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97–415 PDF 2015

S. HRG. 114–108 

PERSPECTIVES ON THE EXPORT–IMPORT BANK 

OF THE UNITED STATES 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING AND EVALUATING EX-IM BANK FINANCING AND THE 

BANK’S ROLE IN CREATING OR SUPPORTING U.S. JOBS 

JUNE 2, 2015 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman 

MICHAEL CRAPO, Idaho 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

WILLIAM D. DUHNKE III, Staff Director and Counsel 

MARK POWDEN, Democratic Staff Director 

DANA WADE, Deputy Staff Director 

JOHN V. O’HARA, Senior Counsel for Illicit Finance and National Security Policy 

JELENA MCWILLIAMS, Chief Counsel 

SHELBY BEGANY, Professional Staff Member 

LAURA SWANSON, Democratic Deputy Staff Director 

GRAHAM STEELE, Democratic Chief Counsel 

MEGAN CHENEY, Democratic Legislative Assistant 

DAWN RATLIFF, Chief Clerk 

TROY CORNELL, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, JUNE 2, 2015 

Page 

Opening statement of Chairman Shelby ................................................................ 1 

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2 

WITNESSES 

Veronique de Rugy, Senior Research Fellow, Mercatus Center, George Mason 

University ............................................................................................................. 4 

Prepared statement .......................................................................................... 37 

Linda Menghetti Dempsey, Vice President, International Economic Affairs, 

National Association of Manufacturers .............................................................. 5 

Prepared statement .......................................................................................... 89 

Responses to written questions of: 

Senator Sasse ............................................................................................ 107 

Michael R. Strain, Deputy Director of Economic Policy Studies, American 

Enterprise Institute for Public Policy Research ................................................ 7 

Prepared statement .......................................................................................... 94 

John G. Murphy, Senior Vice President for International Policy, U.S. Chamber of Commerce ................................................................................................... 9 

Prepared statement .......................................................................................... 96 

Responses to written questions of: 

Senator Sasse ............................................................................................ 109 

Daniel Ikenson, Director, Herbert A. Steifel Center for Trade Policy Studies, 

Cato Institute ....................................................................................................... 11 

Prepared statement .......................................................................................... 99 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Newspaper articles submitted by Chairman Shelby ............................................. 113 

Statement from the Bankers Association for Finance and Trade and the 

Financial Services Roundtable submitted by Senator Brown .......................... 121 

(III)

(1) 

PERSPECTIVES ON THE EXPORT–IMPORT 

BANK OF THE UNITED STATES 

TUESDAY, JUNE 2, 2015 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10 a.m., in room SD–538, Dirksen Senate 

Office Building, Chairman Richard C. Shelby, Chairman of the 

Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The Committee will come to order. 

This is the first of our oversight hearings on the Export-Import 

Bank of the United States, which is currently authorized through 

June the 30th of this year. 

During the May 2012 reauthorization process, we built in several 

reforms for the Bank related to risk management and accountability. 

I have long been concerned with the Bank’s financial risk to the 

American taxpayers, who ultimately stand behind the Bank. I 

made it clear in 2012 that Congress should not merely give 

Eximbank another blank check. 

That is why I called for a comprehensive Government Accountability Office study on Eximbank’s risk management practices. I 

also sought to put in place measures that would reduce the operational risk and hold accountable the Bank’s management from the 

top-down. 

Three years later, I remain disappointed with the Bank’s lack of 

progress toward these goals. 

During the past few years, the GAO has identified significant 

weaknesses in areas such as the Bank’s analysis of the default 

risk, portfolio stress testing, the underwriting process, and the forecasting of exposure. Such weaknesses have shown to be part of an 

overall pattern of failure. 

In addition, the Inspector General has recently reported that 

about 40 percent of its recommendations to the Eximbank remain 

open or unresolved. 

After years of efforts to reform the Bank, I am not convinced that 

it has made enough progress to warrant a long-term reauthorization. Taxpayers, I believe, should not be compelled to once again 

stand behind the Bank if the problems are impossible to fix. 

Congress cannot leave unaddressed Eximbank’s failures to properly manage its risk. It is especially important to get this right, 

2 

considering Eximbank’s disproportionate exposure in certain industries, geographic areas, and large single foreign customers. 

In addition, I continue to be concerned about the eventual effects 

of the rapid 40 percent increase in the Bank’s lending cap, which 

was enacted in 2012 over my objections. 

In determining whether reauthorization is justified, I believe 

Congress must take another hard look at Eximbank. It must assess 

the true cost of the Bank on American labor, industries, and taxpayers, not only the benefits to a select few companies. 

There are strong voices in favor of letting the Bank sunset and 

equally strong opinions in favor of trying one more time to address 

serious concerns with the Bank. Those who say Eximbank should 

be allowed to expire argue that the Bank can never be reformed 

and that the subsidies do little, if anything, to advance the Nation’s 

overall economic prospects. Those who say that the Bank should 

live to see another day argue that it is a necessary evil of export 

financing that seeks to level the playing field among aggressive foreign export policies. 

As the Banking Committee begins to examine these issues, we 

welcome the distinguished panel of witnesses today. Each brings a 

valuable perspective and has been asked to present evidence to 

support his or her assessment of the Bank. 

On Thursday of this week, we will hear from Fred Hochberg, the 

Chairman and President of the Export-Import Bank of the U.S. 

The Committee will then consider next steps as the Bank’s current 

reauthorization nears expiration. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman. Thank you for holding today’s hearings. 

To all our witnesses, for being here, thank you for sharing your 

views on the Export-Import Bank. 

In today’s global economy, we should support businesses when 

they sell their products around the globe. Exports are as important 

to the aerospace industry in the Chairman’s home State of Alabama as they are to my State of Ohio. 

That is why reauthorizing Eximbank by June 30th is essential. 

It should be easy. It should be bipartisan. 

In 2006, when George Bush was in the White House, the Bank 

was reauthorized by a voice vote in the House and by unanimous 

consent in the Senate. As those votes show, Eximbank used to be 

a bipartisan issue until some made its existence an ideological litmus test. 

The Bank fills gaps in private export financing to help foreign 

buyers purchase U.S. goods and services. 

During their recent debate on trade promotion authority in the 

Senate, we heard from supporters of the legislation that fast-track 

was needed to boost our U.S. exports, that it was needed to increase our role in the globalized economy, that it was needed because it was geopolitically important. All that is debatable with respect to TPA and with TPP but absolutely true, undoubtedly, when 

applied to the Export-Import Bank. 

3 

With Eximbank, these benefits come without the cost of off-shoring jobs and without the cost of exposing U.S. markets to a flood 

of foreign goods. Senators who supported fast-track because it 

would promote U.S. exports and grow our economy should support 

Eximbank for the same reasons. 

We know that competitors around the world have their own exim banks. There are about 60 export credit agencies worldwide. 

One analyst said, quote, ‘‘Killing a Bank is like telling an athlete 

he has to spot a competitor 10 yards in a race.’’ 

Why would we put our manufacturers and exports at a disadvantage to China, to India, to most European countries? Last year, Eximbank reported it supported $27 billion in exports and 164,000 American jobs, includes more than $250 million in 

deals, in my State alone, 60 percent—60 percent—of which went to 

small businesses. In total, Eximbank has provided some $3 billion 

in financing and guarantees to more 300 Ohio businesses, more 

than two-thirds of which were small businesses. This means more 

manufacturing, more middle-class jobs, more experts, more jobs 

overall, particularly in the high-paying manufacturing area. 

Finally, for the many conservative organizations that have been 

so concerned about Federal budget deficits, Eximbank is self-sustaining. Last year, it returned more than $600 million to the U.S. 

Treasury. 

For all those reasons, we cannot afford to allow the Bank’s authorization to expire at the end of the month nor can we do just 

a few months at a time. As we talk about predictability, we inject 

more on predictability into the system and into financing decisions 

that companies in our country make. 

I commend Senator Kirk; I commend Senator Heitkamp, for their 

bipartisan efforts to ensure that Eximbank is reauthorized with 

some reforms. 

I look forward to working with Chairman Shelby in addition to 

the two Members of this Committee who are here today, Senators 

Kirk and Heitkamp, to ensure that authority for the Eximbank 

does not lapse for the first time in its 7–0, 70-year history. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you. Thank you, Senator Brown. 

First, we will hear from Dr. Veronique de Rugy of the Mercatus 

Center at George Mason University. 

Senator DONNELLY. Mr. Chairman? Mr. Chairman? 

Chairman SHELBY. Oh, Senator Donnelly. 

Senator DONNELLY. Are any of the other Members going to be allowed to make opening statements? 

Chairman SHELBY. I thought we would limit this because we 

have got a vote and get started. We will give you time, though, to 

make an opening statement later. 

Senator DONNELLY. Thank you. 

Chairman SHELBY. First, we will hear from Dr. Veronique de 

Rugy of the Mercatus Center at George Mason University, who has 

spent a considerable amount of time studying the Bank and official 

export credit financing. 

Next, we will turn to Ms. Linda Dempsey, the Vice President of 

International Economic Affairs at the National Association of Manufacturers. Her role at the National Association of Manufacturers 

4 

is to lead efforts to improve global competitiveness of U.S. manufacturers. 

Third, we will hear from Dr. Michael Strain, a resident scholar 

and Deputy Director of Economic Policy Studies at the American 

Enterprise Institute. 

Next, Mr. John Murphy, Senior Vice President for International 

Policy at the U.S. Chamber of Commerce, will give his remarks. 

And finally, Dr. Daniel Ikenson, Director of the Herbert A. Stiefel 

Center for Trade Policy Studies at the Cato Institute, where he 

serves as an expert on trade and investment policy, will offer his 

perspective on the Export-Import Bank before we turn to questions. 

We will start with you, ma’am. 

All of your written testimonies will be made part of the record. 

If you could sum up your basic points in 5 minutes because we do 

have a vote schedule and we are going to have to take a break and 

then come back. 

STATEMENT OF VERONIQUE DE RUGY, SENIOR RESEARCH 

FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY 

Ms. DE RUGY. Good morning, Chairman Shelby, Ranking Member Brown, and Members of this Committee. It is an honor to appear before you today to testify about the Export-Import Bank. 

We do not agree on much in Washington, but everyone should 

agree that the Federal Government should not direct our limited 

public resources primarily to wealthy, politically connected companies, and yet, that is what the Export-Import Bank does. On the 

domestic side, 64 percent of Eximbank finances benefits 10 large 

corporations, 40 percent benefits Boeing. 

Think about it this way; there is an agency whose entire reason 

for being appears to be promote the specific welfare of a handful 

of corporations. 

On the foreign buyers’ side, the top beneficiaries include a majority of State-owned companies such as Pemex, the Mexican oil and 

gas giant, and Air Emirates, the airline of wealthly United Arab 

Emirates. 

In spite of this, some say that there are good reasons to reauthorize Eximbank—because it promotes exports, it fills a critical financing gap, and without it, jobs will instantly disappear. But none 

of these arguments withstand scrutiny, as my testimony will show. 

However, I also want to focus on the groups who are affected by 

Eximbank activities that have gone ignored. These people do not 

have connections in Washington. They do not have press offices 

and lobbyists. But they matter, too. 

It is difficult, but extremely important, that we consider the unseen cost of political privileges whether they take the form of market distortions, resource misallocation, or higher prices. 

So let’s start. 

First, contrary to what you hear from a supporter, the Eximbank 

plays a marginal role in export financing, backing less than 2 percent of exports each year. It means that 98 percent of U.S. exports 

are financed using a wide variety of private banks and other financial institutions without Government interference or assistance. So 

allowing Eximbank to expire would not result in a collapse of the 

U.S. export market. 

5 

Second, the Bank claims that it fills a critical financing gap, but 

according to the Bank’s own data 16.6 percent of its activities are 

justified by filling this financing gap. What it means is that 83 percent of what the Bank does has nothing to do with filling a financing gap. So, basically, Eximbank is in the business of extending 

cheap loans to large foreign corporations so they can buy goods and 

services through massive domestic firms. 

Third, the Bank claims that if its charter expires jobs will disappear. It takes credit for supporting 164,000 jobs in 2014, but 

GAO has criticized the Bank’s methodology, among other reasons, 

for omitting to take under consideration the jobs that actually 

would exist without the Bank. 

But even if we accept the Bank’s questionable job claims, failing 

to reauthorize Eximbank will not disturb existing loans and, hence, 

the jobs they support. It will simply prevent the Bank from asking 

taxpayers to make new loans. 

Also, top Eximbank beneficiaries have billions of dollars of backlogs which will keep their workers and small business suppliers 

busy for years to come. Boeing, for instance, has $441 billion in 

backlogs, meaning that it will have years to arrange alternative 

private financing like many small and large exporters do every 

year. 

Now the 10 large corporations who capture the majority of 

Eximbank benefits have various incentives to make sure their 

voices are heard, but it is critical that we consider the unseen victims of political privilege. These victims are, first, taxpayers who bear the risk of $140 billion in liability. 

Second, they are consumers who pay higher prices for purchase 

of subsidized goods. 

And, third, these victims are unsubsidized firms competing with 

subsidized ones. They not only pay a higher financing cost but lose 

out when private capital flows to politically privileged firms regardless of the merit of their projects. 

Indeed, some of these victims are victimized multiple times, first 

as taxpayers, then as consumers, then as competitors, and finally 

as borrowers. 

Unfortunately, we will never see the businesses that could have 

been. We will never hear from the workers whose wages were not 

raised or whose jobs disappeared because of the unfair competition 

from Eximbank-backed firms. 

It took courage and leadership to stand up and represent the forgotten firms, workers, taxpayers, and consumers whose voices are 

so easily drowned out by the corporate beneficiaries of Government 

privilege. So thank you very much for organizing this hearing, and 

I am looking forward to your questions. 

Chairman SHELBY. Ms. Dempsey. 

STATEMENT OF LINDA MENGHETTI DEMPSEY, VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS 

Ms. DEMPSEY. Thank you, Chairman Shelby, Ranking Member 

Brown, and Members of the Committee. I appreciate the opportunity to testify today on behalf of the National Association of ManVerDate Nov 24 2008 12:35 Dec 21, 2015 Jkt 046629 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 L:\HEARINGS 2015\06-02 PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNI
6 

ufacturers, the NAM, which is the largest industrial trade association in the United States and the voice for the 12 million men and 

women who make things in America. 

With 95 percent of the consumers outside the United States and 

global demand for manufactured goods that far exceeds domestic 

consumption of those goods, the United States has to win more 

sales overseas if we are going to sustain and grow manufacturing 

and jobs in this country. While the recent growth in exports is impressive, U.S. manufacturers are facing an increasingly challenging 

global economy where growth has slowed and America lags behind 

most major Nations in terms of our export success. 

The NAM and its members view the Eximbank as one of the 

most important tools the U.S. Government has to boost U.S. exports and support American jobs. In fiscal year 2014, Eximbank enabled more than $27 billion in exports, supporting over 160,000 

American jobs, by providing services that are not available commercially for which fees and interest are collected and for which 

there was only a zero—less than 0.2 default rate. 

It has undergone significant reform in recent years and is increasingly supporting small businesses. Indeed, nearly 90 percent 

of the 2014 transactions directly supported small businesses. 

And every U.S. exporter that wants to apply for an Ex-Im service 

can do so, and if it meets the eligibility criteria it will be provided 

that service; no special access required. 

While Eximbank does not need to finance the great majority of 

U.S. exports, it is critical in a few key areas. Let me explain. 

For small businesses, there are already 3,300 small business 

transactions in 2014; 545 companies were first-time Eximbank 

users and probably first-time exporters, too. They are the direct 

Eximbank users, but they also supply to some of the big companies 

out there that export. If Eximbank is closed, small businesses 

would feel it first. 

Current Treasury Department rules put export-intensive companies in a bind when it comes to asset-based lending. The Eximbank 

is sometimes the only option to enable crucial working capital flow. 

Without Eximbank, small businesses will be faced almost immediately with a loss of that working capital, and they will have to 

face the dilemma about whether they are going to pay their workers or pay the mortgage on their facility. 

For infrastructure, a worldwide growth sector, Eximbank plays 

an especially crucial role because this is where long-term lending 

is required. Post-financial crisis, there are a whole bunch of new 

restraints that have been put on this long-term commercial ending. 

And, without Eximbank U.S. exports in a wide range of infrastructure, energy, and aerospace sectors will be lost to foreign competition. 

For emerging markets, many U.S.-based lenders need to rely on 

Eximbank for expertise and to mitigate geopolitical and collateral 

risk. Without Eximbank, U.S. businesses will lose sales in these 

markets that are showing substantial promise. 

Finally, U.S. exporters from a broad range of sectors are increasingly selling to foreign Governments and State-owned enterprises. 

Whether it is a medical equipment company that is selling to a 

State-owned hospital overseas or companies in nuclear and power 

7 

generation that are selling major equipment, these Governments 

and State-owned enterprises expect a Government at the other side 

of that table, at least to begin the bidding process. In many cases, 

Eximbank actually does not play a role in the final transaction. If 

Eximbank is not reauthorized, U.S. manufacturers will be out of all 

of these areas that affect both small and large companies. 

As the U.S. Congress debates the future of Eximbank, our trading partners are moving forward aggressively. Last year, the NAM 

put out a report, ‘‘The Global Export Credit Dimension,’’ that documented the over 60 ECAs worldwide and the foreign—and their 

massive foreign export credit. 

The ECAs of our top nine trading partners provided nearly half 

a trillion dollars just in official funding, and countries like China, 

South Korea, and Canada and Brazil are growing massively. Without Eximbank, the U.S. will ceding sales to our competitors overseas at the cost of manufacturing and jobs domestically. 

While the United States is a relatively small player, it is actually 

the U.S. that has led global efforts to eliminate subsidies, to eliminate market distortions through export credit, and has succeeded 

with our OECD partners, including through sector-specific arrangements such as in nuclear power, ships, aircraft, and renewable energy and water. 

The United States has also initiated negotiations with developing 

countries to put disciplines on foreign export credit agency funding, 

but that has been particularly difficult, particularly as the U.S. is 

debating Eximbank’s future. 

If Eximbank is eliminated, the continued arms race and the global ECA activity will expand unchecked, and U.S. manufacturers, 

other businesses, and workers will be the victims. Time is of the 

essence. 

Thank you. I urge this Committee and the Senate to move forward now on an Eximbank reauthorization. 

Chairman SHELBY. Dr. Strain. 

STATEMENT OF MICHAEL R. STRAIN, DEPUTY DIRECTOR OF 

ECONOMIC POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH 

Mr. STRAIN. Chairman Shelby, Ranking Member Brown, and 

Members of the Committee, thank you for the opportunity to appear before you today to discuss the Eximbank. It is an honor. 

I do not believe that the Eximbank should be reauthorized. I will 

outline why, with a special focus on the Eximbank’s impact on jobs. 

In a healthy economy, one characterized by full employment, the 

Eximbank does not create jobs. This stands in stark contrast to the 

rhetoric of some of the Ex-Im Bank’s supporters, but it is the correct conclusion, at least to a first approximation, for informing the 

Committee as it debates the appropriate course of action for the 

Eximbank. 

Imagine an economy like ours, with some firms that export goods 

abroad and many more firms that sell only within the United 

States. All labor resources are utilized. 

The Government enters and subsidizes the exporting firms. This 

will surely help those firms, and it may even increase the number 

8 

of jobs those firms can support. But as labor resources are fully employed, these new jobs must come from somewhere. 

What the export subsidy is doing, in effect, is shifting jobs from 

firms that do not export to firms that do. This does not increase 

employment on the whole. 

Now it must be said that there is considerable debate among 

economists as to whether the U.S. economy is currently characterized by full employment. Many economists believe we are quite 

close to full employment, but I am not among them. 

In such an environment, it can be argued that export credit may 

help support jobs. To this argument, I have three replies. 

The first is that the Congress should not reauthorize a permanent export credit agency in order to achieve the temporary goal 

of tightening a slack labor market. Monetary and policy fiscal policy are much better tools to tighten the labor market. 

The second is that even if the Congress chooses to authorize finance to selected sectors to support employment, exports would not 

be high on the list of firms or industries to target. 

Finally, failing to reauthorize the Eximbank would not immediately terminate its existing financing arrangements, and the lives 

of those arrangements will likely run longer than our current labor 

market conditions. 

I will now turn from the employment impacts of the Ex-Im Bank 

to considerations of the broader economy. 

Textbook models of international trade for a large economy predict that export subsidies will lower national welfare, will make the 

United States worse off relative to a situation without the subsidies. 

In contrast, some, though far from all, more complicated models 

set in an oligopolistic market environment, featuring particular 

forms of strategic competition, do find situations in which export 

subsidies can make the Nation better off. 

A unifying feature of these models, however, is that the Government’s policy toward exports requires an incredible amount of 

knowledge that the Government almost surely does not possess in 

reality. To illustrate this, consider some general equilibrium effects 

of a simple subsidy. 

Much discussion of the Eximbank focuses on partial equilibrium 

effects, on the effects of the Eximbank on a single market, or on 

a single set of firms. But economic policy, including the decisions 

of the Eximbank, can effect many firms and many markets. And 

so general equilibrium considerations must be taken into account 

by the Congress when deciding whether to allow the Eximbank to 

continue providing export credit. 

And export subsidy will give subsidized firms an advantage over 

their foreign competitors, increasing the demand for those firms’ 

output. But this, in turn, will increase the demand for inputs to 

production among the subsidized firms, increasing the price of 

those resources faced by other sectors, and putting firms in those 

sectors—sectors that do not receive export credit—at a disadvantage relative to a situation without the export subsidy. 

Even if the subsidy helps firms that receive it then, the subsidy 

may hurt the overall economy. 

9 

It is hard to imagine how the Government could understand all 

the interlocking parts of the economy well enough to know whether 

the subsidy is a net positive for the United States. 

The existence of capital market deficiencies and imperfections, 

and the export credit behavior of foreign Nations, do not nullify 

general equilibrium concerns about information and uncertainty. 

Political economy presents other concerns as well. The default assumption of the Congress should be that well-connected, influential 

corporations will be in a better position to exercise influence over 

whether they receive Ex-Im Bank financing than other less-connected corporations. This creates important issues that the Congress cannot ignore. 

To conclude, let me offer final thoughts. 

First, it is reasonable to describe the Eximbank as dispensing socalled corporate welfare, but the Eximbank is hardly the chief offender. After the Eximbank’s fate is resolved, the Congress should 

oppose crony capitalism in other sectors of the economy, where its 

magnitude is often larger, just as vigorously. 

Second, in the realm of trade policy, future negotiations and arrangements should stress the need for foreign Nations to limit 

their provision of export credit. 

Finally, supporters of the Eximbank have a reasonable argument 

that there may be times when limited, temporary, strategic trade 

policy may be appropriate. But such policy should address specific, 

identifiable actions of foreign Governments or other strategic goals 

in a very targeted way. It should not be left to an open-ended export credit agency such as the Eximbank. 

But regardless of progress on these three fronts, the Eximbank 

should not be reauthorized. 

Chairman SHELBY. Mr. Murphy. 

STATEMENT OF JOHN G. MURPHY, SENIOR VICE PRESIDENT 

FOR INTERNATIONAL POLICY, U.S. CHAMBER OF COMMERCE 

Mr. MURPHY. Mr. Chairman, Ranking Member Brown, Members 

of the Committee, I am very pleased to be here today to testify on 

the importance of reauthorizing the Eximbank. 

I represent the U.S. Chamber of Commerce, the world’s largest 

business federation, representing the interests of more than three 

million businesses of every size, sector, and State. 

You have heard the fundamentals from my colleague, Linda 

Dempsey: Eximbank, last year, supported more than $27 billion in 

American exports, more than the merchandise exports of the State 

of Alabama, more than the merchandise exports of Arkansas, 

Idaho, Nebraska, and South Dakota combined. Eximbank is especially important to the small- and mid-sized companies, which account for nearly 90 percent of its transactions. 

The idea that Congress would even consider making the United 

States the one major trading Nation in the world without an official export credit agency has left many in the U.S. business community baffled. Consider how this would put specific sectors and 

industries at a comparative disadvantage in global markets. 

First, shutting down Eximbank would mean many small businesses could not even export because commercial banks often 

refuse to accept foreign receivables as collateral for a loan without 

10 

an Eximbank guarantee. For these small firms, Eximbank is often 

indispensable. 

