other nations are doing right now? 

Mr. HOCHBERG. The analogy with Germany is not a perfect analogy. I will tell you why. Because a lot of German cars are made 

in Italy. The brakes, for example, on a Porsche are made in Germany. Tires come from France or other countries. So, looking at 

Germany and its content rules is like looking at the State of Illinois and saying, if you purchase supplies or goods from Wisconsin, 

that is an import. 

In part, Europe, the EU has been merging its manufacturing for 

a number of years. So it is not a perfect analogy, what happens in 

the EU, as happens in the United States. 

Mr. DOLD. Mr. Hochberg, I appreciate your time and your testimony. And thank you so much for being here. 

Mr. HOCHBERG. Thank you. 

Chairman MILLER OF CALIFORNIA. Mr. Hochberg, thank you. I 

want to congratulate you on the great job you are doing. 

I think if American companies have an opportunity to compete, 

they will and they will succeed. And if they succeed, Americans are 

put back to work, and that is our goal. 

I look forward to having the next hearing, when we actually 

mark this bill up. And thank you. If you have any closing statements, you are welcome to make them. 

Mr. HOCHBERG. No. Chairman Miller, I just want to thank you 

for your leadership. Working with you and your staff has been 

enormously helpful. As a former businessman, or perhaps a current 

businessman, your ability and flexibility and creativity in working 

with us, I genuinely appreciate. And I want to thank you for taking 

the time, not just at this hearing but in the last several months. 

Chairman MILLER OF CALIFORNIA. I want to thank you, and I 

look forward to a continued, long relationship. Thank you, sir. 

Mr. HOCHBERG. Thank you so much. 

Chairman MILLER OF CALIFORNIA. I would like to call the next 

panel forward. As they are getting seated, I would like to take time 

to introduce each one of them. 

Ms. Donna K. Alexander is chief executive officer of the Bankers’ 

Association for Finance and Trade-International Financial Services 

18 

Association, BAFT-IFSA. Ms. Alexander formerly served on the 

U.S. Export-Import Bank Sub-Saharan African Advisory Committee, representing the financial services industry. 

Ms. Thea Lee has served as a deputy chief of staff for the American Federation of Labor and Congress of Industrial Organizations, 

AFL-CIO, since 2009. She is also a member of the State Department Advisory Committee for International Economic Policy and 

the Export-Import Bank Advisory Committee. 

Mr. Osvaldo Luis Gratacos—did I pronounce that properly, or 

was I close? 

Mr. GRATACOS. Close enough. 

Chairman MILLER OF CALIFORNIA. Close enough, that will work. 

Osvaldo—is that right? 

Mr. GRATACOS. Yes. 

Chairman MILLER OF CALIFORNIA. Okay—is the inspector general for the Export-Import Bank, serving as acting inspector general since October 2009. Before his nomination, Mr. Gratacos 

served as the deputy inspector general and counsel to the inspector 

general, where he served as OIG’s principal administrative and 

legal officer. 

Mr. John Hardy—that is an easier one to pronounce—is president of the Coalition for Employment Through Exports, CEE. Mr. 

Hardy has spent his career, both in the government and the private sector, on export promotion and project of trade finance sector. 

Dr. Matthew Slaughter is the associate dean for the MBA program and the Signals Company professor of management at the 

Tuck School of Business at Dartmouth College. Professor Slaughter 

is a keynote speaker to many audiences and business and policy 

communities and has testified before both chambers of the U.S. 

Congress. 

I believe, in fact, just last month, you were invited by the Minority to testify before the Domestic Monetary Policy Committee. Is 

that correct? 

Mr. SLAUGHTER. That is correct. 

Chairman MILLER OF CALIFORNIA. Ms. Alexander, you are recognized for 5 minutes. 

Thank you all for coming. 

STATEMENT OF DONNA K. ALEXANDER, CHIEF EXECUTIVE 

OFFICER, BAFT-IFSA 

Ms. ALEXANDER. Thank you, Mr. Chairman. Thank you for the 

opportunity to appear here today. And thank you, Mr. Scott. And 

our condolences to Mrs. McCarthy. Thank you to the rest of the 

subcommittee, as well. 

As the chairman indicated, I represent BAFT-IFSA, which is a 

newly merged trade association. Prior to the merger, BAFT, the 

Bankers’ Association for Finance and Trade, has had a long-term 

relationship with this particular body and this particular committee. So we are happy to be back here today testifying about 

some of these issues that are very important to us. 

We represent the financial services community globally, and our 

primary emphasis is shaping market practices, influencing regulation and legislation around the globe, and trying to find good busiVerDate Nov 24 2008 17:51 Aug 16, 2011 Jkt 066869 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\66869.TXT TERRIE
19 

ness solutions to regulatory and legislative challenges. So we really 

appreciate the opportunity to be here today. 

Our members around the globe are active in trade finance, and 

many deal with export credit agencies in a number of countries on 

a daily basis. Like other export credit agencies, or ECAs, Ex-Im 

plays a crucial role by providing export financing products that 

help fill gaps in trade financing. 

You will hear me say often whenever I do public speaking that 

‘‘trade finance is the oil to the wheels of commerce.’’ And I think 

that bears repeating: ‘‘Trade finance is the oil to the wheels of commerce.’’ That is why we are here today. And that is why the ExIm programs have a multiplier effect that are very important, particularly in this recovering era for not only the United States but 

other economies around the globe. 

Ex-Im contributed greatly to the recovery of global trade finance 

markets during the crisis, and we really value a continued working 

relationship with them. We worked closely with Chairman 

Hochberg, the COO, Alice Albright, and her staff, as well. So we 

are very grateful for that relationship. 

We would like to emphasize three major points today. First, 

trade finance should continue to be supported as a driver for economic growth. And we are still recovering from the crisis, as I said, 

and these public/private-sector partnerships that Ex-Im Bank plays 

a critical role in are really vital to this continued recovery. So we 

strongly support reauthorization, and we support the increase of its 

lending ceiling. 

Second, we ask for expedited reauthorization because that helps 

ensure the availability of affordable finance for U.S. exports, and, 

of course, it is very important for the national export initiative. 

And third, we believe that Ex-Im needs to focus on streamlining 

their processes so it can compete more effectively with other ECAs. 

And I can get into that a little bit more. Regrettably, some of what 

we heard is that Ex-Im ranks amongst some of the least competitive ECAs in some of their programs around the world. And we 

would like to see that change and be part of helping that change. 

We did review the discussion draft and have a number of issues 

to discuss. We look forward to working with you and your staff on 

improving this. And we look forward to working with both sides of 

the aisle on this. There are some recommendations we would like 

to make to you. 

I would like to highlight that we think that Ex-Im Bank should 

continue to enhance its programs even more. You talked about content, earlier, as a large part of the competitiveness argument 

around Ex-Im Bank. We also think that enhancing their programs 

that really respond to global economic conditions is a good way to 

go. I am sure you have heard about their supply-chain program, 

which is a new one, and we think that is going to be very effective. 

We think that sharpening the competitive edge is important. And 

that does require looking at the content and having an open discussion with all the stakeholders on content. But we also think it is 

important that there be processes inside of Ex-Im Bank that are 

streamlined, and we have some suggestions on that. 

We are proud to say that we have quarterly calls with Ex-Im 

Bank because, as part of a larger constituency of the trade finance 

20 

community, BAFT-IFSA works very closely with Ex-Im. Our banks 

are not necessarily Ex-Im Bank customers, but they facilitate the 

customers and clients, if you will, of Ex-Im Bank. And so we are 

right there focusing constantly on what needs to be expedited, how 

things could run more smoothly to get that trade finance and the 

deals out there, to get the credit approved in a more streamlined 

manner. 

