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94–686PDF 2015

TRADE PROMOTION AGENCIES AND

U.S. FOREIGN POLICY

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

MAY 19, 2015

Serial No. 114–40

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

TOM EMMER, Minnesota 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

DARRELL E. ISSA, California 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

REID J. RIBBLE, Wisconsin 

LEE M. ZELDIN, New York 

WILLIAM KEATING, Massachusetts 

BRAD SHERMAN, California 

BRIAN HIGGINS, New York 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

(III)

C O N T E N T S 

Page

WITNESSES 

Mr. Fred P. Hochberg, chairman and president, Export-Import Bank of the 

United States ........................................................................................................ 6

The Honorable Elizabeth L. Littlefield, president and chief executive officer, 

Overseas Private Investment Corporation ......................................................... 14

The Honorable Leocadia I. Zak, director, U.S. Trade and Development Agency ........................................................................................................................... 29

Mr. Daniel J. Ikenson, director, Herbert A. Stiefel Center for Trade Policy, 

Cato Institute ....................................................................................................... 53

General James L. Jones, USMC, Retired, founder, Jones Group International 

(former National Security Advisor to the President of the United States) ..... 67

Ms. Susan Jaime, founder, Ferra Coffee International ........................................ 76

Carly Seidewand Eppley, vice president, Global Sales and Administration, 

Resin Technology, LLC ........................................................................................ 82

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Mr. Fred P. Hochberg: Prepared statement .......................................................... 8

The Honorable Elizabeth L. Littlefield: Prepared statement ............................... 16

The Honorable Leocadia I. Zak: Prepared statement ........................................... 31

Mr. Daniel J. Ikenson: Prepared statement .......................................................... 56

General James L. Jones, USMC, Retired: Prepared statement ........................... 70

Ms. Susan Jaime: Prepared statement .................................................................. 78

Carly Seidewand Eppley: Prepared statement ...................................................... 85

APPENDIX 

Hearing notice .......................................................................................................... 96

Hearing minutes ...................................................................................................... 97

General James L. Jones, USMC, Retired: Material submitted for the record ... 98

(1)

TRADE PROMOTION AGENCIES AND

U.S. FOREIGN POLICY 

TUESDAY, MAY 19, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 10 o’clock a.m., in 

room 2172 Rayburn House Office Building, Hon. Ted Poe (chairman of the subcommittee) presiding. 

Mr. POE. This subcommittee will come to order. Without objection, all members will have 5 days to submit statements, questions, 

and extraneous materials for the record, subject to the length limitation and the rules. 

I will now make my opening statement. Trade is critical to the 

national economy of the U.S. For example, manufacturing jobs related to trade pay 18 percent more than manufacturing jobs that 

are not. Trade plays a key role in new jobs. If a company wants 

to expand, it has to reach new customers because 95 percent of the 

customers are outside the United States. 

Trade is the lifeblood of my hometown of Houston, Texas. Over 

half of Houston’s economy depends on trade. Houston has one of 

the largest ports in the world and it is the only gas capital of the 

world. Overall, trade supports more than one out of five jobs in 

Texas and Texas has been the top exporting state for 12 consecutive years. This is not just for large businesses either. Ninety-three 

percent of Texas exporters are small- and medium-size businesses. 

Texas is the number one state and Houston, Texas is the number 

one city when it comes to receiving support from EXIM. 

There is no question about the importance of trade. We need 

trade to grow. What we are looking at today is the Federal Government’s role in trade. Before us today we have three agencies in the 

Federal Government that promote trade and investment. 

The Export-Import Bank is the official U.S. export credit agency. 

It provides direct loans, loan guaranties and export credit insurance to help finance U.S. exports of goods and services. 

The Overseas Private Investment Corporation, or OPIC, is the official U.S. development finance institution. OPIC seeks to promote 

economic growth and developing economies by providing political 

risk insurance, project and investment fund financing, and other 

services to U.S. firms investing in those countries. 

The U.S. Trade and Development Agency, or TDA, seeks to link 

U.S. businesses to export opportunities overseas that lead to ecoVerDate 0ct 09 2002 15:43 Jun 30, 2015 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\051915\94686 SHIRL
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nomic growth and development in middle income countries by funding a range of pre-export activities. 

The question before us today is do we need these agencies? Sixty 

other countries have export credit agencies of their own. Supporters of reauthorizing EXIM Bank argue that if Congress allows 

the EXIM Bank to expire, then these 60 other countries will be 

happy to jump in, put our American companies at a competitive 

disadvantage, and take business away from the U.S. 

Some users of EXIM say they will go out of business without 

EXIM. Critics of the bank respond that subsidizing companies has 

no place in a free market system. But some of these same critics 

support government subsidies for terrorism risk insurance, flood insurance, they support the FDIC, and the National Credit Union 

Share Insurance Fund. 

There is also substantial disagreement about exactly what this 

costs the taxpayer. Critics say due to some tricky accounting standards, taxpayers are left holding the bag, while the agencies themselves argue they return a surplus to the U.S. Treasury every year. 

Critics argue that Congress enacted reforms during the EXIM 

Bank’s 2012 reauthorization, but claimed that these reforms were 

never implemented. EXIM disagrees, saying that it has completed 

and implemented all reforms. 

While trade promotion agencies are supposed to promote trade 

that helps the U.S., many Americans have questions about helping 

foreign companies that are in the U.S. economy. Do big State 

Owned Enterprises, or SOEs, deserve taxpayer dollars on top of the 

money they get from their own governments? And what about 

American companies that are trying to compete against these industries? 

At the same time, these agencies have a special focus on helping 

small business. Twenty-five percent of EXIM authorized money 

went to small businesses last year, exceeding its 20 percent requirement. Over the past 5 years, 75 percent of OPIC’s supported 

projects have involved a U.S. small- or medium-size business. 

Just last month, a former Export-Import Bank loan officer pled 

guilty to taking more than $78,000 in bribes for fast tracking unqualified loan applications. OPIC has similar examples of fraud. 

This is a good sign that fraud is identified and perpetrators are 

punished, but there seems to me that more could be done to prevent fraud in the first place. 

So my hope is that this hearing can bring some clarity to this 

debate. 

The American companies just need a level playing field to compete. No one innovates as well as the U.S. from the iPhone to hydraulic fracturing the United States is the world’s leader in coming 

up with new ideas that create new jobs and a higher standard of 

living for everyone. For example, if you add up the 20 countries the 

United States has a trade agreement with, American manufacturers run a $50 billion trade surplus with them. That is what happens when we combine the strength of American spirit with a level 

playing field. American companies win. 

Before turning to the ranking member for his opening remarks, 

I would like to submit to the record the testimonies in support of 

reauthorizing EXIM Bank from the Nuclear Energy Institute, 

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Texas Association of Business, Texas Association of Manufacturers, 

and over 300 businesses in Texas. Hearing no objection, all of these 

testimonials from these 300 different groups in support of the 

EXIM Bank will be made part of the record. 

Now I will turn to the ranking member, Mr. Keating, and the 

gentleman from Massachusetts may give his opening statement. 

Mr. KEATING. Thank you, Mr. Chairman, for conducting this 

timely and bipartisan-spirited hearing. And thank you to our witnesses for taking the time to testify here today. 

The agencies that are the subject of this hearing, the Export-Import Bank, the Overseas Private Investment Corporation, and the 

Trade and Development Agency each serve vital U.S. interests. 

Since its founding over eight decades ago, the EXIM Bank has 

helped finance U.S. exports of goods and services and contribute to 

U.S. employment where alternative financing is unavailable or to 

counter government backed export financing by foreign competitors. 

It is estimated that the EXIM Bank helped to finance approxi- mately $27.5 billion worth of American exports and supported more 

than 164,000 American jobs in Fiscal Year 2014 alone. 

Small- and medium-size U.S. business benefit greatly from EXIM 

Bank’s products, particularly its working capital guarantee, which 

enables small businesses to obtain loans, to purchase raw materials 

and supplies, and its export credit insurance, which covers the risk 

of nonpayment by international buyers and extends credit to qualified foreign customers. 

The businesses that use these products aren’t Fortune 100 companies. They are companies like Decas Cranberry Products, Inc., a 

family owned, small business in Carver, Massachusetts, in my district, that sells cranberries and cranberry products to Europe, Canada, Mexico, South America, and Asia as a direct result of the support provided by EXIM. Since using EXIM Bank’s export credit insurance, Decas cranberry sales have reached $60 million, approximately 15 percent of which is export related. 

The companies like Resin Technology of Groton, Mass., whose 

vice president, Carly Seidewand, is attempting to be here today 

and to share in how EXIM’s working capital guarantee has helped 

her company, the company founded by her father. It increased 

sales and it expanded its workforce as a result. 

As our economy continues to grow, it is essential that the EXIM 

Bank continue to provide its valuable services to thousands of 

American exporters and their families. For this reason, I am the 

co-sponsor of H.R. 1031, Promoting U.S. Jobs Through Export Act 

of 2015 which would reauthorize the EXIM Bank charter through 

2022. 

I am often intrigued by the answers I receive when I ask my 

peers and colleagues which company they believe is the largest 

American auto exporter? In today’s ever connected global economy 

the answer should not surprise you. It is BMW Manufacturing 

Company. In 2014 alone, BMW exported $9.2 billion worth of passenger vehicles through the Port of Charleston, accounting for more 

than 260,000 vehicles. BMW’s facility in Spartanburg, South Carolina remains the largest U.S. automobile exporter another year 

running. Last year, this facility announced $1 billion investments 

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in production capacity increased to 450,000 vehicles, making it the 

largest BMW plant in the world. 

In this increasingly global economy, it would be irresponsible for 

this Congress to fail to reauthorize the EXIM Bank which pays for 

itself and enables U.S. manufacturers to sell more products abroad 

and create new good jobs here at home. 

Thank you, Mr. Chairman, and I yield back. 

Mr. POE. The Chair recognizes the gentleman from South Carolina, Mr. Wilson. 

Mr. WILSON. Thank you, Mr. Chairman, for holding this important and timely bipartisan hearing. Within the 2nd Congressional 

District of South Carolina which I represent, is Zeus Corporation 

of Orangeburg, Prysmian Cable of Lexington, and HEY of Aiken. 

These three companies share a common bond. They all produce 

parts for the Boeing 787 Dreamliner which is currently being built 

outside of Charleston, South Carolina. And in just in the last 5 

years, they now have 8,000 employees at the facility in Charleston. 

Zeus Corporation manufactures the tubing for the aircraft. 

Prysmian Cable makes the internal cable. And HEY produces the 

key interior components of the Dreamliner. Additionally, Thermal 

Engineering of Columbia provides composite painting of the 

Dreamliners creating jobs. 

As we continue to debate reauthorization, I hope we can focus on 

the fact of jobs and that there are more than 60 competing international export credit agencies that undercut and destroy American 

jobs daily. In a perfect work, the Export-Import Bank would not 

not be needed, but unfortunately, Mr. Chairman, we do not live in 

a perfect world. 

I am really grateful to hear my colleague from Massachusetts. 

We share a real appreciation of BMW. It is the largest single facility of BMW and South Carolina is the leading export of cars. We 

are also the leading manufacturer and exporter of tires. And so 

with Michelon, with Bridgestone, Continental, Giti, our state has 

made such progress and I am particularly grateful to find out that 

our friends and neighbors of Massachusetts appreciate this too. I 

yield back. 

Mr. POE. I thank the gentleman and I would request that members keep their statements to 1 minute, but indeed of bipartisan 

equal time, Mr. Sherman, you have 1 minute and 30 seconds. 

Mr. SHERMAN. Mr. Chairman, thank you for holding this hearing. 

I have been very involved in export administration agencies. When 

I sat in that chair, this subcommittee wrote a new charter for 

OPIC which passed the House of Representatives, and of course, 

the full committee overwhelmingly. Unfortunately, for reasons that 

escape me, there is the United States Senate. But I want to commend you, Ms. Littlefield, for following through regulation many of 

the policy provisions that were in the bill that passed this committee and the full committee by an overwhelming vote. 

The hot issue now is EXIM. Mr. Chairman, unlike you, I gave 

100 speeches in favor of the candidacy of George McGovern. But 

even I don’t believe——

Mr. POE. That is a true statement. 

Mr. SHERMAN. That is a true statement. All my statements are 

true. I do not believe in unilateral disarmament. Germany, Japan, 

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Korea, and China have export promotion authorities which as a 

percentage of their economy dwarf EXIM Bank. And the idea that 

American companies should be trying to export and face competition from those agencies without the help of Mr. Hochberg would 

astound me. 

Finally, the EXIM Bank actually makes money. You will hear 

that there is something called fantasy accounting in which they 

lose money. Let me assure you, as a CPA, and I will agree with 

the CBO, if we didn’t have EXIM, we would have to cut the budget 

assuming we didn’t want to increase the deficit. And those cuts 

might very well come from foreign operations. I yield back. 

Mr. POE. The Chair recognizes the gentleman from Pennsylvania, 

Mr. Perry, for his opening statement. 