In fact, buyers overseas nowadays expect vendors to offer financing. Without Eximbank’s account receivables insurance and lines of 

credit, many U.S. small businesses would be unable to extend 

terms to foreign buyers and would have to ask for cash in advance. 

In such a case, the business will most likely go to a firm from another country that is able to offer financing. 

For these small businesses, Eximbank is not just nice to have— 

it is indispensable—nor is there any assurance that eliminating 

Eximbank would cause commercial banks to step into the breach. 

In addition to these direct small business beneficiaries, tens of 

thousands of smaller companies that supply goods and services to 

large exporters also benefit from Eximbank. 

Second, it is par for the course for expensive capital goods, such 

as Canadian planes, Chinese trains, and Russian nuclear reactors, 

to be sold worldwide with unashamed backing from these firms’ national export credit agencies. 

In the past few years, we have seen major tenders for locomotives in African countries and elsewhere hang in the balance. 

These tenders, worth hundreds of millions of dollars, required that 

the supplier finance a significant portion of the transaction. Chinese competition in these cases has been fierce, and they come 

well-prepared with generous financing from one of China’s several 

export credit agencies. 

Again, in these circumstances, the calculus is clear; no 

Eximbank, no sale. 

Third, foreign infrastructure opportunities are another area 

where export credit agency support is often required. Closing 

Eximbank would shut American exporters out of huge business opportunities overseas because ECA support is required for a company even to bid on overseas infrastructure projects. 

Fourth, nuclear power is another sector where the fate of 

Eximbank will have a major impact. According to the Nuclear Energy Institute, just 5 nuclear power plants are under construction 

in the United States, but 61 new plants are under construction 

overseas. So for the U.S. nuclear industry, which directly employs 

more than 100,000 Americans in high-skill, high-wage jobs, it is export or die. 

But here is the rub. Export credit agency support is always a bidding requirement for international nuclear power plant tenders. 

Without Eximbank, U.S. nuclear power companies will not even be 

able to bid for business overseas. 

Make no mistake; executives in a number of these industries will 

face hard questions of whether to shift production abroad where export credit agency support is available. 

Eximbank’s critics would like to have it both ways. On the one 

hand the Bank is a colossus with the power to distort free markets, 

but on the other it is such a small agency that its abolition would 

do no harm to the U.S. companies that depend on it. It cannot be 

both. 

In fact, Eximbank is modestly and appropriately scaled, acting 

mostly in the circumstances I have described, where it is necessary 

to U.S. competitiveness. 

11 

In closing, Eximbank does not skew the playing field. It levels it 

for U.S. exporters facing head-to-head competition with foreign 

firms backed by their own export credit agencies. Often, it acts 

even as a deterrent in cases where it is not even used but its availability can make a determination. 

Eximbank does not pick winners and losers, but refusing to reauthorize Eximbank is picking foreign companies as winners and U.S. 

exporters as losers. 

The Bank’s opponents have attempted to tie it to unsavory customers overseas. This is only an attempt to divert attention from 

the true beneficiaries of Eximbank, the tens of thousands of American workers whose jobs depend on the Bank’s support for their exports. Their voice must be heard in this debate. 

Thank you. 

Chairman SHELBY. Mr. Ikenson. 

STATEMENT OF DANIEL IKENSON, DIRECTOR, HERBERT A. 

STIEFEL CENTER FOR TRADE POLICY STUDIES, CATO INSTITUTE 

Mr. IKENSON. Good morning, Chairman Shelby, Ranking Member 

Brown, Members of the Committee. 

I am Dan Ikenson, Director of the Herbert A. Stiefel Center for 

Trade Policy Studies at the Cato Institute, and I appreciate the invitation to share my perspectives on the Export-Import Bank of the 

United States with you today. The views I express are my own and 

should not be construed as representing any official positions of the 

Cato Institute. 

To the extent that today’s hearing will help illuminate the full 

impact of Eximbank on the economy and on the market process, I 

am pleased to participate and offer some assistance. 

Americans tend to view the global economy as an us-versus-them 

proposition where exports are ‘‘Team U.S.A.’s’’ points, imports are 

the foreign team’s points, the trade account is the scoreboard, and 

the deficit on that scoreboard means the home team is losing at 

trade. 

But trade is not a competition between us and them. It is not a 

national sport played by countries but a cooperative exercise between billions of people seeking to obtain value through exchange. 

The purpose of trade policy is not to secure a trade surplus but 

to increase potential for economic growth. 

Why should U.S. taxpayers underwrite, and U.S. policymakers 

even promote, the interests of exports anyway when the benefits of 

those exports accrue primarily to the shareholders of the companies 

enjoying the subsidies? 

There is no national ownership of private export revenues. As 

Milton Friedman used to say, exports are the things we produce 

but do not get to consume while imports are the things we consume 

but do not have to produce. 

But given the exalted status of exports in Washington’s economic 

policy narrative, Eximbank’s self-portrayal as indispensable to U.S. 

export success makes for a good survival strategy. Never mind that 

on that metric Eximbank is scarcely relevant and Eximbank supported $27.4 billion in exports last year, which is less than 2 percent of the total U.S. export value. 

12 

But policymakers should stop conflating the interests of exporters with the national interest and commit to policies that reduce 

frictions throughout the supply chain, from product conception to 

consumption. 

For example, over 55 percent of the value of U.S. imports last 

year consisted of intermediate goods, capital goods, and other raw 

materials—the purchases of U.S. businesses. Yet, many of those 

imports are subject to customs duties which raise the cost of production for the U.S.-based companies that need them, making those 

firms less competitive at home and abroad. 

U.S. duties on products like sugar, steel, magnesium, polyvinyl 

chloride, and other crucial manufacturing inputs have made it 

more difficult for U.S. companies to compete at home and abroad, 

and it has chased companies to foreign shores where those inputs 

are less expensive, and it has deterred foreign companies from setting up shop stateside. 

And just as import duties on intermediate goods adversely impact downstream consuming industries, subsidies for exporting intermediate goods have the same adverse impact. 

Just as U.S. steel tariffs hurt U.S. manufacturers of appliances 

and auto parts by raising their cost of production and lowering the 

cost of production of foreign competitors, subsidies to export steel 

have the same kind of adverse effect on steel-using industries—diverted supply leading to higher domestic input prices and lower 

input costs for competitors abroad. 

What is seen and celebrated as the tariff or export subsidy that 

benefits the steel industry, what goes unseen but is every bit as 

real, are the costs imposed on downstream industries. 

Eximbank financing helps two sets of companies—U.S. firms 

whose exports are subsidized through direct loans or loan guarantees and the foreign firms who purchase those subsidized exports. 

So high fives all around for the beneficence of Eximbank. 

But those same transactions impose costs on two different sets 

of companies—competing U.S. firms in the same industry who do 

not get Eximbank backing and U.S. firms in downstream industries 

whose foreign competition is now benefiting from reduced capital 

costs courtesy of the U.S. Government. 

Eximbank is an exercise in picking winners and losers, nothing 

more. 

Eximbank financing reduces the cost of doing business for the 

lucky U.S. exporter and reduces the cost of capital for his foreign 

customer, but it hurts U.S. competitors of the U.S. exporter. It is 

what I call industry costs. 

It also hurts U.S. competitors of its foreign customer—that is 

what I call the downstream industry costs—by putting both groups 

at relative cost disadvantages. 

According to the findings of a recent Cato Institute study, the 

downstream costs alone amount to a tax of approximately $2.8 billion every year. 

And the victims include companies in each of the 21 broad U.S. 

manufacturing sectors and 189 of 237 specific manufacturing sectors as defined at the 6-digit level of the North American Industry 

Classification System, and the victims are in every State. 

13 

In other words, the average firm in four of every five manufacturing industries is made worse off by the Export-Import Bank. 

Market interventions like these, no matter how well-intentioned, 

have secondary effects that have to be taken into account when 

rendering judgment about the benefits and costs of the policy. 

The auto bailout, to give another example, may have helped the 

workers and shareholders at GM and Chrysler, but it denied the 

spoils of competition to Ford, Honda, Toyota, Nissan, Hyundai, Kia, 

and BMW. A market process that rewards worthy firms and punishes less capable ones was subverted. 

So Congress should allow Eximbank to expire at the end of the 

month and refrain from subsequent reauthorization. 

Thank you. 

Chairman SHELBY. Mr. Ikenson, you mentioned in your testimony that Eximbank may reward some companies but penalize 

others whom you described as collateral damage of the Bank. 

Dr. de Rugy, you also alluded to numerous Eximbank losers in 

your testimony. 

Could you explain in more detail, both of you, why most of the 

cost of Eximbank subsidies are unseen, and how do you identify the 

so-called victims of Eximbank in the U.S. economy? 

I will start with you. 

Mr. IKENSON. OK. Well, the costs to downstream industries, I 

think, are manifest through two channels: Diversion of domestic 

supply, which tends to raise the prices of the input, and that raises 

the cost of production for downstream firms. Two, the subsidized 

export of that input reduces the cost of production for the U.S. 

downstream firms’ foreign competitors. 

Often, these costs are small. For example, if a U.S. Steel export 

is subsidized and the cost of steel accounts for only 1 or 2 percent 

of the total cost of production for that firm, that firm—it may be 

imperceptible to that firm than to a firm for whom steel accounts 

for 40 or 50 percent of the cost of production. 

So this is perpetrated in an insidious way. It is like being 

pickpocketed or getting an extra item on your telephone bill for 

some small tax. 

There are costs that result from the diversion of supply, from the 

underwriting of foreign competition. Sometimes companies do not 

realize it. 

In Delta’s case, Delta realized it, but airplanes—Boeing aircraft—are a major cost component for Delta. So they were able to 

call Boeing out and complain about the subsidies to Air India and 

other foreign carriers. 

But a lot of other companies do not see that. They might detect 

that their costs are rising or that their revenues are being impeded, but they might not know that they can attribute that to 

Eximbank subsidies for their suppliers. 

Chairman SHELBY. Doctor. 

Ms. DE RUGY. I would add to what Mr. Ikenson said by saying 

that we know who the beneficiaries of Eximbank are, and there is 

no denying that they are liking it. I mean, they like it enough, and 

they would like to keep the benefit enough that they have an incentive to organize and to spend considerable amount of resources 

coming and lobbying Members of Congress all the time. 

14 

But, in fact, for the victims who, as Mr. Ikenson said, do not necessarily realize it and are spread out throughout the country, this 

incentive does not exist. 

And, actually, the cost of doing such a thing is way too high. 

Think about in your State, Mr. Chairman, Eximbank backs only 

34 percent last year of exports. So it means that over 99 percent 

of exports without export subsidies. 

These exporters, I mean, they are not marching to your office all 

of the time. They may not even realize; some of them do, but they 

may not realize. And yet, some of these exporters, they lose in different ways. 

Maybe some exporters are actually using Boeing planes to export 

their goods, and so they are getting, you know, the financing at a 

higher rate but also—than their competitors, but also they pay 

more for the export of their goods by using Boeing planes than they 

would otherwise. 

But they may know, and certainly, they certainly do not have the 

incentive to come fly to Washington and lobby you. 

Chairman SHELBY. I will direct this next question to—I will start 

with Dr. Strain. 

According to the Bank, nearly 90 percent of its customers last 

year were small businesses as a percentage of transactions. 

Congress set a 20 percent mandate on the dollar value of direct 

small business export assistance, which the Bank has not consistently met. 

The lion’s share of the dollar amount of transactions last year remained with a handful, as you pointed out, of very large companies. 

Dr. Strain, how would you grade the Bank’s assistance to small 

business? 

Mr. STRAIN. Well, I think it has to be acknowledged that if you 

are going to have an export credit agency that a lot of the resources 

are going to flow to large exporters. So when you look at the 

amount of credit provided in dollar figures, a large, large share of 

that goes to big firms. If you look at the number of authorizations, 

a much smaller share goes to big firms. 

But I think it is the dollar figure that actually matters, certainly 

to the macroeconomy and to the way that we think about economic 

policy. And so I think it is very accurate to characterize the 

Eximbank as being a bank that primarily assists very large corporations that have access to credit unlike small competitors. 

And as a consequence, to answer your question directly, I would 

grade the Bank fairly poorly on its congressional mandate to help 

small businesses to a large degree. 

Chairman SHELBY. Do you agree with that, Doctor. 

Ms. DE RUGY. Yes, I do. 

Chairman SHELBY. Thank you. 

Senator Brown. 

Senator BROWN. Thank you. 

I found Mr. Ikenson’s—one of the last comments he made about 

the auto rescue interesting, and I know that Senator Donnelly 

cares a lot about this, too—that you spoke of that it may assisted 

or helped GM and Chrysler but not the others even though we 

were all lobbied pretty heavily by Honda, big in my State because 

15 

of the supply chain, and Ford, big in my State and around the 

country. 

Senator DONNELLY. Mr. Chairman, if I could just say one thing, 

Toyota manufacturing came to my office and sat down with me in 

my office and said it is critical for Chrysler and General Motors to 

survive in order for the supply chain and all the suppliers downstream to survive as well, and they asked us specifically to make 

sure we would stand up for Chrysler and General Motors as well. 

Senator BROWN. And the supply—thank you, Senator Donnelly. 

Let me—and he is right. 

Mr. Ikenson, I understand, too, that in your study you cite Nucor 

as an example of collateral damage in an agreement for foreign 

manufacturers to purchase steel from U.S. Steel. Well, the fact is 

Nucor is supportive of the reauthorization of the Eximbank. 

But I want to get to questions with Mr. Murphy and Ms. 

Dempsey. 

The June 30th expiration is, what, 4 weeks away? Your testimony touched on some of the consequences of that expiration, Ms. 

Dempsey. 

If Mr. Murphy and Ms. Dempsey would give me thoughts on 

what the economic impact would be if it does expire at the end of 

the month, especially for your members. 

And, Mr. Murphy, it is nice to hear the Chamber of Commerce 

talk so much about its workers, something I do not know that it 

is always focused on, but I appreciated those comments today. 

If you would both give me your thoughts on what exactly it 

means to your companies, especially your smaller businesses and 

to your workers. 

Ms. DEMPSEY. Well, thank you, Senator Brown. Thank you, Senator Brown. 

You know, I think it is important to hear what actually is happening on the ground, not just economic theory, because the failure 

to reauthorize the Eximbank on a long-term basis is going to put 

at risk tens of billions of dollars of exports. 

We are not at full employment in this country, and we are certainly not at full manufacturing output. In fact, we have a lot of 

industries that have had to shutter or slow down facilities. 

We can produce a lot more if we have those export markets and 

if we have the Eximbank continue. But given the amount of exports that Eximbank finances on an annual basis, we will be putting tens of billions of dollars at risk and tens of thousands of U.S. 

jobs across America because we are going to lose those sales to foreign competitors. 

And when I think about a small business company like Special 

Products and Manufacturing, whose CEO said the future of American manufacturing is in jeopardy of being seriously hurt if the 

Eximbank is not reauthorized, other companies are going to lose 

sales—small business, large businesses, and this is going to have 

a direct impact on manufacturing in our country. 

Senator BROWN. Mr. Murphy, your thoughts. 

Mr. MURPHY. Out in the global marketplace, amid the tough 

competition we see from new firms and old, from different countries around the world, the theoretical concerns that we have heard 

here ring hollow. 

16 

Out in the marketplace, the choice is not one between Eximbank 

on the one hand and the perfection of free markets on the other. 

It is a choice between U.S.-made aircraft, nuclear reactors, turbines, locomotives, a host of products and their competing products 

from other countries. And, often tipping the balance is official export credit agency support. 

So if Eximbank’s critics have their way, the U.S.-made products 

will no longer have that support, and it really could tip the balance. 

Stan Veuger, who is an AEI scholar and an expert in applied 

microeconomics and who has participated in what I understand is 

a vigorous debate at AEI on this topic, was asked the question: 

Well, why should we have an Eximbank? His answer: Because the 

world is not one frictionless credit market. 

Faced with foreign ECAs, we have an Eximbank, a Federal Government program of, at most, negligible cost that helps U.S. exporters compete with foreign firms on a level playing field. 

He warns against the utopian views of some Libertarians who 

believe that a fallen world can make due with the Garden of Eden’s 

governing institutions. 

For American companies, they want customers. They do not care 

if they have pointy ears and green blood. They want customers who 

can pay. 

And those customers have alternatives from many other countries around the world. And, without Eximbank, those other companies are going to have an advantage. 

And I would like to quote, finally, former CBO head, Douglas 

Holtz-Eakin, who has echoed this view. He says, ‘‘I would love to 

live in a world where we do not need the Eximbank, but this is not 

that world.’’ 

Chairman SHELBY. We have a vote on the floor. So we are going 

to recess for about 20 minutes to give us a chance to vote. 

So we are in recess. 

[Recess.] 

Chairman SHELBY. The Committee will come back to order. 

Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman. 

There is a constant debate over whether or not Eximbank helps 

small businesses. I do not expect to settle the argument today. 

But, can you tell me what types of small businesses benefit the 

most from Eximbank and why? And that would be to the panel. 

Ms. DEMPSEY. I am happy to start, Senator. 

I will say that there are a wide variety of manufacturers in all 

different sectors of the economy. We have food product manufacturers. We have companies in Pennsylvania that make wall coverings. 

We have small agricultural airplanes down in Texas. And it crosscuts all of the different sectors. 

In every single State represented on this panel and every single 

State in this country, there are small businesses that are using the 

Eximbank. 

Mr. STRAIN. If I could add, Senator, it certainly benefits the 

small businesses that receive the credit. 

And so if you imagine a small business—small businesses which 

operate in much more competitive environments than a duopolostic 

17 

market like for large wide-body aircraft—and one firm gets the 

subsidy, gets an Eximbank financing deal, and another firm competing in exactly the same industry, trying to attract exactly the 

same customers, does not. 

It is true that this firm is helped; it is also true that this firm 

is placed at a disadvantage. 

And I think that what makes this complicated is that it is very 

easy to say if we let the Bank go these specific businesses will be 

hurt and they will be in a worse position than they are in today. 

But we have to take into account this other guy who is competing 

against the small business that receives the export financing, 

whose playing field will be more level, who will be better able to 

compete, and the overall effects in that market very well may likely 

be positive. 

Ms. DEMPSEY. Could I add something there? 

So the Export-Import Bank is open to any exporter that meets 

very objective qualifications. If there are two exporters in the same 

industry that both want to get Export-Import Bank services, they 

can do so. And, they do do so. 

And in cases where you have foreign bidding overseas for an infrastructure project or some other Government activity where Governments are looking for bids from around the world, Eximbank 

will actually go in with two or three or any U.S. company, any U.S. 

exporter, that seeks its services and back them up and give them 

that same offer. 

It is not picking winners or losers. This is available to everyone. 

You do not need special access to get a loan or a loan guarantee 

or working capital out of the Eximbank. You can go onto their Web 

site and apply. This is something that is widely available and does 

not have that sort of negative impact. 

Mr. STRAIN. And just 10 seconds, I am sorry. 

If that is true in theory, which it is, it does remain the case that 

some businesses get it and some businesses do not. So there must 

be some reason why these businesses that do not get it and are not 

going through this extremely easy process of doing it. And I think 

the fact that not all businesses are subsidized means that the simple story is not actually as simple in reality. 

Mr. MURPHY. It has been fascinating over the past couple of 

years to prepare a library of interviews with 80 small business 

users of the Bank and their real-world experiences. 

So, for instance, Bridge to Life Solutions in South Carolina, they 

provide cold-storage organ transplant solutions. One of their executives says: Without Eximbank, I would have to tell my customers, 

prepay everything up front or we cannot do business. 

It is only when they were able to purchase credit insurance from 

Eximbank, which they could not get from a commercial bank, that 

they were able to extend terms to foreign customers. And without 

being able to extend terms, they could not make these foreign 

sales. 

Similarly, Eagle Labs in Rancho Cucamonga, California, they use 

credit insurance to sell their surgical equipment for cataract surgery around the world. They explained that despite receiving regular payment from foreign customers their local commercial banks 

would not extend them credit based on their foreign receivables, 

18 

but once they were able to get that guarantee from Eximbank they 

were able to double their sales and double their workforce. 

Senator ROUNDS. Mr. Ikenson. 

Mr. IKENSON. Yes. Thank you. 

Just to respond to Ms. Dempsey’s point, yes, Eximbank is available to whomever qualifies. 

However, some firms have better recourse to exporting. They 

have infrastructure in place. They are more inclined to do so. 

So if two companies are in one firm—in one industry. One may 

be ready to expand abroad where another is not, and the availability of the subsidy to that exporter might hasten the gap in performance between the two companies. 

Yes, there are small businesses that win—the beneficiaries. But 

there are costs, and I could go through a list of companies in many 

States, as John just did, pointing out that these are likely victims 

and that they should have a seat at the table as well. 

Senator ROUNDS. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Donnelly. 

Senator DONNELLY. Thank you, Mr. Chairman. 

First and foremost, I would like to say this is about jobs. This 

is about Indiana jobs. This is about American jobs and whether we 

stand up and fight for them. 

And I feel—as a kid, as I know probably some of you were, I was 

a big fan of Superman comics. And there was a character in there, 

and he was known as Bizarro Superman. And in Bizarro Superman’s world, up was down and down was up. 

And, Mr. Chairman, I feel like I am in the Bizarro testimony 

here sometimes, where sending money back to the Treasury is a 

bad thing and seeing jobs go overseas is a good thing. Well, I would 

disagree with that. 

And I will say that this Senator will fight, and fight nonstop, to 

try to make sure that the Eximbank survives because it is critical 

to jobs, to families in my State, that when they go home want to 

put food on the table, take care of their family, and have a decent 

life for their children. That is what the Eximbank helps do. 

And with that note, Doctor, I would like to ask you: Do you know 

who ABRO Industries is? 

Ms. DE RUGY. Are you talking to me? 

Senator DONNELLY. Yes. 

Ms. DE RUGY. No. 

Senator DONNELLY. Do you know who Vertellus is? 

Ms. DE RUGY. No. 

Senator DONNELLY. Do you know who Polymer Technology Systems is? 

Ms. DE RUGY. No. 

Senator DONNELLY. Do you know who Advanced Machine and 

Tool is? 

Ms. DE RUGY. No. 

Senator DONNELLY. Those are all companies that have benefited 

from Eximbank. They are not huge multinationals. They are companies in South Bend, in Indianapolis, in Ft. Wayne. 

And for them this is not about a theoretical exercise. This is 

about whether or not they have work to do and whether or not they 

have products to export. 

19 

And so I would say that this is the real world. These are the people who the Eximbank is helping. 

And then I would like to ask you: You had mentioned that part 

of the people who are victimized are taxpayers. 

Well, here is the taxpayer victimization that has occurred in the last years: 2012, $803 million returned to the Treasury in profits; 

2013, $1.056 billion returned to the Treasury in profits; 2014, $675 

million returned to the Treasury in profits. 

Here in Washington and in our Government, it drives you crazy 

sometimes to see programs that we run deficits time after time 

after time. And here we are with a program that is returning 

money to the Treasury to help reduce the deficit, and we are attacking the program. It does not seem to make any sense to me. 

And, Dr. Strain, those companies I mentioned, they are not politically well-connected. They are just businesses back home, who 

are trying to make ends meet and who are trying to sell products. 

So I think that these are the kind of things that are the real 

world that we deal with on a constant basis. 

And, Ms. Dempsey, I would like to ask you a question, that as 

we look at this there was talk about businesses being penalized by 

the Eximbank. 

One of the companies that I mentioned sells motor oil to Nigeria, 

sells automotive aftercare products to Saudi Arabia. 

Do you think that those products, if the Eximbank went away, 

that products like that and products sold around the world—do you 

think it would be a company from Ohio who lost the opportunity, 

or do you think it would be from somewhere else? 

Ms. DEMPSEY. Thank you, Senator. 

I think it would be from somewhere else. As I noted in my testimony, you know, we have over 60 export credit agencies operating 

worldwide and much more aggressive than the U.S. 

The U.S. has been much less export-intensive. But when our 

companies export it does support jobs; it supports manufacturing. 

And the companies you cited in Indiana—I would mention Draper 

as well, a window shade manufacturer—they have all been able to 

grow their operations by exports. 

We have not heard of the type of theoretical subsidy or problem 

that Mr. Ikenson is talking about or those types of losers. 

The only question is, when there is a foreign deal is that deal 

going to go forward? And that is something the Eximbank takes a 

look at because the Eximbank is not going to operate to provide 

services if that deal were not going forward. 

