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[Senate Hearing 114-108]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-108

      PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNITED STATES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

 EXAMINING AND EVALUATING EX-IM BANK FINANCING AND THE BANK'S ROLE IN 
                    CREATING OR SUPPORTING U.S. JOBS

                               __________

                              JUNE 2, 2015

                               __________

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

MICHAEL CRAPO, Idaho                 SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois                  JON TESTER, Montana
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
JERRY MORAN, Kansas

           William D. Duhnke III, Staff Director and Counsel
                 Mark Powden, Democratic Staff Director
                    Dana Wade, Deputy Staff Director
    John V. O'Hara, Senior Counsel for Illicit Finance and National 
                            Security Policy
                    Jelena McWilliams, Chief Counsel
                Shelby Begany, Professional Staff Member
            Laura Swanson, Democratic Deputy Staff Director
                Graham Steele, Democratic Chief Counsel
             Megan Cheney, Democratic Legislative Assistant
                       Dawn Ratliff, Chief Clerk
                      Troy Cornell, Hearing Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor

                                  (ii)

                            C O N T E N T S

                              ----------                              

                         TUESDAY, JUNE 2, 2015

                                                                   Page

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

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2

                               WITNESSES

Veronique de Rugy, Senior Research Fellow, Mercatus Center, 
  George Mason University........................................     4
    Prepared statement...........................................    37
Linda Menghetti Dempsey, Vice President, International Economic 
  Affairs, National Association of Manufacturers.................     5
    Prepared statement...........................................    89
    Responses to written questions of:
        Senator Sasse............................................   107
Michael R. Strain, Deputy Director of Economic Policy Studies, 
  American Enterprise Institute for Public Policy Research.......     7
    Prepared statement...........................................    94
John G. Murphy, Senior Vice President for International Policy, 
  U.S. Chamber of Commerce.......................................     9
    Prepared statement...........................................    96
    Responses to written questions of:
        Senator Sasse............................................   109
Daniel Ikenson, Director, Herbert A. Steifel Center for Trade 
  Policy Studies, Cato Institute.................................    11
    Prepared statement...........................................    99

              Additional Material Supplied for the Record

Newspaper articles submitted by Chairman Shelby..................   113
Statement from the Bankers Association for Finance and Trade and 
  the Financial Services Roundtable submitted by Senator Brown...   121

                                 (iii)