Mr. PERRY. Thank you, Mr. Chairman. Folks, thanks for being 

here. President Roosevelt created the Export-Import Bank in 1934 

to promote U.S. sales overseas by providing loans to foreign entities 

looking to purchase American goods. Sounds like a good deal. However, when the government subsidizes an export for one company, 

other companies in the same sector might not get the same benefit 

and oftentimes hurts their sales and job creation. 

The EXIM Bank may help a few American businesses, but at 

times it is definitely at the expense and hurting of others and we 

have heard from them. Some people categorize this as corporate 

welfare programs and pick winners and losers and have no rightful 

place in U.S. trade policy agenda. Although I think that unilateral 

disarmament as has already been stated is concerning, I think we 

should also be focusing on reducing the burden of domestic regulations and taxes which will spur productivity and employment while 

reducing the role and the necessary role of the Federal Government 

in the U.S. economy and understanding that 98 percent of sales 

abroad are done without the EXIM and I yield back. 

Mr. POE. The gentleman yields back. The Chair recognizes the 

gentleman from New York, Mr. Higgins. 

Mr. HIGGINS. Thank you, Mr. Chairman, for holding this hearing. 

The U.S. trade promotion agencies play a critical role in boosting 

U.S. exports. They provide the bulwark against foreign governments that heavily subsidize their own domestic industries. In my 

western New York community, the Export-Import Bank has supported over $100 million in exports and more than 600 jobs. 

Furthermore, the Export-Import Bank is self-sustaining and has 

generated more than $7 billion in excess revenues to the United 

States Treasury. Failing to undertake a long-term reauthorization 

of the Bank would only serve to hurt American businesses and 

workers. I look forward to the discussion today. Thank you for 

being here. 

Mr. POE. The gentleman yields back. Does anybody else wish to 

be recognized for an opening statement? 

Without objection, all witnesses’ prepared statements will be 

made part of the record. I ask that each witness please keep your 

presentation to no more than 5 minutes. We have two panels. And 

I will introduce the first panel and then they can give their opening 

statements. 

Fred Hochberg is chairman and president of the Export-Import 

Bank of the United States. Mr. Hochberg has previously served in 

6

a variety of positions in the private and public sector including Acting Administrator for the Small Business Administration. 

Ms. Elizabeth Littlefield is president and chief executive officer 

of the Overseas Private Investment Corporation. Ms. Littlefield 

previously held several positions relating to finance and development and was a recipient of the Secretary of State’s Distinguished 

Service Award in 2012. 

Ms. Zak is director of the U.S. Trade and Development Agency. 

Prior to joining the USTDA, Ms. Zak was partner in the Washington and Boston Offices of Mintz, Levin, Cohn, Ferris, Glovsky 

and Popeo, P.C. and taught at several law schools around the 

United States. 

Mr. Hochberg, we will start with you and you have 5 minutes. 

STATEMENT OF MR. FRED P. HOCHBERG, CHAIRMAN AND 

PRESIDENT, EXPORT–IMPORT BANK OF THE UNITED STATES 

Mr. HOCHBERG. Chairman, Ranking Member, and distinguished 

members of the subcommittee, thank you for inviting me to testify 

about the role that EXIM plays in promoting commercial diplomacy, a critical component of American foreign policy. 

In May 2012, EXIM was reauthorized with overwhelming bipartisan support, 330 members in the House and 78 in the Senate. 

The 2012 Reauthorization all put in place a number of reforms. 

And let me underscore, each and every one of those reforms has 

been implemented. 

Since then, the Bank has continued to support U.S. private sector job growth including 164,000 jobs last year alone. We have also 

generated as has been stated, billions of dollars for the taxpayers 

including $675 million sent to the Treasury for deficit reduction in 

2014. 

EXIM fully believes and works with the private sector to support 

U.S. job growth. We do this in two ways. One, when the private 

sector is unwilling or unable to provide financing to exporters; and 

secondly, when U.S. exporters face foreign competition backed by 

other governments, EXIM works to level the playing field for U.S. 

businesses and their workers. 

At one time, EXIM financed defense exports. However, since 

1968, Congress has prohibited the Bank from financing most military sales. While almost all of EXIM’s financing is commercial, U.S. 

companies with a defense presence can still benefit from EXIM 

nonetheless. 

W.S. Darley is a fire equipment producer, headquartered in Illinois that manufactures in both Wisconsin and Iowa with a supply 

chain throughout America. Darley is a company that works in both 

the commercial and defense sectors. One way that Darley keeps its 

workforce fully deployed is by balancing between the two with 

roughly half their business being commercial. 

Recently, EXIM financing empowered them to sell 32 fire trucks 

to Nigeria supporting 100 jobs. On top of that, the sale included 

training services for public service employees in Lagos. This transaction is but one example of how when countries build things together, they often form lasting bonds that go far beyond the commercial to serve our national interests. 

7

In addition, as directed by Congress, the Bank requires some of 

our larger transactions to be shipped on U.S. flagged vessels, thereby supporting a strong merchant marine. Over the past 2 years 

alone, more than $90 million in shipping fees have been paid by 

foreign buyers to the U.S. Merchant Marine. 

U.S. businesses operate in the global economy. American businesses and workers aren’t simply competing against Chinese, Russian, or French counterparts. Often, they are competing against 

whole nations. 

Last week, I met with my foreign counterparts, discussed the future of export credits. Congress has made it clear they would like 

the Treasury Secretary to ratchet down export credits. However, 

what I heard from Europe to Asia to South America was just the 

opposite. Our foreign counterparts intend to accelerate financial 

backing for their exporters as well as serving as a much-needed 

backstop. 

When commercial banks withdraw from regions or sectors that 

are experiencing downturns, export credit agencies step forward 

and fill the gap so that domestic exporters don’t lose sales or workers. In some way, EXIM is like a fire truck. You don’t sell of a fire 

truck just because you haven’t had a fire in the past few years. 

We appreciate the widespread support, bipartisan support of 

EXIM and we are eager to continue to support American jobs as 

the Bank has done effectively and efficiently for over eight decades, 

providing long-term certainty to U.S. businesses, seeking to compete in overseas markets is imperative. Businesses need to make 

long-term plans to grow global sales, hire more workers, and invest 

in innovation. Those sales, in turn, lead to greater economic stability, both in the U.S. and abroad. And for all nations, economic 

stability is the foundation of security and peace. 

In closing, as Congress considers reauthorization of EXIM Bank, 

I trust this committee will keep American competitiveness at the 

forefront. We appreciate the subcommittee’s interest. We look forward to working with you to empower your constituents to export 

more, hire more American workers, and strengthen America’s economic resilience to the global age ahead. 

Thank you and I look forward to answering your questions. 

[The prepared statement of Mr. Hochberg follows:]

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Mr. POE. Thank you, Mr. Hochberg. The Chair recognizes Ms. 

Littlefield for her opening statement. 

STATEMENT OF THE HONORABLE ELIZABETH L. LITTLEFIELD, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, OVERSEAS 

PRIVATE INVESTMENT CORPORATION 

Ms. LITTLEFIELD. Mr. Chairman, Ranking Member Keating and 

members of the committee, thank you for inviting me here to testify before you today. 

I am Elizabeth Littlefield, the President and CEO of the Overseas Private Investment Corporation (OPIC). OPIC is the U.S. Government’s development finance institution. It mobilizes private capital investment flows into poor and developing countries to help 

solve critical development challenges and in so doing, it advances 

U.S. foreign policy and national security objectives. We do this by 

providing long-term loans, guarantees and political risk insurance 

to businesses investing much needed capital into these developing 

countries, capital that would not be invested there without OPIC’s 

financing and risk-mitigating services. 

And because businesses are willing to pay the full cost of our 

services and more, OPIC generates income for the taxpayer and 

has done so reliably for 37 straight years. 

Since the end of World War II, a strong, bipartisan consensus 

has recognized the fundamental link between poverty, economic instability, and conflict. In conflict, vulnerable nations, foreign direct 

investment helps to create jobs, opportunity, hope, and stability. At 

the same time, OPIC support helps our U.S. clients, a large majority of whom are small businesses, to tap into those fast growing, 

dynamic, emerging markets creating jobs both at home and abroad. 

Today, OPIC manages just under 600 long term investment 

projects in over 100 developing countries, principally in critical infrastructure, in power, private education, private healthcare, lowincome housing, and microfinance and other financial services, all 

of these being sectors that contribute powerfully to sustainable economic development. 

In every one of these projects, our private investors also have 

their capital at risk. Every one of these projects is centered on 

achieving positive and measurable development impact and every 

one of those aims to be commercially viable. So OPIC uses the 

power of the markets and business to tangibly deliver American development and foreign policy goals. The Agency provides an effective development that pays for itself and more. 

More than one third of OPIC’s entire portfolio is invested in postconflict nations or nations currently vulnerable to conflict. My own 

work at OPIC reflects these national security priorities. While I 

have been at OPIC, I have been on the ground in Haiti, Liberia, 

South Sudan, Afghanistan, Jordan, Egypt, Tunisia, and others to 

help draw investments into those fragile countries. 

In Afghanistan, OPIC’s large portfolio of investments includes a 

cashmere processing facility, a state-of-the-art water bottling facility, and a highly successful small and medium enterprise lending 

facility, created in partnership with USAID which now supports 

successful job creating businesses in and around Kabul. 

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In Iraq, OPIC’s investment portfolio supported the reconstruction 

of that country in many, many ways, ranging from microfinance 

lending to low-income housing to a dredging project to clear Iraq’s 

water ways. 

In Haiti, OPIC worked with USAID and a U.S. company to deliver micromortgages and housing reconstruction loans after that 

earthquake. 

Even South Sudan. I traveled to Juba immediately following the 

initial peace agreement to identify critical infrastructure projects 

that could potentially be financed, taxpayer-free, with the private 

sector investment. 

So in closing, OPIC’s goal is to help fragile market economies 

grow and stabilize so that the odds of conflict are reduced or to 

help restore the foundation of the market economy after a conflict 

as our troops begin to come home. As former Secretary of Defense 

Robert Gates once put it, ‘‘Development is one of America’s great 

giant force multipliers.’’ We agree. 

Every single dollar that OPIC extends has a multiplier effect for 

national security. It has a multiplier effect for development and it 

has a multiplier effect for the taxpayer, as every $1 into OPIC’s operations has generated up to $8 back to the Treasury, back in that 

deficit reduction. 

Mr. Chairman, this is why we believe that OPIC is smart, lean, 

and market-driven development. Thank you very much and I welcome your questions. 

[The prepared statement of Ms. Littlefield follows:]

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Mr. POE. Thank you, Ms. Littlefield. The Chair recognizes Ms. 

Zak for opening statement. 

STATEMENT OF THE HONORABLE LEOCADIA I. ZAK, 

DIRECTOR, U.S. TRADE AND DEVELOPMENT AGENCY 

Ms. ZAK. Chairman Poe, Ranking Member Keating, and members 

of the subcommittee, thank you for your interest in USTDA’s work 

to help U.S. companies create jobs here at home while promoting 

sustainable development abroad. 

As we were preparing for today, my staff came across a quote. 

It was incredibly relevant to the topic of this hearing. It is from 

former Secretary of State Cordell Hull who said, ‘‘When goods and 

products cross borders, armies don’t.’’ Secretary Hull understood 

what we at USTDA strongly believe, that robust, diplomatic trade 

relationships mean resilient economies and secure nations. 

Now more than ever, given the impact of globalization, America’s 

prosperity depends on trade with strong, stable states. Establishing 

secure markets and fostering trade ties is exactly what we do. In 

fact, it is part of the unique dual mandate that Congress gave us. 

That is to promote U.S. private sector participation in development 

projects in emerging markets with an emphasis on sectors with significant U.S. exports. 

USTDA approaches this mission in three important ways. First, 

we help to build infrastructure for economic development, stable 

markets for U.S. exports, and secure routes for global trade. Colombia, for example, has been a strategic focus of U.S. engagement in 

Latin America for decades. As part of this engagement, USTDA 

maintained an active portfolio to not only build the infrastructure 

in Colombia, but also to strengthen diplomatic and economic ties. 

During the negotiations of the U.S.-Colombia Trade Promotion 

Agreement, USTDA helped the Port of Cartagena comply with the 

U.S. Customs Container Security Initiative. The port implemented 

changes from USTDA’s technical assistance with the help of goods 

and services from several states. Moreover, Cartagena’s designation 

as a CSI port strengthened commercial relations while enhancing 

the safety and security of cargo. 

Second, our activities facilitate strategic partnerships to build 

long term trade ties. USTDA’s public/private partnerships help 

U.S. industry establish long-lasting connections with leaders from 

the world’s fastest growing markets. In fact, for those of you who 

have traveled to India, you probably didn’t realize you were benefitting from the Agency’s U.S.-India Aviation Cooperation Program. 

The ACP has enabled U.S. and Indian officials to collaborate in 

several critical areas, including safety and security. Because of the 

relationships that the ACP has developed, the Government of India 

asked USTDA for help in successfully restoring their Category 1 

safety rating from the FAA. They have also asked us to help them 

develop the technical capacity to test, certify, and procure state-ofthe-art aviation security equipment. 