But if you have a deal going forward overseas and the question 

that the Eximbank answers is not whether someone in some other 

industry or any industry in the U.S. is going to be hurt, that deal 

is going to go forward. 

The question is whether a U.S. manufacturer or other business 

is going to participate, whether U.S. workers will be able to work 

on the products and services that Eximbank would support. 

And so this is really just about, from our perspective, being able 

to boost U.S. exports which is all—there is a huge amount of gain 

there. And we are growing exports, but we are not growing them 

fast enough. 

Senator DONNELLY. Thank you. 

20 

And, Mr. Chairman, I would just like to say one more thing in 

the matter of setting the historical record straight, and that would 

be this—that last week General Motors held a $1.2 billion expansion in the Silverado and Sierra Truck plant in Ft. Wayne, that in 

Kokomo, Indiana, in 2009 we went from over 5,000 transmission 

workers to almost zero, and that today there are over 7,000 people 

building Chrysler transmissions, and on top of that that we had to 

build an extra plant to contain all the work. So that is a little bit 

of a historical correction as to what happened. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman and Ranking Member for having this hearing. 

I am in the category of just trying to understand and to try to 

make a good decision on behalf of the people that I represent. You 

know, the context within which I look at this is, you know, with 

others on this Committee. 

On one hand, I have led the charge to wind down Fannie and 

Freddie, you know, which have $5 trillion in mortgages, and to create a more dynamic system where you do not have two behemoths 

that basically dominate the housing industry. So that is one end of 

the spectrum. 

On the other end, we have this entity that it is hard for me to 

determine, you know, exactly why there have not been greater reforms, and yet, I understand some of the things that Senator Donnelly is pointing out. 

So let me just—Ms. Dempsey, if you would, on Boeing, since everybody wants to talk about Boeing—and I have nothing against 

Boeing. I like flying in the airplanes that they build. 

But give me an example of a transaction where Boeing, which is 

a very sophisticated company, would be doing business with an entity. We mentioned that many of the entities are State-owned enterprises; in many cases, very wealthy countries that own these 

State-owned enterprises. 

Give me an example of a transaction where Boeing really would 

be concerned about the credit on the other side of the deal and, 

therefore, would need to operate through the Bank in this way. 

Ms. DEMPSEY. Thank you, Senator. I think that that is a great 

point to bring up here. 

One of the things that I think gets misunderstood in this debate 

is it is not Boeing that is necessarily going out and saying, well, 

I need Eximbank. Our companies, whether it is a large company 

or a small company, they are getting demands from their customers about how that customer wants to purchase. 

In the case of Boeing, you have two major wide-body aircraft producers in the world. One is here in the United States, supporting 

tens of thousands of small businesses—— 

Senator CORKER. Now, if you could—I have got 5 minutes—I 

want you to give me an example. I understand all that. 

Ms. DEMPSEY. So you have a foreign airline that says: I want 

this type of financing. I know that the French and the Germans are 

going to finance the Airbus. Boeing, can you meet that? Can the 

Eximbank meet that? 

21 

Senator CORKER. So it is not that they are worried about the 

credit. It is that the Eximbank is able to give these companies— 

these countries, companies, State-owned enterprises—terms that 

are comparable to what Boeing’s competition is using. Is that what 

you are saying? 

Ms. DEMPSEY. Yes. 

Senator CORKER. OK. You want to say something? Yes, ma’am. 

Ms. DE RUGY. Yeah. I mean, this assumption is that the only— 

the driving factor for choosing a Boeing plane as opposed to an Airbus plane is the existence of credit subsidies. 

I mean, it is worth noting that last year 90 percent of Boeing 

planes were sold without any export subsidies. In fact, it is a general rule. 

According to GAO, 85 percent of all airplanes are sold without 

these types of export subsidies. We have ample examples. 

I mean, there is no denying that the companies abroad, like Air 

Emirates or Ryanair, who are just like the top beneficiaries, foreign 

beneficiaries of Eximbank, they like getting cheap subsidies no 

matter how wealthy they are. 

That being said, we have ample examples of these companies. In 

the same month for instance, Air Emirates in June 2012, bought 

Boeing planes with export subsidies, 2 of them at the same time 

they bought 4 Airbus planes without any subsidy, which says a lot 

about the banks’ willingness to lend without export subsidy, the 

willingness of Air Emirates, and the ability for it to actually lend, 

and also the fact that it is not the primary and only deciding factor 

in buying a plane. 

Senator CORKER. So, if I could—you all have been very fulsome 

in your answers, and we may want to follow up. 

But so in that case—and I understand some of the smaller enterprises that Donnelly was talking about, that it would be difficult 

for them maybe to go to a sophisticated lender and deal with the 

$50,000 transaction; I got it. 

But in this case it is really about they are dealing with other 

countries, and the other countries want, obviously, the best arrangement they can get. And so it gives Boeing, in those cases, a 

competitive, level playing field. 

Ms. DEMPSEY. Level playing field. 

Senator CORKER. All right. So let me ask you this: One of the 

things we have looked at in our office is Eximbank being truly the 

lender of last resort, which would do away with this whole scenario 

you are talking about because Boeing could get credit. It is just 

that they would not be as competitive without this type of credit. 

But we have looked at the form that people fill out, and you 

know, you do not really have to be—Eximbank does not really have 

to be the lender of last resort. I mean, you are not like violating 

an oath when you fill this thing out. It is pretty loose. 

Is there a way to truly make Eximbank for entities like Donnelly 

was talking about, an entity that deals with folks where they are 

the lender of last resort, and we did not have to worry about the 

level playing field issue? 

Ms. DEMPSEY. I would say I hear from a lot of the small businesses that there is already a lot of paperwork; there is a lot of 

delay. 

22 

One of the things that we constantly have in the U.S. as a problem is our paperwork and delay, and because of that we sometimes 

lose the sale. So I think anything that one might consider on that 

you have to be careful. 

But, lender of last resort? Does that mean that when, you know, 

Air Emirates wants to buy a plane, we are—you know. Perhaps 

there is credit available on the commercial market, but they are 

going to get a better deal out of Europe from Airbus, from their export credit agencies over there. 

And I think, you know, people keep throwing around the word 

subsidy constantly. Where is this subsidy? 

This is a Government entity that pays fully for itself with the 

fees and the interest it takes in. It raises those fees. It raises those 

interests. 

And in the area of aircraft, the U.S. has led the industrialized 

world at the OECD to have a new aircraft sector understanding 

that has raised the interest rates on this to get rid of the market 

distortions. 

Just saying it is a subsidy does not make it so. 

Senator CORKER. Well, if I could, in closing, I think what some 

people may say is a subsidy is the true cost of Eximbank’s capital 

is not calculated, and therefore, other private entities that might 

want to do that business are knocked out of that business. That 

might be the subsidy they are talking about. 

But, thank you, sir. 

Chairman SHELBY. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

The first thing I just want to point is it is always easy to talk 

about Boeing, but behind Boeing is a supply chain where very 

small manufacturers, very small businesses are also benefited kind 

of long-term, and those folks are deeply concerned about what is 

happening right now with the Eximbank. 

In fact, most of the push that I get in North Dakota is coming 

from our very small businesses, whether it is a wheelchair manufacturer who said: Look, I have maximized my effect in the market 

today. I need to have access to the international market. I do not 

know about to do it. 

And you say, we have got this great tool. 

I think there is no question that small business is a huge beneficiary. Now in proportion to their position in terms of their contribution to gross domestic product, they might even be in excess 

of what you might see compared to multinational corporations. 

So let’s take a couple things off the table, and one of those is that 

there are somehow companies that have been disadvantaged, who 

are pounding the table. In fact, the testimony of one of the panelists raises the issue of a couple companies, both of which who are 

outrageous supporters of the Eximbank. 

And so what we really have here is a philosophical difference. 

And we are hearing from people who represent an ideology that is 

free enterprise above all else, no interference at all of Government, 

and we are hearing from people who actually create jobs. 

And the question is, are we going to listen to the ideology of, you 

know, get rid of all subsidies, which in a perfect world might make 

sense, when we are not operating in a global economy where we 

23 

have institutions exactly like this pouring money into their export 

credit agencies? 

And so we are not in a perfect world. 

And so to me, today, what we need to do is we need to have a 

conversation with the people who are actually on the ground with 

American manufacturing. 

And, Ms. Dempsey, I want to ask you about our current state of 

affairs, which is we are looking like we are going to, for the first 

time in 70 years, let the charter of the Bank expire. Expire this 

year. That is outrageous to me. 

And I want you to tell me what the injury is to American manufacturers if we do that. 

Ms. DEMPSEY. Thank you, Senator, and I could not agree more. 

You know. 

Today starts the NAM manufacturing summit, and we have over 

500 people who have flown in, and they are going to be talking to 

your offices and others about the Export-Import Bank and how critical it is. 

This is an issue where my phone rings off, you know, the system 

because this—— 

Senator HEITKAMP. Not just calls from Boeing? 

Ms. DEMPSEY. No. This is from small businesses. These are 

emails from small businesses about whether they are going to be 

able to continue to get, you know, assurances that they are going 

to get paid when they send their product overseas, that they are 

going to have the working capital so that they can pay their employees and export at the same time—something that commercial 

banks do not provide. 

Senator HEITKAMP. Are they recounting to you the disruption 

that is happening as a result of this uncertainty, as a result of us 

not doing our job in a timely fashion? 

Ms. DEMPSEY. There is a lot of harsh words, and there is a lot 

of uncertainty and fear. 

One of the things we see is foreign competitors to our companies 

here in the United States using the fact that Export-Import Bank 

may shut down at the end of this month to tell foreign customers, 

hey, you cannot trust the Americans; you cannot necessarily be 

guaranteed that they are going to come through on this sale. 

And there has been a lot of uncertainty for big sales but small 

sales. This will cost U.S. exports, make no mistake, and the jobs 

that they support. 

Senator HEITKAMP. Currently, the last time I checked, there is 

$18 billion in the pipeline that will be stalled out if we do not do 

this. And so while we are arguing philosophically, the people you 

represent are trying to keep people working. They are trying to 

keep their product moving into a market where 95 percent of all 

consumers live outside this country. 

I want to ask Mr. Murphy: When you try and explain the resistance to an entity that returns money to the Treasury, that actually 

supports American jobs, what argument do you provide for why we 

are stalling out? 

Mr. MURPHY. Well, it is difficult to be able to explain that, I 

think, particularly with the small business users of the Bank. They 

are baffled by it. 

24 

I think that they are a very handful of three of four companies 

that have been identified across the country that do not support 

the Export-Import Bank, that have spoken out against it, including 

Delta, for instance. 

But I work for the broadest business organization in the country, 

an underlying membership of three million companies of every size, 

sector and region. I cannot tell you how broad the support is for 

this and how difficult it is to explain what is going on. 

Senator HEITKAMP. I think that is a point that we need to make, 

which is that this is not a 51–49 in your membership. This is 

hugely supported compared to everything else. 

Mr. MURPHY. It is completely uncontroversial. 

Senator HEITKAMP. Yes. And I guess I just want to make one 

final pitch, which is we have got to reauthorize the Eximbank before the end of the year, or before the end of this month, or else 

we have crated a huge disruption. We have done something again 

in this body and in this Congress that is so disruptive to the marketplace that it is unfathomable that we would risk these jobs. 

And so I want to thank you for your testimony. 

Mr. MURPHY. Senator, if I could just say briefly, thank you to 

you, Senator Donnelly, Senator Kirk, for your leadership on a bill 

to reauthorize the Bank. 

Chairman SHELBY. Senator Kirk. 

Senator KIRK. Thank you, Mr. Chairman. 

I just want to show the Committee the sign that you see when 

you arrive at Beijing Airport. It says, ‘‘Welcome From the ExportImport Bank of China.’’ It shows exactly what happens when we 

leave the battlefield to the other team. 

I want to show you another picture of the C919. It is the competitor to the Boeing 737. This aircraft has now been booked 400 times 

over, representing billions in sales lost by the United States. 

I would say if you represent the State of Illinois, as I do, you 

think about all the families that depend on Boeing and Caterpillar, 

Caterpillar being based in Peoria. 

Mr. Chairman, I would definitely say that Eximbank plays in Peoria. 

So let me ask Dempsey. I just want to go through the panel here. 

For Mr. Ikenson, for your think tank, about how many people 

work there? 

Mr. IKENSON. How many people are employed at Cato? 

Senator KIRK. At Cato, yes. About 200? 

Mr. IKENSON. Fewer. About 100 to 150. 

Senator KIRK. And for Ms. Dempsey, you represent about 12 million Americans, right? 

Ms. DEMPSEY. Manufacturers do throughout the—there are 12 

million manufacturing workers throughout the American economy. 

Senator KIRK. Well, let’s just ask the panel. If you represent 

more than 10 million workers, raise your hand. 

[Ms. Dempsey and Mr. Murphy indicating.] 

Senator KIRK. So, Mr. Murphy, I do not know if you have got 10 

million people at your firm there. 

Mr. MURPHY. Well, the underlying membership of the Chamber, 

we estimate is—— 

Senator KIRK. It certainly would be. 

25 

Mr. MURPHY. ——more than 20 million workers at companies 

that are members of the Chamber. 

Mr. STRAIN. I would like to think that I represent millions of 

Americans who love the free enterprise system, Senator. 

Senator KIRK. I would say now when we look at the makeup of 

this panel it seems to be a lot of insider, Beltway folks who represent very tiny employer bases. 

When you look at the entire employment base of the United 

States, for Eximbank, it supports about 46,000 jobs in the State of 

Illinois. For our State, which could ill afford to lose any more, this 

is the impact on the country. 

We are under the logo of ‘‘ship goods, not jobs.’’ For the United 

States, about 164,000 annual jobs supported by Eximbank, exports 

of $27.5 million. 

In the case of Illinois, I have already talked about Peoria. Supporting jobs in Chicago and Burr Ridge and Lincolnshire and Moline and Decatur and Mount Prospect, I would say the impact is 

pretty huge in my State, right in the middle of the Heartland. 

With that, I will yield back, Mr. Chairman. 

Chairman SHELBY. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

You know, there has been a lot of talk about who is supported 

by the Export-Import Bank. And as you all know, under the terms 

of the congressional charter, Eximbank is supposed to focus on 

helping America’s small businesses grow and export goods. In fact, 

by law, at least 20 percent of the Bank’s spending each year must 

go directly to supporting small businesses. 

Now in fiscal year 2014, the Eximbank met that target, but in 

the 3 previous fiscal years it did not. That means that small businesses in Massachusetts and across the country were not receiving 

the level of support that Congress explicitly requires the Bank to 

provide. 

I am concerned about the Bank’s performance in this area. 

Mr. Murphy, I imagine that the Chamber of Commerce must be 

as well. After all, the Chamber often notes in its literature that it 

represents more than 3 million American businesses of which more 

than 96 percent are small businesses with fewer than 100 employees. 

So I want to ask, Mr. Murphy: I know the Chamber supports the 

reauthorization of Eximbank; you have made that clear today. But 

given the Chamber’s overwhelming small business membership, 

does the Chamber also support substantially raising the Bank’s 

small business spending requirement from 20 percent to some 

higher number? 

Mr. MURPHY. Well, thank you for the question, Senator. 

Our small business members are very active in advocating for reauthorization of the Bank, and we have worked closely with the 

Bank to try and forge connections between its staff and the small 

business community so that companies that want to export can get 

their services. 

It is—we kind of scratch our heads about the decline in support 

for small business. However, it does—— 

Senator WARREN. Well, Mr. Murphy. 

Mr. MURPHY. Yes. 

26 

Senator WARREN. Let me just—since our time is limited here. 

The question I am asking is whether or not you would support, 

you the Chamber of Commerce would support, increasing the statutory requirement for what—— 

Mr. MURPHY. No, we do not. We are—— 

Senator WARREN. The percentage goes to small businesses. 

I am a little surprised by your answer. I would think that the 

Chamber would strongly support a change that would help more 

than 95 percent of your membership. 

Mr. MURPHY. Our close interaction with the Bank has left me 

with the conviction that the Eximbank is doing everything it can 

to track down and find and identify small businesses that need its 

service. 

Senator WARREN. So you are—— 

Mr. MURPHY. In many cases, they can find commercial banking 

services. 

Senator WARREN. Well, then let me ask the question a slightly 

different way, Mr. Murphy. Would the Chamber support including 

a stronger enforcement mechanism so that the Bank would face 

some serious consequences if it did not reach the 20 percent target 

for small businesses? 

Mr. MURPHY. I do not believe it is the sort of objective that 

should have some sort of a punishment as a result for failure to 

comply with it. 

Senator WARREN. Well, I am talking about enforcement. You 

know, we ask them to do something. We direct them here in Congress to do something. 

And we have talked about the history from the past 4 years. In 

three out of 4 years they have not met the objectives, and there evidently has been no consequence that comes from that. 

You are supposed to be here, I thought you always say, representing small businesses, and I have just offered you two alternatives: Increase the percentage. Add some enforcement to it. 

And you are telling me the Chamber is not interested in any of 

that? 

Mr. MURPHY. And if I had a folder of examples of companies that 

were seeking Eximbank support so that they could grow their exports that were somehow unmet, then I would express it. 

Senator WARREN. So you are telling me the Eximbank is not responsible for its inability to reach these small businesses? 

Let me just ask you, Ms. Dempsey: How about you? I have the 

same question. Given the overwhelming number of small businesses that NAM claims to represent, would you support increasing 

their percentage, the percentage that Ex-Im is required to do for 

small businesses, above 20 percent? 

Ms. DEMPSEY. Senator, we do not support increasing a mandate. 

What we support is the types of tools and getting out the information. And like the Chamber, we work to connect Eximbank with 

small businesses. 

But what we—— 

Senator WARREN. So I am sorry. Let me just make sure I am understanding. Are you supporting any change then in the authorization, an authorization that has been in place when Eximbank has 

failed to meet even the 20 percent standard? 

27 

Ms. DEMPSEY. In terms of the mandate, we are not seeking a 

change in that because what we want is for Eximbank to be more 

effective in that and just mandating a higher level is not going to 

succeed in that. 

The U.S., as a Nation—— 

Senator WARREN. Well, then would you support greater enforcement mechanisms? 

Ms. DEMPSEY. I just agree with focusing on this as enforcement. 

The U.S., as a Nation, is much less export-intensive. People—our 

small businesses are very used to selling domestic—— 

Senator WARREN. Ms. Dempsey, if I could stop you there—— 

Ms. DEMPSEY. Sorry. 

Senator WARREN. ——because my question is how—who it is 

that Eximbank is supposed to support, and you come in here and 

tell me it is supposed to support small businesses. 

I believe that Eximbank helps create jobs in Massachusetts and 

across America, the kinds of good manufacturing jobs that we are 

losing to other countries far too often, and the Bank does that 

while consistently making money for taxpayers. I understand this 

point. 

But I also believe there is significant room for improvement in 

the Bank’s operations, including a commitment to make these loans 

more easily available for small businesses. More often than not, big 

businesses can find private funding options for their export deals, 

but that is not usually the case for small businesses. 

I believe that we should push the Bank to do more for small 

businesses, and I would think the people who represent small businesses would be strong supporters of that. 

And I believe we should hold the Eximbank accountable if it fails 

to reach those goals, and I would expect the Chamber and NAM 

to support that. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Cotton. 

Senator COTTON. I just want to say for the record to the panel 

that I have been on the receiving end of Senator Warren’s challenging questions before. She was my professor in law school. And 

you did a much better job handling her questions than I ever did 

when I was in law school. 

We live in a globalized world. America is competing with—American companies are competing with companies around the world. 

One argument you hear in favor of the Eximbank commonly is 

a reference to arms control language, that we cannot unilaterally 

disarm. Between the Europeans and the Chinese and the dozens of 

other export credit agencies around the world, it would be unwise 

for the United States to let the Eximbank unwind its operations 

and wind down. 

Ms. de Rugy, could you respond to that argument with the 

strongest counterargument you have? 

Ms. DE RUGY. So this argument assumption is that it would hurt 

the United States overall to disarm, to drop these export subsidies, 

and I think there is a pretty strong case to be made that it is not 

very clear-cut. 

28 

I mean, I think, as Dr. Strain has shown—I mean, there are 

ways in which actually this type of export subsidies are damaging 

to the economy as a whole. 

Moreover, I think that what we should aspire to do if we want 

to promote export is to do it in a more general basis. And there are 

a lot of actually sound policies that we should be implementing 

rather than actually just targeting on special winners without considering the cost, such as, for instance, the reform of the corporate 

income tax, which is extremely punishing, especially for companies 

that are competing abroad. 

Why don’t we stop this type of targeted subsidies to a few and 

expand and implement policy that would benefit everyone, even the 

nonexporters? 

Senator COTTON. Mr. Strain, do you have anything to add? 

Mr. STRAIN. I do, Senator. I agree with that. 

I think that the argument about unilateral disarmament is a 

strong argument that supporters of the Eximbank have. I think 

that the argument presupposes that the policies of the Eximbank 

are a net positive and are engaging in this battle, you know, in an 

effective way. 

And I think that that really is not well-supported by the evidence. It very well could be the case that so-called unilateral disarmament actually is better for the United States as a whole even 

if it is worse for the, you know, particular companies that we have 

heard from, from the Chamber and from NAM. 

And so I think we have to maintain some level of humility about 

what it is exactly that the Government is able to know will happen 

when an economic policy is put in place. We are talking about, essentially, a situation of concentrated benefits and diffuse costs, and 

we have heard quite a bit from the Chamber and from NAM about 

who benefits in a concentrated way. 

And the question simply is, are the diffuse costs greater than the 

concentrated benefits? They are much harder to measure. It is 

much harder to know. 

And I think that the weight of the evidence suggests that with 

export subsidies they probably are greater than the concentrated 

benefits. And so unilateral disarmament may be bad for these specific companies, but it may be good for the United States as a 

whole. 

Senator COTTON. Ms. de Rugy. 

Ms. DE RUGY. I am sorry; I forgot to add that it is worth pointing 

that it is not a majority of what Eximbank does. I mean, according 

to its own justification data, only 30—roughly a little over 30 percent of what Eximbank does is justified as countervailing export 

subsidies. So almost 70 percent of what Eximbank does has nothing to do with competing with export subsidies abroad. 

Mr. STRAIN. And, Senator, if I could just add very quickly—— 

Senator COTTON. Actually, I would like to hear the other side. 

Mr. Murphy. 

Mr. MURPHY. So over the weekend I was reading Chairman 

Hochberg’s testimony for the House Financial Services Committee, 

and he recounted how he was recently at a meeting of the 79 export credit agencies from around the world. Dozens of them explained how they plan to be expanding the export finance that they 

29 

make available. Precisely, two said they intended in the years 

ahead to be cutting it; that was Austria and Norway. The Chinese 

were silent. 

China has three, what they call, policy banks. One is China 

Eximbank. Two other banks provide similar levels of support. 

There is a gusher of export credit agency support coming out 

around the world. 

And in our experience, what we hear from our member companies time and again is that it can make a determination even in 

cases where it is not used, as a kind of deterrent effect. The fact 

that it could be used in some cases, it can turn the sale away from 

the American exporter to a competitor from abroad, and that is 

why we think we should not be the only country in the world not 

to have one of these agencies. 

Senator COTTON. Ms. Dempsey, you look as if you wanted to add 

something. 

Ms. DEMPSEY. You know, thank you. I totally agree. 

I wanted to point out that when Dr. de Rugy was talking about 

that a certain percentage of Eximbank’s transactions are not dealing with subsidies or dealing with market failures, in fact, yes, 

they are. 

The pie chart that she put in her testimony—and I am happy to 

provide one as a follow-up—ignores the small business side, ignores 

the types of loans where the OECD says that Eximbank can only 

finance up to 85 percent, and so that other 15 percent is what is 

unaccounted for. Those loans, of course, would not happen but for 

Eximbank, and they are areas where there is market failure. 

The U.S. has led the world in trying to eliminate market distortions in export credit. We have been pretty successful at the OECD 

in all—overall and then in sectors like aircraft and renewables and 

lots of other sectors. 

We are having a hard time with the developing world. They are 

trying to increase, as Mr. Murphy explained. And, if the U.S. takes 

itself out, if we do not have an Export-Import Bank, what do we 

think is going to happen? 

You do not know the theory of what is going to happen there? 

What we are seeing on the ground is exactly what Mr. Murphy 

was saying. They are expanding. They want to grow their economies, and they want to grow it through exports. And they are going 

to go forward regardless. But it is probably going to get worse, and 

it is going to make it harder for manufacturers to be able to win 

these sales overseas. 