 
      PERSPECTIVES ON THE EXPORT-IMPORT BANK OF THE UNITED STATES

                              ----------                              

                         TUESDAY, JUNE 2, 2015

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., in room SD-538, Dirksen 
Senate Office Building, Chairman Richard C. Shelby, Chairman of 
the Committee, presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The Committee will come to order.
    This is the first of our oversight hearings on the Export-
Import Bank of the United States, which is currently authorized 
through June the 30th of this year.
    During the May 2012 reauthorization process, we built in 
several reforms for the Bank related to risk management and 
accountability.
    I have long been concerned with the Bank's financial risk 
to the American taxpayers, who ultimately stand behind the 
Bank. I made it clear in 2012 that Congress should not merely 
give Eximbank another blank check.
    That is why I called for a comprehensive Government 
Accountability Office study on Eximbank's risk management 
practices. I also sought to put in place measures that would 
reduce the operational risk and hold accountable the Bank's 
management from the top-down.
    Three years later, I remain disappointed with the Bank's 
lack of progress toward these goals.
    During the past few years, the GAO has identified 
significant weaknesses in areas such as the Bank's analysis of 
the default risk, portfolio stress testing, the underwriting 
process, and the forecasting of exposure. Such weaknesses have 
shown to be part of an overall pattern of failure.
    In addition, the Inspector General has recently reported 
that about 40 percent of its recommendations to the Eximbank 
remain open or unresolved.
    After years of efforts to reform the Bank, I am not 
convinced that it has made enough progress to warrant a long-
term reauthorization. Taxpayers, I believe, should not be 
compelled to once again stand behind the Bank if the problems 
are impossible to fix.
    Congress cannot leave unaddressed Eximbank's failures to 
properly manage its risk. It is especially important to get 
this right, considering Eximbank's disproportionate exposure in 
certain industries, geographic areas, and large single foreign 
customers.
    In addition, I continue to be concerned about the eventual 
effects of the rapid 40 percent increase in the Bank's lending 
cap, which was enacted in 2012 over my objections.
    In determining whether reauthorization is justified, I 
believe Congress must take another hard look at Eximbank. It 
must assess the true cost of the Bank on American labor, 
industries, and taxpayers, not only the benefits to a select 
few companies.
    There are strong voices in favor of letting the Bank sunset 
and equally strong opinions in favor of trying one more time to 
address serious concerns with the Bank. Those who say Eximbank 
should be allowed to expire argue that the Bank can never be 
reformed and that the subsidies do little, if anything, to 
advance the Nation's overall economic prospects. Those who say 
that the Bank should live to see another day argue that it is a 
necessary evil of export financing that seeks to level the 
playing field among aggressive foreign export policies.
    As the Banking Committee begins to examine these issues, we 
welcome the distinguished panel of witnesses today. Each brings 
a valuable perspective and has been asked to present evidence 
to support his or her assessment of the Bank.
    On Thursday of this week, we will hear from Fred Hochberg, 
the Chairman and President of the Export-Import Bank of the 
U.S. The Committee will then consider next steps as the Bank's 
current reauthorization nears expiration.
    Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman. Thank you for 
holding today's hearings.
    To all our witnesses, for being here, thank you for sharing 
your views on the Export-Import Bank.
    In today's global economy, we should support businesses 
when they sell their products around the globe. Exports are as 
important to the aerospace industry in the Chairman's home 
State of Alabama as they are to my State of Ohio.
    That is why reauthorizing Eximbank by June 30th is 
essential. It should be easy. It should be bipartisan.
    In 2006, when George Bush was in the White House, the Bank 
was reauthorized by a voice vote in the House and by unanimous 
consent in the Senate. As those votes show, Eximbank used to be 
a bipartisan issue until some made its existence an ideological 
litmus test.
    The Bank fills gaps in private export financing to help 
foreign buyers purchase U.S. goods and services.
    During their recent debate on trade promotion authority in 
the Senate, we heard from supporters of the legislation that 
fast-track was needed to boost our U.S. exports, that it was 
needed to increase our role in the globalized economy, that it 
was needed because it was geopolitically important. All that is 
debatable with respect to TPA and with TPP but absolutely true, 
undoubtedly, when applied to the Export-Import Bank.
    With Eximbank, these benefits come without the cost of off-
shoring jobs and without the cost of exposing U.S. markets to a 
flood of foreign goods. Senators who supported fast-track 
because it would promote U.S. exports and grow our economy 
should support Eximbank for the same reasons.
    We know that competitors around the world have their own 
ex-im banks. There are about 60 export credit agencies 
worldwide.
    One analyst said, quote, ``Killing a Bank is like telling 
an athlete he has to spot a competitor 10 yards in a race.''
    Why would we put our manufacturers and exports at a 
disadvantage to China, to India, to most European countries?
    Last year, Eximbank reported it supported $27 billion in 
exports and 164,000 American jobs, includes more than $250 
million in deals, in my State alone, 60 percent--60 percent--of 
which went to small businesses. In total, Eximbank has provided 
some $3 billion in financing and guarantees to more 300 Ohio 
businesses, more than two-thirds of which were small 
businesses. This means more manufacturing, more middle-class 
jobs, more experts, more jobs overall, particularly in the 
high-paying manufacturing area.
    Finally, for the many conservative organizations that have 
been so concerned about Federal budget deficits, Eximbank is 
self-sustaining. Last year, it returned more than $600 million 
to the U.S. Treasury.
    For all those reasons, we cannot afford to allow the Bank's 
authorization to expire at the end of the month nor can we do 
just a few months at a time. As we talk about predictability, 
we inject more on predictability into the system and into 
financing decisions that companies in our country make.
    I commend Senator Kirk; I commend Senator Heitkamp, for 
their bipartisan efforts to ensure that Eximbank is 
reauthorized with some reforms.
    I look forward to working with Chairman Shelby in addition 
to the two Members of this Committee who are here today, 
Senators Kirk and Heitkamp, to ensure that authority for the 
Eximbank does not lapse for the first time in its 7-0, 70-year 
history.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you. Thank you, Senator Brown.
    First, we will hear from Dr. Veronique de Rugy of the 
Mercatus Center at George Mason University.
    Senator Donnelly. Mr. Chairman? Mr. Chairman?
    Chairman Shelby. Oh, Senator Donnelly.
    Senator Donnelly. Are any of the other Members going to be 
allowed to make opening statements?
    Chairman Shelby. I thought we would limit this because we 
have got a vote and get started. We will give you time, though, 
to make an opening statement later.
    Senator Donnelly. Thank you.
    Chairman Shelby. First, we will hear from Dr. Veronique de 
Rugy of the Mercatus Center at George Mason University, who has 
spent a considerable amount of time studying the Bank and 
official export credit financing.
    Next, we will turn to Ms. Linda Dempsey, the Vice President 
of International Economic Affairs at the National Association 
of Manufacturers. Her role at the National Association of 
Manufacturers is to lead efforts to improve global 
competitiveness of U.S. manufacturers.
    Third, we will hear from Dr. Michael Strain, a resident 
scholar and Deputy Director of Economic Policy Studies at the 
American Enterprise Institute.
    Next, Mr. John Murphy, Senior Vice President for 
International Policy at the U.S. Chamber of Commerce, will give 
his remarks.
    And finally, Dr. Daniel Ikenson, Director of the Herbert A. 
Stiefel Center for Trade Policy Studies at the Cato Institute, 
where he serves as an expert on trade and investment policy, 
will offer his perspective on the Export-Import Bank before we 
turn to questions.
    We will start with you, ma'am.
    All of your written testimonies will be made part of the 
record. If you could sum up your basic points in 5 minutes 
because we do have a vote schedule and we are going to have to 
take a break and then come back.