These projects present a significant opportunity for U.S. industry 

to provide India with the solutions necessary to achieve international standards and to meet its security needs. The India ACP 

is critical to the success of these efforts. That is because they, like 

30

our other PPPs, foster person-to-person connections, provide access 

to key stakeholders, and strengthen bilateral trade ties. 

Third, and finally, I could not agree more with the chairman’s 

statement regarding leveling the playing field and U.S. business 

doing the rest. That is why USTDA helps level the playing field for 

U.S. firms competing in international tenders. 

Both our U.S. and foreign partners have told us about challenges 

presented by low cost procurement systems. I know at first blush 

this doesn’t sound exciting, but relying on lowest cost often means 

that a host country is forced to acquire poor quality goods and services which is not in their long-term interest. We believe there is 

nothing low cost about buying something twice. Because we pride 

ourselves on listening to the needs of our stakeholders, we responded to this challenge by partnering with George Washington 

Law School to launch our Global Procurement Initiative. The GPI 

delivers customized solutions that target specific procurement 

issues. 

One of our first GPI countries was Vietnam, a long-term partner 

of USTDA. They asked for our help in implementing their national 

procurement law which they revised to include low cost. 

The GPI embodies our Agency’s mandate. It responds to our 

partner countries’ efforts to develop sustainable infrastructure 

projects. It also answers U.S. industry’s call to level the playing 

field for greater international competition. Activities like these 

produce results for our foreign partners and for U.S. industry. And 

they provide a demonstrable return on taxpayer investments. 

USTDA’s current multiplier, $76 in exports for every $1 programmed is the highest in the Agency’s history. 

Mr. POE. Ms. Zak, I would ask you to sum up your statement, 

because it is a part of the record. 

Ms. ZAK. Certainly. USTDA leverages the private sector. In what 

we have before us is a development model that is new and it is effective. And with this development model, we lay the foundation for 

strong, stable states, states capable of preventing conflict, states 

capable of managing crises, capable of promoting prosperity. 

USTDA’s development model advances economic interests of the 

United States and even more importantly, it safeguards U.S. national security. It ensures that U.S. goods and products cross borders so our military doesn’t have to. 

Chairman Poe, subcommittee members, thank you very much for 

having us here this morning. I look forward to your questions. 

[The prepared statement of Ms. Zak follows:]

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Mr. POE. Thank you. Thank all the witnesses for being here. I 

will start with myself and would ask that the witnesses be as brief 

as possible under the time restraints. 

Chairman Hochberg, I want to start with you. You may know 

that while we are having this hearing, there is a press conference 

down the next building over, a pep rally if you will, talking about 

the demise and end of EXIM Bank as we know it. Controversy here 

in Congress and we have heard a lot on both sides as you know. 

A few questions. Is the statement true that Houston, Texas is the 

number one city in the U.S. that uses EXIM Bank for its businesses, small businesses? 

Mr. HOCHBERG. Yes, it is. 

Mr. POE. And Texas is the number one state, is that correct? 

Mr. HOCHBERG. Texas is the number one state in the country for 

exports. 

Mr. SHERMAN. Mr. Chairman, I would like to withdraw my support for EXIM Bank. 

Mr. POE. Okay, you may do that. I don’t know if you have ever 

heard of Olney, Texas or not. I know you are from New York. Have 

you ever heard of Olney, Texas? 

Mr. HOCHBERG. Absolutely. One of our great American exporters 

is from Olney, Texas. 

Mr. POE. Air Tractor. 

Mr. HOCHBERG. Air Tractor. 

Mr. POE. Air Tractor makes small planes that fertilize the fields 

and also does other things, fight fires. Olney is a town that is near 

Burnet and Flower Mound in case you were interested where they 

are. David Ickert owns it. Two hundred plus employees. And I 

would like your answers to be based upon this statement by him 

that ‘‘Air Tractor has been using EXIM for 20 years. Has never 

filed a claim for money from the Bank. In places such as Spain, Air 

Tractor has been selling for years. EXIM helped us to get a firm 

footing and they no longer need to use the Bank. In other countries 

in South America, the company needs EXIM to get financing because smaller banks don’t pay any attention to Air Tractor in 

Olney, Texas.’’

Using this business as an example, the statement has been 

raised and I think it is a fair question, using EXIM Bank, how does 

that, if it does, deny equal competition from other businesses that 

don’t use EXIM Bank in the U.S., other businesses that need financing as well? 

Mr. HOCHBERG. I don’t believe it does, sir. I mean when we support Air Tractor, it is a great company. They have less than 300 

employees in a town with about 3,000 people. It is a big business 

for a town of Olney, Texas with three traffic lights. We support 

their exports to farmers in Argentina, Brazil, a lot of their farmers 

in Latin America that are not credit worthy without our export 

support, without our guarantee. We are not helping them when 

they compete in the United States. When they compete in the 

United States, they compete in a free and open market. The only 

time we help them is how they compete against other foreign competitors who are trying to take that sale away from them. 

Mr. POE. All right, does EXIM Bank give loans to foreign companies? 

40

Mr. HOCHBERG. We will do buyer financing. In the case with Air 

Tractor, we have actually provided a guarantee that the foreign 

buyer will pay over a 5- to 6-year period and then that is transferred over to—actually Wells Fargo Bank is the one bank that will 

work with them on these transactions. 

Mr. POE. Does EXIM work with American banks in the loan 

process like Amegy in Texas, Wells Fargo, and other banks or not? 

Mr. HOCHBERG. Actually, Amegy Bank, we named our lender of 

the year this past year—in 2015. But we also work with foreign 

banks. We will work with the bank that the buyer needs to work 

with in order to make sure we can provide the guarantee that will 

make the transaction go forward. 

Mr. POE. If EXIM works with foreign companies, how does that 

help the United States? 

Mr. HOCHBERG. Well, in the case of Air Tractor, using that as an 

example, it is a foreign buyer who has a choice. They can buy either American made crop dusters and firefighting equipment or foreign. So in that case, we—if the financing is the one thing that is 

needed to make that sale, the customer, the exporter has to deal 

with price, quality, value, service. We only can step in if financing 

is the one stumbling block and the private sector can’t or won’t do 

it. We can step in and make sure there is a level playing field so 

that they can buy an American product versus a foreign product. 

Mr. POE. How about state-owned enterprises? Some of the concern is that EXIM Bank helps foreign state owned enterprises with 

financing. Comment on that if you would. 

Mr. HOCHBERG. Well, occasionally, yes. In many other countries, 

much more so than the United States. There are a lot of stateowned enterprises in transportation, in power, in utilities, in a 

number of those fields. And in that case, those state-owned enterprises have a choice, to buy an American product or a Chinese or 

a Russian or a French product, particularly in the utility field. So 

if that is the case, we want to make sure there is a level playing 

field that American companies, American workers get an even shot 

at making that sale. 

Mr. POE. Last question, let us go back to Air Tractor in Olney, 

Texas. There is no EXIM Bank. What are the possibilities—what 

would happen to Air Tractor in Olney, Texas without EXIM Bank? 

Mr. HOCHBERG. Well, Dave Ichert recently said when I asked 

him, he said it is a matter of 68 jobs. That is the number of people 

likely to lose their positions at Air Tractor if the Bank isn’t reauthorized by June 30th because right now half their sales, more 

than half their sales are export sales. 

Mr. POE. The Chair will recognize the ranking member, the gentleman from Massachusetts, Mr. Keating. 

Mr. KEATING. Thank you, Mr. Chairman. Unlike California, we 

are not worried about competition from Texas or any state. In Massachusetts, we are prepared to take on any comers. But I would 

like to deal with the critics. 

Chairman Hochberg, get right to the point. Things that are 

heard are that EXIM is corporate welfare and it is for big business. 

I want you to address—I have demonstrated one of my districts. It 

is not a big business. Demonstrate how it is for medium and small 

businesses. Number two, do the U.S. taxpayers bear this cost? And 

41

number three, how do you address the critics that say well, this 

can be done in the private sector? They could just step in and provide the same kind of export financing instead of EXIM and take 

on those three with some information that you would have in detail. 

Mr. HOCHBERG. Well, thank you, sir. Well, your first question 

you asked about corporate welfare. I frankly find that term confusing. Customers—people who use the Bank, foreign buyers or corporations, they pay a fee. They pay a fee just as Elizabeth 

Littlefield said at OPIC. People pay a fee for that service. They pay 

a fee for the service. We fulfill the service and we turn over to 

Treasury the excess. Last year, $675 million. Welfare implies taking money from one group of people and handing it to somebody 

else. We have actually customers, clients of the Bank, giving us 

money for a service. We render the service and then the excess we 

send to the taxpayer. So it goes the exact opposite direction. 

Ninety percent of our customers are small businesses like Air 

Tractor that the chairman mentioned, like Darley, a company I 

mentioned in my oral testimony. So I am not sure I understand 

what that charge is. It has a nice ring to it, but it doesn’t really 

have any meaning. In terms of taxpayer, we have reserves that are 

paid for. We collect a fee. We put aside low loss reserves like any 

responsible lending institution would do. Congress, we are a zero 

appropriation. We are totally self-sustaining which is required by 

WTO. However, Congress still appropriates about $100 million. The 

excess goes to the taxpayer. That low loss reserve account is there 

as a backstop in the rare cases we have a default. It is about $5 

billion today and our default rate which we report is one of the reforms from Congress in 2012. Every 90 days we report on defaults 

to Congress. They are currently running at 0.167 percent, less than 

1⁄5 of 1 percent. But those reserves are all paid for by customers 

and clients of the Bank. They are not coming out of the taxpayer. 

And your last question about the private sector, the private sector is who brings us in. When a company needs support to make 

a sale and to make sure we have the jobs in America, they will 

usually go to a bank or they will go to an insurance broker. The 

bank or insurance broker is the one that calls us in, generally, and 

says we can’t do this transaction without a government guarantee. 

That is certainly the case with Air Tractor. They cannot make 

those sales. A lot of banks are not anxious to make loans to farmers in Brazil and Argentina and other developing countries. 

Darley has made it very clear, they have said if we are going to 

compete with our competitors in China, Austria and Germany, we 

have to come to the table with government-backed financing just 

like our competitors do. So again, it is the private sector that has 

called us in in order to make sure there is a level playing field. 

Mr. KEATING. Thank you, Mr. Chairman, I think you were really 

concise on those criticisms. I don’t think really warrant much material consideration, but it is good we address them because I think 

too many of us here are—it is not a bad thing, are all on the same 

page on this issue. 

Now a question for Ms. Littlefield, you mentioned about OPIC’s 

work in developing countries and how much that centered on conflict in at-risk areas. You mentioned specifics about Afghanistan 

42

and Iraq. Could you give us a few specifics about Pakistan, Jordan, 

Egypt, or Tunisia as well? Because I think when people hear the 

details, they will get a sense of how this can ameliorate the different conflicts around the world. Could you touch on some more 

examples and then how you find it helpful in terms of resolving 

these conflicts? 

Ms. LITTLEFIELD. Absolutely, thank you very much, Congressman. I can give you an example or two of each of those countries, 

but perhaps I will start with Jordan because, as we all know, Jordan is one of the U.S.’ staunchest allies and has been extraordinarily brave and outspoken against the forces of extremism. That 

tiny country is extremely poor. They are one of the most water insecure countries on the Planet Earth. Ever since the pipeline from 

Egypt, where they were getting their gas, has been blown up repeatedly, they are getting all of their fuel shipped up from Eilat to 

Amman in trucks, heavy fuel oil. And they have got anywhere between 750,000 and 1.2 million Syrian refugees all pouring into this 

tiny little country. 

This is a country where we have made a significant effort to 

identify U.S. partners that would help us invest in critical infrastructure there. For example, now our OPIC projects provide 25 

percent of the power in that country of Jordan; 22 percent of the 

water flowing into Amman, its capital; and in partnership with 

USAID, we have created a small and medium enterprise lending 

facility in Jordan that is made 200 loans that are supporting enterprises, that are creating 6,000 to 7,000 jobs, including jobs for Syrian refugees. 

Mr. KEATING. My time is up. But that is a great detailed explanation of just one country. In just the last several days, I have seen 

the refugee settlements in Jordan. And I would just like to emphasize our Subcommittee of Terrorism and Trade, how today’s hearing shows the connection between those things. With that, I will 

yield back, Mr. Chairman. 

Mr. POE. The Chairman yields back his time. The Chair recognizes Mr. Perry from Pennsylvania for his questioning. Mr. Perry. 

Mr. PERRY. Thank you, Mr. Chairman. Mr. Hochberg, in your 

prepared testimony you stated that ‘‘EXIM fills gaps when the private sector is unable or unwilling to provide financing for U.S. exports,’’ a particularly important role for small business of which 

there are several in the district I represent. 

What would you say your proportion of EXIM financing goes to 

small business? 

Mr. HOCHBERG. Well, it is 90 percent of the transactions and last 

year, 39 percent of the exports we financed were shipped directly 

from small businesses and then, of course, there are many other 

small businesses in the supply chain of larger companies. 