We are focusing—and I am sure you will have some questions on 

some of their programs—on helping advise Ex-Im Bank on how 

they might improve some of their medium-term programs, and I 

can go into that later. The bottom line is that we believe Ex-Im 

Bank has a crucial role, and you have all said it here: They boost 

U.S. jobs and exports and support the economy. But it is important 

to the global recovery, as well. I think that you should really pull 

back and look at this from a 60,000-foot level, not just at the 

United States. Ex-Im Bank is a very important player and I recognize your jurisdiction is the United States, but you also have a 

global view because of the nature of the country you represent. 

The reauthorization will give us an adequate, affordable trade finance, and these public-private partnerships are absolutely critical 

going forward. We are not out of the woods yet economically, but 

we are interested in coming out of the woods. We are at your disposal to help in modifying legislation, advancing it, whatever you 

would like. 

Thank you. 

[The prepared statement of Ms. Alexander can be found on page 

45 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you very much. 

Mrs. Lee? 

STATEMENT OF THEA MEI LEE, DEPUTY CHIEF OF STAFF, 

AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS (AFL-CIO) 

Ms. LEE. Thank you, Chairman Miller, Vice Chairman Dold, and 

Mr. Scott. It is a great pleasure to be here and to testify on behalf 

of the 121⁄2 million working men and women who belong to the 

AFL-CIO on the important issue of the reauthorization of Ex-Im 

Bank and how best to maximize the positive impact of the Ex-Im 

Bank’s actions on American jobs and exports. 

I have had the privilege of serving on the Ex-Im Bank’s Advisory 

Committee for more than a decade now, so I have had a lot of experience working both with the Ex-Im Bank staff and the leadership 

as well as with a lot of the companies that use Ex-Im Bank services. 

I do want to take a moment to commend Chairman Fred 

Hochberg for his leadership of Ex-Im Bank and for his unwavering 

dedication to supporting a strong U.S. export sector and American 

jobs. 

The AFL-CIO supports President Obama’s goal of doubling U.S. 

exports by 2015. And we very much appreciate the support that 

Ex-Im Bank has provided to help reach that goal, especially in the 

wake of the financial crisis. Chairman Hochberg talked about, and 

I think you mentioned as well, Chairman Miller, the great success 

that Ex-Im Bank has had over the last couple of years in greatly 

21 

increasing export financing, and we would like to see that growth 

continue. 

It is important to keep in mind that the ultimate goal of Ex-Im 

Bank is not just to make more loans, but to support U.S. jobs 

through increased exports, as I know everyone here has mentioned. 

As Section 2 of the Bank’s reauthorization makes clear, the Bank’s 

objective in authorizing loans, guarantees, insurance, and credit 

shall be to contribute to maintaining or increasing employment of 

United States workers. 

It is important to recognize the role of the U.S. Congress in making sure that the policy backbone of the Ex-Im Bank, so to speak, 

stays strong. The Ex-Im Bank comes under tremendous pressure 

from the companies that use its service, the clients of Ex-Im Bank. 

You can imagine, from the point of view of an individual company, 

of course it is more convenient not to have any constraints, not to 

have limitations, not to have any strings attached to the loans it 

receives. And so the companies are very forceful advocates for 

weakening domestic content requirements, for weakening the U.S. 

flagship requirements, and for getting rid of or weakening the economic impact statement. Yet, all three of these things are vitally 

important to the work of the Ex-Im Bank. They are what distinguishes the Ex-Im Bank from private loans. There is private financing out there for companies that don’t wish to accede to those 

kinds of strings attached. But I just want to reiterate how important they are. 

The proposed legislation that we are discussing today, the Securing American Jobs Through Exports Act of 2011, reauthorizes ExIm Bank through 2015 and increases its exposure cap to $160 billion over the next 3 years. The AFL-CIO supports the reauthorization of Ex-Im Bank and the expansion of available financing. 

We are concerned, however, that the draft legislation that is 

under discussion today would have the impact of providing contradictory guidance to Ex-Im Bank, particularly with respect to domestic content. And, for that reason, we oppose the inclusion of 

Section 5 in any reauthorization of Ex-Im Bank, and we would oppose the final legislation if that provision were included. 

I understand from the discussion that happened earlier that it is 

certainly not the intention of Chairman Miller to undermine the 

domestic content requirements, but we are concerned when we see 

the language which is contradictory about competing effectively for 

export opportunities and the impact on U.S. manufacturing companies that it could be interpreted by a future leadership of the ExIm Bank to weaken or dilute the domestic content requirements. 

And we think this would be tremendously problematic. 

The Ex-Im Bank has a lot of discretion today in how it administers domestic content guidelines. I think the Ex-Im Bank leadership recognizes how important the domestic content requirement is 

to the legitimacy of Ex-Im Bank and to the support that Ex-Im 

Bank has received over the years from the Congress and from the 

American people. 

We are also concerned in terms of the question of direct and indirect costs. Congressman Scott raised this issue with Chairman 

Hochberg earlier. As you said, Chairman Miller, current Ex-Im 

Bank policy does allow indirect costs to be included in the calculaVerDate Nov 24 2008 17:51 Aug 16, 2011 Jkt 066869 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\66869.TXT TERRIE
22 

tion of domestic content. We have disagreed with this for a long 

time. We have raised this issue with the Ex-Im Bank. We would 

like to see domestic content calculated on the basis of production 

costs. 

I think, for most ordinary people, when they hear that a product 

is 85 percent made in the United States, they imagine that means 

that the content of the product, the inputs of that product are 85 

percent made in the United States. And we are concerned, as Congressman Scott said, that with indirect costs being included, particularly advertising, marketing, CEO pay, overhead, bonuses, and 

so on, that it is very easy for accounting to manipulate those costs 

in a way which is detrimental and which would reduce the number 

of U.S. jobs. 

So we would like to see the content provisions remain strong and 

at their current level. We would like to see the economic impact 

provisions actually strengthened in any legislation, to the extent 

that there is going to be a change. 

I thank you very much for your attention. I look forward to your 

questions, and I look forward to my fellow panelists’ presentations. 

[The prepared statement of Ms. Lee can be found on page 84 of 

the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. 

Mr. ‘‘Gratacos?’’ Is that close? 

Mr. GRATACOS. ‘‘Gratacos.’’ 

Chairman MILLER OF CALIFORNIA. Okay. You are recognized for 

5 minutes, sir. And I apologize for butchering your name. 

STATEMENT OF OSVALDO LUIS GRATACOS, INSPECTOR 

GENERAL, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. GRATACOS. No, it is fine. 

Good afternoon, Chairman Miller, and distinguished members of 

this subcommittee. Thanks for the opportunity to testify about the 

activities of the Office of Inspector General and the programs and 

operations at Ex-Im Bank. 

Before I continue, I would like to thank you for this opportunity, 

my family and members of the Ex-Im OIG staff. 

In my remarks, I will provide a brief history of the OIG and 

some of its accomplishments. Then, I will discuss some of the challenges and inefficiencies Ex-Im Bank is facing in performing its 

mission, based on our reports and observations. Finally, I will provide some observations on some of the charter language proposed 

of this subcommittee. 

Ex-Im OIG was created by law in 2002, but the inspector general, the IG, did not take office until August 2007. Since reaching 

current staff levels, about 11 folks, the OIG has achieved noticeable 

success in performing its duties. Especially, the OIG has issued 19 

audits and special reports containing over 82 findings, recommendations, and suggestions for improving Ex-Im Bank programs and operations. Law enforcement actions total 59 indictments and arrests, 6 convictions, 14 guilty pleas, and over 178 

management referrals for enhanced due diligence actions. 

Currently, we have 37 matters under investigation involving 534 

transactions, totaling $350 million in claims paid by Ex-Im Bank. 

Since 2009, the total overall IG financial impact is approximately 

23 

$209 million, while our budget has remained at $2.5 million per 

year. 