Senator COTTON. If in a more perfect world the United States 

could actually persuade all of the countries around the world with 

the ECAs to eliminate theirs, would you then believe that we 

should eliminate the Eximbank? 

Ms. DEMPSEY. As long as the market can deal with the issues 

that exporters in our country need. 

Small businesses cannot use their exports as collateral when 

they are trying to get a loan from a commercial bank, and that 

means they are not—you know. We have got companies who mortgage their personal house. 

30 

We need to deal with that type of failure. We need to deal with 

commercial banks that are not able to do long-term loans or loans 

into emerging countries. So we have got those issues to deal with. 

But, yes, if we can move to a system where we have—we discipline out these export credit agencies, let’s go forward. 

Senator COTTON. Thank you all. 

Chairman SHELBY. A couple of observations. 

In Senator Warren’s question about reforming the Bank, both 

Mr. Murphy’s and Ms. Dempsey’s answers were troubling because 

you obviously like the status quo. 

And in your answers, she gathered and I gathered that you are 

not representing small business; you are representing one or two 

big companies that are getting most of the business, using the 

Bank the most. That is troubling. 

So if somebody wanted to reform the Bank, you all would be 

against it, basically, unless you could write the reform. That is one 

of the problems that the Bank has today. 

That was not a question. That was a comment. 

Some of our witnesses have referred to the arguments against 

the reauthorization of the Bank as economic theory whereas arguments in favor of the Bank are based on reality—quote. 

Certainly, arguments in favor of the Bank benefit from realworld examples—we know that—whereas arguments against the 

Bank are more attenuated because the potential economic damage 

done by Government-backed lending is not easily measured, as one 

would expect, but that does not mean it does not exist. 

Ms. Dempsey, does the National Association of Manufacturers reject all economic theory? 

Ms. DEMPSEY. Of course not, Senator. 

Chairman SHELBY. OK. In other words, you do not reject the theory that says Government-backed loan guarantees have negative as 

well as positive effects on American markets and manufacturers? 

Ms. DEMPSEY. Well, Mr. Chairman, you know, we have not actually heard that complaint, as Mr. Ikenson and other panelists were 

detailing. That is not the complaint that we have actually heard 

from our businesses. 

We like to ground our views and our policy, which are decided 

by our members, based on our members’ experiences. And so something like the small business issue, I think we need to figure out 

why Eximbank is not getting more loans and services to small businesses before we, you know, dramatically increase mandates. 

I will say as well, though, that the NAM supports the reform 

bills that have been introduced by Senators Heitkamp and Donnelly, by Senator Kirk, that includes some reform on small business as well. 

Chairman SHELBY. Dr. Strain. 

Mr. STRAIN. Well, I agree, Mr. Chairman, that if the point of the 

Eximbank is to help small businesses then presumably those who 

support the Eximbank should be in favor of increasing its assistance to small businesses. I think that is a fairly common-sensical 

view, and I think Senator Warren articulated it very well. 

I think that with respect to defending economic theory, which I 

am happy to do, you know, sometimes it is very hard to measure 

things. We have a very big economy, a lot of moving parts. 

31 

It is very easy for politically connected organizations to come to 

Washington and to find organizations that will say, hey, you know, 

these policies help me; do not get rid of them. 

And it is much harder for organizations and individuals that do 

not have those kinds of resources or who are injured in slightly— 

in slighter ways, in smaller ways, but when you aggregate all that 

up, you end up doing some damage to come and organize. 

I think that the fact that the overwhelming majority of exports 

occur in this country without access to special export financing—— 

Chairman SHELBY. About 98 percent. 

Mr. STRAIN. Something about 98 percent without access to export 

financing does cast doubt on predictions of horrible destruction and 

gloom and doom that will take place if that 2 percent of deals have 

to operate under the same circumstances as the other 98. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Two questions, Mr. Chairman. Thank you. 

And thanks again for the patience of all of you. 

And, again, thanks to Senator Heitkamp for her leadership on 

this, with Senator Kirk. 

Ms. Dempsey, I want to ask you about the supply chain. 

GE Aviation in Evendale, Ohio, provides engines for commercial 

and military aircraft. Some 7,500 employees in the Cincinnati area. 

They are also in Nela Park in Cleveland—electric lighting and 

many other—several other sites around. 

We hear the Export-Import Bank largely benefits, we hear, eight 

or so large corporations. 

Understanding GE has told me they have 19,000 suppliers in my 

State alone, and we are one of the GE States. But 19,000 suppliers 

in one State. 

Talk about what—sort of dispel—take 90 seconds and dispel this 

myth that it is all about these 8 large companies. 

Ms. DEMPSEY. Well, that is exactly right, Senator, and it is true. 

It is true with our biggest exporters. It is true with our mediumsize exporters. But a company like Boeing or a company like GE 

that has tens of thousands of suppliers around the country, some 

of those are companies with 20 employees, with 50 employees. 

One of our companies, Click Bond, is here this week as part of 

our NAM summit. They do not export directly. They provide to 

large capital equipment exporters. Their business grows when our 

exports, and that company’s exports, are able to grow overseas. 

This benefits all of those companies. It does not, as we have seen, 

you know, impact negatively others. 

It creates more opportunity for manufacturers across all of the 

supply chains, whether you are primary metal or equipment, or you 

are tool and die. If you are talking capital equipment, power train, 

all of those items that go into a large piece of capital equipment 

overseas, they all benefit, and those benefits are around the country. 

I will say one of the things that has been difficult is identifying 

those suppliers. We have a lot of companies. Until the last year 

and this debate really heated up and we really started spending a 

lot of time looking for them—they do not even know that their 

product is being exported overseas because they are sending on. 

32 

They might not even be a first-tier supplier to a Boeing or 

Eximbank, but they are benefiting; their employees are benefiting. 

And we have seen, you know, real good growth in manufacturing 

in the United States, and we want to keep that going because those 

are really good, high-paying jobs in our country, and we want to 

continue growing them. 

Senator BROWN. Thank you, Ms. Dempsey. 

Before my last question, I would ask unanimous consent of the 

Chair that a statement from the Bankers Association for Finance 

and Trade and the Financial Services Roundtable be included in 

the Committee document. 

Chairman SHELBY. Without objection, so ordered. 

Senator BROWN. Thank you. 

Mr. Murphy, some of the other witnesses argue that Ex-Im— 

crowds out was the term I think being used—crowds out private financing, but BAFT and FSR member banks offer financing through 

the working capital and credit insurance programs at Eximbank. 

Would these banks use these programs if they could finance 

these transactions through other means? 

Mr. MURPHY. I believe there is a real consensus in the commercial bank community that Eximbank does not crowd them out. 

There was a recent letter that the Business Association for Finance and Trade and the Financial Services Roundtable sent to 

Congress that explained that Eximbank cannot be replaced solely 

by the private sector, and they explained balance sheets constraints 

arising from prudential capital and liquidity requirements, among 

other factors, along with institutional credit, country and 

counterparty limitations are among the factors that limit the ability of commercial banks to provide export finance. 

So there is a niche for Eximbank. 

And the fact that it finances, in fact, a small portion of American 

exports is not a problem; it is a virtue. It is a virtue that in the 

vast majority of cases commercial banks are able to provide this. 

However, as I think we have outlined in great detail, there are 

particular circumstances for small business and specific industries, 

where in head-to-head competition or because of foreign buyers’ requirements Eximbank is necessary. 

Senator BROWN. Thank you. Thank you all. 

Chairman SHELBY. Senator Rounds, do you have another question? 

Senator ROUNDS. I do, Mr. Chairman. 

It would appear to me in the discussion here that we all agree, 

or we appear to agree, that the Eximbank is a tool which is utilized. 

It seems to be a question as to who utilizes the tool, but nonetheless, it is a tool which is utilized to compete with other similar 

types of entities throughout the world. 

If that tool simply goes away, it would appear that we find our 

own people who are in the business of exporting to be a competitive 

disadvantage. I understand that the economics would suggest then 

that there are tradeoffs to that. 

But I am just curious because it seems to me that if it is such 

a serious issue that it hurts our economy and, yet, it only accounts 

for 2 percent of the total amount of imports out there, it does not 

33 

appear to have had a major impact on the rest of the economy. 

Nonetheless, for the organizations who are exporting, it is of critical importance, or at least that is what we are led to believe. 

I am just curious. There were some items brought up here that 

I think kind of stick out. 

Number one, we have heard that there is a subsidy in sort for, 

in particular, Boeing and other organizations, that in terms of competitive financing as provided by this particular bank that other 

banks cannot compete with. 

I just—but I am also hearing that there has been an agreement 

internationally that there is not a competitive disadvantage provided by this particular bank and that it is a fair competition right 

now. 

So there is not—from what I am hearing, there is not a competitive advantage for the interest rates being provided, but rather, because this is the way the other people who are accepting our exports, they are expecting as a part of business to have this tool 

available in some situations. 

So what—when we get right down to it, what damage is this particular entity doing to our economy, and what is the cost that we 

are trying to avoid? 

Sir? 

Mr. MURPHY. In 2011 at the OECD, an agreement was reached 

on how export credit agencies, such as Eximbank, would provide 

support for wide-body aircraft. So, basically, Boeing and Airbus. 

That agreement obligated Eximbank to significantly raise the fees 

that it charges Boeing for its—to use its services. 

That is—as a result of that, the interest rate implied there that 

Boeing is receiving is actually quite comparable to what is available on the public market. 

However, there are many circumstances around the world that 

we continue to see where foreign airlines insist that official export 

credit agency support be part of any deal. They are in a position 

to demand it, and the competition is certainly prepared to show up 

with that support. 

So, in a sense, this is a criticism in the past that was addressed. 

Senator ROUNDS. OK. Let me just move on to just two other 

thoughts here. 

We have just heard—and I want to just verify this one more 

time—that there are, right now, areas in which commercial banks 

are simply not able to utilize these exported products as collateral 

for loans. Could you get into that just a little bit for me, please? 

Anyone of you is welcome to, I think. 

Ms. DEMPSEY. So, you know, private lenders, private commercial 

lenders are prohibited from accepting export receivables as collateral. 

Senator ROUNDS. Under existing U.S.—— 

Ms. DEMPSEY. Commercial. Financial. You know, the rules and 

regulations set by this Committee and beyond. 

This restriction limits credit options, creates a market failure, especially for small businesses that do not have other collateral that 

they can use to guarantee that loan, and this is where Eximbank 

steps in with what is called its working capital loan. 

34 

Senator ROUNDS. OK. So then the last item is the discussion here 

about Eximbank and its operational capabilities and whether or 

not there ought to be additional items put on it. 

I am of the opinion, starting out looking at this, that if you simply tell them they have got to increase the percentage, what you 

end up doing is either decreasing the total amount that they can 

lend in order to comply with a particular arbitrary number or there 

is a way around it by simply have more of the final product broken 

out into smaller businesses coming through. There are ways 

around it when they want to. 

Are there issues within Eximbank that have to be looked at in 

terms of reforms that should be made to make it work better than 

it does today? 

Ms. DEMPSEY. So I will say there are two bills that have been 

introduced in the Senate by Members of this Committee that have 

a number of reform provisions as part of that. Our organization 

supports moving forward on both or either of these bills. We want 

to see a long-term Eximbank. 

There are certainly areas where Eximbank’s services and operations can be improved, and there is a lot of—— 

Senator ROUNDS. What you are telling me is that none of you can 

look at it and say right now that there is a specific issue—— 

Ms. DEMPSEY. No. 

Senator ROUNDS. ——which stands out that needs to be fixed at 

this time. 

Ms. DEMPSEY. Not on that level. Not on the small business level. 

I think the small business level is more a function of our economy and how companies operate. And they do not look abroad as 

much as they should. There are ways we can work on that, but I 

agree with you that just mandating a new cap for small business 

is not necessarily going to achieve that. 

Chairman SHELBY. I think the doctor wants to comment on that. 

Ms. DE RUGY. I think it is important to point out that the underlying assumption of this conversation is that without the export 

subsidies the sale would not happen. 

Well, let’s look at Boeing. Again, Boeing is a primary beneficiary, 

domestic beneficiary. There is a subsidy for the foreign companies 

abroad buying Boeing airplanes because they get really a preferential treatment with lower rates and better terms. That is 

where we call it a subsidy. 

I mean, there is an advantage. 

And I like Senator Donnelly’s Bizarro superhero because, I mean, 

there was a time where the Democrats were actually very concerned about the Export-Import Bank not too long ago, in 2002, because of U.S. workers and because we were giving such an advantage to foreign companies who then compete. 

But if this assumption that without Eximbank, right, planes 

would not be sold, then you would not actually see that 98 percent 

of Boeing planes are sold without a subsidy; you would not see that 

Air Emirates actually makes a decision to buy Airbus planes without any export subsidies. 

I mean, the fact that companies demand it and like it, I mean, 

it is totally understandable. Wouldn’t you want a cheap loan that 

reduced your financing costs? Of course, you would. Right? 

35 

But making it sound as if you take it away the business would 

disappear and everyone would be hurt—there is no doubt that it 

is possible that Boeing would sell fewer planes, but that the world 

would collapse or the sky would fall is just a wrong assumption. 

Senator ROUNDS. Thank you. 

Chairman SHELBY. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

Just a couple points because I think it is important that we kind 

of understand the reforms that are in the provisions that are in the 

Kirk-Heitkamp bill, but I do want to make the point following up 

on Senator Rounds’ point. 

It is always a little difficult for me when somebody comes with 

the argument, look how insignificant it is in the real world, 2 percent, and then says, but it is catastrophic to the free enterprise system. You know, those are just two really inconsistent notions and 

not particularly persuasive. 

I want to run through some of the concerns that Senator Warren 

expressed. 

The Kirk-Heitkamp bill actually does raise the target for small 

business from 20 percent to 25 percent and requires reporting. And 

we say target, and we understand that the more we can tell potential manufacturers and potential exporters about the resource so 

that they can, in fact, increase their exports. 

And there are thousands of stories about the pickle lady who 

doubled her order of pickles because she all of a sudden found out 

that she could finance it through the Eximbank. And so we have 

got some great small business stories. I think we can build on those 

if we really make a concerted effort. 

And, I look forward to hearing from Mr. Hochberg. 

But as we look at kind of taxpayer protection and making sure, 

as Senator Corker talked about, eliminating or at least reducing 

the amount of exposure, there are a number of provisions in the 

Kirk-Heitkamp bill that basically allow for some restrictions, some 

backstops, and the one I am particularly interested in, which is a 

pilot program for reinsurance so that in fact the taxpayers are not 

backstopping at all, that we are actually looking in the private 

market for reinsurance. 

So I guess my question is to Ms. Dempsey and Mr. Murphy. At 

this point, you have been fairly supportive of the Kirk-Heitkamp 

bill. Can you reinforce that today, that we are looking at a reform 

package? 

It may not be things that you agree with, but you understand everything is a compromise and that you are in fact supporting these 

compromises. 

Ms. DEMPSEY. The NAM strongly supports moving forward with 

the long-term Export-Import reauthorization, and the bill that you 

and Senator Kirk have introduced is going to do that, is going to 

keep the Eximbank functioning at an important level that is going 

to grow manufacturing in the United States. 

Senator HEITKAMP. Mr. Murphy. 

Mr. MURPHY. Similarly here, we have been pleased to express 

our support for the bill. There are a number of common-sense reforms included in it, relating to closer audit scrutiny and stronger 

36 

supervision, a stronger board, that we think make a lot of sense 

going forward. 

My comment earlier to Senator Warren, which was perhaps not 

captured fully, was I simply do not have on behalf of the Chamber’s 

membership a compilation of pleas for support from small business 

to the Eximbank that have gone unanswered. My point is simply 

that the Eximbank has actually done a pretty good job in terms of 

outreach there and receiving those. 

But, by all means, we appreciate the bill’s contribution to moving 

forward, including in its outreach to small business. 

Senator HEITKAMP. And we can continue and build on that outreach, and I think we will meet these targets if we make a concerted effort, whether it is the manufacturers or the chambers, if 

we are able to get reauthorization. 

I just want to reiterate a point. You know, nothing like repetition 

in terms of communication. We are on track right now to allowing 

the charter of the Eximbank to expire and the disruption that we 

have, whether that is a short-term or long-term. 

There are obviously people here in the Congress who want to put 

a stake through the heart of the Eximbank. 

And I understand the other panelists. You know, the sky is not— 

you know, that the sky will not fall tomorrow if that happens. 

But there is $18 billion of potential export investment that will 

go unanswered if we allow this to continue. 

And so I just want to put in a plug for getting something done 

in June, getting something done long-term. We will live to fight 

this. Let’s go with these reforms. See if they address some of the 

concerns. 

And I just want to reiterate my support for my bill. Surprise, 

surprise. 

Chairman SHELBY. Thank you, Senator. 

Because a lot of people do not believe, Senator, with all due respect, that the Kirk-Heitkamp is a real reform bill. And it does not 

even have a sunset in it either, among other things, but that is neither here nor there. 

We have a hearing on this on Thursday. We will have the head 

of the Bank to testify, and I am sure there will be a lot of interest 

in this. 

I ask unanimous consent at this point to put four articles in the 

record. One is a Washington Post article that is called ‘‘A Bank 

with Congress in Its Pocket;’’ two, the Wall Street Journal, ‘‘The 

Bank to Nowhere;’’ three, the Wall Street Journal article, ‘‘The Peculiar Uses of a Taxpayer Bank;’’ and four, Roll Call, ‘‘What Happens if the Export-Import Bank Expires?’’ 

Without objection, so ordered. 

I thank all of you for your testimony here today and your patience in the interruption because of votes. 

This Committee is adjourned. 

[Whereupon, at 12:11 p.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

37 

1Matthew Mitchell, ‘‘The Pathology of Privilege: The Economic Consequences of Government 

Favoritism’’, Arlington, VA: Mercatus Center at George Mason University, 2014, 1–2, http:// 

mercatus.org/publication/pathology-privilege-economic-consequences-government-favoritism. 

PREPARED STATEMENT OF VERONIQUE DE RUGY 

SENIOR RESEARCH FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY

JUNE 2, 2015 

Good morning Chairman Shelby, Ranking Member Brown, and Members of the 

Committee. Thank you for the opportunity to testify today on the important topic 

of the Export-Import Bank of the United States. 

My name is Veronique de Rugy, and I am a senior research fellow at the Mercatus 

Center at George Mason University, where I study the U.S. economy, the Federal 

budget, homeland security, taxation, tax competition, and financial privacy. 

We don’t agree on much in Washington. In view of the all of the economic and 

social problems facing our Nation, we should agree that the Federal Government 

ought not direct our limited public resources to subsidies that benefit successful politically connected corporations at the expense of thousands of companies and millions of American workers who compete in the global marketplace without Government favors. This is why Congress should not reauthorize the Ex-Im Bank. 

The policy debate surrounding the Ex-Im Bank has focused on maintaining the 

privileges long enjoyed by Boeing and a few other similar large corporations. It is 

vitally important, however, to recognize the many unseen costs of political privilege, 

whether it takes the form of market distortions, resource misallocation, destroyed 

potential, higher prices, or the competitive disadvantages imposed upon Main Street 

businesses that lack connections in Washington or access to press offices and lobbyists. These Main Street businesses matter, too. 

Contrary to what you will hear from its supporters and beneficiaries, the Ex-Im 

Bank plays a marginal role in export financing—backing a mere 2 percent of U.S. 

exports each year. The vast majority of exporters secure financing from a wide variety of private banks and other financial institutions without Government interference or assistance. With U.S. exports hitting record high levels, it is obvious that 

such financing is abundant and Government assistance is superfluous. 

Furthermore, letting the Ex-Im Bank’s charter expire won’t disturb existing deals. 

Failure to reauthorize will prevent the Ex-Im Bank from extending new loans, 

which would be a win for taxpayers who are ultimately on the hook for a total of 

$140 billion if bank reserves fail to cover defaults. 

In this testimony, I would like to address the following points: 

1. The Ex-Im Bank distorts the market by creating privilege, undermining the legitimacy of both Government and the market. 

2. The Ex-Im Bank fails on its own grounds. 

3. The Ex-Im Bank suffers from massive transparency issues. 

1. The Ex-Im Bank: The Poster Child of Government-Created Privilege 

There is abundant research about the negative effects of cronyism. For example, 

in a book called The Pathology of Privilege: The Economic Consequences of Government Favoritism, my colleague Matt Mitchell explained that ‘‘Whatever its guise, 

Government-granted privilege [to private businesses] is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the Government and the private sector.’’ 1

The Ex-Im Bank is one of those destructive Government-granted privileges. This 

shows up in two forms, one strikingly visible, and the other invisible. Among the 

top 10 domestic beneficiaries of the Ex-Im Bank is Boeing. At a 40 percent share 

of total Ex-Im Bank loan authorizations in 2014, Boeing dwarfs the 25 percent combined share of all small businesses. What we do not see are the higher costs borne 

by American exporters, due to the Ex-Im Bank being one of those destructive Government-granted privileges. 

A. Government Privilege and ‘‘Boeing’s Bank’’ 

A look at the top 10 domestic beneficiaries for all Ex-Im Bank transactions between 2007 and 2014 shows that the Ex-Im Bank lives up to its nickname of 

‘‘Boeing’s Bank’’. The aviation giant, which has a market capitalization of $100 billion, is by far the biggest beneficiary of the Ex-Im Bank’s largesse, which provides 

$66.7 billion in subsidized financing to foreign purchasers of Boeing planes. General 

Electric, a company with a market cap of $279 billion, also ranks among the biggest 

beneficiaries, with $8.3 billion in export assistance. The $2.2 billion in Ex-Im Bank 

38 

financing that benefits Caterpillar, a company with a market cap of $54 billion, is 

boosted by the $2.7 billion loan guarantee to its subsidiary, Solar Turbine Inc. (also 

on the Top 10 list). 

B. Big Buyers Go With Big Exporters 

On the foreign side, things aren’t much different—the subsidized financing largely 

benefits very large companies that either collect massive subsidies as State-controlled entities or could easily access private financing. The following table shows 

the top 10 foreign buyers, based on the total amount of financing authorized from 

FY2007 through FY2013. 

39 

2 Veronique de Rugy and Diane Katz, ‘‘The Export-Import Bank’s Top Foreign Buyers’’, 

Mercatus Research, Mercatus Center at George Mason University, Arlington, VA, April 2015, 

http://mercatus.org/publication/export-import-bank-s-top-foreign-buyers. 3 ‘‘The Emirates Story’’, Emirates, http://www.emirates.com/english/about/ 

thelemirateslstory.aspx. 4 ‘‘Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate 

Welfare?’’ Hearing before the House Financial Services Committee (June 25, 2014) (testimony 

of Richard H. Anderson, Chief Executive Officer, Delta Air Lines), http://financial-services.house.gov/calendar/eventsingle.aspx?EventID=385048. 5The open-skies agreements promote ‘‘increased travel and trade’’ and enhanced productivity 

by ‘‘eliminating Government interference in the commercial decisions of air carriers about 

routes, capacity, and pricing, freeing carriers to provide more affordable, convenient, and efficient air service for consumers.’’ See U.S. Department of State, Open Skies Agreements, http:// 

www.state.gov/e/eb/tra/ata/. 