Mr. PERRY. Let me ask you this. How does EXIM define small 

business? 

Mr. HOCHBERG. We actually follow the Small Business Administration’s definition, so however the SBA, and I was at that agency 

in the 1990s, they define what a small business is and we use their 

definition. 

Mr. PERRY. Which is? 

43

Mr. HOCHBERG. Well, it varies industry by industry. Basically, it is 500 employees or less or a net worth of $15 million or less. But 

it does have some variation depending on unique industrial classifications. 

Mr. PERRY. I will go with you on the 500 employees, but it is my 

understanding that EXIM defines small business as having fewer 

than 1500 employees which skews the ratios. What can you elucidate about that? 

Mr. HOCHBERG. We follow precisely the SBA definition. We do 

not have any—there is no variance whatsoever between our definition and the SBA’s definition. 

Mr. PERRY. I will hold you to that in the future. Mr. Gutierrez, 

a former Export-Import Bank loan officer, of course, pled guilty to 

taking more than $78,000 in bribes for fast tracking unqualified 

loan applications for approval. And he also admitted that in one 

case he ignored that a company had defaulted in ten, ten prior 

deals backed by EXIM at the cost of $20 million. Twenty million 

dollars is real money to me, real money to taxpayers, but still recommended the company for approval. I guarantee if I default on 

one loan, on one, much less than $20 million, I am out at the bank. 

I am out. 

How many open fraud investigations and indictments are there 

currently involving EXIM Bank? Do you know? 

Mr. HOCHBERG. The Inspector General stated most recently that 

there are 31 investigations, none of which have to do with employees. All have to do with outside companies that are trying to defraud the government. 

Mr. PERRY. And I understand that. Let me ask you that in this 

vein then because I think sometimes we hear that it is—and there 

are plenty of anecdotes on either side, but some in particular is the 

appearance of some kind of professional nepotism when we look at 

former New Mexico governor, Bill Richardson, regarding his association with the Spanish energy company Abengoa’s International 

Advisory Board. An investigation by the Daily Caller found that 

fully half, fully half of EXIM’s advisors on the board in 2014 were 

executives at companies or unions that directly benefitted from 

EXIM financing during their term. What is EXIM’s plan to fix 

that? Or should there be a plan? 

Mr. HOCHBERG. The advisory committee was established by Congress to advise the Bank and a report is going to Congress in a few 

weeks on how competitive we are versus other export creditors. 

Mr. PERRY. Does it require people to sit on both EXIM’s advisory 

board and work for the companies of which are receiving the loans 

from EXIM? 

Mr. HOCHBERG. Generally speaking, they are clients of the Bank 

because they are in the best position to advise us. 

Mr. PERRY. But does it require that they sit on both? I am asking 

you what is EXIM—Congress requires an advisory board. But what 

is EXIM doing to ensure that there is not a quid pro quo, that 

there is not someone on both sides of the arrangement putting taxpayer dollars in peril? 

Mr. HOCHBERG. There are strict ethical rules in place that none 

of them influence whatsoever any——

Mr. PERRY. Do you believe that none of them influence that? 

44

Mr. HOCHBERG. Absolutely. 

Mr. PERRY. I sleep with my wife. Do you think she doesn’t influence me on my daily decisions regarding my children, my bank account or what clothes—I am serious. Do you believe that? And do 

you think it deserves further scrutiny in that regard? 

Mr. HOCHBERG. Every advisory committee member is fully vetted. We have a full ethics briefing——

Mr. PERRY. All right, I hear you. 

Mr. HOCHBERG. None of them have anything to do with any 

transactions whatsoever. 

Mr. PERRY. Let me ask you this. Why does EXIM understate the 

risk regarding being tied to Treasury securities and it kind of inflates the appearance of profit because you don’t consider the 

changes in the market based on Treasury securities? Why does 

EXIM do that particularly? 

Mr. HOCHBERG. I am not following your question, sir. We completely comply with U.S. accounting rules, FCRA. We have been 

audited by currently Deloitte Touche, previously by 

PricewaterhouseCoopers. 

Mr. PERRY. Why does EXIM have a different standard of default 

than every other bank that I have checked with? 

Mr. HOCHBERG. We follow the default rules that have been promulgated by Congress and sent to us. That is how we report to 

Congress every 90 days. That 0.167 percent is in full compliance 

with the way Congress has defined it. 

Mr. PERRY. Thank you, Mr. Hochberg. Thank you, Mr. Chairman. I yield. 

Mr. POE. I thank the gentleman from Pennsylvania for his questions. The Chair recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Mr. Hochberg, I think it is entirely reasonable 

that you have an advisory board made up in chief of your customers. You know, there are very few vegans who are on the Ruth’s 

Chris Advisory Board. You want to survey your customers to see 

if you are doing a good job. 

Ms. Zak, you quoted, I guess it was Cordell Hull about the trade, 

a beautiful, poetic, often false characterization of history. If you 

make a list of Germany’s chief trade partners in 1938, then you 

make a list of the countries they were at war with in 1942, it is 

the same list. Same with Japan having as its chief trading partners, China, Britain, and the United States, so trade is wonderful, 

but the idea that it prevents wars is more poetry than history. 

Mr. Hochberg, why it is in our national interest that our allies 

buy weapons from us some of the times? Do our weapons exporters 

face foreign governing financing in competition? Do we lose military sales because there is a provision now in your charter that 

prevents you from financing military objects? 

Mr. HOCHBERG. I can’t verify whether we lose military sales, but 

I can state that Britain, France, Italy, Germany, their export credit 

agencies do finance their defense sales. 

Mr. SHERMAN. So unless they are stealing sales from us, they are 

wasting their time and the efforts of those European governments. 

I mean obviously we want to be careful, but we are careful as to 

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mines that it is in our interest to export weapons, it is very much 

in our interest to export those weapons rather than see those other 

competing finance agencies. So I look forward to working with you 

after the demonstration dies down the hall, not only to keep you 

in business, but to allow you to do the work that will build American export capacity, build our defense infrastructure and I love 

those other countries you mentioned, but I would just as soon have 

all the defense infrastructure here. Now and then they are going 

to export weapons to countries we wouldn’t want to see. 

Ms. Zak, sometimes companies are going to come to you and say 

we need your effort to help our supply chain, our globals. And what 

they are really doing is they are saying we want you to help offshore jobs. Do you ever get sucked into providing assistance where 

in the name of a global supply chain for an American company you 

are helping to build the infrastructure, otherwise help exports from 

other countries to the United States? 

Ms. ZAK. USTDA’s mandate is very clear. We focus on U.S. jobs, 

not jobs abroad. And we do not help with jobs abroad. 

Mr. SHERMAN. And Mr. Hochberg, I am sure you listen to the opponents of the Bank. They have their rallies. Are any of them rallying for the elimination of the export financing authorities of Britain or Germany or China? Do you see any signs on that? 

Mr. HOCHBERG. Not a single one, sir. 

Mr. SHERMAN. And are any of them, any of those signs saying let us increase the U.S. budget deficit by $670 million per year? 

Mr. HOCHBERG. I haven’t heard that either, sir. 

Mr. SHERMAN. Are any of them proposing tax increases that would generate $670 million per year? 

Mr. HOCHBERG. I have not seen that either. 

Mr. SHERMAN. So there is a sign shortage. I yield back. 

Mr. POE. Thank the gentleman from California. The Chair recognizes the gentleman from South Carolina, Mr. Wilson. 

Mr. WILSON. Thank you, Mr. Chairman, and I thank each of you 

for being here and the opportunities really provided to create jobs 

and as was stated by Mr. Keating, the State of South Carolina, we 

are so grateful to be the number one exporter of cars. Who would 

imagine in 20 years from zero with BMW and the last 3 years the 

leading manufacturer of tires and the leading exporter. And this is 

by Michelin which has the largest single investment in the world 

in the district I represent. Also, we are grateful for Bridgestone 

Japanese, Continental German, and Giti Singapore. So over and 

over, we see the benefit of trade. 

With that, Ms. Littlefield, with the Overseas Private Investment 

Corporation, how is the corporation funded? 

Ms. LITTLEFIELD. Thank you very much, Congressman. OPIC 

was capitalized back in 1971 in the Nixon administration and subsequently paid back all the capital with which we were capitalized 

in the Reagan administration. And in the ensuing years since then, 

we have generated capital every single year back to the Treasury. 

Mr. WILSON. And this would be through fees? 

Ms. LITTLEFIELD. Through fees and commissions. We charge cost 

covering fees and commissions and interest rate spreads which our 

clients are more than happy to pay since we are the only source 

of financing or insurance for them in these markets. 

46

Mr. WILSON. And so it is not taxpayer funded? 

Ms. LITTLEFIELD. It is not taxpayer funded. We are a net reduction of the deficit every single year, sir. 

Mr. WILSON. And how much would be the net reduction on average? 

Ms. LITTLEFIELD. In the last few years, it has ranged between 

$325 million and $425 million. 

Mr. WILSON. Thank you, and Mr. Hochberg, the same. How is 

the EXIM Bank financed? 

Mr. HOCHBERG. By WTO in order to be an allowable government 

support for exports, we have to be self sustaining. We have been 

self sustaining since 2007. We have sent to the Treasury just under 

$7 billion over the last 20 years. Last year, as the congressman 

mentioned, it was $675 million. The year before it was more than 

$1 billion that was sent to the Treasury. 

Mr. WILSON. But there are accusations that you are conducting 

crony capitalism. But yet it is actually a payback for the benefit of 

the taxpayers. 

Mr. HOCHBERG. Well, we actually—we don’t receive the money. 

We actually just send the money to the taxpayers for deficit reduction each year and CBO scores our budgets so it is actually used 

by the appropriators in budgeting for 2016. 

Mr. WILSON. Well, that is certainly a story that the American 

people and my constituents need to know. So thank you very much. 

And Ms. Zak, what types of criteria must a business meet to 

qualify for trade promotion and investment programs? What types 

of factor might prevent a company from receiving assistance? 

Ms. ZAK. Thank you very much. The first thing that USTDA 

looks at is one, that it does create jobs in the United States. We 

focus on exports and we also focus on development opportunities. 

We also ensure that there is additionality, that our services are 

needed to be able move an active forward to implementation. Then 

we undergo a very serious due diligence process and we look at everything from the financial aspects to the legal aspects, and our 

due diligence process as well. But we look for mutual interest, but 

jobs are one of our number one criteria. 

Mr. WILSON. And again, Mr. Hochberg, the EXIM Bank charter 

specifically states that you will not compete with the private sector. 

And because of this, it is a bank of last resort. How do you ensure 

that people have attempted to use the private sector and not succeeded? 

Mr. HOCHBERG. Well, the customers actually have to state that 

on their application. They have to assert and certify that they are 

coming to us because they cannot get financing elsewhere. We 

verify that. I mean frankly, candidly, with small businesses, I ran 

a small business for 20 years. It is pretty clear small businesses 

don’t have a lot of options. But again, they are coming to us because a bank is bringing to them or an insurance broker is bringing 

them because they cannot secure it independently. 

And sometimes we also have to level the playing field. When we 

see the kind of financing that China, Russia, France, Germany, 

others do in different fields, when we see evidence of that, we want 

to make sure there is a level playing field that U.S. companies can 

47

compete and we don’t lose jobs because of outsized government financing on the other side of the transaction. 

Mr. WILSON. Thank you. And as I conclude, I appreciate again 

Mr. Keating giving me the opportunity to talk about the Port of 

Charleston. Just in the last month, Governor Nikki Haley secured 

from Daimler $1⁄2-billion investment for trucks, and then last Monday, Volvo Corporation announced its first North American manufacturing facility at Ridgeville, South Carolina in the district of 

Congressman Jim Clyburn. So we see a huge benefit. Thank you 

very much. 

Mr. POE. The gentleman yields back. The Chair recognizes the 

gentleman from Texas, Mr. Castro. 

Mr. CASTRO. Thank you, chairman. And thank each of the witnesses for your testimony today. 

I want to pick up where the congressman left off, Mr. Hochberg. 

Can you describe some of the infrastructure for financing that foreign countries use that are comparable to EXIM? What are we 

competing against basically? 

Mr. HOCHBERG. Well, we are competing for power, transportation. We have got a company called Acrow that builds bridges in 

Cameroon and Ghana. There is intense Chinese competition to 

build that kind of infrastructure in Africa. We did a transaction of 

locomotives just last year. Half the order was split between the 

United States and China for locomotives in South Africa. We have 

done a power project where we also competed in West Africa, so I 

am not just focusing on Africa, but frequently developing countries 

are where we face intense competition in the infrastructure. 

Mr. CASTRO. What are the European governments or the Asian 

governments doing for their businesses? 

Mr. HOCHBERG. Well, to just give you an example, when I have 

met with the Customer TransNet in South Africa, and inquired 

what were the Chinese terms for the loan so I would make sure 

that we were competitive, I was told well, they asked me what I 

would like, would I like a 10-year, a 15-year, a 20-year loan? Do 

I need a grace period? It was somewhat of a menu pricing. That 

was not the case what we can provide. We adhere to international 

standards and it is either 12 or 14 years for locomotives and there 

are very fixed fees attached to that. 