Ex-Im Bank, as the official credit agency of the United States, 

has experienced incredible growth in the last few years. In order 

to provide a more effective and competitive environment, Ex-Im 

needs to address some of its operational weaknesses and inefficiencies. 

Number one, replacing an aging and ineffective infrastructure. 

The current infrastructure is old, fragmented, does not adequately 

support Ex-Im Bank’s business needs, limits the Bank’s ability to 

meet the market demands, and requires manual inputs, leading to 

human errors. Currently, my office has undertaken a comprehensive audit of IT systems, subsystems, and other infrastructures at 

the Bank, with the objective of looking for ways to improve the systems and to look at expenditures throughout the years. 

Number two, Ex-Im Bank needs to reduce transactional approval 

times for its short- and medium-term programs. Ex-Im recognizes 

this inefficiency and is working toward a way to fix it. We are commencing work on an evaluation and review of the process, with the 

objective of improving this. 

Number three, develop annual performance plans to measure 

program and product effectiveness. This would allow Ex-Im to allocate the resources objectively, based on success or failure of its 

product. After discussion with my office, Ex-Im has agreed to develop this plan starting in Fiscal Year 2012. 

Regarding the current language proposed by the subcommittee, 

we have some observations. In Section 5, the report to Congress, 

asking the IG to issue a report on some areas regarding domestic 

content rules, we respectfully petition this subcommittee to reconsider the proposed language here, because we strongly believe that 

some of the topics covered by the report will fall outside the statutory duties of fraud, waste, and abuse of the IG. Further, it contains potential negative budget implications for our office, given the 

limited budget that we have. 

Finally, Section 6, talking about IT improvements, recognizes ExIm IT weaknesses; however, a positive outcome is only achievable 

if Ex-Im Bank develops comprehensive IT strategic and implementation plans focused on the business needs of the Bank and the 

markets. 

Chairman Miller and members of this subcommittee, thank you 

once again for the opportunity to testify before you. And I will be 

pleased to respond to any questions you might have. 

[The prepared statement of Mr. Gratacos can be found on page 

60 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you very much. 

Mr. Hardy? You are recognized for 5 minutes. 

STATEMENT OF JOHN HARDY, PRESIDENT, THE COALITION 

FOR EMPLOYMENT THROUGH EXPORTS (CEE) 

Mr. HARDY. Chairman Miller, Vice Chairman Dold, and Congressman Scott, the Coalition for Employment Through Exports 

thanks you for the opportunity to testify on the reauthorization of 

the U.S. Ex-Im Bank and about the competitive playing field for 

export finance. 

24 

The Coalition believes in a strong, responsive, and flexible Ex-Im 

Bank that enables all U.S. exporters to fully compete on a level 

playing field with the export credit agencies of other countries. We 

believe it is critical that Ex-Im be reauthorized before the charter 

expires. Any delay in reauthorization beyond that point will have 

a crippling effect on outstanding and future export transactions. 

CEE supports the increase in the Bank’s lending authority proposed in the subcommittee discussion draft. Ex-Im must have the 

lending capacity to support more transactions in order to increase 

exports and create more jobs. 

CEE also fully supports the direction being considered by the 

subcommittee for a mandated policy review to ensure that Ex-Im 

eligibility requirements are reviewed in light of the current competitive climate. This ensures that all American exporters have the 

opportunity to make their case for access to Ex-Im Bank financing. 

By providing an opportunity to lay out the facts on the table without predicting an outcome, this proposal will begin a critical discussion as to how Ex-Im can support increased exports and U.S. jobs. 

I would like to spend the few minutes left discussing Ex-Im competitiveness and the content eligibility requirement, which the vast 

majority of our members consider the number one priority for reform. We have one member whose overarching priority is the timely reauthorization of the Bank. 

In the last 10 years, there has been rapid growth in the importance, flexibility, and size of foreign export credit agencies as their 

governments have greatly expanded their mission and resources to 

enhance the competitiveness of their countries’ exporters. As a consequence, foreign ECAs too often are better able to offer comprehensive financing, to the detriment of American exporters. 

Ex-Im supports about 1 percent of U.S. exports, with commitments in 2010 of approximately $25 billion. The volume is nowhere 

close to what—for example, EDC committed last year at $82 billion; the Japanese export credit agency has committed well over 

$100 billion in support of their exporters; the Chinese, over $300 

billion through several different banks. 

A critical reason for this larger support is that most other ECAs 

have moved to a national interest standard in which their objective 

is to support exports, whatever their nature, to maximize the value 

added to the domestic economy. These ECAs are strategic in what 

they support, are proactive on behalf of their exporters, and look 

at themselves as partnering with their business community to support all aspects of their national economy. These ECAs also operate 

with far more flexible content rules than Ex-Im. 

Moreover, Ex-Im Bank’s content policy limits U.S. competitiveness for two reasons: first, as the policy determines eligibility based 

on manufacturing, it ignores all value to the U.S. economy generated by high-tech and other services; and second, it fails to account for the present-day reality of global supply chains. 

CEE believes that the eligibility requirements at Ex-Im Bank 

must always take into account and promote vital manufacturing 

jobs, but the policy needs to be modernized to take into account 

other high-value, high-paying jobs that reflect the evolution of the 

U.S. economy to one based on innovation. 

25 

Ex-Im Bank also needs to recognize the present-day reality of 

global supply chains, which exporters need to maintain their international competitiveness. An informal survey of a number of CEE 

exporters found, for these multinational corporations, that an overwhelming number of their product lines had content levels below 

the 85 percent necessary for full Ex-Im financing support. Even by 

the Bank’s own competitiveness reports, each year a substantial 

number of Ex-Im transactions do not qualify for full financing support. 

With only partial support from Ex-Im, exports are constrained, 

a reality that is clearly at odds with the approach of other ECAs 

like Germany, that emphasize aggressive support for their exports 

in order to maximize export volume and job growth for their significantly unionized workforce. 

In conclusion, Ex-Im Bank is one of the most vital assets of the 

U.S. Government to support exports and job growth. It is critical 

that it be reauthorized. The current draft bill will take the Bank 

forward in broadening its outreach. We pledge to work with Congress to assist in this process and to answer any questions Members might have. 

Thank you very much. 

[The prepared statement of Mr. Hardy can be found on page 69 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Hardy. 

Dr. Slaughter? 

STATEMENT OF MATTHEW J. SLAUGHTER, ASSOCIATE DEAN 

AND SIGNALS COMPANIES’ PROFESSOR OF MANAGEMENT, 

TUCK SCHOOL OF BUSINESS, DARTMOUTH COLLEGE 

Mr. SLAUGHTER. Chairman Miller and members of the subcommittee, thank you very much for inviting me to testify on these 

important issues regarding America’s Export-Import Bank and the 

broader economy. 

In my remarks, I will first offer some broad economic context. 

After this, I will discuss two issues regarding the global competitiveness of U.S. companies. Linked to each of these three points, 

I will offer a recommendation about how the Ex-Im Bank can better foster job creation to benefit American workers and families. 

First, let me emphasize how damaged the U.S. labor market remains today. Unemployment still sits at 9 percent, with about 25 

million Americans unemployed or underemployed. America needs 

to find a way to grow millions of jobs as soon as possible. But to 

rebalance the U.S. economy away from excessive consumption and, 

thus, trade deficits that helped create the world financial crisis, 

America needs to grow millions of jobs linked to the global economy 

via exporting and related capital investment. The President’s goal 

of doubling U.S. exports is admirable, but achieving this without 

substantial policy support will be difficult. 

In light of today’s still-fragile recovery and the pressing need to 

create millions of jobs linked to exports and related investment, I 

recommend that the Export-Import Bank’s funding cap be expanded by 200 percent—that is, expand its total liability cap from 

$100 billion to $300 billion. Given Ex-Im Bank’s long-running 

record of prudent lending and net transfers to the U.S. Treasury, 

26 

this increase should present little risk to America’s overall fiscal 

condition, dire though it is. 