The number one buyer was the Mexican State-owned petroleum company, Pemex, 

which has a market cap of $416 billion but has somehow needed more than $7 billion in U.S. taxpayer-backed financing to facilitate deals with American exporters 

in recent years. Pemex, in fact, received some 30 percent of the more than $23 billion of Ex-Im Bank financing that flowed to foreign buyers in the oil and gas sector 

between 2007 and 2013. Overall, 21 percent of Ex-Im Bank financing went to this 

sector, a policy that seems at odds with the current Administration’s less than favorable view of fossil fuels. In fact, the financing to foreign oil and gas firms exacerbates the regulatory burdens imposed by the Obama administration, which favors 

Ex-Im Bank reauthorization, on the domestic oil and gas industry. 2

Other top buyers include foreign companies such as Emirates airline, which has 

benefited from $3.4 billion in U.S.-backed financing and proudly boasts on its Web 

site that it has ‘‘recorded an annual profit in every year since its third in operation.’’ 3 Other foreign airlines also get cheap loans from the Ex-Im Bank, prompting 

charges of unfair competition. According to the lawsuit filed by Delta Airlines, along 

with the Airline Pilots Association, the unfair competition granted to Air India alone 

has resulted in the loss of some 7,500 U.S. airline jobs. 4

These subsidies have prompted several American carriers and their employee 

unions to demand a rescission of the open-skies agreements 5 with several airlines 

charging that the subsidies constitute unfair competition, including interest-free 

40 

6 ‘‘Emirates, Qatar Airlines and Etihad Airways in Violation of U.S. Agreement?’’ ETurbo 

News, March 7, 2015, http://www.eturbonews.com/56263/emirates-qatar-airlines-and-etihadairways-violation-us-agreement. 7Sallie James, ‘‘Time to X Out the Ex-Im Bank’’, Trade Policy Analysis No. 47, Cato Institute, 

Washington, DC, July 6, 2011, http://www.cato.org/publications/trade-policy-analysis/time-xout-exim-bank. 8 Allan I. Mendelowitz, ‘‘Export Promotion: Federal Programs Lack Organizational and Funding Cohesiveness’’, GAO/NSIAD-92-49, Washington, DC: Government Accountability Office, January 1992, http://www.gao.gov/assets/220/215530.pdf. 

loans, discounted airport charges, Government protection on fuel losses, and belowmarket labor costs. 6

The subsidies are largely captured by large producers, domestic and foreign, and 

the subsidies result in a policy mix that is contradictory in the goals it seeks to 

achieve. But there is more to the story. 

C. The Unseen and the Unconnected Victims 

It is difficult, but extremely important, that we consider the unseen costs of political privilege. Ex-Im Bank supporters tout subsidized firms’ successes, but they do 

not consider the unseen costs imposed on the other 98 percent of unsubsidized exports. 

In these cases, it is firms’ own Government—not a foreign Government—that puts 

them at a competitive disadvantage. That is, foreign firms are receiving subsidized 

financing, which lowers their cost of business. But their American counterparts are 

paying market rates for financing, which means their cost of business is higher. The 

Ex-Im Bank also gives lenders an incentive to shift resources away from unsubsidized projects and towards subsidized ones—regardless of the merits of each 

project. 

These capital market distortions have ripple effects. Subsidized projects attract 

more private capital while other worthy projects are overlooked. The subsidized get 

richer while the unsubsidized get poorer—or go out of business. 

Unfortunately, we will never see the businesses that could have been. Perhaps 

they would have been better, more efficient, or more responsible than politically connected firms. But we will never know as long as the Ex-Im Bank exists and continues to distort the market through privilege. 

Visible and invisible, this is how the Ex-Im Bank has come to exemplify ‘‘the extraordinarily destructive force’’ of Government-granted privilege, in the words of my 

colleague Matt Mitchell. 

2. The Ex-Im Bank: Not What It Is Made Out To Be 

Some say that there are good reasons to continue the Ex-Im Bank’s subsidies and 

Government privilege. They say that the Ex-Im Bank promotes U.S. exports and 

supports small businesses while leveling the playing field and filling an important 

‘‘financing gap.’’ They also claim that jobs would instantly disappear absent the ExIm Bank. But none of these arguments withstand scrutiny. 

A. The Ex-Im Bank Can’t Affect the Trade Balance Overall 

Economists tend to be extremely suspicious of export-subsidy schemes like those 

provided by the Ex-Im Bank and their ability to meaningfully boost exports. Sallie 

James, trade policy analyst at the Cato Institute, notes, ‘‘Export promotion programs for certain goods—marketing programs for certain commodities, say—may 

have beneficial effects for that industry but cannot affect the trade balance overall.’’ 7 The Government Accountability Office (GAO) stated, ‘‘Export promotion programs cannot produce a substantial change in the U.S. trade balance, because a 

country’s trade balance is largely determined by the underlying competitiveness of 

U.S. industry and by the macroeconomic policies of the United States and its trading partners.’’ 8

The data confirms this point: the Ex-Im Bank backs less than 2 percent of U.S. 

exports each year. Considering who a vast majority of the buyers and sellers are, 

it is unreasonable to assume that these exports will disappear if the Ex-Im Bank 

vanishes. 

Also, while there is no doubt that the selected exporters benefiting from the subsidies enjoy them, the impact on the overall economy should not be overlooked. A 

review of the academic literature on the topic suggests that in most cases export 

subsidies reduce the total income of the country paying the subsidies. In other 

words, the GDP of the country issuing the subsidies is very likely to be negatively 

affected. In all cases, export subsidies reduce worldwide income by increasing the 

41 

9Salim Furth, ‘‘The Export Import Bank: What the Scholarship Says’’, Backgrounder No. 

2934, Heritage Foundation, Washington, DC, August 7, 2014, http://www.heritage.org/research/reports/2014/08/the-export-import-bank-what-the-scholarship-says. 10 Veronique de Rugy, ‘‘The Right Way To Help Exporters: Kill Ex-Im, Reform the Corporate 

Income Tax’’, The Corner, National Review Online, April 30, 2014, http:// 

www.nationalreview.com/corner/376826/right-way-help-exporters-kill-ex-im-reform-corporate-income-tax-veronique-de-rugy. 11 Ike Brannon and Elizabeth Lowell, ‘‘Export-Import Bank: Obstacles and Options for Reform’’, Research, American Action Forum, Washington, DC, May 16, 2011, http:// 

americanactionforum.org/research/export-import-bank-obstacles-and-options-for-reform. 12These increased costs and decreased profits manifest themselves through different channels: First, nonprivileged exporters lose when their competitors get help, and so do nonexporters. Second, anyone who competes with the privileged foreign buyers loses market share. 

Third, consumers trying to buy the good whose demand is artificially high must pay a higher 

price. Finally, anyone trying to obtain capital loses since the Ex-Im Bank subsidy raises the cost 

of capital for nonsubsidized firms, and lenders are likely to prioritize demand for capital from 

borrowers with a Government guarantee, independently of the merits of their projects. When 

the higher interest rates paid by the nonsubsidized firms are factored in, the net impact of the 

Ex-Im Bank is probably a net loss in terms of jobs and growth. 13 Veronique de Rugy and Diane Katz, ‘‘Export Jobs Won’t Disappear Absent Ex-Im Bank’’, 

Mercatus Center at George Mason University, May 21, 2015, http://mercatus.org/publication/ 

export-jobs-won-t-disappear-absent-ex-im-bank. 

wealth of those, and only those, who are subsidized—at the expense of other exporters and taxpayers. 9

Reforming the broader macroeconomic policies that are more likely to harm the 

U.S. trade position, such as the corporate income tax system, will help U.S. exports 

far more than anything the Ex-Im Bank could do. 10

B. Jobs Will Not Vanish If the Ex-Im Bank Charter Expires 

The Ex-Im Bank takes credit for supporting 164,000 jobs in 2014, but this number 

should be viewed with skepticism. In addition, economists have shown 11 that in 

most cases schemes like the Ex-Im Bank redistribute jobs from nonsubsidized industries to subsidized ones. 12

Many in Congress, however, are still worried that letting the Ex-Im Bank charter 

expire will have an immediate impact on existing jobs supported by the Ex-Im 

Bank. They shouldn’t worry because even if the Ex-Im Bank is not reauthorized, 

it will have to honor the loans it already extended to companies. An orderly wind 

down means that the Ex-Im Bank won’t be able to extend new loans. 

The biggest beneficiaries of the Ex-Im Bank know that their employees and their 

suppliers are perfectly safe in the event the charter is not reauthorized. That’s because Boeing, Caterpillar, General Electric, and the like all have billions of dollars 

of backorders that will keep their workers busy for years to come. 

Diane Katz and I have released new research that shows the companies’ backlogs 

as reported in their latest annual reports. 13 Boeing Co. posted a ‘‘record’’ backlog 

of $441 billion (in 2013); General Electric Co. recorded a backlog of $261 billion (in 

2014); Caterpillar Inc.’s backlog is $16.5 million (in the first quarter of 2015); and 

Bechtel Corp. posted a ‘‘strong’’ backlog of $70.5 billion (in 2014). 

42 

14 Howard Schneider and Krista Hughes, ‘‘U.S. Ex-Im Acknowledges Errors in Politically Sensitive Small Biz Data’’, Reuters, November 14, 2014, http://www.reuters.com/article/2014/11/ 

14/us-usa-trade-exim-idUSKCN0IY11Y20141114. 15Diane Katz, ‘‘Ex-Im Misrepresents Subsidies to Prominent Billionaire’’, Daily Signal, May 

1, 2015, http://dailysignal.com/2015/05/01/ex-im-misrepresents-subsidies-to-prominent-billionaire/. 16Diane Katz, ‘‘The Real Story Behind the Small Business the Export-Import Bank Claims 

It Built’’, Daily Signal, June 4, 2014, http://dailysignal.com/2014/06/04/real-story-behindsmall-business-ex-im-claims-built/. 

This means that absent subsidies from the Ex-Im Bank, these corporations have 

production backlogs that will take years to fulfill—some with Ex-Im Bank financing 

in place and others without. Shutting down the Ex-Im Bank will not result in job 

losses—except, perhaps, among the ranks of lobbyists who are trying to scare members of Congress into maintaining this fount of corporate welfare. 

C. The Ex-Im Bank Does Not Mostly Support Small Businesses 

In recent years, the Ex-Im Bank has tried to recast its role away from export subsidies towards other priorities. For instance, Ex-Im Bank defenders argue that 90 

percent of its deals benefit small firms. Of course, this shouldn’t be a reason for renewing the Ex-Im Bank’s charter, since its main function (export subsidies) is harmful to the U.S. economy. 

In addition, the Ex-Im Bank’s small business claim is dubious. By dollar value, 

in 2014, some 25 percent of the Ex-Im Bank’s activities benefited small businesses 

(defined as a company with 1,500 employees or less than $21 million in annual revenues). 

Also, even using the Ex-Im Bank’s definition, the vast majority of U.S. small businesses—over 99.9 percent—receive no benefits from the Ex-Im Bank and are placed 

at a competitive disadvantage against large, subsidized competitors. 

Finally, it is worth noting that the Ex-Im Bank has been caught mislabeling its 

data to make it look as if more lending has gone to benefit small businesses, 14 and 

it has been touting small business successes of companies that were large 15 or already successful before any involvement with the Ex-Im Bank. 16

43 

17 Export-Import Bank Reauthorization Act of 2012, Pub. L. No. 112–122, 108 Stat. 4376. 

D. The Ex-Im Bank Is Not Really Leveling the Playing Field for U.S. Exporters or 

Filling a Financing Gap 

A common argument about the Ex-Im Bank is that without the export subsidies, 

foreign companies would not purchase U.S. goods and would instead buy goods from 

companies whose countries offer such subsidies. For instance, without Ex-Im Bank, 

Emirates airline wouldn’t buy any Boeing planes but would instead buy Airbus 

planes to benefit from European subsidies. Defenders of the Ex-Im Bank also claim 

that private lenders are unwilling to risk lending to foreign companies. In our example, it implies that lenders would only extend loans to Emirates to buy a plane if 

the U.S. Government or one of the three EU Governments offering export credits 

backs the deal. 

This fear is reflected in the Ex-Im Bank charter. It spells out three criteria for 

Ex-Im Bank financing: (1) ‘‘to assume political or commercial risk that exporter and/ 

or financial institutions are unwilling or unable to undertake’’; (2) ‘‘to overcome maturity or other limitations in private-sector export financing’’; or (3) ‘‘to meet competition from a foreign, officially sponsored export-credit agency.’’ 

However, the data demonstrate that there is a gap between what the Ex-Im Bank 

claims it should be doing and what it actually does. As a condition of its most recent 

reauthorization in 2012, Congress required the Ex-Im Bank to designate the purpose served for certain financing deals. While the bank still does not provide justifications for all transactions in its portfolio, its current charter compels it to provide at least some explanation by category for all loans and long-term loan guarantees in its annual report. 17

The data show that less than one-third of the estimated export value of the ExIm Bank’s portfolio is intended to counteract competitive disadvantages created by 

foreign Governments’ own export subsidies. Moreover, more than 98 percent of U.S. 

exports occur without Government financing through the Ex-Im Bank, demonstrating that the Ex-Im Bank is not critical for helping U.S. exports thrive globally. 

As for the claim that the Ex-Im Bank fills an important ‘‘financing gap’’ by supporting U.S. exports, it is not supported by data. The Ex-Im Bank designates only 

44 

18 Veronique de Rugy and Rizqi Razmat, ‘‘Export-Import Bank Portfolio Broken Down by Stated Goal’’, Mercatus Center at George Mason University, http://mercatus.org/sites/default/ 

files/C1-Prop-Export-Value-large.jpeg. 19De Rugy and Katz, ‘‘The Export-Import Bank’s Top Foreign Buyers’’. 20 ‘‘Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate 

Welfare?’’ Hearing before the House Financial Services Committee (June 25, 2014) (testimony 

of Richard H. Anderson, Chief Executive Officer, Delta Air Lines) http:// 

financialservices.house.gov/calendar/eventsingle.aspx?EventID=385048. 21Government Accountability Office, ‘‘Export-Import Bank: Information on Export Credit 

Agency Financing Support for Wide-Body Jets’’, July 8, 2014, http://www.gao.gov/assets/670/ 

664679.pdf. 22 Andy Winkler, Douglas Holtz-Eakin, ‘‘Reauthorizing the Export-Import Bank: A Policy 

Evaluation’’, Research, American Action Forum, Washington, DC, May 20, 2014, http:// 

americanactionforum.org/research/reauthorizing-the-export-import-bank-a-policy-evaluation. 

16.4 percent of its financing as necessary to address a lack of private capital. 18 That 

means that most of what the Ex-Im Bank does has nothing to do with ‘‘filling a financing gap.’’ 

What about the claim that foreign carriers will not purchase Boeing planes without subsidized financing from the United States and would instead buy Airbus 

planes with export credits from foreign Governments? 

The reality is that there is no shortage of private capital to finance aircraft purchases, and airlines would continue to purchase Boeing products in the absence of 

Ex-Im Bank subsidies. In my recent paper with Diane Katz, we look at the example 

of Emirates airline. The UAE State-owned company is the second biggest recipient 

of Ex-Im Bank financing. We write: 19

In June 2012, Emirates bought two Boeing 777s using Ex-Im Bank financing, and four Airbus A380s using private financing. 20 Obviously, the Statecontrolled airline could afford to buy planes without subsidies, and subsidies are not the only factor in the carrier’s choice of aircraft. 

This is consistent with the results of a study by the GAO that found 85 percent 

of Boeing and Airbus large-aircraft deliveries were not subsidized by export-credit 

agencies. 21

3. The Ex-Im Bank Is Suffering From Massive Transparency Issues 

Scholars have been critiquing the poor quality of the Ex-Im Bank data for years. 

A 2014 report by the American Action Forum notes: ‘‘There continues to be areas 

needing additional transparency. For instance, publicly available data on program 

authorizations can often be incomplete and inadequate.’’ 22

My own research has documented in detail that the dataset stored at Data.gov, 

a Federal Web site launched in 2009, was spotty and incomplete—the GAO and the 

Ex-Im Bank’s own inspector general have repeatedly found that the agency’s recordkeeping is subpar and needs improvement. The dataset available at Data.gov is 

missing a great deal of information, and it is common to find beneficiaries marked 

as ‘‘unknown’’ or ‘‘various U.S. companies’’. It is also common to find the names of 

companies misspelled or identified differently on different forms, which makes working with the numbers even harder. 

Let me illustrate how that should present a major problem for Congress. The ExIm Bank isn’t allowed to lend money to customers in certain countries, such as 

North Korea, Libya, and Iran. Russia was added to the list last year. But in order 

to know whether the Ex-Im Bank is actually complying with these restrictions and 

limitations, we need to be able to check its data. Unfortunately, as I have mentioned 

before, the Ex-Im Bank’s data, when available, are a mess. So much of the data are 

labeled ‘‘unknown’’ and ‘‘various countries’’ that it is hard for Congress to utilize the 

Ex-Im Bank’s data for proper oversight. 

The following chart displays the top foreign buyers of exports financed by the ExIm Bank from 2007 to 2013. (We had to use the old dataset that used to be on 

Data.gov but was one day mysteriously removed and later replaced with an 

abridged dataset that did not list critical fields such as ‘‘Primary Buyer.’’) This chart 

shows the total dollar amount of deals financed by the Ex-Im Bank in which the 

Primary Buyer is marked as ‘‘unknown’’ or ‘‘various’’ in data made available to the 

public—33 percent of buyers by dollar value are not named. 

45 

23 Brody Mullins, ‘‘Boeing Helped Craft Own Loan Rule’’, Wall Street Journal, March 12, 

2015, http://www.wsj.com/articles/boeing-helped-craft-own-loan-rule-1426203934. 

How do we know that some Ex-Im Bank loans didn’t go to companies in restricted 

countries if we don’t know which companies are getting loans? In some cases, the 

dataset shows the name of a country associated with the unknown deal. But how 

can we be sure that it is actually accurate without the name of the company? 

I would like to trust the Ex-Im Bank, but it is hard to in light of how it has intentionally mislabeled its data to make it look as if more lending was going to benefit 

small businesses than actually was; how it has employees being investigated for taking bribes in exchange for loans; and how it indulged in collusion with top corporate 

executives at Boeing by asking for input on bank policies that could benefit their 

firm. 23 Even without the Ex-Im Bank’s past missteps, it’s hard to see why we 

should trust it when it does not even release accurate data. 

Conclusion 

Beyond its operational lapses and its economic inefficiency, the problem with the 

Ex-Im Bank is that the many groups who its activities affect are people who don’t 

have connections, lobbyists, and press offices in Washington. These unseen victims 

matter, too. 

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1Data from the World Trade Organization Statistical Database, accessed on Jan. 29, 2015. 

Most recent data available. 2Moutray, Chad, ‘‘NAM/lndustryWeek Survey: Manufacturers Bullish, But Frustrated With 

Washington’’, lndustryWeek, June 9, 2014. See http://www.industryweek.com/global-economy/ 

namindustryweek-survey-manufacturers-bullish-frustrated-washington?page=1. 3David Riker, ‘‘Do Jobs in Export Industries Still Pay More? And Why?’’ International Trade 

Administration, U.S. Department of Commerce, July 2010, accessed at www.trade.gov/mas/ 

ian/build/groups/public/@tglian/documents/webcontent/tglianl003208.pdf. 

PREPARED STATEMENT OF LINDA MENGHETTI DEMPSEY 

VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF

MANUFACTURERS

JUNE 2, 2015 

Chairmen Shelby, Ranking Member Brown, and Members of the Committee, 

thank you for the opportunity to testify today. I appreciate the chance to highlight 

on behalf of the National Association of Manufacturers (NAM) the importance of reauthorizing the U.S. Export-Import Bank to help manufacturers compete in the 

global marketplace that will enable them to support and sustain good-paying manufacturing jobs throughout every State. 

The NAM is the Nation’s largest industrial association and voice for more than 

12 million women and men who make things in America. Manufacturing in the U.S. 

supports more than 17 million jobs, and in 2014, U.S. manufacturing output reached 

a record of nearly $2.1 trillion. It is the engine that drives the U.S. economy by creating jobs, opportunity and prosperity. The NAM is committed to achieving a policy 

agenda that helps manufacturers grow and create jobs. Manufacturing has the biggest multiplier effect of any industry and manufacturers in the United States perform more than three-quarters of all private-sector R&D in the Nation—driving 

more innovation than any other sector. 

Importance of Exports to U.S. Manufacturing and Jobs 

Since its origin, the United States has recognized the importance of exports to 

promoting industrial and economic growth and supporting jobs. The ability of U.S. 

companies to export has also been a critical issue for the NAM since its founding. 

With 95 percent of consumers outside the United States and global demand for 

manufactured goods that far exceeds domestic demand, manufacturers in the United 

States need to win more sales overseas if they are going to sustain and grow operations and employment. 

World trade in manufactured goods reached $11.8 trillion in 2013 1 and greatly 

exceeds U.S. consumption of manufactured goods (domestic shipments and imports), 

which totaled $4.1 trillion in 2014. U.S. manufactured goods exports have more than 

doubled in the past decade, reaching a record $1.6 trillion in 2014. While that 

growth is impressive, U.S. manufacturers and exporters are facing an increasingly 

challenging global economy where growth has slowed. America lags behind many of 

its largest trading partners when it comes to exporting. U.S. exports comprised only 

9.5 percent of global trade in manufactured goods in 2013. We can and must do 

more to expand U.S. exports if we are going to grow manufacturing and the jobs 

it supports in the United States. 

The importance of exports to the bottom line for manufacturers across the United 

States is not a theoretical issue. More than 40 percent of respondents in a recent 

National Association of Manufacturers (NAM) survey cited exports as a primary 

driver of growth for their company. 2 Those survey respondents who were more positive about their export potential over the next 12 months were also more optimistic 

in their company’s economic outlook, sales and capital spending plans. 

Nor are exports a theoretical issue for the workers employed in every State by 

our Nation’s manufacturers. As new export opportunities emerge overseas, manufacturers in the United States are able to both sustain and create American jobs. According to the latest figures from the U.S. Department of Commerce, every $1 billion in exports creates or supports 5,796 jobs. 

Recently, exports have played a significant role in the ongoing manufacturing recovery. Since the end of 2009, export-intensive sectors with substantial export 

growth have seen the largest job gains. U.S. manufactured goods exports support 

higher-paying jobs throughout the United States. Moreover, jobs supported by exports pay, on average, 18 percent more than other jobs. 3 Employees in the ‘‘most 

trade-intensive industries’’ earn an average compensation of nearly $94,000, or more 

90 

4 Calculations From the Manufacturers Alliance for Productivity and Innovation (MAPI) Foundation, using 2013 input output data from the Bureau of Economic Analysis, accessed at 

www.themanufacturinginstitute.org/Research/Facts/About-Manufacturing/Foreign-Trade-andlnvestment/Impact-on-Compensation/Impact-on-Compensation.aspx. 5Office of the Comptroller of the Currency, Treasury Department, Comptroller’s Handbook, 

at 17–18, accessed at http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/pub-ch-asset-based-lending.pdf. 

than 56 percent more than those in manufacturing companies that were less engaged in trade. 4

Importance of Ex-Im Bank to Growing U.S. Exports 

One vital tool that thousands of manufacturers use to compete successfully in 

global markets is the Ex-Im Bank. The NAM strongly supports Ex-Im Bank’s mission to support U.S. jobs through exports and views the Bank as one of the most 

important tools the U.S. Government has to help grow U.S. exports and jobs. 

The Export-Import Bank is essential to boosting exports of U.S. products. In 

FY2014, Ex-Im Bank enabled more than $27 billion in exports—leveraging about 

$20.5 billion in authorizations. Nearly 90 percent of those transactions directly supported small businesses, with an estimated $5 billion in support for small business 

exporters. Furthermore, the Bank has maintained its incredibly low default rate of 

through the recession and through several years of record growth. At the end of 

FY2014, the Bank’s default rate was less 0.2 percent. Notably, Ex-Im’s activities are 

already targeted and, by law, must not compete with private sector lending activity. 

Ex-Im Bank helped promote just under two percent of total U.S. exports in 

FY2014. While it does not need to finance the great majority of U.S. exports, it is 

considered vital in certain areas of significant growth, particularly for small- and 

medium-sized business exporters, long-term financing for large projects, sales to 

emerging markets, and sales to foreign State-owned entities. 

• Small- and Medium-Sized Business Exports. Ex-Im is vital to many and medium-sized businesses to enable them to start to export overseas. Small businesses, both those that are direct exporters and those that supply domestically 

to larger U.S. exporters, will feel the blow if Congress fails to reauthorize ExIm Bank. Those companies that utilize Ex-Im Bank insurance programs to enable their working capital will be faced almost immediately with a dilemma 

about how to pay their workers and make the mortgage payments on their facilities, let alone consider growing and hiring. Suppliers whose U.S. customers 

lose out on large infrastructure, aerospace and energy projects overseas because 

they cannot bid without access to Ex-Im Bank will also see their orders shrink. 

Of the Bank’s 3,300 small business transactions in FY2014, 545 companies were 

first-time Ex-Im users. Ex-Im’s role in jump-starting new small- and mediumsized exporters is particularly important. 

•Many small- and medium-sized manufacturers across the country have turned 

to Ex-Im Bank to take advantage of new international trade opportunities and 

grow their workforce. Special Products & Mfg., Inc. (SPM) in Rockwall, Texas, 

is a second generation, family owned business that has grown—with the help 

of exports—from a small garage shop in the 1960s into a firm with more than 

200 machine operators, welders, assemblers, engineers and other associates in 

a 140,000 square foot state-of-the-art factory. Over the past several years, SPM 

has seized opportunities to expand their business into the world marketplace. 