Mr. CASTRO. Sure. I come from Texas as the chairman does, and 

Texas does more trade than any other state in the nation. So this 

is obviously a very big deal for us. We have companies, big and 

small, but some like Boeing and Caterpillar who have a significant 

presence around San Antonio who benefit from EXIM. But I would 

ask all of you what is at stake for us for a state like Texas if your 

services go away? 

Mr. HOCHBERG. Well, on the second panel you actually have a 

witness, Susan Jaime, who is from San Antonio who can speak for 

herself about her coffee exports that—we chatted just before the 

hearing about 40 percent of her sales are exports. 

When I talked to Air Tractor, a company mentioned previously 

from Texas, Dave Ichert talked about the potential of laying off 68 

employees that are attributed to their export sales which we are 

pleased working with them. We have grown from 10 percent of 

sales to 50 percent of sales. And most importantly, in the oil and 

48

gas field which is laboring over a drop in prices, keeping that industry vital is important to America’s national interest in terms of 

us having a presence globally and keeping our technology up. We 

do extensive work with the oil and gas companies, exploration, engineering, equipment manufacturers in the Houston area. 

Ms. LITTLEFIELD. Thank you, Congressman. We know that when 

U.S. companies invest capital in emerging markets, that creates a 

magnet in future years for exports to then flow. And we also know 

that 95 percent of the world’s customers, as the chairman said in 

the beginning, are outside of these borders. This is where the markets are the most dynamic. They are growing and this is where the 

future for American businesses is. 

In Africa alone, we don’t talk about Africa much when we talk 

about trade, but in the next 10 years the number of households 

with disposable income is going to grow by 50 percent. All of those 

households have reached the tipping point beyond subsistence 

where they can begin to invest in consumer goods and other things 

that U.S. companies are making. So it is critically important that 

we be able to have a level playing field as my colleagues have said 

and provide the services that U.S. companies need to access these 

markets, both in terms of their investments which is the business 

of OPIC as well as the exports that may follow which is, of course, 

the business of EXIM. 

Ms. ZAK. And just following on from what the chairman mentioned at the beginning and President Littlefield mentioned, 95 

percent of the consumers are outside of the United States. This is 

a very important market and that there is a need to level the playing field which is one of the things that our agency does. 

And last year alone, for every dollar programmed, we are seeing $76 in U.S. exports, we noted that there were $5.8 billion associated with our program which supports approximately a little over 

32,000 jobs. So it is important to jobs, exports, and the future. 

Mr. CASTRO. Sure. And then I will just make one last remark in 

my last 15 seconds. I support the reauthorization of EXIM and support the work that you all are doing. I think every agency in the 

U.S. Government deserves a thorough vetting and quite frankly to 

be improved probably, but you are running in the black. You are 

doing a great service for American companies and I hope that this 

Congress can find a way to preserve the services that you are providing. I yield back, Chairman. 

Mr. POE. The gentleman from Texas yields. The Chair recognizes 

the gentleman from Wisconsin, Mr. Ribble, for his questioning. 

Mr. RIBBLE. Thank you, Mr. Chairman. Mr. Hochberg, I will go 

ahead and start with you and then go on to Ms. Littlefield. Just 

to kind of give you my own historical perspective, I am a former 

business owner and I have voted in support of reauthorizing EXIM 

in the past. I am a little bit more sanguine today than I was 2 or 

3 years ago and in part I am sanguine because of the CBO’s fair 

value accounting method to determine the actual cost to the taxpayer. 

I am going to quote from the CBO’s 2014 report: ‘‘For Fiscal 

Years 2015 to 2024, CBO found that EXIM Bank’s six largest credit programs would generate budgetary savings of about $14 billion 

under FCRA accounting, but costs about $2 billion on a fair value 

49

basis.’’ They then go on to say later in the report, ‘‘In CBO’s view, 

fair value estimates provide a more comprehensive measure of the 

cost of Federal credit programs and CBO has provided fair value 

estimates for many programs to help lawmakers more fully understand the tradeoffs between certain policies.’’ That is a big swing, 

$14 billion plus to $2 billion negative over a decade. Would you 

care to comment on that? 

Mr. HOCHBERG. Sir, we have one accounting system in the 

United States Government. Congress passed an accounting system 

called Federal Credit Reform Act in 1990. And we fully comply 

with that. I ran a company for 20 years. We don’t keep two sets 

of books. There is one set of books. Those are the books that Congress has determined. If Congress changes the accounting system, 

we will change our operations. But one thing is unmistakable. We 

transferred, we sent $675 million to the Treasury. We sent the year 

before over a $1 billion. Cash is cash. If the accounting system 

were different, some of that cash would remain at the Bank and 

would not transfer to the Treasury. It would build up more and 

more reserves that would be sitting at the Bank’s balance sheet instead of the Federal Government’s balance sheet. 

Mr. RIBBLE. Wouldn’t that go then to reduce taxpayer risk in 

case of default when the economy dips? 

Mr. HOCHBERG. Well, first of all, we have over $5 billion of reserves paid for by customers. These are not taxpayer monies. It is 

paid for by customers. We send the default rate report to Congress 

every 90 days. Our peak default before the financial crisis was 1.6 

percent in 2006. So if we are looking for a real stress test, we have 

had the most real stress test you can devise in the last 5, 6 years, 

looking at the financial crisis we faced. And our default rate has 

sadly declined from that 1.6 level in 2006 going through the worst 

financial crisis we have ever incurred. So nothing is certain in life, 

sir, but I think we have seen one, a demonstration of good underwriting by our staff and the fact is we do report this to Members 

of Congress every 90 days. We just sent a report up for the March 

30th period. 

Mr. RIBBLE. What is the current interest rate that you charge 

your customers? 

Mr. HOCHBERG. Most of our credit is through either insurance or 

a guaranteed loan. So in a guaranteed loan, a bank essentially 

pays a premium, an insurance premium, and thereby we guarantee 

the loan. Then the Bank makes a direct—makes a loan to its customer. So most of the loans are either insurance or guarantee. And 

the rare cases we make a direct loan which is an unusual case, 

sometimes usually government to government or certain transactions, it is 100 basis points over Treasury which is the global 

rules that we have to apply to. 

Mr. RIBBLE. And is that as well what the European Union’s rates 

would be? 

Mr. HOCHBERG. We all have to charge 100 basis points over the 

relevant Treasury rate for that currency. 

Mr. RIBBLE. You have heard the discussion between—it has been 

pretty widely publicized that Delta Airlines has got a problem because they want to buy Boeing airplanes and couldn’t get it at discount. Air India got it at discount, not that they are competing. 

50

And so we gained jobs at Boeing, lost jobs at Delta. How do you 

respond to that? 

Mr. HOCHBERG. Well, two ways, sir. One, we voluntarily do what 

is called an economic impact study. We are the only credit agent 

in the world that does this. We look at the benefits to the U.S. 

economy from an export and we compare that against any potential 

loss to the U.S. economy. And we actually do that on every single 

transaction of the Bank, down to $10 million or less to make sure 

we are adding, we are accretive to the U.S. economy. That is number one. 

Number two, Delta has sued us. Four times the courts have 

ruled in favor of the Export-Import Bank. And we did double the 

fees that we charged foreign carriers back in 2011. And we make 

sure that foreign carriers are paying more than any U.S. carrier 

pays. 

Mr. RIBBLE. I see I am out of time, Mr. Chairman, so I will yield 

back. Mr. Littlefield, I will talk to you offline. 

Mr. POE. I thank the gentleman. The Chair recognizes the 

gentlelady from Illinois, Ms. Kelly. Turn on your mic, too. Thank 

you. 

Ms. KELLY. Thank you. I would say most of us in this room recognize the importance of trade to the future of our economy. Accordingly, as we consider future trade deals, we must engage in a 

deeper, broader, and more inclusive dialogue about its impact on 

American families. This stated objective of U.S. trade policy is to 

liberalize markets by reducing trade and investment barriers, creating a rules-based trading system, enforcing commitments under 

trade agreements, and supporting economic growth. 

What role do EXIM Bank, OPIC, and TDA play in supporting 

U.S. trade policy goals? 

Mr. HOCHBERG. Well, the Export-Import Bank obviously works 

closely with the other two panelists here, Commerce Department, 

and U.S. Trade Representative, State Department. Our role is very 

narrow and very precise. It is to provide financing when the private 

sector is unable, when it cannot handle that transaction. And our 

focus is really on U.S. jobs and making sure that we don’t cede jobs 

to foreign competitors because they provide financing and U.S. 

companies don’t have access to it. 

Ms. KELLY. Thank you. 

Ms. LITTLEFIELD. Thank you, Congresswoman. OPIC’s role is a 

little bit different, a development agency rather than a trade agency. So I would answer the question slightly differently and to say 

that we are all clearly in this room and elsewhere very concerned 

about the need to pay for stability and development in fragile 

places. And we know that we need to engage in these places for 

strategic, economic, and moral reasons. OPIC’s model may not be 

the only solution for stabilizing these markets, but it certainly is 

an incredibly effective one as it calls upon the private sector to 

shoulder some of the burden of helping address these issues and 

do so in a way that is actually creating income for those private 

sector investors as well as jobs built at home and abroad. Thank 

you. 

Ms. ZAK. And USTDA helps to build infrastructure. So with respect to trade one of the things we do is that we help to develop 

51

infrastructure in other economies. But we want to ensure that it 

is done in a way that creates a fair playing field for U.S. businesses 

and jobs to be created at the same time. 

USTDA has also helped with respect to the implementation so 

that we ensure that standards that are required under trade agreements are met as well. 

Ms. KELLY. I yield back the remainder of my time. I have to go 

vote, Mr. Chairman. 

Mr. POE. I thank the gentlelady. Just for Mr. Rohrabacher’s information, there is a vote in another committee, not on the floor. 

And with unanimous consent, unless there is an objection, the 

Chair will allow a member of the full committee, but not a member 

of this committee to ask questions, the chairman of the European 

Subcommittee, Mr. Rohrabacher from California. 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. There 

is a lot of discussion about trade going on on Capitol Hill these 

days. I am glad that you are here. And just a couple of items just 

for—in terms of OPIC. Is OPIC policy—there has been an on-going 

problem with a constituent that I have had that his family owned 

a major company in Ethiopia and frankly, they have been offering 

like a pittance as compensation for this very expensive piece of 

property and business. OPIC has decided not to fund that situation. Not to be involved in Ethiopia until situations like that are 

corrected. Is that still the policy that if a government like Ethiopia 

is engaged in these type of activities that are denying the U.S. citizens the right to compensation for property that they have confiscated, do we still have that policy that we are not providing 

loans in that country? 

Ms. LITTLEFIELD. Mr. Rohrabacher, we spoke about this before 

and as it stands now, OPIC continues to operate under the guidance of the Secretary of State in terms of selecting the countries 

in which we operate. That being said, we are not active currently 

with any major projects in Ethiopia. 

Mr. ROHRABACHER. Right. 

Ms. LITTLEFIELD. I am not involved with the details of this. We 

have left it for the State Department, but I know that the U.S. 

Government——

Mr. ROHRABACHER. Let me ask, that is good, number one, thank 

you for that. But is that a standard policy that if we have outstanding claims by American citizens against a particular government that we are not going to be improving or approving transactions in that country? 

Ms. LITTLEFIELD. That is not one of our policies. We do believe 

that when U.S. investors invest in these markets, they bring with 

them very high standards of environment, labor, and human rights 

standards as well as an improvement in the governance standards 

in those countries. So we see a direct correlation between foreign 

direct investment flow into countries and improvements in the 

business climate. 

Mr. ROHRABACHER. Well, let me note I believe that that is encouraging dictatorship and the worst kind of a situation. You have 

American citizens themselves who have been denied due compensation for confiscated property, for us to go in is ridiculous, but I apVerDate 0ct 09 2002 15:43 Jun 30, 2015 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\051915\94686 SHIRL
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preciate the fact that at least in Ethiopia that that is kept in mind 

because my constituent is having that problem. 

By the way, I take it that OPIC is engaged in actually promoting 

the development of businesses overseas in these various countries. 

Is that not creating competition for American products? 

Ms. LITTLEFIELD. It is not. We certify that not one of our projects 

causes any damage to the U.S. economy nor causes the loss of any 

job in the U.S. 

Mr. ROHRABACHER. So you don’t have any projects that you are 

financing to develop, to build in a foreign country, that you are not 

financing anything that has any competition with American counterparts. Is that correct? 

Ms. LITTLEFIELD. That is correct, sir. 

Mr. ROHRABACHER. All right, we will check into that, but we will 

have to see. In terms of the foreign banks that you mentioned 

about the Export-Import Bank coming to you with these banks 

have come and said well, you are guaranteeing some loans with 

foreign banks, but mainly American banks. Do banks benefit from 

this guarantee? 

Mr. HOCHBERG. Well, the benefit really goes to the exporter. 

Mr. ROHRABACHER. That’s not the question. Do the banks benefit 

from this? 