Let me now address one of the most discussed features of current 

Ex-Im operations: its domestic content requirements, which exporters and lenders have characterized as the Bank’s greatest weakness. These domestic content requirements are increasingly at odds 

with the global production networks that U.S. exporters are part 

of and, as such, constitute a major constraint on the ability of 

American companies and workers to benefit from Ex-Im support. 

There is no single global strategy that works best for all companies at all times. Production arrangements that make one company 

globally competitive can be very different from what works for 

other firms. 

In addition, the common presumption that globally engaged U.S. 

companies tend to rely on a vanishingly small amount of domestic 

U.S. content is simply incorrect. U.S. Government data for multinational companies shows this quite clearly. In 2008, the U.S. parent operations of U.S.-based multinationals purchased over $6.3 

trillion in intermediate inputs, of which almost 89 percent, $5.6 

trillion, was bought from other companies in the United States. 

And this heavy reliance on domestic suppliers has been virtually 

unchanged for decades. 

It is also the case that many of these U.S.-parent input purchases are from small- and medium-sized enterprises in America. 

A similar pattern of input purchases applies for the U.S. affiliate 

operations of foreign-based multinationals. In 2008, these companies purchased almost $2.8 trillion in intermediate input, of which 

almost 80 percent was bought from other companies in the United 

States. And it is important to stress that these U.S. subsidiaries of 

global companies are a major source of U.S. exports—in 2008, over 

18 percent of total U.S. exports of goods. 

The rich variety of global supply configurations of U.S. exporters 

means that domestic content requirements are, increasingly, a competitive barrier for these firms that will tend to harm, not expand, 

their U.S. job creation. I recommend elimination of the Export-Import Bank’s domestic content requirements. This should spur more 

companies to seek Ex-Im support for more transactions, the result 

of which would be more export deals, leading to more U.S. employment and other U.S. activities. 

Finally, let me address the increasing importance of the U.S. 

services trade. The Ex-Im Bank has historically focused on export 

of goods, yet many of America’s strongest export industries today 

are in services, not goods. In recent years, the United States has 

been the world’s single largest exporter of services. Moreover, the 

United States has long run a trade surplus in services—in 2010, 

of almost $156 billion—that reflects American strengths, including 

highly skilled labor and information technology. 

For America to create millions of jobs linked to exports, many of 

these jobs will have to be linked to services exports. Manufacturing 

trade alone will not be sufficient. I recommend that the Ex-Im 

Bank endeavor to expand its lending for all types of services trade: 

both standalone services and also the services related to merchandise exports, such as technical support and maintenance. The curVerDate Nov 24 2008 17:51 Aug 16, 2011 Jkt 066869 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\66869.TXT TERRIE
27 

rent Ex-Im Bank charter mandates full consideration of services, 

but this activity is only a small portion of overall Bank operations. 

America’s economic challenges today remain large. To meet these 

challenges, America needs leaders with the vision and courage to 

craft innovative policies. Reauthorizing the Ex-Im Bank to be both 

larger and nimbler can be one such policy. 

Thank you again for your time and interest in my testimony. 

And I look forward to answering any questions that you may have. 

[The prepared statement of Dr. Slaughter can be found on page 

88 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. I have enjoyed all 

the testimony. 

My focus in this draft was to do everything we can to create 

American jobs. And, Ms. Lee, I know you are speaking from your 

heart, and I note in your testimony you state that ‘‘nowhere in the 

required consideration of Section 5 do American jobs come into 

play.’’ 

I appreciate that sometimes legislation can be difficult to read 

and understand, but, from the bill, it says, ‘‘The Bank shall take 

into account such considerations to meet the purpose described in 

Paragraph 1, which says the Bank shall establish guidelines which 

shall be aimed at ensuring that the Bank enables U.S. companies 

to maintain and create U.S. jobs.’’ I specifically put that. 

Does that in any way change your opinion of what you thought 

my intent was? 

Ms. LEE. Of course, I see the language about jobs in the overall, 

the general piece, but it worried me that it was absent from the 

required considerations. And it seemed to me that the Bank, in 

going about to try to meet the purposes of the legislation, would 

be looking at the very specific pieces that were laid out here and 

that there were, as I said, contradictory messages embodied in this. 

Chairman MILLER OF CALIFORNIA. Yes, but it referred that every 

one of the subsections had to refer back to Section 1. And I know 

what problem that was stated; I know you had a problem with domestic content, should it be calculated, CEO pay, overhead, indirect 

costs. You oppose that. But you support the current program, but 

that is what the current program does. They include all that in 

there. 

So it seemed you are saying one thing and supporting another, 

when they both are identical. 

Ms. LEE. Well— 

Chairman MILLER OF CALIFORNIA. And then you go on, you said 

you think it should be based purely on production costs. Could you 

tell me what that meant? 

Ms. LEE. What I worry about is, in the legislation, if you explicitly ask the Bank to incorporate indirect costs, which is now an informal policy, that could cause the Bank to make that a formal, explicit policy that is hard to change in the future. 

Chairman MILLER OF CALIFORNIA. Okay. 

Ms. LEE. So I am concerned that the legislation would send the 

Bank further in a direction that we think is not— 

Chairman MILLER OF CALIFORNIA. I know you are trying to create jobs. I am a business guy by profession. I still have some investments going out there. And I found out the most difficult thing 

28 

businesses have is getting somebody to know they make a product 

and getting the product out there. And if they can’t advertise the 

product and market the product, generally their product does not 

grow and the company does not start major production because 

there is no market capability. 

But if you can’t include marketing as your cost and advertising 

as your cost, especially a CEO who runs the company—and if we 

are talking about production costs, are you talking about the 

manhours or what? I am trying to understand what you are saying 

in production costs. What is production costs? What would you define that to be? 

Ms. LEE. That would be, certainly, the labor involved and the inputs and the origin of the inputs and so on. So, if you have a car, 

the actual pieces of machinery that go into the car—the wheels, the 

tires—and the labor— 

Chairman MILLER OF CALIFORNIA. Okay. How about the equipment that helps manufacture it and the building it is manufactured in and the name brand that goes along with that and the 

cost of developing that name brand, is that all not part of production costs? 

Ms. LEE. When you get into the name brand and you get into the 

advertising— 

Chairman MILLER OF CALIFORNIA. Is that not part of production 

costs? 

Ms. LEE. It is not part of production costs. 

Chairman MILLER OF CALIFORNIA. Okay, so— 

Ms. LEE. It is part of the overall costs. It is indirect costs. 

Chairman MILLER OF CALIFORNIA. Then, you are saying, if you 

are producing a car, we should not include all the mechanized systems that are computerized that actually do the welding and help 

the assembly; we should be talking about just the manhours that 

are over there operating that equipment. That is all we should be 

dealing with? 

Ms. LEE. When you are trying to determine what portion of a 

product is made in the United States of America, it is much clearer, certainly for the average person, to look at the actual product 

itself. When you take advertising costs— 

Chairman MILLER OF CALIFORNIA. But that is what I am trying 

to do. 

Ms. LEE. —how do you apportion it across all the products that 

a company makes? 

Chairman MILLER OF CALIFORNIA. Are we are talking about just 

the man-labor that is out there that is on payroll? That is all we 

should be looking at? 

Ms. LEE. No, and inputs, as well—raw materials, inputs, the— 

Chairman MILLER OF CALIFORNIA. Okay, the wheels, the—but 

what about all the infrastructure that enables them to do that? 

Ms. LEE. Of course— 

Chairman MILLER OF CALIFORNIA. Is that part of a cost or not? 

So— 

Ms. LEE. It is not part of the production cost. It is not part of 

the direct costs. 

Chairman MILLER OF CALIFORNIA. Okay, that is the problem. 