From Europe to South America, SPM is exporting products ranging from new 

and improved gas station pumps to large steel enclosures for drill rig drives. 

SPM also supplies many companies like General Electric and Caterpillar, and 

SPM’s Chief Operator Officer Ed Grand-Lienard made the trip to Washington 

earlier this year to let Congress know that the future of American manufacturing is in jeopardy of being seriously hurt if the Ex-Im Bank is not reauthorized. This company is just one of the many small businesses that have reaped 

the benefits of expanded market access and tools like Ex-Im Bank, and the 

NAM would be happy to provide others to the Committee. 

• Long-Term Project Finance. Ex-Im Bank, like foreign export credit agencies 

(ECAs), has taken on an increasingly important facilitation role for export financing as the role of commercial banks in financing long-term projects continues to shrink in the wake of the financial crisis. U.S. regulatory guidelines 

that favor domestic receivables over foreign sales, 5 implementation of Basel III 

91 

6 Basel Committee on Banking Supervision, ‘‘Basel III: A Global Regulatory Framework for 

More Resilient Banks and Banking Systems’’. December 2010, accessed at http://www.bis.org/ 

publ/bcbs189.pdf. 7 Berne Union Yearbook 2012 at 55, accessed at http://www.berneunion.org/wp-contenl/ 

uploads/2013/10/BerneUnion-Yearbook-2012.pdf—Quoting Steve Tvardek, Head of the OECD 

Export Credits Division, OECD. 8 Berne Union Yearbook 2014 at 66, accessed at http://www.berneunion.org/wp-content/ 

uploads/2012/10/BerneUnion-80-Yearbook-2014.pdf. 9See, e.g., ‘‘Power Shift: The Rise of Export Credit and Development Finance in Major 

Projects’’. November 2013; Baker and McKenzie with Infrastructure Journal, accessed at http:// 

www.bakermckenzie.com/files/Publication/7dc07b54-651f-4168-9c81-0abdfdc432ca/Presentation/PublicationAttachment/6943f6ae-5718-42f8-a587-9a06c65902d7/ 

fclgloballpowershiftlnov13.pdf. 10 ‘‘Power Shift: The Rise of Export Credit and Development Finance in Major Projects’’ 

[2013]. 11 ‘‘Filling the Funding Gap—Korea Eximbank’’, Project Finance International (March 2013), 

accessed at http://www.pfie.com/filling-the-funding-gap-%E2%80%93-korea-eximbank/ 

21071929.article. 

rules 6 and the European sovereign debt crisis 7 have all impacted the ability 

and appetite of banks to participate in long-term export financing projects at 

competitive rates. While some banks have been able to restore effectively their 

balance sheets, commercial bank participation in long-term, high-volume funding (tenors longer than 10 years and over a few hundred million dollars) remains highly selective. Many experts—including top executives from U.K. Export Finance (UKEF), Korea Trade Insurance Corporation (K-Sure) and Deutsche Bank—suggest that Basel III will continue to constrain commercial banks 

from playing a significant role as long-term funders of large-scale projects and 

other sales. 8 As a result, ECAs are increasingly a driving force for large-scale, 

long-term projects—particularly projects in the infrastructure, energy and aerospace sectors. 9 Infrastructure Journal data show that ECA lending activity in 

commercial project finance transactions increased threefold from less than $10 

billion in 2009 to more than $30 billion projected for 2013, and ECAs are providing the only project finance available in some markets. In particular, Japan 

Bank for International Cooperation (JBIC) is a global leader for energy and infrastructure project finance 10 and Korea EximBank is rising in prominence, 

particularly in its priority energy sector. 11

• Emerging Markets. Many U.S.-based lenders also turn to Ex-Im to mitigate geopolitical and collateral risk in an effort to provide viable trade financing solutions for exporters. Without Ex-Im, many private lenders have limited options: 

opt not to finance otherwise viable export activity in emerging markets, charge 

rates that are uncompetitive globally or place limits on the overall amount of 

financing to particular emerging markets. Ex-Im Bank, for example, offers 

medium- and long-term guarantees that provide flexible lender financing options for buyers of U.S. capital goods and services. Ex-Im also supports commercial banks through letter of credit (LC) confirmations that reduce a bank’s risks, 

offering private sector lenders greater flexibility in working with their client 

base. 

• Government and State-Owned Enterprise (SOE) Transactions. U.S. exporters 

from a broad number of sectors increasingly are selling to foreign Governments 

and State-owned entities. Be it medical equipment sales to foreign State-owned 

hospitals, power generation equipment to foreign State-owned utilities or communications satellites to foreign Governments for national mobile satellite systems, such sales support greater exports and jobs in the United States, but are 

difficult to win. In some cases, the foreign purchaser favors suppliers with a 

Government entity on the other side of the table. In other cases, like a nuclear 

power plant project overseas, an ECA lending option is a requirement to participate in the initial bidding phase—even if the customer ultimately opts for another financing option. While the Governments of most of the United States’ 

major trading partners are willing to oblige, Ex-Im is the only Government entity able to play such a role for U.S. exporters. Without Ex-Im’s presence, U.S. 

exporters simply would not be eligible to compete for many of these substantial 

foreign sales. 

In short, while Ex-Im’s role is relatively small compared to the overall size of U.S. 

exports, it plays an outsized and highly important role in opening the door to U.S. 

exports for certain types of transactions where U.S. exporters continue to see substantial growth opportunities. 

92 

12 NAM, ‘‘The Global Export Credit Dimension: The Size of Foreign Export Credit Agencies 

Compared to the United States’’ (2014), accessed at http://www.nam.org/uploadedFiles/NAM/ 

SitelContent/Issues/Global%20Export%20Credit%20Dimension%20Web.pdf; see also NAM, 

‘‘Forfeiting Opportunity: Ex-Im Bank Reauthorization Is Essential for Manufacturers To Compete Globally in the Face of Massive Foreign Export Credit Financing’’ (2014), accessed at 

http://www.nam.org/uploadedFiles/NAM/SitelContent/Issues/ 

Forfeiting%20Opportunity%20Web.pdf. 13Members include Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, 

Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States. 

OECD, ‘‘Members and Partners’’, accessed at http://www.oecd.org/about/membersandpartners. 14Most prominently, OECD members developed the ‘‘Arrangement on Officially Supported Export Credits’’ (ECA Arrangement) that sets out financial disciplines for standard export credits 

and for export credits for certain sectors that reduce and eliminate potential market distortions. 

In particular, the EGA Arrangement—which has been agreed to by Australia, Canada, the European Union, Japan, New Zealand, Norway, South Korea, Switzerland, and the United States, 

emphasizes that OECD ECAs should be competing ‘‘on quality and price of goods and services 

exported rather than on the most favorable officially supported terms’’. OECD, ‘‘Official Export 

Credit Agencies’’, accessed at http://www.oecd.org/tad/xcred/eca.htm; see also, OECD, ‘‘Official 

Export Credit Agencies’’, accessed at http://www.oecd.orq/tad/xcred/eca.htm. 15OECD, ‘‘Official Export Credit Agencies’’, accessed at http://www.oecd.org/tad/xcred/ 

eca.htm. 16The 18 participants are 9 participants in the OECD arrangement (Australia, Canada, the 

European Union, Japan, New Zealand, South Korea, Switzerland, and the United States) and 

The Global Export Credit Dimension 

One of the significant roles that the Ex-Im Bank plays is aiding U.S. exporters 

and their workers to compete in a global economy that is characterized by dramatically increasing export credit assistance provided by Governments in Europe, Asia, 

and Latin America. As detailed in a study released by the NAM in 2014, The Global 

Export Credit Dimension: The Size of Foreign Export Credit Agencies Compared to 

the United States (2014), 12 there are more than 60 ECAs worldwide and the ECAs 

of our top nine trading partners—Brazil, Canada, China, France, Germany, Japan, 

Mexico, South Korea, and the United Kingdom—provided nearly half a trillion dollars in annual export support. Other key findings of that report include: 

• The ECAs of China, Japan, South Korea, and Germany are already individually 

larger than the Ex-Im Bank, and all of the nine major foreign ECAs are larger 

as a share of their countries’ GDP than the Ex-Im Bank is compared to U.S. 

GDP; 

• China’s primary ECA provides more than five times the assistance than the 

U.S. Ex-Im Bank does; 

• Major foreign ECAs, including those in Germany, China, and Canada, are expanding exports more successfully than the Ex-Im Bank. The Ex-Im Bank supported 2.42 percent of total U.S. exports in 2013, while Germany (3.63 percent), 

China (12.50 percent), and Canada (20.29 percent) helped to support even more 

international sales; 

• Foreign ECA activity grew sharply in several major countries, including China, 

South Korea, and Canada, between 2005 and 2013; and 

• Official ECA activity is particularly critical to key and growing manufacturing 

sectors of the global economy, including infrastructure and transportation 

where manufacturers in the United States are well positioned to grow in related 

exports if competitive financing is available. 

While the United States is a relatively small player in ECA activity, it has worked 

intensively to negotiate strong rules to eliminate market distortions and subsidies 

that oftentimes characterize foreign ECAs. In particular, the United States has led 

efforts to bring developed country members of the Organization for Economic Cooperation and Development (OECD) 13 and non-OECD countries to the negotiating 

table. Largely as a result of U.S. leadership over several decades, most of the 

OECD’s industrialized countries have agreed to uniform standards for fair and commercially based ECA lending. 14 Sector-specific arrangements have also been negotiated to provide even stricter discipline on ECA financing related to ships, nuclear 

power, aircraft, renewable energy, climate change mitigation, and water projects. 15

Work with non-OECD countries has been more difficult and that is where the 

greatest concern about subsidized ECA financing lies. The United States has worked 

intensively to undertake negotiations with key developing countries to agree to operate their ECAs based only on commercial considerations. As a result of U.S. efforts, 

18 major providers of export credits 16 have been invited to participate in the InterVerDate Nov 24 2008 12:35 Dec 21, 2015 Jkt 046629 PO 00000 Frm 00096 Fmt 6621 Sfmt 6621 L:\HEARINGS 2015\06-02 PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNI
93 

9 non-OE CD members (Brazil, China, India, Indonesia, Israel, Malaysia, Russian Federation, 

South Africa, and Turkey). 17 ‘‘Report on Export Credit Negotiations’’, U.S. Department of the Treasury, December 2013. 

The IWG held two full meetings (hosted by China in May 2013 and the European Union in September 2013) and one technical meeting (hosted by Germany in March 2013); European Commission, Report from the Commission to the European Parliament and the Council—Annual Report on negotiations undertaken by the Commission in the field of export credits, in the sense 

of Regulation (EU) No. 1233/2011 (May 28, 2014), accessed at http://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=COM:2014:299:FIN. 

national Working Group on Export Credits (IWG), which held its first meeting in 

November 2012 and has met several times. Work is slow as many non-OECD participants have been ‘‘cautious’’ and not clearly committed to the process. 17

The U.S. Ex-Im Bank’s role, while small in the global economy, is critical to many 

thousands of exporters. Failing to reauthorize Ex-Im is tantamount to unilateral 

disarmament and will also negate U.S. leadership in seeking to eliminate foreign 

ECA market distortions and subsidies. 

Time Is of the Essence 

Last fall, Congress extended Ex-Im Bank’s authorization through June 30, 2015. 

Manufacturers need Congress to act quickly on legislation to provide a long-term reauthorization of Ex-Im Bank. Reliable access to export financing is a vital part of 

being globally competitive, and the Ex-Im Bank has taken on even greater significance in today’s turbulent financial environment. Manufacturers in the United 

States—and their customers overseas—operate based on long-term plans that often 

involve multiyear projects in which the Ex-Im Bank is a critical partner. Without 

the certainty of a long-term Ex-Im reauthorization, U.S. exporters have already 

been put at a significant disadvantage, which will hamper growth here at home and 

result in lost opportunities for American workers and businesses. 

If Congress fails to enact quickly a long-term reauthorization of Ex-Im Bank, 

manufacturers will be forfeiting opportunities to competitors overseas and, thereby, 

risk the loss of not just of exports, but of manufacturing growth and good-paying 

jobs in every State. 

• If the Ex-Im Bank is not reauthorized, tens of billions of dollars in U.S. exports 

will be put at risk annually. Manufacturers overseas will increasingly win foreign sales that could have been won by manufacturers in the United States. 

The loss of U.S.-manufactured exports will be at the expense of thousands of 

manufacturers in the United States and hundreds of thousands of American 

workers who rely on Ex-Im services to boost their export sales. 

• Weakening America’s export competitiveness will be particularly damaging in 

the face of intense and growing global competition that has already resulted in 

a substantial decline in America’s share of the global manufacturing market. 

• Even greater manufacturing export opportunities will be lost on an annual basis 

as trade expands and U.S. exporters effectively cede foreign sales. The loss of 

new export opportunities will be particularly severe for small- and mediumsized businesses and for exports to emerging markets and infrastructure sectors 

where growth is expected to be strongest. 

Time is of the essence. The uncertain future of the Ex-Im Bank is already putting 

U.S. export sales as risk. 

Conclusion 

There is broad support for Ex-Im Bank’s reauthorization from job-creators across 

the country. Over the past year, more than 83,000 letters from manufacturers, exporters, and constituents have been sent to you and your colleagues. In February, 

more than 700 people from 41 States—representing a broad spectrum of manufacturing sectors and along the breadth of the supply chain—came to Washington, DC, 

to ask their Members of Congress to support a long-term reauthorization of Ex-Im 

Bank. This week, the NAM is hosting its annual Manufacturing Summit in Washington and hundreds of NAM members are here to advocate for policies—including 

the long-term reauthorization of Ex-Im Bank—that benefit manufacturers in the 

United States. 

The Ex-Im Bank is a targeted tool and a last resort that enables U.S. businesses 

to find a foothold in an increasingly competitive marketplace. Failure to reauthorize 

the Ex-Im Bank is already creating uncertainty that is putting U.S. exports at risk. 

The failure to reauthorize the Ex-Im Bank will have even greater, more lasting and 

more damaging effects on manufacturers of every size throughout out the United 

States, threatening tens of billions of dollars in export sales as well as the security 

94 

The views expressed in this statement are those of the author. The American Enterprise Institute for Public Policy Research does not hold institutional positions on any issues. 1 Economist David P. Baron puts it succinctly in his book The Export-Import Bank: An Economic Analysis (Academic Press, 1983): Employment objectives ‘‘do not provide a sufficient justification for Eximbank [Ex-Im Bank] programs’’. 2 Congressional Budget Office, ‘‘The Benefits and Costs of the Export-Import Bank Loan Subsidy Program’’, March 1981. 

of hundreds of thousands of American jobs that depend directly or indirectly on the 

Ex-Im Bank’s export financing. I urge you to move forward quickly on a long-term 

reauthorization for Ex-Im Bank to enable it to effectively fulfill its principal mission 

of supporting U.S. jobs through exports. 

Thank you, Chairmen Shelby and Ranking Member Brown for holding this hearing and for providing me the opportunity to testify on the importance of a long-term 

reauthorization of the Export-Import Bank to our Nation’s manufacturers. 

PREPARED STATEMENT OF MICHAEL R. STRAIN 

DEPUTY DIRECTOR OF ECONOMIC POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE

FOR PUBLIC POLICY RESEARCH

JUNE 2, 2015 

Chairman Shelby, Ranking Member Brown, and Members of the Committee, 

thank you for the opportunity to appear before you today to discuss the Export-Import Bank of the United States. It is an honor. 

I do not believe that the Export-Import Bank should be reauthorized. I will spend 

the next few minutes outlining why, with a special focus on the Ex-Im Bank’s impact on jobs. 

Jobs in a General Economy 

In a healthy economy—one characterized by full employment—the Ex-Im Bank, 

an open-ended export credit agency that is properly described as offering export subsidies to selected firms, does not create jobs. This stands in stark contrast to the 

rhetoric of some of the Ex-Im Bank’s supporters. But it is the correct conclusion, 

at least to a first approximation, for informing the Committee as it debates the appropriate course of action for the Ex-Im Bank. 1

Imagine an economy like ours, with some firms that export goods abroad and 

many more firms that sell only within the United States. All labor resources are 

utilized. The Government enters and subsidies the exporting firms. This will surely 

help those firms, and may even increase the number of jobs those firms can support. 

But as labor resources were already fully employed, these new jobs must come from 

somewhere. What the export subsidy is doing, in effect, is shifting jobs from firms 

that do not export to those that do. 2 This does not increase employment on the 

whole. 

Jobs in an Economy Without Full Employment 

Now, it must be said that there is considerable debate among economists as to 

whether the U.S. economy is currently characterized by full employment. Many 

economists believe we are quite close to full employment, but I am not among them. 

Despite a rate of unemployment that is rapidly approaching one at which the Federal Reserve may be properly concerned about inflation, it is still the case that employment rates among prime-age workers have not fully recovered from the Great 

Recession, the level of involuntary part-time work remains elevated, and wage 

growth is unsatisfactory. 

In such an environment, it can be argued that export credit may help support 

jobs. To this argument l have three replies. The first is that the Congress should 

not reauthorize a permanent export credit agency in order to achieve the temporary 

goal of tightening a slack labor market. Monetary and fiscal policy are much better 

tools to tighten the labor market. The second is that even if the Congress chooses 

to offer financing to selected sectors to support employment, exports would not be 

high on the list of firms or industries to target. Finally, failing to reauthorize the 

Ex-Im Bank would not immediately terminate its existing financing arrangements, 

and the lives of those arrangements will likely run longer than our current labor 

market conditions. 

The Economy as a Whole: General Equilibrium Concerns 

I will now turn from the employment impacts of the Ex-Im Bank to considerations 

of the broader economy. Textbook models of international trade for a large economy 

95 

3See, for example: James A. Brander and Barbara J. Spencer, ‘‘Export Subsidies and International Market Share Rivalry’’, Journal of International Economics, vol. 18, 1985. Avinash 

Dixit, ‘‘International Trade Policy for Oligopolistic Industries’’, Economic Journal, vol. 94, supplement: conference papers, 1984. Jonathan Eaton and Gene M. Grossman, ‘‘Optimal Trade and 

Industrial Policy Under Oligopoly,’’ Quarterly Journal of Economics, vol. 101, no. 2, May 1986. 

For an excellent overview of this literature, see Robert C. Feenstra, ‘‘Advanced International 

Trade: Theory and Evidence’’, Princeton University Press, 2004. 4Of course, the Government also requires other knowledge in addition to that of general equilibrium effects to ensure that export subsidies are welfare improving. The type of competition 

in the industry, the appropriate design of the subsidy, and the reaction of other Nations, to 

name a few, can be very difficult things for the Government to know. 5For example, Kishore Gawande and Usree Bandyopadhyay, ‘‘Is Protection for Sale? Evidence 

on the Grossman-Helpman Theory of Endogenous Protection’’, Review of Economics and Statistics, vol. 82, no. 1, February 2000. 

such as the United States predict that export subsidies will lower national welfare— 

will make the United States worse off-relative to a situation without the subsidies. 

In contrast, some (though far from all) more complicated models set in an oligopolistic market environment featuring particular forms of strategic competition do 

find situations in which export subsidies can make the Nation better off. 3

A unifying feature of these models, however, is that the Government’s policy towards exports requires an incredible amount of knowledge that the Government almost surely does not possess in reality. 

To illustrate this, consider some general equilibrium effects of a simple subsidy. 4

Much discussion of the Ex-Im Bank focuses on partial equilibrium effects—on the 

effects of the Ex-Im Bank on a single market, or on a single set of firms. But economic policy, including the decisions of the Ex-Im Bank, can affect many firms and 

many markets, and so general equilibrium considerations must be taken into account by the Congress when deciding whether to allow the Ex-Im Bank to continue 

providing export credit. 

An export subsidy will give subsidized firms an advantage over their foreign competitors, increasing the demand for those firms’ output. But this, in turn, will increase the demand for inputs to production among the subsidized firms, increasing 

the price of those resources faced by other sectors, and putting firms in those sectors—sectors that do not receive export credit—at a disadvantage relative to a situation without the export subsidy. 

Even if the subsidy helps firms that receive it, then, the subsidy may hurt the 

overall economy. It is hard to imagine how the Government could understand all 

the interlocking parts of the economy well enough to know whether the subsidy is 

a net positive for the United States. The existence of capital market deficiencies and 

imperfections and the export-credit behavior of foreign Nations do not nullify general-equilibrium concerns about information and uncertainty. 

Political Economy Concerns 

Political economy presents other concerns as well. The default assumption should 

be that well-connected, influential corporations will be in a better position to exercise influence over whether they receive Ex-Im Bank financing than other, less-connected corporations. The default assumption should not be that political connections 

will not play a role in which firms receive export credit. 5 This creates important 

issues that the Congress cannot ignore. 

Conclusion: ‘‘Corporate Welfare’’ and Trade Policy 

To conclude, let me offer three final thoughts. First, it is reasonable to describe 

the Ex-Im Bank as dispensing so-called ‘‘corporate welfare’’. But the Ex-Im Bank is 

hardly the chief offender. After the Ex-Im Bank’s fate is resolved, the Congress 

should oppose ‘‘crony capitalism’’ in other sectors of the economy (where its magnitude is often larger) as vigorously. 

Second, in the realm of trade policy, future negotiations and arrangements should 

stress the need for foreign Nations to limit export credit. 

Finally, supporters of the Ex-Im Bank have a reasonable argument that there 

may be times when limited, temporary, strategic trade policy may be appropriate. 

But such policy should address specific, identifiable actions of foreign Governments 

or other strategic goals in a targeted way. It should not be left to an open-ended 

export credit agency such as the Ex-Im Bank. 

But regardless of progress on these three fronts, the Ex-Im Bank should not be 

reauthorized. 

96 

PREPARED STATEMENT OF JOHN G. MURPHY 

SENIOR VICE PRESIDENT FOR INTERNATIONAL POLICY, U.S. CHAMBER OF COMMERCE

JUNE 2, 2015 

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than three million businesses of all sizes, sectors, 

and regions, as well as State and local chambers and industry associations. 

More than 96 percent of Chamber member companies have fewer than 100 employees, and many of the Nation’s largest companies are also active members. We 

are therefore cognizant not only of the challenges facing smaller businesses, but also 

those facing the business community at large. 

Besides representing a cross-section of the American business community with respect to the number of employees, major classifications of American business—e.g., 

manufacturing, retailing, services, construction, wholesalers, and finance—are represented. The Chamber has membership in all 50 States. 

The Chamber’s international reach is substantial as well. We believe that global 

interdependence provides opportunities, not threats. In addition to the American 

Chambers of Commerce abroad, an increasing number of our members engage in the 

export and import of both goods and services and have ongoing investment activities. The Chamber favors strengthened international competitiveness and opposes 

artificial U.S. and foreign barriers to international business. 

Positions on issues are developed by Chamber members serving on committees, 

subcommittees, councils, and task forces. Nearly 1,900 businesspeople participate in 

this process. 

Chairman Shelby, Ranking Member Brown, and distinguished Members of the 

Committee, my name is John Murphy, and I am Senior Vice President for International Policy at the U.S. Chamber of Commerce (Chamber). I am pleased to testify 

today on the importance of reauthorizing the Export-Import Bank of the United 

States (Ex-Im), the charter for which will lapse on June 30. The Chamber is the 

world’s largest business federation, representing the interests of more than 3 million 

businesses of all sizes, sectors, and regions, as well as State and local chambers and 

industry associations. 

Ex-Im is one of the most important tools at the disposal of U.S. companies to level 

the playing field for trade finance as they seek to increase exports and create jobs 

at home. The benefits of its programs to the U.S. economy are plain: In fiscal year 

2014, Ex-Im provided financing or guarantees for $27.5 billion in U.S. exports, 

thereby supporting more than 164,000 American jobs. 

Last year alone, the volume of exports supported by Ex-Im was more than all U.S. 

merchandise exports to Italy, India, or Australia. It was also more than the total 

merchandise exports of Alabama and more than the merchandise exports of Arkansas, Idaho, Nebraska, and South Dakota combined. 

Ex-Im is especially important to U.S. small- and medium-sized businesses, which 

account for nearly 90 percent of Ex-Im’s transactions. In addition to these direct 

beneficiaries, tens of thousands of smaller companies that supply goods and services 

to large exporters also benefit from Ex-Im’s activities. 