    STATEMENT OF VERONIQUE DE RUGY, SENIOR RESEARCH FELLOW, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Ms. de Rugy. Good morning, Chairman Shelby, Ranking Member 
Brown, and Members of this Committee. It is an honor to appear 
before you today to testify about the Export-Import Bank.
    We do not agree on much in Washington, but everyone should 
agree that the Federal Government should not direct our limited 
public resources primarily to wealthy, politically connected 
companies, and yet, that is what the Export-Import Bank does. 
On the domestic side, 64 percent of Eximbank finances benefits 
10 large corporations, 40 percent benefits Boeing.
    Think about it this way; there is an agency whose entire 
reason for being appears to be promote the specific welfare of 
a handful of corporations.
    On the foreign buyers' side, the top beneficiaries include 
a majority of State-owned companies such as Pemex, the Mexican 
oil and gas giant, and Air Emirates, the airline of wealthly 
United Arab Emirates.
    In spite of this, some say that there are good reasons to 
reauthorize Eximbank--because it promotes exports, it fills a 
critical financing gap, and without it, jobs will instantly 
disappear. But none of these arguments withstand scrutiny, as 
my testimony will show.
    However, I also want to focus on the groups who are 
affected by Eximbank activities that have gone ignored. These 
people do not have connections in Washington. They do not have 
press offices and lobbyists. But they matter, too.
    It is difficult, but extremely important, that we consider 
the unseen cost of political privileges whether they take the 
form of market distortions, resource misallocation, or higher 
prices.
    So let's start.
    First, contrary to what you hear from a supporter, the 
Eximbank plays a marginal role in export financing, backing 
less than 2 percent of exports each year. It means that 98 
percent of U.S. exports are financed using a wide variety of 
private banks and other financial institutions without 
Government interference or assistance. So allowing Eximbank to 
expire would not result in a collapse of the U.S. export 
market.
    Second, the Bank claims that it fills a critical financing 
gap, but according to the Bank's own data 16.6 percent of its 
activities are justified by filling this financing gap. What it 
means is that 83 percent of what the Bank does has nothing to 
do with filling a financing gap. So, basically, Eximbank is in 
the business of extending cheap loans to large foreign 
corporations so they can buy goods and services through massive 
domestic firms.
    Third, the Bank claims that if its charter expires jobs 
will disappear. It takes credit for supporting 164,000 jobs in 
2014, but GAO has criticized the Bank's methodology, among 
other reasons, for omitting to take under consideration the 
jobs that actually would exist without the Bank.
    But even if we accept the Bank's questionable job claims, 
failing to reauthorize Eximbank will not disturb existing loans 
and, hence, the jobs they support. It will simply prevent the 
Bank from asking taxpayers to make new loans.
    Also, top Eximbank beneficiaries have billions of dollars 
of backlogs which will keep their workers and small business 
suppliers busy for years to come. Boeing, for instance, has 
$441 billion in backlogs, meaning that it will have years to 
arrange alternative private financing like many small and large 
exporters do every year.
    Now the 10 large corporations who capture the majority of 
Eximbank benefits have various incentives to make sure their 
voices are heard, but it is critical that we consider the 
unseen victims of political privilege.
    These victims are, first, taxpayers who bear the risk of 
$140 billion in liability.
    Second, they are consumers who pay higher prices for 
purchase of subsidized goods.
    And, third, these victims are unsubsidized firms competing 
with subsidized ones. They not only pay a higher financing cost 
but lose out when private capital flows to politically 
privileged firms regardless of the merit of their projects.
    Indeed, some of these victims are victimized multiple 
times, first as taxpayers, then as consumers, then as 
competitors, and finally as borrowers.
    Unfortunately, we will never see the businesses that could 
have been. We will never hear from the workers whose wages were 
not raised or whose jobs disappeared because of the unfair 
competition from Eximbank-backed firms.
    It took courage and leadership to stand up and represent 
the forgotten firms, workers, taxpayers, and consumers whose 
voices are so easily drowned out by the corporate beneficiaries 
of Government privilege. So thank you very much for organizing 
this hearing, and I am looking forward to your questions.
    Chairman Shelby. Ms. Dempsey.