Mr. HOCHBERG. The banks pay a fee. 

Mr. ROHRABACHER. Yes. 

Mr. HOCHBERG. For insurance and in exchange for that fee, we 

ensure the loan. 

Mr. ROHRABACHER. Okay, but the banks aren’t benefitting? 

Mr. HOCHBERG. You can say they are benefitting, but they are 

paying for it. 

Mr. ROHRABACHER. The banks are benefitting. Let us just put it 

this way, they wouldn’t be coming to you with customers if they 

were not benefitting? 

Mr. HOCHBERG. Right. 

Mr. ROHRABACHER. Okay, so we have in some way basically 

guaranteed the banks the profit that they will make from the deal 

or they at least will not have a loss from that deal. Is that correct? 

Mr. HOCHBERG. We provide insurance to the banks that make 

the loan, exactly. 

Mr. ROHRABACHER. Let me just suggest that that is crony capitalism where we take the banks and we make sure that they are 

not going to lose money and we put our taxpayers’ money at risk 

and the question is is whether or not that would happen in the private sector. In the film business, they have a thing called bonding. 

You have a project and they bond it. If you are making a profit 

every year, like you suggest, why don’t we just leave that to the 

private sector then? Can’t they do bonding with these banks that 

are looking for a guarantee that they are not going to lose money? 

Mr. HOCHBERG. Congressman, the private sector does a spectacular job. They just don’t do all the job. So we finance about, as I 

have said about 2 percent of U.S. exports. A third of them go to 

developing countries. The private sector does a great job. They just 

don’t do it in every market and every product category. 

Mr. ROHRABACHER. Right. 

Mr. POE. The gentleman’s time has expired. 

53

Mr. ROHRABACHER. Thank you. 

Mr. POE. I thank the gentleman. I thank the witnesses for being 

here. I want to advise the witnesses that all members have the opportunity to present written questions to the witnesses. Several 

members were not here, could not be here and I would encourage 

the members to put those questions in writing as soon as possible 

regardless of where they are on this issue that we have been discussing today. With that, I thank the witnesses for being here and 

we will begin with our second panel as soon as they are seated. 

The Chair is ready to begin the second panel if the witnesses will 

be seated. The Chair will introduce the next four witnesses. I want 

to thank the witnesses for waiting all morning to give their testimony. It is appreciated. 

Mr. Daniel Ikenson is director of the Herbert Stiefel Center for 

Trade Policy at the Cato Institute. Mr. Ikenson has held several 

positions focusing on international trade planning, and is widely 

published in the area of trade policy. 

General Jim Jones is the founder of the Jones Group International and previously has served as the National Security Advisor to the President of the United States. General Jones has served 

our country with a long, distinguished military career including 

leading NATO military operations as Commander of the United 

States European Command and Supreme Allied Commander in Europe. 

Ms. Susan Jaime is the founder of Ferra Coffee International in 

San Antonio. In addition to roasting coffee, she has joined with 

Texas A&M’s AgriLife projects to teach coffee growers around the 

globe how to grade, roast, and market their coffee beans. 

Carly Seidewand is vice president of the Global Sales and Administration of Resin Technology, LLC. Ms. Seidewand took over 

the global petrochemical trading and compounding company from 

her father, an entrepreneur chemist. 

We will begin with Mr. Ikenson. You have 5 minutes. 

STATEMENT OF MR. DANIEL J. IKENSON, DIRECTOR, HERBERT A. STIEFEL CENTER FOR TRADE POLICY, CATO INSTITUTE 

Mr. IKENSON. Thank you, sir. Good morning, Chairman Poe, 

Ranking Member Keating, and members of the subcommittee. I am 

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

Policy Studies at the Cato Institute. Thank you for the invitation 

to share my views with you today concerning trade promotion 

agencies and the U.S. foreign policy. The views I express are my 

own and should not be construed as representing any official positions of the Cato Institute. To the extent today’s hearing will help 

clarify some of these issues and prompt a serious effort to reform 

and retire some of the redundant, distortionary, and frankly, scandal-prone agencies among the panoply of Federal offerings, I am 

pleased to be of assistance. 

U.S. trade promotion agencies are in the business of promoting 

exports, not trade, in the more inclusive sense. That is worth noting because despite some of the wrong-headed merchantilist assumptions that undergird U.S. trade policy that exports are good 

54

and imports are bad, the fact is that the real benefits of trade are 

transmitted through imports, not through exports. 

In January 2010, President Obama set a national goal of doubling U.S. exports in 5 years and prominent net plan was a larger 

role for government in promoting exports including expanded nonmarket lending programs to finance export activity and increase in 

the number of Commerce Department foreign outposts to promote 

U.S. business and an increase in Federal agency chaperoned marketing trips. But the NEI neglected a broad swath of worthy reforms by ignoring the domestic laws, regulations, taxes, and other 

policies that handicap U.S. businesses and their competition for 

sales in the United States and abroad. For example, nearly 60 percent of the value of U.S. imports in 2014 consisted of intermediate 

goods, capital goods, and other raw materials. Those are the purchases of U.S. businesses, not consumers. 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 less 

competitive at home and abroad. 

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

chloride, and other crucial manufacturing inputs have chased companies to foreign shores where those imports are less expensive 

and they have deterred foreign companies from setting up shop 

stateside. 

Policy makers 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 interest of exporters anyway when the benefits 

of those exports accrues primarily to the shareholders the companies enjoin the subsidized marketing or matchmaking? There is no 

national ownership of private export revenues. 

If policymakers seek a more appropriate target for economic policy, it should be to attract and retain direct investment which is 

the seed of all economic activity including exports. Given the exalted status of exports in Washington’s economic policy narrative, 

it is understandable why agencies would want to portray themselves as indispensable to U.S. export success. But on that metric, 

none of the subject agencies is scarcely relevant. EXIM supported 

$27.4 billion in exports in 2014. USTDA supports approximately 

$2.5 billion per year. And OPIC less than $2 billion. In aggregate, 

these agencies support less than 2 percent of all U.S. exports. 

But the relevant economic question concerns the cost and benefits of these agencies to the U.S. economy. So let me focus a little 

bit on EXIM. EXIM 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. But those same transactions impose costs on two different 

sets of companies, competing U.S. firms in the same industry who 

do not get EXIM banking and U.S. firms in downstream industries 

whose foreign competition is now benefitting from reduced capital 

costs courtesy of the U.S. Government. 

EXIM 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, as well 

55

as U.S. competitors of his foreign customer, by putting them at relative cost disadvantages. According to the findings by a recent 

CATO Institute study, the downstream cost 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. 

The notion that because Beijing, Brasilia, and Brussels subsidize 

their exporters, Washington must too sweeps under the rug the 

fact that the United States is a major export credit subsidizer that 

has been engaged in doling out such largess since 1934 well before 

the founding of the People’s Republic of China. 

To say that U.S. exporters need assistance with financing to level 

the playing fields suggest that they lack advantages among the 

multitude of considerations that inform the purchasing decision. 

Moreover, the fact that less than 2 percent of U.S. export value 

goes through export promotion agencies, suggest this rationale for 

EXIM is bogus. Congress should allow EXIM to expire at the end 

of next month and the administration should announce plans to 

bring cases to the WTO 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. For better or worse, at different 

times and for different purposes over the years, the U.S. trade policy has been a tool of U.S. foreign policy, trade preference programs, trade agreements, the trade Trans-Pacific Partnership, investment treaties, trade sanctions, infrastructure funding and 

trade financing of all bid pursuit or deployed for reasons not entirely economic in nature. Pursuing strategic objectives through 

trade policy has a long history. 

The State Department’s mission is to shape and sustain a peaceful, prosperous, just, and democratic world and foster conditions for 

stability and progress for the benefit of the American people and 

people everywhere. That broad mission may justify one or two export promotion agencies, but according to the CRS, the Congressional Research Service, there are at least 20 such agencies within 

the U.S. Government with overlapping responsibilities and in some 

cases working at cross purposes. Thirty seconds. 

EXIM’s Inspector General——

Mr. POE. I am sorry, you cannot have 30 seconds. Your statement is in the record. We all have it. 

Mr. IKENSON. Concluding thought, the United States maintains 

enormous commercial advantages over other countries. We have 

the world’s largest market, strong institutions, including respect to 

private property and the rule of law, etcetera, etcetera. These 

things underlie the strength of the U.S. economy which is crucial 

to reaching U.S. security and foreign policy goals going forward. 

Thank you. 

[The prepared statement of Mr. Ikenson follows:]

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Mr. POE. Thank you, Mr. Ikenson. You got more in 6 minutes 

than anybody I have ever heard in my life. But thank you very 

much. 

The Chair recognizes General Jones. First of all, General Jones, 

thank you for your service to our country. 

STATEMENT OF GENERAL JAMES L. JONES, USMC, RETIRED, 

FOUNDER, JONES GROUP INTERNATIONAL (FORMER NATIONAL SECURITY ADVISOR TO THE PRESIDENT OF THE 

UNITED STATES) 

General JONES. Thank you, sir. Mr. Chairman, Ranking Member 

Keating, committee members, thank you for holding this very important hearing and for inviting me to testify before you today. 

With your permission, I would like to submit two items for the 

full hearing record; an op-ed I authored on the national security 

implications of the Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership and ‘‘The Task Ahead’’ an article on the dynamics of U.S. global engagement in the 21st century. 

As requested by the committee, I will briefly summarize my 

statement and look forward to your questions. I have had the honor 

of serving in our Nation’s uniform for over 40 years. Much of that 

time was during the Cold War when the world was a very different 

place, defined by the long struggle between the West and the 

former Soviet Union. Ultimately, democracy prevailed over Communism and our ideals proved superior to those of our adversaries, 

as did our resolve and military might of the United States and the 

NATO alliance. As a result, freedom prevailed and despite today’s 

many challenges the truth is that freer societies, freer markets, 

and freer trade have achieved a great leap forward in the human 

condition and our values have contributed immeasurably to a better world and to America’s interests around that world. 

But today, the geostrategic operating environment of the 21st 

century is vastly different from that of the past century. As such, 

we need a much broader toolkit to be successful. Maintaining global stability is essential to America’s peace and prosperity, it is no 

longer a function solely of our ability to deploy and defeat but of 

our capacity to engage and endow, and ultimately, to turn promise 

and opportunity into jobs and higher quality of life for those seeking true freedom. 

By leading on trade, the United States tightens bonds with allies 

around the globe, strengthens influence and would-be hot spots and 

bolsters greater global stability through expanding economic cooperation, the kind envisioned by the Transatlantic Trade and Investment Partnership, the Trans-Pacific Partnership, and the African Growth and Opportunity Act advanced by the extension of 

trade promotion authority. 

So if America wishes to remain a nation of great leadership and 

influence in the years and decades ahead, we shouldn’t shrink from 

competing in the trade-based global economy, the world mainly of 

America’s making in the last century and one I think we can be 

extremely proud of. 

But much is riding on our success. Economically and 

geostrategically, 95 percent of the world’s customers live outside 

our borders. Most are hungry for American goods and services and 

68

solutions. And for this reason, America’s future jobs and prosperity 

depend greatly on trade and global economic engagement and leadership. 

But it is equally true that 95 percent of the hearts and minds 

America must win to achieve a more peaceful and prosperous future also live outside our borders, so commercial diplomacy, the 

kind that Secretary of Commerce Penny Pritzker advocates, is a 

key ingredient in the strategy for winning them. Importantly, this 

hearing was conceived to analyze whether the U.S. trade promotion 

agencies play an important role in U.S. foreign policy. My answer 

is an unequivocal yes. They play a crucial role. 

Many of the pertinent facts are presented in my full statement, 

but I would simply boil down my reasoning to the following points. 

One, trade and trade promotion are critical to American jobs and 

prosperity. A prosperous America is far better able to protect this 

country’s values and advance its interests in a dangerous world. 

Two, trade promotion is critical to America’s security. As the 

former NATO Commander Service Chief and National Security Advisor, I have seen first-hand the geostrategic importance of American economic engagement. Where the U.S. private sector is not 

present, America’s influence suffers. And this vacuum is filled by 

economic and geostrategic competitors, and in the developing world 

is often filled by those who don’t share either our values or our 

principles; the result is a less stable and secure world. 

Three, many opponents of trade promotion agencies base their 

arguments on a vision of a world with no export financing and no 

foreign government support for our competitors, where markets are 

untrammeled by state directed export finance and other support. 

But in today’s real world, approximately 60 export credit agencies 

are jockeying to offer enticing financial terms to win more sales for 

their companies and workers, often at the expense of U.S. companies. 

Russia and China have expanded their state backed export support even as we continue to deliberate on the future on the EXIM 

Bank and our desire for expanded trade agreements. 

They and the leaders of America’s other export competitors 

would welcome the United States ending export finance and trade 

promotion programs, which means more business for their companies and more influence for them around the world. Although I 

agree that we should aspire to a world of pure private sector competition, unilaterally disarming by eliminating the EXIM Bank and 

our other trade promotion agencies is not the answer. It would destroy the U.S. Treasury’s leverage at negotiating reductions to 

state backed export finance that would be observed by all, creating 

the level playing field that we should all seek. 