Let’s say, then, if we are looking at a product that could meet 85 

29 

percent content, if we are dealing with just the labor side, that 

might only be 20 percent, that might only be 15 percent, because 

of all the associated costs that labor needs to build that product. 

And that is why I think we need to be longsighted rather than 

shortsighted. The technology has occurred. Like it or not, technology has occurred. And many countries that we are trying to 

compete with stole our technologies that we spent billions of dollars 

and years to develop. They took it. And they are using it right now, 

and they are competing against us at a lesser cost because they did 

not spend all the money to develop that technology. They just stole 

ours, because we have the best business sector in the world. And 

they have parroted it very well, in many cases. 

My concern is, I think we need to figure the manhours that are 

out there, but all the things that are associated with that manhour. 

If you look at just going to an automobile plant and say—I see men 

out there, but what about all that cost associated with producing 

that car that is not the tires and the seats and the engines? It is 

all the other things that man needs to be able to produce that. If 

that is not taken into consideration and if the marketing and advertising that is necessary to generate the revenues to do all that 

is not taken into consideration, I think we are really putting American businesses at a disadvantage. And my goal is to not do that. 

Mr. Hardy, have you provided the Bank any suggestions regarding the issue of content eligibility for Ex-Im financing? And I am 

out of time, so I am going to take this one question. Have you provided them with any suggestions regarding the issue of content eligibility for Ex-Im financing? 

Mr. HARDY. Yes, we worked with staff extensively in terms of 

those elements. We are also prepared to work with the ranking 

members, in terms of trying to arrive at a full spectrum of guidelines that will make everybody comfortable. CEE— 

Chairman MILLER OF CALIFORNIA. And you think they need to be 

more creative in this area? 

Mr. HARDY. I think everybody needs to feel that there is going 

to be a level playing field, in terms of the guidelines. And if there 

is a need to adjust those guidelines for everybody to feel comfortable, then we are perfectly happy to work with them to try and 

accomplish that objective. 

We believe that the structure that you have proposed represents 

a tremendous opportunity to re-evaluate a standard that is now 20- 

some years old. It is, in effect, a pre-globalization standard. And we 

need to understand the consequences of having a standard that is 

that old and that out of date, in light of the reality of the way particularly the multinational corporations have found that they, in 

order to be competitive, have had to adjust their manufacturing, 

their assembly operations in order to be competitive. 

The striking thing that we found with regard to the informal survey that we did was how high the percentage was of product lines 

that were below the 85 percent content. So that something extraordinary or something special had to take place in order to make almost all of these product lines fully competitive. And it just reflects 

the fact that the current content level simply bears no relationship 

to the reality these companies have to deal with to be competitive. 

Chairman MILLER OF CALIFORNIA. Thank you. 

30 

Mr. Scott, I think I have equalized your opening statement, so 

we are even at this point. 

And I hope we have time for a second round, but I would love 

to—I have many more questions, and I am sure my colleagues do, 

also. 

Mr. Scott, you are recognized for 5 minutes. 

Mr. SCOTT. Thank you. 

I think we have to look at this whole proposition in light of 

where we are right now as a country. Our unemployment rate, 

while we may be encouraged with it slightly coming down—it is 

right about 8.8 percent now. In my home State of Georgia, it is still 

right at about 10 percent, 9.9-something. So we are getting some 

movement there. But there are, clearly, 13 million Americans without work. There are 15 million other Americans who are underemployed and/or basically others giving up on employment. 

So we are at a very, very difficult state, as far as employment 

is concerned. And so when you make policy and you are looking at 

this, you have to be very sensitive within the environment in which 

we are moving. 

And this Bank’s mission, keep in mind, is to create and sustain 

good manufacturing jobs here in America, not in other countries. 

So when we keep all this in front of us, we have to be careful to 

make sure what we institute in policy makes sure we keep that 

mission in mind. And it is clear that any proposals that will enable 

the Bank to lend greater financial support for foreign content of 

U.S. exports is definitely contrary to the Bank’s mission of creating 

and sustaining good manufacturing jobs here. 

So, with that, the higher the domestic content, the more jobs will 

be created and sustained here in the USA. That is what I am concerned about. That is what the American people are concerned 

about. It is their tax dollars we are concerned with here. So we 

have to keep that in mind. 

But if we change this domestic content, if we lessen the requirement, it would make it easier to outsource these jobs and dilute the 

definition of domestic content. 

With that, let me ask you, Mr. Hardy, I read in an article in Inside U.S. Trade from last July, and you stated that one of the top 

priorities of your group was to lower the Ex-Im Bank’s domestic 

content standards. And when asked whether you would be able to 

quantify the effect on U.S. jobs of removing Ex-Im’s content of shipping restrictions, you acknowledged that the data would be substantially anecdotal. 

So my question to you is, do you have any substantive data that 

supports the claim that lowering the domestic content standards 

would create more U.S. jobs in manufacturing in this country? 

Mr. HARDY. Thank you, Congressman Scott. 

There is a lot of anecdotal information. As I said, going back to 

the point that I was just making regarding the content levels for 

the product lines of many of the exporters that are in CEE, that 

they are below the 85 percent content level. The factor that has actually not been addressed in any of the dialogue to date is whether, 

if you reduce the content level so that more products can become 

fully supported by Ex-Im, whether there will not be a significant 

increase in exports as a consequence of that action. 

31 

That is, the dialogue that has continued up to this point has 

been basically on the assumption that it is a zero-sum game; that 

the requirement is that jobs can only be created by focusing entirely on U.S. content and U.S. manufacturing, as opposed to a 

modest reduction in the manufacturing in the United States as a 

consequence of the need of the exporters to be competitive, which 

generates, because these products are fully competitive now and 

are fully supported by Ex-Im, that you can dramatically increase 

the volume. 

When you talk to the business community, it is all about growing 

the volume of exports. And yet, in so much of the discussion about 

the content level, it is really not underscored. We have one exporter, specifically to your point, who said that if the content level 

was dropped from 85 to 70, it would result in an increase of a billion dollars in exports for that one exporter. 

Mr. SCOTT. Thank you. I appreciate that, and I think your information you are sharing is more opinionated, less substantive. But, 

again, I value what you are saying. But my time is short. 

Let me ask you— 

Chairman MILLER OF CALIFORNIA. I think it is up, or close. 

Mr. SCOTT. All right, it is close. 

Mr. Slaughter, I read in the Wall Street Journal an article from 

April 19th of this year discussing the economic impact of 

globalization, in which you said, ‘‘For every one job that the U.S. 

multinationals create abroad, they created nearly two U.S. jobs in 

their U.S.-based parents.’’ 

But recent data released by the Department of Commerce shows 

that, during the 2000s, multinational companies cut their workforce in the United States by 2.9 million and increased their employment overseas by 2.4 million. This is a reversal from the 1990s, 

when they added jobs everywhere. They added 4.4 million in the 

United States and 2.7 million abroad. 

So, in light of this new data, how can you still maintain that 

eliminating content standards could still create U.S. jobs? 

Mr. SLAUGHTER. That is a great question. 

I think of it in a couple of ways, Congressman. One is, we don’t 

know what is happening in the 2000s with the operation of U.S.- 

based multinationals around the world. In response to the good 

question you asked Mr. Hardy, there have been some academic 

studies that I and others have done looking at earlier periods, the 

1980s and 1990s. And contrary to what I think a lot of the presumption is, there has been some good work done in manufacturing 

firms, in particular, where you can look at the company-level data 

and look at what they are doing outside the United States and 

what they are doing back inside the United States. These are based 

on legally mandated surveys that the Commerce Department does 

with these companies every year. 

And there is some good research that has been done that shows, 

historically, when these companies expanded abroad, when they 

did more capital investment abroad, more hiring abroad, they tended to hire more people and do more capital investment back in the 

United States. 