Competitiveness at Stake 

Unilateral disarmament is rarely a good idea, but this is precisely what refusing 

to reauthorize Ex-Im would accomplish. The Organization for Economic Cooperation 

and Development (OECD) reports that the 79 official export credit agencies (ECAs) 

worldwide have extended more than $1 trillion in trade finance in recent years. 

Every major trading Nation has at least one official ECA. The ECAs of the world’s 

other top trading Nations provided 18 times more export credit assistance to their 

exporters than Ex-Im did to U.S. exporters last year, according to a recent report 

prepared by the National Association of Manufacturers with data and analysis from 

the Economist Intelligence Unit. 

However, the competitive challenge is even more daunting in the developing 

world. ECAs in developing countries, which in most cases do not abide by the rules 

of the OECD Arrangement on Officially Supported Export Credits, provide far more 

export financing on much more generous terms than Ex-Im does. 

This was especially pronounced during and immediately after the 2008–2009 financial crisis: In 2008, China’s ECAs provided Chinese exporters 17 times more export credit as a share of GDP than Ex-Im did for U.S. exporters. As late as 2010, 

Chinese and Brazilian ECAs provided 10 times more financing to domestic exporters 

as a share of GDP than Ex-Im did. Even today, ECAs based in China, India, and 

Brazil far outpace Ex-Im in lending volumes. 

Some critics contend that closing Ex-Im would set an example for others, or that 

negotiations could then induce other countries to close their ECAs. This is pure fanVerDate Nov 24 2008 12:35 Dec 21, 2015 Jkt 046629 PO 00000 Frm 00100 Fmt 6621 Sfmt 6621 L:\HEARINGS 2015\06-02 PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNI
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tasy. In discussions at the OECD and in other fora, Governments from Germany 

to China have shown zero interest in shuttering their ECAs. 

Even the conservative Government of Canada, which is widely recognized for its 

free-market, free-trade approach to economic policy, has shown no interest in placing new limits on its ECA. In fact, Canada’s equivalent of Ex-Im (Export Development Canada) provided 30 times more export finance to its exporters than Ex-Im 

does to U.S. firms, relative to the size of its economy. 

The fact that the Treasury has not been able to negotiate an agreement to wind 

down other countries’ ECAs is not a valid reason to penalize U.S. exporters and the 

workers they employ. U.S. companies produce many of the world’s best goods and 

services, but without Ex-Im they would often find themselves at an unfair disadvantage when competing with foreign enterprises backed by official export credit agencies. For the United States not to have an operating ECA would put U.S. exporters 

at an absolutely unique disadvantage. 

A Key Tool for Small Businesses 

These realities play out differently for various sectors and industries. The challenge is especially poignant for small businesses as commercial banks often refuse 

to accept foreign receivables as collateral for a loan without an Ex-Im guarantee. 

For example, Bridge to Life Solutions in Columbia, South Carolina, provides stateof-the-art cold storage organ transplant solutions. As John Bruens, Chief Commercial and Business Development Officer for Bridge to Life, explains: ‘‘Without Ex-Im, 

I would have to tell my customers, ‘prepay everything up front, or we can’t do business.’ ’’ By purchasing credit insurance from Ex-Im for the firm’s foreign receivables, 

Bridge to Life has been able to extend credit terms to its international customers. 

Indeed, buyers overseas increasingly expect vendors to offer financing. Without 

Ex-Im’s accounts receivables insurance and lines of credit, many U.S. small businesses would be unable to extend terms to foreign buyers and would have to ask 

for cash-in-advance. In such a case, the business will most likely go to a firm from 

another country that benefits from ECA support. 

Similarly, Eagle Labs in Rancho Cucamonga, California, uses Ex-Im’s credit insurance to insure orders for surgical equipment for cataract surgery. Michael De 

Camp, Vice President of International Sales for Eagle Labs, explains that despite 

receiving consistent payment from foreign customers, local banks would not extend 

credit to Eagle Labs based on uninsured accounts. Once Eagle Labs secured Ex-Im 

credit insurance, the firm was able to secure a line of credit from a private bank, 

bought the capital equipment it needed, doubled its sales, and doubled its workforce. 

Head to Head: Exports of Capital Goods 

Looking beyond small- and medium-sized businesses, it is par for the course for 

expensive capital goods such as Canadian planes, Chinese trains, and Russian nuclear reactors to be sold worldwide with unashamed backing from these firms’ national ECAs. For example, South African railway Transnet last year put out a bid 

for 466 diesel electric locomotives at a total contract price of $750 million. As is common in such bids, one requirement was that the supplier must finance a significant 

portion of the transaction. 

Backed by aggressive export financing provided by China’s export credit agency, 

Chinese locomotive manufacturers won half the order. In March 2014, General Electric won the order for the other 233 locomotives—but only because Ex-Im support 

was available to level the financial playing field. Without Ex-Im, GE would have 

lost the entire order—with real world consequences for workers at its Erie, Pennsylvania plant. 

This kind of story plays out time again with capital goods. Last month, Reuters 

reported on another $350 million deal to build locomotives for sale in Angola that 

would be lost if Ex-Im’s charter is allowed to lapse, endangering 1,800 jobs. 

Foreign infrastructure opportunities are another area where ECA support is included in bidding requirements. Closing Ex-Im would shut major American exporters out of huge business opportunities overseas because ECA support is often required for a company even to bid on overseas infrastructure projects. The New York 

Times reported last month that a $668 million drinking water project in Cameroon 

will go not to U.S. vendors but to their Chinese competitors if Ex-Im is not reauthorized. 

The Nuclear Power Sector: A Case in Point 

Nuclear power is another sector where the fate of Ex-Im will have a major impact. 

According to the Nuclear Energy Institute, five nuclear power plants are under construction in the United States, but 61 new plants are under construction overseas. 

An additional 165 plants are in the licensing and advanced planning stages—nearly 

all abroad. NEI explains: 

98 

Over the next decade, exports of up to 15 new nuclear plants could hinge 

on the availability of Ex-Im Bank products. At roughly $3 billion to $5 billion per plant, the projects represent a potential $45 billion to $75 billion 

in U.S. exports in need of Ex-Im Bank support. Four nuclear power 

projects—including up to seven plants—are already in Ex-Im Bank’s project 

pipeline. These projects represent $21 billion to $35 billion in potential 

business that could become committed orders within the next 2–3 years 

. . . 

Export credit agency support is almost always a bidding requirement for 

international nuclear power plant tenders [emphasis added]. Ex-Im Bank is 

therefore vital to the success of U.S. exports even in cases where the customer ultimately elects not to use Ex-Im financing. Without Ex-Im Bank, 

U.S. commercial nuclear suppliers would suffer a major competitive disadvantage or be excluded for failure to meet tender requirements . . . 

U.S. suppliers of nuclear technology, equipment and services compete 

against a growing number of foreign firms—many of which are State-owned 

and benefit from various forms of State support. All foreign nuclear energy 

competitors are backed by national export credit agencies or other State financing. 

Refusing to reauthorize Ex-Im would put U.S. companies selling expensive capital 

goods such as aircraft, locomotives, turbines, and nuclear power plants at a unique 

competitive disadvantage because their foreign competitors all enjoy ample financing from their home-country export credit agencies—enough to easily knock U.S. 

companies out of the competition. For some industries, executives will face the question of whether to shift production to locations where ECA support is available. 

Nor does Ex-Im force commercial banks out of the trade finance business. In a 

recent joint letter to congressional leaders expressing strong support for Ex-Im, the 

Bankers Association for Finance and Trade (BAFT) and the Financial Services 

Roundtable (FSR) explained that Ex-Im ‘‘cannot be replaced solely by the private 

sector.’’ ‘‘Balance sheet constraints (arising from prudential capital and liquidity requirements, among other factors) along with institutional credit, country and 

counterparty limitations’’ are among the factors that limit the ability of commercial 

banks to provide export finance. 

The associations added: ‘‘An Ex-Im Guarantee does not make a bad deal ‘bankable’ . . . commercial banks share the risk on transactions with Ex-Im and so would 

not enter into arrangements where the risk trumps the viability of the deal.’’ 

No Cost to the Taxpayer 

Ex-Im operates at no cost to the American taxpayer and has amassed a $4 billion 

loan-loss reserve that provides more than adequate protection against losses. The 

fact that Ex-Im loans are backed by the collateral of the goods being exported is 

the principal bulwark against losses. Ex-Im’s overall active default rate in recent 

years has hovered below one-quarter of 1 percent and stood at 0.167 percent as of 

March 31, 2015. 

Ex-Im charges fees for its services that have generated billions of dollars in revenue for the U.S. Treasury. In fact, Ex-Im has sent to the Treasury $7 billion more 

than it has received in appropriations since 1990. This figure comes from Ex-Im’s 

annual report, which uses the accounting method required by law. Contrary to 

rumor, the Congressional Budget Office (CBO) has never denied that Ex-Im continues to generate a ‘‘negative subsidy,’’ i.e., it is a net contributor of revenue to the 

Treasury. 

Using an alternative ‘‘fair-value’’ accounting method, CBO last year produced an 

estimate that Ex-Im might impose costs on the Treasury over the next decade. However, this alternative accounting rests on questionable assumptions. For instance, 

this scenario assumed Ex-Im would extend loans at a level nearly 40 percent higher 

than it did last year, even though the Bank’s lending has been declining steadily 

as the financial crisis of 2008–2009 recedes. Moreover, in 2012, CBO released a 

similar report in which it estimated that Ex-Im would generate a ‘‘negative subsidy’’ 

for taxpayers even under the fair-value methodology. It is unclear what changed in 

CBO’s approach. 

According to the Merriam-Webster Dictionary, a subsidy is ‘‘money that is paid 

usually by a Government to keep the price of a product or service low.’’ As noted, 

Ex-Im provides no such subsidy; on the contrary, the fees it charges have risen in 

recent years. In the aircraft sector, a new 2011 multilateral agreement doubled the 

fees for export credit financing, thereby addressing the concern that some export 

credit financing was below market rates. 

99 

Some critics charge that Ex-Im picks winners and losers, skewing the marketplace. On the contrary, Ex-Im extends loans and guarantees to all applicants that 

meet its strict lending requirements but does so only when commercial credit is unavailable or when it is necessary to counteract below-market credit from foreign 

ECAs. Ex-Im also acted to fill the void when the availability of private-sector trade 

finance fell by 40 percent during the 2008–2009 financial crisis. 

At times Ex-Im’s opponents have attempted to tie it to unsavory customers overseas. In the Chamber’s view, this is an attempt to divert attention from the true 

beneficiaries of Ex-Im—the tens of thousands of American workers whose jobs depend on the Bank’s support for their exports. Their voice must be heard in this debate. 

Conclusion 

The breadth and depth of support for Ex-Im’s reauthorization across the business 

community is impressive. With Americans overwhelmingly focused on the need to 

generate economic growth and good jobs, business owners are perplexed by the campaign against Ex-Im. In particular, the thousands of small businesses that depend 

on Ex-Im to be able to access foreign markets are stunned at the threat that Washington could let its charter lapse. 

Ex-Im does not skew the playing field—it levels it for U.S. exporters facing headto-head competition with foreign firms backed by their own ECAs. Ex-Im doesn’t 

pick winners and losers—but refusing to reauthorize Ex-Im is picking foreign companies as winners and U.S. exporters as losers. 

Ex-Im’s critics need to take a broader look at the global economy and the serious 

threats to U.S. industrial competitiveness—including in many national security-sensitive sectors. America’s modestly scaled, properly limited Ex-Im Bank plays a vital 

role in this context. 

The Chamber appreciates the opportunity to provide these comments to the Committee. We are committed to working with Congress to secure Ex-Im’s reauthorization before June 30. 

PREPARED STATEMENT OF DANIEL IKENSON 

DIRECTOR, HERBERT A. STEIFEL CENTER FOR TRADE POLICY STUDIES, CATO

INSTITUTE

JUNE 2, 2015 

Introduction 

Chairman Shelby, Ranking Member Brown, Members of the Committee, it is a 

great pleasure to have been invited to share my ‘‘Perspectives on the Export-Import 

Bank of the United States’’ with you today. My intention is to focus primarily on 

the domestic victims of the Export-Import Bank (Ex-Im) by describing some of the 

hidden costs—the collateral damage—that are often overlooked or swept under the 

rug. 

To the extent that today’s hearing will help illuminate the holistic impact of ExIm on the U.S. economy and the market process—in contrast to the cherry-picked 

examples of how Ex-Im has helped particular companies meet their particular 

goals—I am pleased to participate and offer some assistance. 

Before turning to that task, however, I would like to applaud the Committee for 

taking up this important subject in a public hearing. Committed oversight of the 

executive branch by the legislative branch is crucial to our system of checks and 

balances, which must remain functionally robust to ensure the health of our constitutional republic, and protect it from even the most subtle encroachments. 

Insulated in Export Rhetoric 

Everyone loves exports. In fact, many Americans think of trade as a competition 

between ‘‘Us’’ and ‘‘Them,’’ where exports are ‘‘Team USA’s’’ points, imports are the 

foreign team’s points, the trade account is the scoreboard, and the deficit on that 

scoreboard means our team is losing at trade. That narrative is wrong, but certainly 

ripe for exploitation by agencies that portray themselves as serving some national 

goal of boosting exports. 

The economic fact of the matter is that the real benefits of trade are transmitted 

through imports, not through exports. As Milton Friedman used to say: imports are 

the goods and services we get to consume without having to produce; exports are 

the goods and services we produce, but don’t get to consume. 

The purpose of exchange is to enable each of us to focus on what we do best. By 

specializing in an occupation—instead of allocating small portions of our time to producing each of the necessities and luxuries we wish to consume—and exchanging 

100 

1Data from the U.S. Bureau of Economic Analysis. 

2Data from the U.S. Bureau of Economic Analysis and the U.S. Bureau of Labor Statistics. 

the monetized output we produce most efficiently for the goods and services we 

produce less efficiently, we are able to produce and, thus, consume more output than 

would be the case if we didn’t specialize and trade. By extension, the larger the size 

of the market, the greater is the scope for specialization, exchange, and economic 

growth. 

When we transact at the local supermarket or hardware store, we seek to maximize the value we obtain by getting the most for our dollars. In other words, we 

want to import more value from the local merchant than we wish to export. In our 

daily transactions, we seek to run personal trade deficits. But when it comes to 

trading across borders or when our individual transactions are aggregated at the 

national level, we forget these basics principles and assume the goal of exchange 

is to achieve a trade surplus. But, as Adam Smith famously observed: ‘‘What is prudence in the conduct of every private family, can scarce be folly in that of a great 

kingdom.’’ 

The benefits of trade come from imports, which deliver more competition, greater 

variety, lower prices, better quality, and innovation. Arguably, opening foreign markets should be an aim of trade policy because larger markets allow for greater specialization and economies of scale, but real free trade requires liberalization at 

home. The real benefits of trade are measured by the value of imports that can be 

purchased with a unit of exports—the so-called terms of trade. Trade barriers at 

home raise the costs and reduce the amount of imports that can be purchased with 

a unit of exports. 

Yet, in Washington, exports are associated with increased economic output and 

job creation, while imports are presumed to cause economic contraction and job loss. 

But that is demonstrably false. The first 1 of the two charts below plots annual 

changes in imports and annual changes in GDP for 44 years. If imports caused economic contraction, we would expect to see most of the observations in the upper left 

and lower right quadrants—depicting an inverse relationship. Instead, we see a 

strong positive relationship. In 43 of 44 years, imports and GDP moved in the same 

direction. 

The second 2 chart plots annual changes in imports and U.S. employment. Similarly, there is a fairly strong positive relationship between these variables, as well. 

101 

3 Bureau of Economic Analysis, ‘‘U.S. International Trade in Goods and Services, Exhibit 6’’. 

U.S. Exports and Imports of Goods by Principal End-Use Category, February 2015, http:// 

www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm. 

In keeping with the conventional Washington wisdom that exports are Team 

America’s points and imports are the foreign team’s points, in his January 2010 

State of the Union address President Obama set a national goal of doubling U.S. 

exports in 5 years. That goal was subsequently enshrined as the ‘‘National Export 

Initiative’’, which decreed establishment of an Export Promotion Cabinet ‘‘to develop 

and coordinate the implementation of the NEI.’’ Six months later, the new cabinet 

produced its recommendations in a 68-page report titled ‘‘The Export Promotion 

Cabinet’s Plan for Doubling U.S. Exports in Five Years’’, which became the centerpiece of the Administration’s trade policy agenda. 

Most prominent in the plan was a larger role for Government in promoting exports, including expanded nonmarket lending programs to finance export activity, 

an increase in the number of the Commerce Department’s foreign outposts to promote U.S. business, an increase in Federal agency-chaperoned marketing trips, and 

other sundry subsidies for export-oriented business activities. Ex-Im suddenly had 

a more prominent role to play. 

Shortsightedly, the NEI systemically neglected a broad swath of opportunities to 

facilitate exports by contemplating only the export-focused activities of exporters. 

The NEI presumed that the only barriers impeding U.S. exporters were foreign 

made. But before companies become exporters, they are producers. And as producers, they are subject to a host of domestic laws, regulations, taxes, and other 

policies that handicap them in their competition for sales in the U.S. market and 

abroad. 

For example, nearly 60 percent of the value of U.S. imports in 2014 comprised 

of intermediate goods, capital goods, and other raw materials—the purchases of U.S. 

businesses, not consumers. 3 Yet, many of those imported inputs are subject to customs duties, which raise the cost of production for the U.S.-based companies that 

need them, making them less competitive at home and abroad. Indeed, U.S. duties 

on products like sugar, steel, magnesium, polyvinyl chloride, and other crucial manufacturing inputs have chased companies to foreign shores—where those crucial inVerDate Nov 24 2008 12:35 Dec 21, 2015 Jkt 046629 PO 00000 Frm 00105 Fmt 6621 Sfmt 6621 L:\HEARINGS 2015\06-02 PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNI 60215050.eps
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4Daniel Ikenson, ‘‘Economic Self-Flagellation: How U.S. Antidumping Policy Subverts the National Export Initiative’’, Cato Trade Policy Analysis No. 46, May 31, 2011, http:// 

www.cato.org/publications/trade-policy-analysis/economic-selfflagellation-how-us-antidumpingpolicy-subverts-national-export-initiative. 5http://www.exim.gov/about/facts-about-ex-im-bank 

gredients are less expensive—and deterred foreign companies from setting up shop 

stateside. 4

To nurture the promise of our highly integrated global economy, policymakers 

should stop conflating the interests of exporters with the national interest and commit to policies that reduce frictions throughout the supply chain—from product conception to consumption. Why should U.S. taxpayers underwrite—and U.S. policymakers promote—the interests of exporters, anyway, when the benefits of those efforts accrue, primarily, to the shareholders of the companies enjoying the subsidized 

marketing or matchmaking? There is no national ownership of private export revenues. And the relationship between revenues (domestic or export) and jobs is today 

more tenuous than in years past. 

Globalization means that companies have growing options with respect to where 

and how they produce. So Governments must compete for investment and talent, 

which both tend to flow to jurisdictions where the rule of law is clear and abided; 

where there is greater certainty to the business and political climate; where the 

specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where there are 

limited physical, political, and administrative frictions; and so on. The crucial question for U.S. policymakers is: why not focus on reforms that make the U.S. economy 

a more attractive location for both domestic and foreign investment? 

According to the Congressional Research Service, there are approximately 20 Federal Government agencies involved in supporting U.S. exports, either directly or indirectly. Among the nine key agencies with programs or activities directly related 

to export promotion are the Department of Agriculture, the Department of Commerce, the Department of State, the Department of the Treasury, the Office of the 

U.S. Trade Representative, the Small Business Administration, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, and the Export-Import Bank. 

Relative to attracting domestic investment, export promotion is a circuitous and 

uncertain path to economic growth and job creation. If policymakers seek a more 

appropriate target for economic policy, it should be attracting and retaining investment, which is the seed of all economic activity, including exporting. 

Problems With Ex-Im’s Rationalizations 

The mission of the Ex-Im is ‘‘to support American jobs by facilitating the export 

of U.S. goods and services.’’ Given the exalted status of exports in Washington’s economic policy narrative, it is understandable why Ex-Im would portray itself as indispensable to U.S. export success. It’s a reasonable survival strategy. But on the metric of contribution to export success, Ex-Im is scarcely relevant. It supported $27.4 

billion in exports in 2014, which is less than 2 percent of all U.S. exports last year. 5

Of course, $27 billion is nothing to sneeze at, but the implication that most, if 

not all, of those sales would never have happened in the absence of Ex-Im is pure 

nonsense. But the more important question is not whether Ex-Im supports U.S. exports. That’s the political question. The relevant economic question concerns the 

costs and benefits of Ex-Im to the U.S. economy. 

Proponents limit their analyses to the impact of Ex-Im on taxpayers. In recent 

years, it has generated positive returns to the Treasury, but that myopic focus 

doesn’t come close to approximating the appropriate cost-benefit analysis. 

While the benefits of Ex-Im’s activities are real to the recipients and visible to 

the public (the value of exports supported, projects financed, insurance policies underwritten are all highly touted), the costs imposed on nonbeneficiaries usually go 

unseen by its victims—and unacknowledged by Ex-Im and its supporters. Identifying and quantifying those costs are necessary to measuring the net benefits. 

Ex-Im supporters claim that the bank fills a void left by private sector lenders 

unwilling to finance certain riskier transactions and, by doing so, contributes importantly to U.S. export and job growth. Moreover, rather than burden taxpayers, the 

Bank generates profits for the Treasury, helps small businesses succeed abroad, encourages exports of ‘‘green’’ goods, contributes to development in sub-Saharan Africa, and helps ‘‘level the playing field’’ for U.S. companies competing in export markets with foreign companies supported by their own Governments’ generous export 

financing programs. So what’s not to like about Ex-Im? 

103 

First, by dismissing the risk assessments of private-sector, profit-maximizing financial firms and making lending decisions based on nonmarket criteria to pursue 

often opaque, political objectives, Ex-Im misallocates resources and puts taxpayer 

dollars at risk. That Ex-Im is currently self-financing and generating revenues is 

entirely beside the point. Ex-Im’s revenue stream depends on whether foreign borrowers are willing and able to service their loans, which is a function of global economic conditions beyond the control of Ex-Im. Given the large concentration of aircraft loans in its portfolio, for example, Ex-Im is heavily exposed to the consequences of a decline in demand for air travel. Recall that Fannie Mae and Freddie 

Mac also showed book profits for years until the housing market suddenly crashed 

and taxpayers were left holding the bag. 

Second, even if taxpayers had tolerance for such risk taking, the claim that ExIm exists to help small businesses is belied by the fact that most of Ex-Im’s loan 

portfolio value is concentrated among a handful of large U.S. companies. In 2013 

roughly 75 percent of the value of Ex-Im loans, guarantees, and insurance were 

granted on behalf of 10 large companies, including Boeing, General Electric, Dow 

Chemical, Bechtel, and Caterpillar. 

Third, the claim that U.S. exporters need assistance with financing to ‘‘level the 

playing field’’ with China and others doesn’t square with the fact that the United 

States is a major export credit subsidizer that has been engaged in doling out such 

largesse since well before the founding of the People’s Republic of China. It implies 

the United States is helpless at the task of reining in these subsidies. And it implies 

the United States lacks enormous advantages among the multitude of factors that 

inform the purchasing decision. But, somehow, 98 percent of U.S. export value is 

sold without the assistance of trade promotion agencies. 

Fourth, and perhaps most importantly, by trying to ‘‘level the playing field’’ with 

foreign companies backed by their own Governments, Ex-Im ‘‘unlevels’’ the playing 

field for many more U.S. companies competing at home and abroad. This adverse 

effect has been ignored, downplayed, or mischaracterized, but the collateral damage 

is substantial and should be a central part of the story. 

The Collateral Damage to Ex-Im’s Victims 

A proper accounting reveals that Ex-Im’s practices impose significant costs on 

manufacturing firms across every industry and in every U.S. State. When Ex-Im 

provides financing to a U.S. company’s foreign customer on terms more favorable 

than he can secure elsewhere, it may be facilitating a transaction that would not 

otherwise occur. That is the basis for Ex-Im’s claim that it helps the U.S. economy 

by increasing exports and ‘‘supporting’’ jobs. But the claim is questionable because 

those resources might have created more value or more jobs if deployed in the private sector instead. If that is the case, Ex-Im’s transaction imposes a net loss on 

the economy. But suppose it could be demonstrated that Ex-Im transactions grow 

the economy larger or create more jobs than if those resources had been deployed 

in the private sector instead. Would Ex-Im then be correct in its claim? No. Further 

analysis is required. 