Finally, I agree that Congress has a sacred responsibility to ensure the taxpayers’ dollars are used wisely. Our country has yet to 

see an agency or program that couldn’t be improved. In that regard, the constant work of reforming and refreshing our initiatives 

is crucial, but let us improve them where we can and not eliminate 

them. After four decades of service to the nation, a strong aversion 

is ingrained in me as I know it is in you, to anything that threatens our national well being. Among them, anything that would set 

69

back our country’s economic competitiveness in the world. Thank 

you, Mr. Chairman. 

[The prepared statement of General Jones follows:]

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Mr. POE. Thank you, General Jones. The Chair recognizes Ms. 

Jaime. 

STATEMENT OF MS. SUSAN JAIME, FOUNDER, FERRA COFFEE 

INTERNATIONAL 

Ms. JAIME. Mr. Chairman and Trade Subcommittee of the House 

of Representatives, thank you for inviting me to share my perspective on the importance of the EXIM Bank. 

I have been working in the coffee industry for more than 18 

years, and started my own company, Ferra Coffee International, in 

2009 with $50 in the bank and a passion for international trade 

and soft commodities. From the start, the heart, soul, and goal of 

my business has always been to help coffee growers worldwide. I 

learned very quickly that the coffee grower is the last one in the 

chain of the coffee trade business to get a fair price for their product and the last, if ever, to get training to properly assess the quality of their coffee or effectively negotiate a fair price with international buyers. 

To make a lasting difference in the lives of those coffee growers, 

by paying them fairly and according to the quality of their coffee, 

to prevent families from being broken apart because parents or 

young adults must leave their home countries and families to come 

to the United States to work illegally, my business plan had to 

change. 

If Ferra Coffee sold only to distributors in the State of Texas or 

any other domestic state, we could only expect to sell one or two 

pallets of approximately 1200 pounds at a time. In contrast, when 

we are able to secure an international contract with an international distributor, orders are generally for at least one full container, which is 48,000 pounds average. It is easy to see the advantage. 

Behind each bag of Ferra Organic Flavor Coffee, or each bag of 

Ferra Liquid Coffee, there are seven U.S. small businesses that 

supply products and services contributing to our finished product, 

that is labeled USDA organic, roasted, Q graded, and manufactured in San Antonio, Texas. 

Ferra Coffee has successfully started offering our roasted specialty coffees internationally, thanks to the support that the EXIM 

Bank has provided. By their doing due diligence in checking that 

the distributors with whom we establish relationships and make 

contracts are legitimate, and that we do not get involved with dubious, unreliable, or criminal groups while conducting international 

trade, the EXIM Bank has truly ensured our success. 

The EXIM Bank also literally insures payment of our shipments, 

and has given my company the peace of mind of knowing that the 

value of the product shipped is secure and legally insured. The 

EXIM Bank also allows me the ability to offer products that have 

a higher quality for the gourmet market. 

Ferra Coffee International, along with the other small companies 

that are our partners, completely depends for our growth and survival on our ability to sell internationally. Internationally, there is 

no market saturation, and USA made and USDA organic products 

have a great deal of value to the consumer. 

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The EXIM Bank is the one and only entity that we can rely on 

to help us continue to grow, be competitive in markets that are not 

available to us in our own country, and to give us the necessary 

competitive edge in international trade. 

My small company, by purchasing coffee directly from the growers is contributing to stopping illegal immigration and the displacement of family units. We also help seven other small U.S. businesses with opportunities to hire more workers and increase their 

revenue by purchasing more products for international contracts. 

Without the EXIM Bank offering their services that allow my 

company to engage in this type of international trade contracts, I 

will not be able to grow my business beyond the saturated coffee 

market that we have in the U.S.A. 

The EXIM Bank can also do so much more. It can help me, and 

other companies like mine which conduct businesses that are usually not funded by the regular bank system because we have contracts in international markets. By not acting as a conventional 

bank to qualify exporters like me for financial low interest loans. 

Instead of using only a credit score to qualify a company for funding, EXIM Bank could look at, and assess the overall potential, 

growth, and increased revenue that can be achieved by additional 

funding. That is the vision that is needed, and that what we are 

asking for. 

My company is not able to get loans from conventional banks because all of my products are bought in cash. That is the way the 

majority of specialty coffee and tea companies operate. We do not 

have a history of loan payments or credit with coffee or tea growers. We need the EXIM Bank’s support. 

The EXIM Bank is a crucial, vital and important entity that I 

and many other U.S. exporting companies depend on for survival, 

growth, and the ability to compete successfully in business. Every 

U.S.A. company that has the capability to export and do business 

internationally, whether that company is small or large, contributes to the health of our national economy and our country’s leadership in innovation, in the development of more qualified and 

competitive businesses, and of individuals who see our potential 

markets as global opportunities for the kind of success that is indeed, the greater good. 

Every aspect of the EXIM Bank has the potential to create positive and strong advancement for the good of all of us, and the good 

of U.S.A. 

Thank you for your time, kind attention, and for inviting to share 

my story on behalf of all exporters in the U.S.A. 

[The prepared statement of Ms. Jaime follows:]

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Mr. POE. Thank you, Ms. Jaime. Ms. Seidewand. 

STATEMENT OF CARLY SEIDEWAND EPPLEY, VICE PRESIDENT, GLOBAL SALES AND ADMINISTRATION, RESIN TECHNOLOGY, LLC 

Ms. SEIDEWAND. Thank you, Chairman Poe, Ranking Member 

Keating, and the other subcommittee members for inviting me. I 

hope that my story can actually point to the interconnection of 

small- and medium-size businesses across the United States as exporters, some direct, and some indirect. 

Resin Technology is a now $100 million global petrochemical 

trading and compounding company. It has been in operation for 

close to 20 years. I am second generation of my family business. 

It was started by my parents and it is still a father-daughter run 

business today. We sell about 98 percent U.S.-made petrochemicals 

in Houston, Texas. It is an extremely important area for us. And 

we export into over 30 countries worldwide, some developing nations, and more mature economies. The majority of our sales go 

into vinyl construction products worldwide such as water pipe, windows, wire and cable, and even some more sophisticated engineered 

parts, all dependent on the level of development in those import 

countries. 

Today, our largest export markets are Canada, Europe, very importantly, the Caribbean and Mexico, Latin and South America account for about 50 percent of 2014 sales. It should be noted that 

we started the business at about 70 percent U.S. sales and with the 

help of EXIM financing it is now over 70 percent export sales. So 

it has made a huge difference in sort of where our business has 

gone. 

We have fierce competition from large commodity international 

trading firms and foreign producers, the largest ones being between 

Korea, China, and especially Japan where they sell very much on 

price and very low cost to no cost financing in markets where we 

have to compete. 

Prior to the housing decline, we were solely focused in the U.S. 

and Canadian markets with over 70 percent sales in the U.S. We 

started exporting at the end of ’06, doubled our sales, year on year 

for many years. And we didn’t really have the idea that the housing boom would persist, so we knew that export needed to be a part 

of our future growth plan. And obviously, 2008, 2009 proved that 

point very clearly and we needed to compensate for those lower 

sales since everything really—the largest portion goes into construction projects. 

In 2011, Bank of America suggested using Export-Import Bank 

to back our export receivables and inventory via a working capital 

guarantee program where domestic sales remain under their current structure. We had for probably 2 years tried to find other ways 

to finance our exports with Bank of America by increasing the size 

of our insurance policies. We looked at inventory appraisals to try 

and increase the advance rates. We do use an external credit insurance agency which is a big portion of our—what is underwritten. 

But it never could meet the size that we needed to really compete 

in the export market on the buy and on the sell side because a very 

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important part of our business is being able to finance the supply 

side with these major Fortune 500 companies. 

What we did was increase our advance rates up to 90 percent of 

receivables and 75 percent of export inventory, affording us to be 

able to compete with our Asian counterparts which is the most important part because oftentimes they have not only subsidies on 

their freight, but their financing seems almost zero to very low in 

comparison and offer extremely long terms where we normally try 

to finance 60 to 90 days. Sometimes they will finance 120, 270 

days. It is a very different Wild West in certain areas of market. 

And since our product is a more commodity element, the 75 percent 

loan rate than inventory really isn’t considered excessive and our 

credit that we do with customers is the Euler-Hermes credit insurance policy or via letters of credit all with Bank of America or with 

local banks in the United States. 

In our view, the Working Capital Guarantee Program with EXIM 

has been more disciplined. They have audited us more often than 

even our domestic program has. They have very detailed, down to 

customer level on sales. We have to provide waiver letters for foreign currency transactions which is very important in our markets. 

There is tough management on credit overseas and we also have 

to have comprehensive marine and warehouse insurance policies. 

EXIM financing is actually somewhat expensive but where we 

couldn’t find any other options that didn’t include factoring or discounting by the bank with letters of credit where none of customers 

can, there really was no other option for us to really increase to 

where we needed to be. And really, Bank of America said they just 

couldn’t justify the export receivables because they didn’t have the 

global infrastructure or for inventory if something did go wrong to 

actually collect on those receivables which is a very important 

point. 

But the other point that I first brought up was how we partner 

with hundreds of small to medium size U.S. businesses across the 

United States. We are in the Boston market and obviously we have 

people there, but also we have a lot of people that are near the 

ports in Houston and Louisiana that do trucking, toll blending, 

packaging, warehousing, freight forwarding, ones that don’t even 

realize how much they would be affected if trade by EXIM wasn’t 

financed. 

Three such firms that I have mentioned before, Fleur De Lis 

Worldwide, which is in Chairman Poe’s area; TCI, a packaging and 

trucking firm in New Orleans, Louisiana; and JPI South in Pasadena, Texas, all have doubled and tripled their workforces from our 

loyalty in working and partnering together. 

Now with the new boom that we may see in front of us, petrochemicals, it is even more important for us to capitalize on those. 

We personally have doubled our workforce from 4 to 12 people and 

we have actually opened an office in Houston because of the concentration that we need there. 

Mr. POE. Can you summarize the rest of your comments? We 

have your statement for the record. 

Ms. SEIDEWAND. No problem. Basically, for us, if EXIM is not authorized, which I think is really the most important point for us, 

personally, as Resin Technology, we would probably drop back to 

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just a North American business and probably would be somewhere 

between $30 million and $50 million in sales. We wouldn’t be able 

to negotiate the freight, the actual export contracts. There are 

about five major U.S. producers that we work with. Three of them 

are discussing export contracts that we have in place now and all 

of them continually ask what is happening with EXIM. And if that 

isn’t reauthorized that would obviously—actually signing those contracts for expert, so we would have to reduce in sales, reduce staffing and obviously all the multitude of other businesses that we 

work with. Because really the foreign companies that are our competitors, they just don’t have the loyalty to our other U.S. businesses that we would. And I think that is the most important thing 

for us. 

Mr. POE. Thank you, Ms. Seidewand. Thank you. 

Ms. SEIDEWAND. Thank you. 

[The prepared statement of Ms. Seidewand follows:]

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Mr. POE. The Chair recognizes itself for 5 minutes. I want to 

thank all four of you for being here. I have a lot of questions. I will 

submit some of them in writing for the reasons I mentioned earlier. 

As I mentioned in my opening statement, in Houston, Texas, half 

of our economy is based upon the Port of Houston, and we are an 

export port. We send stuff all over the world that goes through our 

port, so trade is important. Unlike the West Coast, primarily import ports. 

Ms. Jaime and Ms. Seidewand, I want to start with you all and 

then move over to our gentlemen, ladies being first, of course. You 

have heard all of the comments by all of the witnesses. You both 

have been here since we started early this morning. You probably 

read, when you had time and were not doing your work in your 

business to read, the press about EXIM Bank and the volatile controversy over it. So my questions will be first to both of you specifically, because you are in the business world and you use EXIM 

Bank. 

Ms. Jaime, tell me a little bit more about how your business got 

started in San Antonio. 

Ms. JAIME. Yes, Mr. Chairman. My business got started basically 

by going to Latin America and finding coffees that were specialty 

graded which is one of the highest quality in coffee; bringing that 

coffee into the United States, and selling it here in the United 

States. Microroasters generally they do and roast approximately 20 

pounds per batch. As time developed, we started distributing more 

to our market in San Antonio and we dedicated ourselves to do 

commercial roasting for chefs, restaurants, hospitals. We are not in 

the retail because the retail is over saturated. If you go to the grocery stores, you have more than a dozen different labels, of course, 

of coffees. So it is not a good idea for my business to have my coffee 

sitting on a shelf in a supermarket where it is not going to be noticeable. 

Mr. POE. So if there was no EXIM Bank, how would that affect 

your business? 

Ms. JAIME. Tremendously. 

Mr. POE. How? How would it affect you? 

Ms. JAIME. It would affect it because I am not going to be able 

to grow as quickly and help as many coffee growers as we can 

when we are exporting. 

Mr. POE. Would you be able to export if you did not have the 

EXIM Bank? 

Ms. JAIME. No. 