So when I think about a company that might try to get financing 

from the Ex-ImBank, I think it is really important to think about 

32 

eliminating those domestic content requirements, because, historically, when firms have been able to reconfigure what they do 

around the world, that has tended to support their operations in 

the United States, not reduce it. 

The 2000s in the aggregate, the numbers you cite are correct, in 

terms of expansion abroad in employment, reduction in employment in America. These firms weren’t contracting all their activities in the United States in the 2000s. Their capital investment, 

their research and development, a lot of other activities went up. 

Their average compensation paid to their American workers went 

up during that time, which is quite different from the rest of the 

economy. 

I think the other thing that is important to keep in mind is, you 

can also get job creation in other firms, in other industries at the 

same time. And my written testimony talks about the example of 

information technology. 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. Dold, you are recognized for 5 minutes. 

Mr. DOLD. Thank you, Mr. Chairman. 

Dr. Slaughter, just while the microphone is hot over there, what 

percentage of U.S. exports are in the service sector? 

Mr. SLAUGHTER. I am going to do the numbers in my head. I 

think about a third of U.S. exports today, total, are services as opposed to shipments of goods. 

Mr. DOLD. And, traditionally, the Bank, can you just give me 

your take on why you think the Ex-Im Bank does not support more 

service-sector businesses? 

Mr. SLAUGHTER. That is a good question. I think part of it is, the 

expansion in services trade has been pretty dramatic in recent 

years. It is partly because I think what impedes flow of services 

across borders hasn’t been the traditional border barriers of governments, of tariffs and quotas and things like that. It has been 

natural barriers, communication and technology barriers. But with 

the IT revolution, the ability to transact a lot of services around 

the world has gone up a lot. So one of the big educational industries that we run a trade surplus in is my line of work, which is 

educational services. 

So the positive trade balance in services the United States has 

had has grown a lot in recent years. And I think that is probably 

part of the reason that there hasn’t been as much of an awareness, 

both of the Bank itself and of a lot of services businesses, of that 

possible connection. 

Mr. DOLD. Any idea in terms of how they are going to calculate 

content with service-type businesses or how would you try to do 

that? 

Mr. SLAUGHTER. No. And I don’t say that to be coy. I think that 

is part of the reason—I think the effort to measure content, domestic versus non-U.S, for any industry is hard; it is even harder for 

services. And so, to come back to some of these conversations, when 

you think about cost of goods sold, you are thinking of SG&A expenses, it is very hard even for manufacturing companies to know 

how to allocate those things. 

33 

Mr. DOLD. Ms. Lee, if I can come back to you for just a second, 

the Ex-Im Bank’s mission is to support American jobs, not just 

manufacturing jobs. Is that your understanding as well? And services certainly would be, I would imagine, a big part of jobs in the 

United States. 

The chairman had some questions before when we were looking 

at what goes into it. And we look at if there is not somebody out 

there, if they don’t know about the product, obviously they are not 

going to be selling a whole lot of them. 

Would you agree or disagree that if I am using marketing firms 

and aspects of that for a particular product that is just going to be 

coming off the line, would that be considered, in your view, something that we could add into content? 

Ms. LEE. That wouldn’t be a direct cost of production, no. 

Mr. DOLD. I understand it is not a direct cost of production. 

Would you be able to, in terms of Ex-Im Bank, would you say we 

should be including that in production as part of content? 

Ms. LEE. No. Our preference is for the calculation of content 

would be that it include only the direct costs of production. 

One of the concerns we have is the apportionment of indirect 

costs, whether it is advertising or brand name or CEO pay or overhead, across many different products, that there is a potential for 

manipulation of those numbers and that it is less straightforward 

for the average American, the average person. The commonsense 

interpretation of where a product is made, I think they are looking 

at the production costs. 

Mr. DOLD. Sure. 

And my colleague, Mr. Scott, had talked before about unemployment and the staggeringly high number of Americans who are out 

of work right now and even more of those who are underemployed 

right now. And I certainly agree. I can honestly tell you that I don’t 

care what side of the aisle you are on, probably the number one 

thing that we are trying to address here in the Congress is, how 

do we jump-start our economy, how do we create more jobs and put 

more Americans back to work? 

And, certainly, Mr. Hardy, your comments earlier about the content, a specific company, if they lowered that content, that they actually might be able to increase exports simply because they are 

going to be able to put more of those people back to work, and that 

individual business would be able to hire more people in Main 

Street, USA, or whatever it may be. 

What do you think, if you had to pick a number out there for content, what would be the ideal number? We have Germany at 50 

percent. We are looking at something a lot higher than that. What 

would you determine would be best in order to create more jobs? 

Mr. HARDY. In a statement for the record that we submitted earlier to the subcommittee with regard to the reauthorization, we had 

proposed moving from 85 to 70 percent. And the reason for that 

was that, again, when we held discussions with our own companies, which are larger exporters in the United States, we found 

that the overwhelming number of product lines were between those 

two numbers. It was quite startling, in that sense, that the content 

levels are at that level because of competitiveness. And for these 

companies, obviously, as they pursue the global market, competiVerDate Nov 24 2008 17:51 Aug 16, 2011 Jkt 066869 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\66869.TXT TERRIE
34 

tiveness is absolutely essential. It is at the core of what they are 

doing. 

So once they have accomplished that—and this is an additional 

element that is striking—they were all below the 85 percent, which 

clearly meant that they were not adjusting their content in order 

to ensure financing. So the content levels are a reflection of what 

it takes to be competitive, which meant that if you drop that content level from 85 to 70, suddenly all of those product lines would 

become fully competitive. 

The chairman actually referenced the Air Tractor example. Air 

Tractor testified in an earlier hearing. Air Tractor, as its CFO who 

testified said, there was a co-financing arrangement with the Canadians. Air Tractor purchased their aircraft engines from Canada. If 

Canada had the same content requirements that U.S. Ex-Im had, 

they would not be able to undertake the co-financing. Because the 

Canadians have reached out and said, we will deem any non-U.S. 

content to be Canadian content, even though there are components 

from other countries that are part of those Canadian engines. 

That is the sort of dilemma that exists, that other EACs are 

bending over backwards, actually, to make these deals happen because of the restrictiveness of U.S. content levels. 

Mr. DOLD. Thank you so much. I appreciate it. 

My time has expired. 

Chairman MILLER OF CALIFORNIA. Mr. Manzullo, you are recognized for 5 minutes. 

Mr. MANZULLO. Thank you. 

I was in a hearing at our Subcommittee on Asia and the Pacific, 

and I can’t roller skate one with skate here and one in the other 

room, but I had the opportunity to look at some of the testimony. 

Ms. Alexander, on page 13 of your testimony, you talk about the 

medium-term program. Are you there? 

Ms. ALEXANDER. Yes, sir. 

Mr. MANZULLO. Okay. I know you are there. Are you there on the 

paper, is what I meant. 

Ms. ALEXANDER. I am on the paper. 

Mr. MANZULLO. Okay, thank you, thank you. 

Ms. ALEXANDER. Thank you for that. 

Mr. MANZULLO. That came out wrong, didn’t it? 

Chairman MILLER OF CALIFORNIA. She won’t take that as an affront. 

Mr. MANZULLO. No, it just came out wrong— 

Chairman MILLER OF CALIFORNIA. She did very well in her testimony, as a matter of fact. 

Mr. MANZULLO. These things happen, okay. 

Anyway, you talk about how the medium-term program supports 

transactions under $10 million for—I guess that word should be 10 

years? Is that— 

Ms. ALEXANDER. The tenor of up to 5 years. 

Mr. MANZULLO. Okay. I wrote that medium-term delegated authority program in 2006 when I chaired the Small Business Committee. And we had that whole small business section incorporated 

into the Export-Import reauthorization bill. And I am really distressed to see that a product of my own hands, that the use has 

dropped significantly. 