Ex-Im financing helps two sets of companies (in the short-run): U.S. firms whose 

export prices are subsidized by below market rate financing and the foreign firms 

who purchase those subsidized exports. It stands to reason, then, that those same 

transactions might impose costs on two different sets of companies: competing U.S. 

firms in the same industry who do not get Ex-Im backing, and U.S. firms in downstream industries, whose foreign competition is now benefiting from reduced capital 

costs courtesy of U.S. Government subsidies. While Ex-Im financing reduces the cost 

of doing business for the lucky U.S. exporter and reduces the cost of capital for his 

foreign customer, it hurts U.S. competitors of the U.S. exporter, as well as U.S. competitors of his foreign customer by putting them at relative cost disadvantages. 

These effects are neither theoretical nor difficult to comprehend. Yet proponents 

of Ex-Im reauthorization rarely acknowledge, let alone concede, that these are real 

costs pertinent to any legitimate net benefits calculation. Instead, they speak only 

of the gross benefits of export subsidies, which they consider to be the value of exports supported by their authorizations. 

But there are at least three sets of costs that are essential to determining the net 

benefits of Ex-Im: (1) the ‘‘Opportunity Cost,’’ represented by the export growth that 

would have obtained had Ex-Im’s resources been deployed in the private sector; (2) 

the ‘‘Intra-Industry Cost,’’ represented by the relative cost disadvantage imposed on 

the other U.S. firms in the same industry (the domestic competitors) as a result of 

Ex-Im’s subsidies to a particular firm in the industry, and; (3) the ‘‘Downstream Industry Cost,’’ represented by the relative cost disadvantage imposed on the U.S. 

competitors of the subsidized foreign customer. 

104 

Opportunity Cost is difficult to estimate, but suffice it to recognize that opportunity costs exist. Indeed, opportunity costs exist whenever there are foregone alternatives to the path chosen. 

The Intra-Industry Cost is somewhat easier to calculate, in theory. If Ex-Im provides a $50 million loan to a foreign farm equipment manufacturer to purchase steel 

from U.S. Steel Corporation, the transaction may benefit U.S. Steel, but it hurts 

competitors like Nucor, Steel Dynamics, AK Steel, and dozens of other steel firms 

operating in the United States and competing for the same customers at home and 

abroad. The $50 million subsidy to U.S. Steel is a cost to the other firms in the industry, who can attribute a $50 million revenue gap between them (aggregated) and 

U.S. Steel to a Government intervention that picked a winner and made them, relatively speaking, losers. The $50 million ‘‘benefit’’ for U.S. Steel is a $50 million cost 

to the other steel firms. 

But then that distortion is compounded when taking into consideration the dynamics that would have played out had the best firm—the one offering the most 

value for the best price—secured that export deal instead. Reaching revenue targets, 

raising capital, and moving down the production cost curve to generate lower unit 

costs all become more difficult to achieve on account of the original intervention, 

amplifying the adverse impact on other firms in the industry. When Government 

intervenes with subsidies that tilt the playing field in favor of a particular firm, it 

simultaneously penalizes the other firms in the industry and changes the competitive industry dynamics going forward. Every Ex-Im transaction touted as boosting 

U.S. exports creates victims within the same U.S. industry. Without Ex-Im’s intervention, Nucor might have been able to win that foreign farm equipment producer’s 

business, which is a prospect that undermines the premise that Ex-Im boosts exports at all and reinforces the point that it merely shifts resources around without 

creating value, possibly destroys value instead. What is given to U.S. steel is taken 

from Nucor and the other firms, among whom may be the more efficient producers. 

The Downstream Industry costs are those imposed by the transaction on the U.S. 

companies that compete with the foreign customer. When a foreign farm machinery 

producer purchases steel on credit at subsidized interest rates, it obtains an advantage over its competitors—including its U.S. competitors. So, when that subsidized 

rate comes courtesy of a U.S. Government program committed to increasing U.S. exports, it only seems reasonable to consider the effects on firms in downstream U.S. 

industries before claiming the program a success: Has the subsidy to the foreign 

farm machinery producer made John Deere, Caterpillar, New Holland, or other U.S. 

farm machinery producers less competitive? Has it hurt their bottom lines? 

Delta Airlines has been vocal in its objection to Ex-Im-facilitated sales of Boeing 

jetliners to foreign carriers, such as Air India. Delta rightly complains that the U.S. 

Government, as a matter of policy, is subsidizing Delta’s foreign competition by reducing Air India’s cost of capital. That cost reduction enables Air India to offer 

lower prices in its bid to compete for passengers, which has a direct impact on Delta’s bottom line. This is a legitimate concern and it is not limited to this example. 

Consider the generic case. A U.S. supplier sells to both U.S. and foreign customers. Those customers compete in the same downstream industry in the U.S. and 

foreign markets. Ex-Im is happy to provide financing to facilitate the sale, as its 

mission is to increase exports and create jobs. The U.S. supplier is thrilled that ExIm is providing his foreign customer with cheap credit because it spares him from 

having to offer a lower price or from sweetening the deal in some other way to win 

the business. The foreign customer is happy to accept the advantageous financing 

for a variety of reasons, among which is the fact that his capital costs are now lower 

relative to what they would have been and relative to the costs of his competitors— 

including his U.S. competitors, who are now on the outside looking in. Ex-Im helps 

some U.S. companies increase their exports sales. But it hinders other U.S. companies’ efforts to compete at home and abroad. 

Moreover, by subsidizing export sales, Ex-Im artificially diverts domestic supply, 

possibly causing U.S. prices to rise and rendering U.S. customers less important to 

their U.S. suppliers. Especially in industries where there are few producers, numerous customers, and limited substitute products, Ex-Im disrupts the relationships between U.S. buyers and U.S. sellers by infusing the latter with greater market power 

and leverage. Delta was able to connect the dots. Other companies have, too. But 

most of the time, the downstream U.S. companies are unwitting victims of this silent cost-shifting. 

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6Daniel Ikenson, ‘‘The Export-Import Bank and Its Victims: Which Industries and States 

Bear the Brunt?’’ Policy Analysis No. 756, September 10, 2014, http://www.cato.org/publications/policy-analysis/export-import-bank-its-victims-which-industries-states-bear-brunt. 

According to the findings in a recent Cato Institute study that I authored, the downstream costs alone amount to a tax of approximately $2.8 billion every year. 6

The victims of this shell game include companies in each of the 21 broad U.S. manufacturing industry classifications used by the Government to compile statistics. And 

they are scattered across the country in every State. 

Among the stealthily taxed were companies such as Western Digital and Seagate 

Technologies—two California-based computer storage device producers that employ 

125,000 workers; Chicago-based Schneider Electric Holdings, which employs 23,000 

workers in the manufacture of environmental control products, and; ViaSystems, a 

St. Louis-based printed circuit board producer with 12,000 employees. These companies haven’t received Ex-Im subsidies, but companies in their supplier industries 

have, which effectively lowers the costs of their foreign competitors. 

While it is relatively easy for a big company like Delta to connect the dots and 

see that Boeing is being favored at its expense (airplane purchases constitute a 

large share of Delta’s total costs), most manufacturing companies are unaware that 

they are shouldering the costs of Government subsidies to their own competitors. 

But the victims include big and small producers—of electrical equipment, appliances, furniture, food, chemicals, computers, electronics, plastics and rubber products, paper, metal, textiles—from across the country. Companies producing telecommunications equipment incur an estimated collective tax of $125 million per 

year. 

The industries in which companies bear the greatest burdens—where the costs of 

Ex-Im’s subsidies to foreign competitors are the highest—are of vital importance to 

the manufacturing economies of most States. In Oregon, Delaware, Idaho, New Jersey, Nevada, and Maryland, the 10 industries shouldering the greatest costs account 

for at least 80 percent of the State’s manufacturing output. The most important industry is among the 10 most burdened by these costs in 33 of 50 States. The chemical industry, which bears a cost of $107 million per year, is the largest manufacturing industry in 12 States. 

For all the praise Ex-Im heaps upon itself for its role as a costless pillar of the 

economy, it is difficult to make sense of the collateral damage left in its wake. Thousands of U.S. companies would be better off if Ex-Im’s charter were allowed to expire, as scheduled, on June 30. 

What To Do About Foreign Export Credit Agencies? 

Of all of the arguments put forward by Ex-Im supporters, the ‘‘leveling the playing field’’ rationale seems to carry the most sway. It is appealing intuitively. But 

the implication that the United States is an innocent party that has no choice but 

to follow suit is laughable. The United States invented this stuff. 

The notion that because Beijing, Brasilia, and Brussels subsidize their exporters 

Washington must, too, is a rationalization that sweeps under the rug the fact that 

there are dozens of criteria that feed into the ultimate purchasing decision, including product quality, price, producer’s reputation, local investment, and employment 

opportunities created by the sale, warranties, aftermarket servicing, and the extent 

to which the transaction contributes toward building a long-term relationship between buyer and seller. To say that U.S. exporters need assistance with financing 

to ‘‘level the playing field’’ suggests that they lack advantages among the multitude 

of factors that inform the purchasing decision. Moreover, the fact that less than 2 

percent of U.S. export value goes through export promotion agencies suggests this 

rationale for Ex-Im is bogus. 

There is a way to bring foreign subsidies under control, however. The United 

States should allow Ex-Im to expire at the end of this month and then announce 

plans to bring cases to the World Trade Organization against Governments operating their export credit agencies in violation of agreed upon limits under the Agreement on Subsidies and Countervailing Measures. The combination of the carrot of 

U.S. withdrawal from the business of export credit financing and the stick of WTO 

litigation would likely incent other Governments to reduce, and possibly eliminate, 

their own subsidy programs. 

Conclusion 

Most of the rationales for keeping the Export-Import Bank are merely rationalizations that don’t stand up to close scrutiny. Perhaps most problematic are the costs 

imposed, often on unwitting victims. Ex-Im subsidies to particular exporters may 

help those companies succeed, but they impose significant costs on other firms in 

106 

the same industry and firms in downstream industries. Accordingly, Ex-Im penalizes many smaller, dynamic, up-and-coming businesses that are often the well 

springs of new ideas, better mousetraps, and smarter business practices and which 

the economy needs to spawn subsequent generations of businesses in perpetuity. 

That evolutionary process underlies the strength of the U.S. economy, and is essential to U.S. success going forward. On the other hand, U.S. economic strength 

is undermined when subsidies are deployed in a spiraling race with other Nations 

to the detriment of the next crop of leading U.S. businesses. Let the Export-Import 

Bank expire. 

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RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE 

FROM LINDA MENGHETTI DEMPSEY 

Q.1. The Export-Import Bank offers a number of different products, 

including loan guarantees, working capital guarantees, and direct 

loans. Should Congress consider eliminating a particular line of 

products, because the product is not particularly useful to companies? 

A.1. Manufacturers and exporters turn to the Ex-Im Bank when 

they identify gaps in private-sector trade finance and need each of 

the current Ex-Im Bank services to enable lending from privatesector institutions—whether that is a loan guarantee to extend 

competitive financing terms to foreign customers that purchase 

U.S. goods, a multibuyer export credit insurance policy that enables access to working capital, or structured financing to help U.S. 

exporters compete globally in natural resource and infrastructure 

sectors. While direct loans are rarely used, they can help U.S. exporters secure competitive financing for international buyers by 

providing fixed-rate financing to creditworthy international buyers 

in both the private and public sector. 

Ex-Im Bank is demand-driven, and a variety of customers and 

exporters rely on different programs for different needs. Ex-Im 

Bank has adjusted existing programs and introduced new initiatives in the wake of the global financial crisis, including a streamlined ‘‘Express Insurance’’ for small-business exporters. While ExIm Bank should continue to evaluate its financing tools to ensure 

they are both efficient and effective, the NAM has no recommendations for eliminating any line of services. 

Q.2. The Export-Import Bank purports to create a ‘‘surplus’’ for 

taxpayers, including in 2014. 

Setting aside the debate over the Bank’s accounting and profits, 

do all of the Bank’s main products have approximately the same 

fiscal record? Or does one program that generates a weaker ‘‘surplus’’ make up for a program with a weaker track record? 

Does each program generate a surplus, under the Bank’s accounting assumptions? 

A.2. It is my understanding that Ex-Im Bank sets its fees and interest rates for programs in order to fulfill its primary mission to 

support U.S. jobs by filling gaps in private export financing. Starting in FY2008, Ex-Im Bank has operated on a self-sustaining basis 

using program revenue to fund current year administrative expenses and program costs. The surplus generated by the Ex-Im 

Bank in recent years—transferred annually to the U.S. Treasury— 

reflects a rate and fee structure that is meeting its purpose of ensuring that Ex-Im is self-sustaining. Ex-Im Bank includes substantial information about its transactions in its Annual Reports. The 

Bank, therefore, would be the best source of information about the 

profile of its programs and about individual transactions. 

Q.3. The Bank has a number of lending ‘‘mandates,’’ including that 

it must make 10 percent of its authority available to renewable energy, 20 percent available to small business lending and that it 

must also promote activity in sub-Saharan Africa. 

108 

1 ‘‘ADB Trade Finance Gap, Growth, and Jobs Survey’’, December 2014. Found at http:// 

www.adb.org/sites/default/files/publication/150811/adb-trade-finance-gap-growth.pdf. 

Should we expect, or do we have evidence to suggest, that these 

transactions have a higher default rate than the nonmandated 

transactions? 

How should this inform Congress’ treatment of the mandates in 

the Bank’s reauthorization? 

A.3. I have no reason to believe those transactions that fulfill the 

congressional mandates to support small business exports, renewable energy exports and exports to sub-Saharan Africa would be exempt from the Bank’s overarching standards—including a standard 

for reasonable reassurance of repayment. Although the Ex-Im Bank 

is a demand-drive institution, Ex-Im Bank works to identify transactions that would meet its standards and also fulfill the mandates 

set by Congress. 

Ex-Im Bank is required by P.L. 112–122 to report to Congress on 

a quarterly basis its default rate for short-, medium-, and longterm financing. Additionally, Ex-Im Bank is required to report 

quarterly to Congress about default rates for short-term loans, medium-term loans, long-term loans, insurance, medium-term guarantees, or long-term guarantees; each key market involved; and each 

industry sector involved. The Bank would be the best source of information about the default rates associated with specific transactions. 

Q.4. We’ve heard how the Export-Import Bank ‘‘supports’’ job and 

exports. For example, according to the Bank’s analysis, in 2014 the 

Bank ‘‘supported’’ 164,000 jobs and $27.4 billion in exports. Notably, there’s a difference between ‘‘supporting’’ jobs and ‘‘creating’’ 

jobs. 

Do we have evidence about what percentage of those jobs and exports would disappear without the Bank and why? 

What percentage of this economic activity would exist, but in a 

different sector? 

A.4. We hear from manufacturers that their lenders have balance 

sheet constraints that arise from prudential capital and liquidity 

requirements as well as institutional credit, country, and 

counterparty limitations—creating real challenges for lenders who 

work with exporters. Further, Ex-Im Bank complements rather 

than competes with private-sector lenders and each transaction undergoes analysis by Ex-Im to determine whether its support is necessary to facilitate the financing of the company’s export sales, including an evaluation of why funds are not available from commercial sources. Standalone private-sector funding of trade transactions is not always available or affordable. The Asian Development Bank released its most recent annual report on the trade finance gap in December 2014, highlighting results from a 2013 survey. That report found trade finance gaps are a persistent feature 

of the global trade landscape—even as the global economy has recovered. Their earlier 2012 survey provided evidence that trade finance gaps, which had only expanded after the global financial crisis, were continuing to negatively impact growth and job creation. 

In 2013, the global trade finance gap was estimated at $1.9 trillion. 1

109 

Given the competitive nature of foreign export credit agencies 

(ECAs), the tens of thousands of exports that Ex-Im supports annually would be put at risk if the Ex-Im Bank is not reauthorized. 

As explained in my testimony and above, Ex-Im’s services are used 

when there are gaps in private sector financing. Without Ex-Im, 

many—if not most—of these sales would be lost to foreign competitors that have easy access to the more than 60 ECAs worldwide 

that oftentimes provide very generous support for their country’s 

exports. As a result, there is a strong possibility that these exports 

would be lost to foreign competitors. In turn, the tens of thousands 

of American workers that produce those goods would no longer 

have secure jobs filling those orders. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE 

FROM JOHN G. MURPHY 

Q.1. The Export-Import Bank offers a number of different products, 

including loan guarantees, working capital guarantees, and direct 

loans. Should Congress consider eliminating a particular line of 

products, because the product is not particularly useful to companies? 

A.1. Based on conversations with our members, particularly smalland medium-sized companies that use the services of the ExportImport Bank of the United States (Ex-Im), we believe the full 

range of these products offers value and should be retained. 

For example, its working capital guarantees allow an exporter to 

tap otherwise excluded collateral in its borrowing base to pay for 

inputs and thus fulfill export orders. Resin Technology, located in 

Groton, Massachusetts, uses this program. Carly Seidewand, Direct 

of Sales and Marketing/Global Markets says: ‘‘We’re a small business, and we don’t have hard assets to lend against other than accounts receivable and inventory.’’ 

In the case of many small businesses, commercial banks often 

refuse to accept foreign receivables as collateral for a loan without 

an Ex-Im guarantee. Ex-Im working capital guarantees back 90 

percent of a private bank’s loans to an American exporter. With 

this tool, Resin Technology can generate the cash flow it needs to 

compete with large, international trading companies. 

Kim Crooks, Finance Director at Zeigler Bros.—based in Gardners, Pennsylvania—observes that when the firm exports, particularly to developing countries, payment cycles can take 60 to 90 

days. Zeigler needs to be able to finance those sales, but private 

banks generally will not lend against foreign receivables for small 

businesses. ‘‘We wouldn’t be able to get bank support without ExIm,’’ explains Crooks. Once Zeigler bought Ex-Im credit insurance 

for its foreign invoices, it was able to secure the working capital it 

needed to grow. 

Based on our interactions with many American small businesses 

that have used Ex-Im’s services, we believe there are substantial 

benefits for the fully array these products. 

Q.2. The Export-Import Bank purports to create a ‘‘surplus’’ for 

taxpayers, including in 2014. 

Setting aside the debate over the Bank’s accounting and profits, 

do all of the Bank’s main products have approximately the same 

110 

fiscal record? Or does one program that generates a weaker ‘‘surplus’’ make up for a program with a weaker track record? 

Does each program generate a surplus, under the Bank’s accounting assumptions? 

A.2. Using the accounting method established by the United States 

Congress and required by law, there is wide acknowledgment that 

Ex-Im does not cost the American taxpayer a dime. Ex-Im charges 

fees for its services that have allowed it to send to the U.S. Treasury $7 billion more than it has received in appropriations since 

1990. Regarding the performance of different financial products, 

Ex-Im Bank staff are in best situated to answer these questions. 

Q.3. The Bank has a number of lending ‘‘mandates,’’ including that 

it must make 10 percent of its authority available to renewable energy, 20 percent available to small business lending and that it 

must also promote activity in sub-Saharan Africa. 

Should we expect, or do we have evidence to suggest, that these 

transactions have a higher default rate than the nonmandated 

transactions? 

How should this inform Congress’ treatment of the mandates in 

the Bank’s reauthorization? 

A.3. Ex-Im Bank staff are in best situated to answer these questions regarding default rates. As for past or future mandates, the 

Chamber has argued that Ex-Im should provide financing in a nondiscriminatory manner for exporters that can meet its rigorous 

standards. 

Q.4. We’ve heard how the Export-Import Bank ‘‘supports’’ job and 

exports. For example, according to the Bank’s analysis, in 2014 the 

Bank ‘‘supported’’ 164,000 jobs and $27.4 billion in exports. Notably, there’s a difference between ‘‘supporting’’ jobs and ‘‘creating’’ 

jobs. 

Do we have evidence about what percentage of those jobs and exports would disappear without the Bank and why? 

A.4. Ex-Im’s methodology to calculate the number of U.S. jobs associated with exports for which it provides a loan or guarantee relies 

on a number of elements used widely across the U.S. Government, 

including, for instance, the ratio of jobs needed to support $1 million in exports (which varies by industry). These ratios are provided by the Bureau of Labor Statistics (BLS). Ex-Im Bank staff 

are best situated to address this methodology in detail. 

The U.S. Chamber of Commerce is hearing from a growing number of companies that the lapse in Ex-Im’s authorization is causing 

or will soon cause them to lose sales and may lead directly to layoffs in the near term. It is clear that some companies were able to 

take measures before the June 30 lapse in Ex-Im’s authorization 

that have blunted the immediate impact. For example, one company was able to extend its Ex-Im working capital loan before June 

30; another requested that a foreign Government grant a 30-day 

extension (to early September) for a bid due date. However, these 

measures will hold off the cost of closing Ex-Im only for a short 

time. 

Press accounts have presented the possibility that some of the 

largest U.S. exporters will consider moving some operations overseas to countries where official export credit agency (ECA) support 

111 

is available in the event Ex-Im is not reauthorized. In our view, executives are contemplating these moves because ECA support is 

often required even to bid on a wide variety of foreign business opportunities. This includes requests for tender from both public and 

private sources, including opportunities as diverse as infrastructure 

projects, nuclear power plants, and contracts to provide medical 

equipment to hospitals. U.S. lawmakers and regulators are powerless to alter these requirements, which are imposed by foreign Governments. 

Further, it is commonplace for long-lived capital goods such as 

aircraft, turbines, and locomotives to be sold worldwide with ECA 

backing, the availability of which can make or break a deal. 

The ripple effects in the U.S. economy could be substantial. It is 

well known that the largest U.S. exporters rely on supply chains 

made up of thousands of small- and medium-sized businesses, some 

of which are only remotely aware that the components they manufacture are intended for export and reliant on Ex-Im support. In 

some cases, tens of thousands of small firms are involved. 

To take one sector as an example, the U.S. aerospace sector employs approximately 1.5 million Americans directly and indirectly. 

Within this ecosystem, smaller companies rely on large firms which 

are in turn highly export dependent. Further, it is characteristic of 

the aerospace sector that the presence of ECA support often determines which firm from which county wins a sale. The availability 

of ECA support can be determinative even in cases where private 

finance is ultimately used. 

In sum, the costs of closing Ex-Im will be substantial and are 

likely to mount over time as industrial networks are rearranged to 

shift production of costly capital goods and other products that tend 

to rely on ECA support to countries where it is available. 

Q.5. What percentage of this economic activity would exist, but in 

a different sector? 

A.5. Permanently closing Ex-Im will result not in a shift of resources from one U.S. industrial sector to another but rather a 

shift in production and employment from a U.S. company to a competing company in another country where ECA support is available. 

To this point, the D.C. District Court in March ruled against 

Delta Airlines in its suit against Ex-Im, rejecting every argument 

that Delta made. The Court concluded that Ex-Im financing for foreign airlines does not affect airlines’ decision to purchase new airplanes. As the prevalence of air travel around the world expands, 

foreign airlines will assuredly purchase aircraft. However, once an 

airline has made the decision to purchase new airplanes, Ex-Im financing does affect whether those airlines purchase American- or 

foreign-made airplanes, the Court reasoned. 

The Court found that, without Ex-Im support, ‘‘airlines simply 

will purchase from Airbus instead of Boeing due to the presence of 

foreign ECA financing.’’ This is certainly the real world experience 

of many Chamber members. 

Delta’s complaint is similar to that of Cliffs Natural Resources, 

a U.S. mining enterprise that protested the sale of U.S.-made Caterpillar equipment to Australia’s new Roy Hill mine with Ex-Im 

112 

support. Crucially, the owners of the Roy Hill mine made it abundantly clear to Caterpillar that they would buy their heavy equipment from manufacturers in Japan or Korea—with support from 

those countries’ ECAs—if Ex-Im support for Caterpillar were not 

made available. The Roy Hill mine was clearly going forward; the 

only choice was whether its owners would buy U.S.-made or foreign-made equipment. 

This is the choice before Congress: Will Ex-Im be reauthorized, 

or is Congress content to hand a significant competitive advantage 

to our trade competitors? The repercussions for high-skill, highwage jobs in a number of U.S. industries will be significant. 

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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

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STATEMENT FROM THE BANKERS ASSOCIATION FOR FINANCE AND 

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