Mr. POE. How much of the business is export business? 

Ms. JAIME. Forty percent of my business right now. 

Mr. POE. You mentioned in your testimony that EXIM helps 

screen your distributors in foreign countries to make sure you are 

not working with criminals. What does that mean? 

Ms. JAIME. Well, it basically means that when we have a submission from a distributor overseas, they give us their information. We 

send that to the EXIM Bank. The EXIM Bank checks to make sure 

that there is no problems with their payments. That they have a 

good record of being an international distributor; if they have a history of doing any business with any manufacturer in the United 

States. And once we get that information back to us, then we can 

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negotiate better with that distributor. If they have never had a history of doing business in the United States, then we are not going 

to be able to offer any kind of payment terms and they are going 

to have to pay for that order up front. 

Mr. POE. You mentioned that your business helps stop illegal immigration. How in the world does you business help stop illegal immigration? 

Ms. JAIME. In the majority of the countries that coffee is grown, 

the coffee grower is very poor and is very limited in the resources 

they have. It is countless and countless number of times, every 

year that I go to the Latin American countries, I find coffee growers that say please represent us well, ma’am. Please sell our product well and pay us well, so that I don’t have to leave my country, 

my family, and have to go and work in the United States illegally. 

Mr. POE. Ms. Seidewand, same line of questioning for you and 

I will try to move as quick as I can. if you don’t have EXIM, how 

does that affect your Boston, Houston business? Microphone. 

Ms. SEIDEWAND. It is interesting how it crosses between both of 

you gentlemen. Really what it means for us is no growth. Really 

in the United States when housing did crash, there was also a lot 

of consolidation of U.S. customers. A lot of manufacturers started 

to consolidate. They were bought by global conglomerates. So the 

U.S. market in manufacturing actually shrunk which is where we 

would sell into. 

So the market isn’t even still the same then—isn’t the same now 

as it was then and really it wouldn’t eliminate exports, but it would 

far reduce them and make them much less attractive. 

Mr. POE. Why? 

Ms. SEIDEWAND. Because we just wouldn’t have the financing to 

offer terms. When I buy from U.S. producers, they give me 30 to 

60 days terms. I need time to actually export, prepare and sell 

those exports. And then I have to compete on terms. I need potentially 60 to 120 days of working capital financing which if your line 

is being held and it is not large enough because you can’t lend 

against enough of your inventory and receivables, you just don’t 

have enough capacity. 

Mr. POE. So why not go to Bank of America and get those 120-

day time limits as opposed to 30 to 60? 

Ms. SEIDEWAND. So LCs are wonderful. If I could do every single 

customer on a documentary letter of credit that came directly to me 

and was all the terms that I wanted, then I would do every one. 

But in certain areas, especially Latin America, as I am sure she 

knows, LCs are not something that they are able to do. 

Mr. POE. Banks won’t do those? 

Ms. SEIDEWAND. They won’t do them. 

Mr. POE. American banks won’t do those? 

Ms. SEIDEWAND. No, the local banks there. The customers won’t 

actually open an LC for them. And if they do, it could cost as much 

as 30 or 40 percent. They just don’t make sense in a commodity 

market. 

Mr. POE. Okay, thank you. My time has expired. I will yield from 

the gentleman from Boston, Massachusetts. 

Mr. KEATING. Thank you, Mr. Chair. I want to just to follow a 

couple of threads one with you, Ms. Seidewand. You mentioned 

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about what other international areas of a company—other countries, actually, are offering in terms of some of the financial terms 

that you need. So you are competing against them. Can you tell us, 

you mentioned Asia, generally. Can you tell us what countries and 

what they are doing that makes it so hard for you to compete? 

Ms. SEIDEWAND. So the loudest one I would say would probably 

be from the trading companies in Japan where their lending rates 

are so low that they are able to offer terms that far outweigh what 

I can compete with. I may have the same price because we have 

competitive products in the United States. For a service, or maybe 

even offering the same types of products from the United States, 

that they and oftentimes are also them and four other countries’ 

worth of products. But they can do so maybe doubling my terms. 

They consistently extend, extend, extend, and so if I can’t compete 

with that, I am not able to offer that to those customers on a longterm basis. 

Mr. KEATING. So it just gives you a level playing field? 

Ms. SEIDEWAND. Absolutely. Absolutely. 

Mr. KEATING. The other thread I wanted to just follow up on and 

thank you for service, General Jones, and having you here has 

prompted this question that I wasn’t prepared to ask, but your 

background and I think you are uniquely positioned to answer this. 

Looking at our trade issues, shared values with Europe and looking 

at the incidents of what is going on Ukraine and some of the other 

countries around there, can you draw a parallel to the advantages 

of our trade particularly with countries who have shared values 

and our security in this part given your NATO background? 

General JONES. Thank you for that question. I think that we are 

living in a very different century and whereas the 20th century 

was characterized by a lot of violence, global wars, and who had 

the strongest and the best armies who wanted to fight, the 21st 

century to me is much more of an economic competition. And this 

is the path that the country—this is a national security issue as 

well. And I believe that if you look at Mr. Putin’s aggression in the 

Crimea and Ukraine and the response to it, it is primarily economic. And there are projects afloat in Europe that the U.S. is also 

participating in to draw up long-term consequences for Mr. Putin’s 

behavior. We can do something about reducing Europe’s dependence on Russian energy, but it is an economic response. We can 

help Ukraine divest itself of being too dependent on Russian energy. 

And so I think the times that we live in, we need to have the 

tools to do that. The Transatlantic Trade and Investment Partnership is already our largest alliance of over $1 trillion in trade, $4 

trillion in investment, and 13 million jobs. And this is a way that 

we can connect with Europe in the 21st century, much the same 

way we did in the 20th century, but with a much more balanced 

approach vis-a`-vis military and economic development. 

So many of our nation’s responses to international threats that 

are facing us are going to be economic. The day that ISIS is defeated in Iraq is a day that we need to have an international plan, 

hopefully, with U.S. leadership to have economic recovery for that 

region because if we don’t, as we did in the Iraq invasion, Iraq will 

just continue to spiral out of control. 

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In my view, it is a simple formula. Security plus economic development, plus governance and rule of law, are the three components 

that have to be factored into international engagements in the 21st 

century. 

Mr. KEATING. I would mention, too, that some of these countries 

wouldn’t be able to participate in the sanctions. 

General JONES. Exactly. 

Mr. KEATING. If they are not strong and join with us which have 

really thwarted Putin’s aggression more than anything else. And 

the second thing, even with NATO, part of their 2 percent contribution is limited because of their economic well being. 

General JONES. Sure. 

Mr. KEATING. And that is important, too, because hopefully after 

Wales and the economy that is advancing although too slowly to be 

able to meet that challenge. Do you think that is important as 

well? 

General JONES. The only reason Iran is at the table is because 

of economic sanctions. The only reason Mr. Putin is going to find 

a way out of his problems in Ukraine is because the economic conditions will ultimately force him to do that. I believe that to be 

true. 

Mr. KEATING. Thank you for your comments. 

General JONES. Thank you, sir. 

Mr. KEATING. I yield back. 

Mr. POE. I thank the gentleman. I have a couple of questions left 

for Mr. Ikenson and General Jones and then I will yield to the 

ranking member if he has further questions. 

Mr. Ikenson, two questions. I will give you both questions and 

then answer both of them. If EXIM Bank is reauthorized, what reforms do you think must be in the reauthorization? And second, 

you said that manufacturers are victims of the Export-Import 

Bank. National Association of Manufacturers representing large 

and small manufacturers support the reauthorization. So could you 

explain that discrepancy and also answer the first question? 

Mr. IKENSON. Sure. 

Mr. POE. Briefly. 

Mr. IKENSON. Thank you for the question. Well, I hope that 

EXIM is not reauthorized. I believe in free market capitalism and 

I think we should try it. But if it is to be reformed, to me, the big 

problem is not necessarily the burden on taxpayers. It is the absence of concern toward other companies when an export sale is 

subsidized, that customer, that foreign customer benefits at the expense of the U.S. customers of that U.S. exporter. And I know that 

Mr. Hochberg mentioned that they do a cost benefit analysis of all 

of their pending transactions. I rather doubt that they do that with 

respect to—they never go into full mode with respect to the impact 

on downstream industries. 

A study that I did took a look at the costs, the costs that are actually imposed on these companies by seeing how important the export product is to the downstream industry as a manufacturing 

input. And based on that and based on the largess that is doled out 

to the exporting industry and to the downstream industry, I was 

able to calculate a cost. The problem is this is a situation of what 

is seen and that which is not seen. We see the export subsidies and 

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we all seem to like exports and we celebrate that, but we don’t 

often see the impact on the downstream industries. Delta is a big 

company and it was able to discern it and bring it to the attention 

of the public. But there are lots of companies, smaller companies, 

that rely on inputs that don’t even really realize that they are 

being affected in a relative way, vis-a`-vis their foreign competitors, 

so some mechanism that brings that to the fore so that there is a 

channel through which companies can evaluate the impact on them 

and maybe seek damages. 

That sort of parlays into the second question, the manufacturing 

sector has many, many victims in a variety of states. It costs about 

$2.8 billion per year. 

Mr. POE. Then why does the National Association of Manufacturers support EXIM Bank? 

Mr. IKENSON. It does because those who benefit, the companies 

that benefit from it are the ones that are speaking out. They want 

EXIM. We have heard some stories here about how crucial EXIM 

is to their businesses. The companies that suffer and then incur 

costs are often unaware of what is going on. 

Mr. POE. So they don’t know they are victims? 

Mr. IKENSON. Many times they don’t know that they are victims. 

They are not as big as Delta. 

Mr. POE. I need to reclaim my time because we are about out of 

time. 

General Jones, be more specific. You make the statement that 

EXIM Bank is important for national security. Why is EXIM Bank 

important for national security and what would be the consequences if we didn’t have it? 

General JONES. Mr. Chairman, if I could just quote from my formal statement and I quote, ‘‘If EXIM Bank is shut down, and the 

United States leaves the field on export financing, such a vacuum 

would not only undermine U.S. business abroad and lose jobs at 

home, but undermine American influence and economic leadership 

at a time when it is needed more than ever.’’

I believe it is an instrument that is valuable. I think the numbers are impressive. And I don’t believe it is in our national interest, if I could use a military term, ‘‘to unilaterally disarm.’’ If we 

do this, you can be sure that the Russians, the Chinese, our friends 

in Europe, they are not doing this. They are competing. And they 

are competing every single day with their missions, not only trade 

missions but heads of state missions, and I believe that the future 

is the public and private sector finding more ways to work together, not ways in which we drift apart. And I think that is a very 

fundamental difference between us and the rest of the competitive 

world that we deal with. 

Mr. POE. Thank you, General Jones. The Chair will yield to the 

gentleman from Massachusetts, Mr. Keating, the ranking member. 

Mr. KEATING. Well, briefly. In response to Mr. Ikenson’s concern, 

I can only ask the two people that are actually in business, Ms. 

Jaime and Ms. Seidewand. If you are worried about downstream 

affecting it, well in a void like that that downstream I am afraid 

is going to be taken by another country, acting in ways that we 

don’t, directly getting involved as a country funding. So in a void 

in that downstream, it is going to be filled somewhere by someone. 

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We want it filled by the U.S. Could either of you comment on that? 

Am I right in that thinking? 

Ms. JAIME. Yes, Mr. Congressman. Basically, just in my field, coffee bean is the second most profitable commodity, traded commodity. If we don’t act as importers and also exporters and be able 

to fill right now the emerging markets, international markets for 

specialty coffees, you are right. Somebody else is going to get it. 

One of the main problems that I have when I go to those countries to buy those coffees that are specialty and they are high quality is that the Chinese buyers are coming in and being very aggressive to be able to get those coffees. And since the coffee grower really does not know how to negotiate for those contracts, they are still 

on the losing side. So it is important for us not only to go, be competitive in purchasing these coffees, but immediately put them in 

the international market that we have a great opportunity to do 

that right now. 

Mr. KEATING. Thank you, Mr. Chair. I yield back and I thank all 

of you for taking the time to be part of this hearing. 

Mr. POE. The gentleman yields back. I also want to thank you 

four for being here most of the morning, here at the testimony and 

your testimony. And as I mentioned to the first panel, there may 

be questions submitted by members on both sides on these issues 

and they will be submitted to you because of the necessity of hearing your answers from other Members of Congress that may not 

have been able to ask questions. In any event, I thank you for 

being here and the subcommittee is adjourned. 

[Whereupon, at 12:17 p.m., the subcommittee was adjourned.] 

(95)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE RECORD

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MATERIAL SUBMITTED FOR THE RECORD BY GENERAL JAMES L. JONES, USMC, RETIRED, FOUNDER, JONES GROUP INTERNATIONAL (FORMER NATIONAL SECURITY ADVISOR TO THE PRESIDENT OF THE UNITED STATES)


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[NOTE: The article entitled ‘‘The Task Ahead,’’ submitted by General James L. 

Jones, is not reprinted here but the link may be found on the following Internet 

page: http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=103486]

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