35 

Then you state, specifically, Ex-Im has added a number of onerous requirements to the medium-term program which we feel hamper its effectiveness without adding value to the portfolio management process. 

Can you tell us what those requirements are so that I can perhaps file an amendment to this bill to get rid of them? 

Ms. ALEXANDER. Thank you, sir. And, first of all, since you authored that, thank you. We do support the medium-term program. 

We think it is a good program to have, and it is important in the 

whole scheme of the global economy that I discussed in my oral 

statement. 

We have been in conversations with Ex-Im about this. We have 

found that the banks who were involved in the medium-term program are pulling back because of administrative requirements. 

They don’t really, in the view of the banks, add value. 

In all fairness to Ex-Im Bank, we have had several meetings 

with them and discussions with them about this, on how to improve their processes. We have some ideas, which we have spelled 

out here. And we are really, quite frankly, in the middle of discussions with them on how we—I don’t want to beat up on them—I 

want to let you know that they are working very closely with us 

on this. 

I think the main issue is, they were very concerned about what 

came out in the inspector general’s report, which stands to reason. 

And so they are trying to respond, to be sure they don’t land back 

there again. And I appreciate that. 

But in looking at some of the things that are required—these 

thresholds for the banks, for example in delegated authority—making sure engagement is worth their while, and is worth their resources and their efforts, they are finding that it is not. So you 

have your banks making a business calculation as to whether it is 

worth their while because of exposure that they would have under 

the medium-term program. 

The banks have said, look at what you have going on with working capital. You have some great models there. Let’s look at how 

that particular process—anything that you can translate from 

working capital into the medium-term program would be helpful. 

I am not sure everything translates because you have short-term 

and different tenors, of course. 

But we think it is a good program, and we would be happy to 

work with you on preserving what you started. 

Mr. MANZULLO. What about withdrawing delegated authority 

from problem banks, rather than punishing all the banks? 

Ms. ALEXANDER. That is, don’t throw the baby out with the 

bathwater. But if you look at the inspector general’s report, which 

I don’t need to get into the weeds on, you will have an idea of what 

some of the problems were. They named a couple of incidents in 

particular. 

Most of the banks involved are members, and they are members 

in good standing. And they can’t be our members unless they are 

in good standing. That is very important to recognize, when you 

are looking at the universe of banks that participate in the delegated authority program. 

36 

So we think that the banks are in a position to advise the ExIm Bank on ideas that they could use going forward. And we are 

happy to share those with you. We would be happy to— 

Mr. MANZULLO. Perhaps we can meet afterwards. The director is 

a good friend of mine, and I will just have him stop by the office 

and say, let’s change this. Because it took a lot of time to set up 

this program. 

Ms. ALEXANDER. Yes. 

Mr. MANZULLO. We worked literally for years to be able to expand the vision, or at least continue the original vision, of Ex-Im, 

which is to help exporters of all sizes. 

In all fairness, I was talking to a constituent who said that she 

could not have exported her product from my hometown of Rockford, Illinois, without Ex-Im Bank. And I said, how much did you 

get? She said, $11,000. Some people may not think that is a lot of 

money, but, it is a good thing for the Ex-Im Bank to continue that 

mission that we saw firsthand, that somebody took the time to do 

all the paperwork for $11,000, which enabled her to export. 

But we would be glad to meet with you as soon as possible and 

formulate a strategy to see if we can get this corrected. 

Ms. ALEXANDER. Thank you, sir. It is a very vital piece of the 

whole financing puzzle for trade finance. 

Mr. MANZULLO. I appreciate that. 

Ms. ALEXANDER. And it is important to our banks because it is 

important to their customers, and you just gave a perfect example 

of how it is. It is part of how the Bank helps service those customers, and that goes to keeping the customers viable and active 

in the economy and keeping the jobs going. 

Thank you, sir. 

Mr. MANZULLO. Thank you. 

Thank you, Mr. Chairman, for having the hearing. 

Chairman MILLER OF CALIFORNIA. Mr. Manzullo, I know that 

you had the manufacturing base decimated in your district in recent years. And I appreciate your testimony. I know it comes from 

your heart. Thank you very much. 

We are going to try to do a second round of testimony if we have 

time. They are not voting on the Floor. 

And I just want to state again, the bill has no content requirement in it at all. So my bill does not state that. It just basically 

says we need to support U.S. jobs. 

And I would work my way down. Dr. Slaughter, I had not quite 

gotten to you. But when asked about Ex-Im domestic content, labor 

leaders said, ‘‘It is just common sense that the higher domestic content there is, the more jobs that will be created and maintained in 

the U.S.’’ 

Is that true? And where do you stand with that comment? 

Mr. SLAUGHTER. I think that misses a couple of important points. 

One is, when I think about the pie getting bigger, I can perhaps 

grow jobs in America even if the content for any given product is 

less than 85 percent domestic because I will be able to sell a lot 

more of those parts abroad. So the Congressman’s example of the 

constituent with an $11,000 loan— 

Chairman MILLER OF CALIFORNIA. That was a great example. 

37 

Mr. SLAUGHTER. There are a lot of entrepreneurs who, because 

of globalization and all the advances in the world over the past 

generation, they are now able to connect with other small entrepreneurs around the world. And a lot of content for a lot of those 

products gets made abroad. But those are tangible jobs that are 

getting created in Rockford, Illinois, and other places like that because there is more stuff being created and sold to foreign markets, 

and that is creating jobs in America. 

So that is one—I think one important perspective is, for any 

given company, they can have more sales and, therefore, more employment, even if the content is something less than 85 or whatever percent you might choose. 

And, again, my written testimony talks about the links to other 

industries. I think information technology is a great example. We 

were talking about BlackBerrys earlier. IT is one of the most globally integrated industries there is. But, boy, the job creation that 

went on in America over the past generation thanks to the gains 

in information technology created literally millions and millions of 

jobs throughout the U.S. economy. 

Chairman MILLER OF CALIFORNIA. GE gave me a good example. 

They currently were competing with the German company Siemens 

on a half-billion-dollar deal in India supplying turbines, wind turbines. And GE was able to meet a 78 percent content requirement. 

And the German company bought their casings and such and many 

other parts from the same companies that GE did, but the German 

company didn’t exceed 50 percent. Yet, the German company provided full financing, where the American company wasn’t able. 

I think it hurts American jobs if we don’t make sure that this 

company sells a turbine that has 78 percent content. What is your 

position on something like that? 

Mr. SLAUGHTER. The big answer I would give is, we have 11.7 

million manufacturing jobs in America today. And if you look at 

Bureau of Labor Statistics data, the last time America had that 

few manufacturing jobs was in April of 1941. 

So, when I think about how to grow as many American manufacturing jobs as I can, I don’t have a strong belief or, frankly, knowledge to know whether 85 percent, 78 percent, or 50 percent is the 

right number. I am looking to try to find ways government policy 

can support job creation, whether those jobs in manufacturing and 

in services are linked to a high or low domestic content value. Because all those things, potentially, can help fill in the job holes we 

have in America today. 

Chairman MILLER OF CALIFORNIA. And, obviously, the supply 

chain, the global supply chain, has changed in the last 5 or 10 

years. What do you think is going to happen in the next 5 or 10 

years, based on the information you have generated today? 

Mr. SLAUGHTER. There will be a lot more information for both 

large and small businesses to tap into those global production 

chains—the small entrepreneurs, the General Electrics, all size of 

companies in between. 

And, given the growth that a lot of U.S.-based companies see 

abroad for having new supplier relationships and to make greater 

sales abroad, I want to empower all those American companies to 

try to tap into those foreign markets and opportunities and grow 

38 

jobs as much as possible, which is, again, why I see efforts to impose ex-ante rules on domestic content as problematic. 

Chairman MILLER OF CALIFORNIA. Do you see the next few years 

as a critical juncture in the global export market? 