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

    Ms. Dempsey. Thank you, Chairman Shelby, Ranking Member 
Brown, and Members of the Committee. I appreciate the 
opportunity to testify today on behalf of the National 
Association of Manufacturers, the NAM, which is the largest 
industrial trade association in the United States and the voice 
for the 12 million men and women who make things in America.
    With 95 percent of the consumers outside the United States 
and global demand for manufactured goods that far exceeds 
domestic consumption of those goods, the United States has to 
win more sales overseas if we are going to sustain and grow 
manufacturing and jobs in this country. While the recent growth 
in exports is impressive, U.S. manufacturers are facing an 
increasingly challenging global economy where growth has slowed 
and America lags behind most major Nations in terms of our 
export success.
    The NAM and its members view the Eximbank as one of the 
most important tools the U.S. Government has to boost U.S. 
exports and support American jobs. In fiscal year 2014, 
Eximbank enabled more than $27 billion in exports, supporting 
over 160,000 American jobs, by providing services that are not 
available commercially for which fees and interest are 
collected and for which there was only a zero--less than 0.2 
default rate.
    It has undergone significant reform in recent years and is 
increasingly supporting small businesses. Indeed, nearly 90 
percent of the 2014 transactions directly supported small 
businesses.
    And every U.S. exporter that wants to apply for an Ex-Im 
service can do so, and if it meets the eligibility criteria it 
will be provided that service; no special access required.
    While Eximbank does not need to finance the great majority 
of U.S. exports, it is critical in a few key areas. Let me 
explain.
    For small businesses, there are already 3,300 small 
business transactions in 2014; 545 companies were first-time 
Eximbank users and probably first-time exporters, too. They are 
the direct Eximbank users, but they also supply to some of the 
big companies out there that export. If Eximbank is closed, 
small businesses would feel it first.
    Current Treasury Department rules put export-intensive 
companies in a bind when it comes to asset-based lending. The 
Eximbank is sometimes the only option to enable crucial working 
capital flow. Without Eximbank, small businesses will be faced 
almost immediately with a loss of that working capital, and 
they will have to face the dilemma about whether they are going 
to pay their workers or pay the mortgage on their facility.
    For infrastructure, a worldwide growth sector, Eximbank 
plays an especially crucial role because this is where long-
term lending is required. Post-financial crisis, there are a 
whole bunch of new restraints that have been put on this long-
term commercial ending. And, without Eximbank U.S. exports in a 
wide range of infrastructure, energy, and aerospace sectors 
will be lost to foreign competition.
    For emerging markets, many U.S.-based lenders need to rely 
on Eximbank for expertise and to mitigate geopolitical and 
collateral risk. Without Eximbank, U.S. businesses will lose 
sales in these markets that are showing substantial promise.
    Finally, U.S. exporters from a broad range of sectors are 
increasingly selling to foreign Governments and State-owned 
enterprises. Whether it is a medical equipment company that is 
selling to a State-owned hospital overseas or companies in 
nuclear and power generation that are selling major equipment, 
these Governments and State-owned enterprises expect a 
Government at the other side of that table, at least to begin 
the bidding process. In many cases, Eximbank actually does not 
play a role in the final transaction. If Eximbank is not 
reauthorized, U.S. manufacturers will be out of all of these 
areas that affect both small and large companies.
    As the U.S. Congress debates the future of Eximbank, our 
trading partners are moving forward aggressively. Last year, 
the NAM put out a report, ``The Global Export Credit 
Dimension,'' that documented the over 60 ECAs worldwide and the 
foreign--and their massive foreign export credit.
    The ECAs of our top nine trading partners provided nearly 
half a trillion dollars just in official funding, and countries 
like China, South Korea, and Canada and Brazil are growing 
massively. Without Eximbank, the U.S. will ceding sales to our 
competitors overseas at the cost of manufacturing and jobs 
domestically.
    While the United States is a relatively small player, it is 
actually the U.S. that has led global efforts to eliminate 
subsidies, to eliminate market distortions through export 
credit, and has succeeded with our OECD partners, including 
through sector-specific arrangements such as in nuclear power, 
ships, aircraft, and renewable energy and water.
    The United States has also initiated negotiations with 
developing countries to put disciplines on foreign export 
credit agency funding, but that has been particularly 
difficult, particularly as the U.S. is debating Eximbank's 
future.
    If Eximbank is eliminated, the continued arms race and the 
global ECA activity will expand unchecked, and U.S. 
manufacturers, other businesses, and workers will be the 
victims. Time is of the essence.
    Thank you. I urge this Committee and the Senate to move 
forward now on an Eximbank reauthorization.
    Chairman Shelby. Dr. Strain.