Mr. SLAUGHTER. Yes. Again, especially for the United States. 

Part of the reason I think it is not enough to think about having 

Ex-Im Bank in the United States meet other peer financing agencies around the world is, we in the United States face a pretty special problem, which is, again, as I mentioned, not just growing jobs 

but growing jobs linked to exports and capital investment. 

Chairman MILLER OF CALIFORNIA. I am going to cut my questions to 4 minutes. I will give you 4 minutes. We will try to get 

through Mr. Dold in 4 minutes, too. Maybe we can do this before 

the votes. 

Mr. Scott, I yield you time for 4 minutes. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Ms. Lee, I would like to talk with you for a moment. I spent most 

of my previous questioning chatting with Mr. Slaughter and Mr. 

Hardy. And I think you remember the questions that I put to them 

and their quotes. I would like to get your take on this and your reaction, if you will, to what they said in their proposals, in their efforts to, in fact, move to dilute the domestic content. 

Ms. LEE. Thank you, Congressman Scott. 

I would oppose any proposal that would weaken or dilute the domestic content requirements, and for a very simple reason: that one 

of the great missions of the Ex-Im Bank is to incentivize and to reward U.S. companies that are creating U.S. jobs on U.S. soil. And 

one of the ways they can do that is by making attractive financing 

available to companies that are doing the right thing, that are creating jobs on American soil. 

Companies, left to their own devices, would like to maximize 

profits by outsourcing more and more and more pieces of the production. I think the statistics that you cited earlier and that Dr. 

Slaughter has discussed at great length confirm that companies, 

without these kinds of incentives, are likely to outsource greater 

parts of production. 

I don’t think there is any empirical evidence that if we reduce 

the domestic content provisions, that there will be an automatic increase in exports that comes from that. 

The Ex-Im Bank financing is attractive, but I think the key drivers of exports are other things. It is demand, it is currency, it is 

trade policies. But it is largely effective demand. It is also companies having the information. That is one of the things that Ex-Im 

Bank has done really well, trying to get information about its products out to small- and medium-sized businesses, out to companies, 

to encourage them to export and to provide that financing. 

The point that Chairman Hochberg made I think is really important, that there is co-financing available for the non-U.S. portion. 

All that Ex-Im Bank is saying is that it wants to use the full faith 

and credit of the U.S. Government, the taxpayer-supported part of 

Ex-Im financing, to support American-made products. 

And the rest of it—nobody is asking these companies not to 

produce, not to be part of a global supply chain. What they are saying is that the portion of that which is produced in the United 

39 

States is a portion that U.S. taxpayers and the U.S. Government 

should be supporting. I think that is just a really important distinction. 

Ex-Im Bank is fully aware of the existence of global supply 

chains and the fact that much production is mixed. But the examples that Chairman Hochberg gave are very clear, that there is financing available for the non-U.S. portions; it just doesn’t have to 

come from the U.S. Government. That is the key piece. 

It is also important to know that there is a distinction between 

companies earning more profits and finding it more convenient to 

get the Ex-Im Bank financing and the companies that are doing 

the right thing and creating jobs on American soil. 

Thank you. 

Mr. SCOTT. And I think—if I have 1 minute left, Mr. Chairman? 

Chairman MILLER OF CALIFORNIA. Yes. 

Mr. SCOTT. All right, thank you. 

The chairman spoke very clearly of his intent, and I certainly respect that and respect his movement in this area, because this is 

very, very critical that we get it right, and I look forward to working with him. And he mentioned that what we want to do is clarify 

and bring some transparency to this. 

I would certainly commend you for that, Mr. Chairman. 

So it would be very important, Ms. Lee, if we got your thoughts 

and your views on how the legislation could, in fact, clarify the content policy and make it more transparent with respect to domestic 

content, how it is defined and calculated. 

Chairman MILLER OF CALIFORNIA. In 15 seconds. 

Ms. LEE. I would be very happy to do that. I think I will submit 

it in writing, given the time constraints. 

Chairman MILLER OF CALIFORNIA. That would be great. 

Mr. SCOTT. Thank you. 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Scott. 

Mr. Dold? 

Mr. DOLD. Thank you, Mr. Chairman. 

Mr. Gratacos, we haven’t heard from you in a little while, so I 

thought we would at least try to mix it up a little bit. 

Chairman MILLER OF CALIFORNIA. Go to the middle. 

Mr. DOLD. Go right to the middle. We will get right in the middle 

of the table. 

Ex-Im Bank has, from what I have been told, a pretty antiquated 

IT system. Would you agree? 

Mr. GRATACOS. Absolutely, yes. 

Mr. DOLD. Can you tell me, do you believe that this represents 

a risk to the Bank? 

Mr. GRATACOS. Not only a risk, we have complaints about how 

some of the human errors have actually affected some of the transactions. When you look into the systems, transaction information 

has disappeared or the buyer’s name has disappeared, so when the 

claim is going to be submitted, it is inconsistent with the paperwork. And so we have included that as part of our audit that we 

are conducting on the systems. 

We have been very outspoken on the changes needed to improve 

the efficiency of the Bank. If the Bank wants to meet the growth, 

40 

this is one of the functions—one of the areas they need to improve 

significantly. 

Mr. DOLD. And you talk about growth. Do you believe that raising the Ex-Im Bank’s exposure cap from $100 billion dollar to $160 

billion is going to be a risk to the taxpayers? 

Mr. GRATACOS. That is a good question. I think the risk to the 

taxpayers is how Ex-Im will handle the internal management of 

the assets and how it conducts the underwriting practices. I think 

that is a focus of the Bank regardless of the level of authorization. 

And I think part of the report that we have issued goes along these 

lines, trying to highlight some of the inefficiencies or areas of improvement in the underwriting practices across programs. 

Mr. DOLD. Okay. 

Dr. Slaughter, in your testimony, you recommend a significant 

increase in Ex-Im’s total financing cap. Can you tell me and just 

elaborate on the importance of that? And is this a big enough increase? Would you like to see it be higher? Can you just elaborate? 

Mr. SLAUGHTER. Sure, Congressman. 

Again, for the United States to have a sustainable recovery, we 

can’t just build back the kinds of jobs we had before the crisis. Part 

of the reason we had the crisis was low savings, excess consumption in the United States. So, again, I think the President’s initiative, the thing about doubling American exports. But, boy, we can’t 

just kind of hope that happens. 

One of the policy mechanisms we could have would be to substantially increase the lending cap for Ex-Im Bank to really help 

America, different firms, big and little, have the opportunity to 

grow export sales. And I think Mr. Hardy’s data that he cited are 

pretty telling, when you look at how aggressive other countries are 

in their support for exports sales by their companies. 

Mr. DOLD. One of the things that—we have a number of small 

businesses. We always focus on some of the larger businesses; they 

seem to get a little bit more of the headlines. You get the big airplanes that are going over with Boeing or GE or something along 

those lines. In the 10th District in Illinois,my hometown, actually, 

we have a great record because over 80 percent of the loans made 

by Ex-Im are made to small businesses, which I think are important. 

What should we be doing to encourage or at least get that promotion out for small businesses? When we talk about that cap, 

when we talk about trying to increase exports, I view it has to be 

across all sectors, not just some of the larger ones. 

Mr. SLAUGHTER. So, I think two things. One is the focus on services. I think a lot of smaller businesses, some of them are manufacturing but others are in a range of activities, and they can find 

these niche markets abroad that they can sell into. 

And I think the observations earlier about the information systems, I think a lot of smaller businesses, they need those technology-mediated connections to be able to make things work for 

them. 

Mr. DOLD. Great. 

Thank you, Mr. Chairman. I yield back. 

Chairman MILLER OF CALIFORNIA. Thank you. 

41 

I would like to thank you for your testimony on the discussion 

draft. It was very informative. 

The Chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 5:00 p.m., the hearing was adjourned.] 

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