  STATEMENT OF MICHAEL R. STRAIN, DEPUTY DIRECTOR OF ECONOMIC 
POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY 
                            RESEARCH

    Mr. Strain. Chairman Shelby, Ranking Member Brown, and 
Members of the Committee, thank you for the opportunity to 
appear before you today to discuss the Eximbank. It is an 
honor.
    I do not believe that the Eximbank should be reauthorized. 
I will outline why, with a special focus on the Eximbank's 
impact on jobs.
    In a healthy economy, one characterized by full employment, 
the Eximbank does not create jobs. This stands in stark 
contrast to the rhetoric of some of the Ex-Im Bank's 
supporters, but it is the correct conclusion, at least to a 
first approximation, for informing the Committee as it debates 
the appropriate course of action for the Eximbank.
    Imagine an economy like ours, with some firms that export 
goods abroad and many more firms that sell only within the 
United States. All labor resources are utilized.
    The Government enters and subsidizes the exporting firms. 
This will surely help those firms, and it may even increase the 
number of jobs those firms can support. But as labor resources 
are fully employed, these new jobs must come from somewhere.
    What the export subsidy is doing, in effect, is shifting 
jobs from firms that do not export to firms that do. This does 
not increase employment on the whole.
    Now it must be said that there is considerable debate among 
economists as to whether the U.S. economy is currently 
characterized by full employment. Many economists believe we 
are quite close to full employment, but I am not among them.
    In such an environment, it can be argued that export credit 
may help support jobs. To this argument, I have three replies.
    The first is that the Congress should not reauthorize a 
permanent export credit agency in order to achieve the 
temporary goal of tightening a slack labor market. Monetary and 
policy fiscal policy are much better tools to tighten the labor 
market.
    The second is that even if the Congress chooses to 
authorize finance to selected sectors to support employment, 
exports would not be high on the list of firms or industries to 
target.
    Finally, failing to reauthorize the Eximbank would not 
immediately terminate its existing financing arrangements, and 
the lives of those arrangements will likely run longer than our 
current labor market conditions.
    I will now turn from the employment impacts of the Ex-Im 
Bank to considerations of the broader economy.
    Textbook models of international trade for a large economy 
predict that export subsidies will lower national welfare, will 
make the United States worse off relative to a situation 
without the subsidies.
    In contrast, some, though far from all, more complicated 
models set in an oligopolistic market environment, featuring 
particular forms of strategic competition, do find situations 
in which export subsidies can make the Nation better off.
    A unifying feature of these models, however, is that the 
Government's policy toward exports requires an incredible 
amount of knowledge that the Government almost surely does not 
possess in reality. To illustrate this, consider some general 
equilibrium effects of a simple subsidy.
    Much discussion of the Eximbank focuses on partial 
equilibrium effects, on the effects of the Eximbank on a single 
market, or on a single set of firms. But economic policy, 
including the decisions of the Eximbank, can effect many firms 
and many markets. And so general equilibrium considerations 
must be taken into account by the Congress when deciding 
whether to allow the Eximbank to continue providing export 
credit.
    And export subsidy will give subsidized firms an advantage 
over their foreign competitors, increasing the demand for those 
firms' output. But this, in turn, will increase the demand for 
inputs to production among the subsidized firms, increasing the 
price of those resources faced by other sectors, and putting 
firms in those sectors--sectors that do not receive export 
credit--at a disadvantage relative to a situation without the 
export subsidy.
    Even if the subsidy helps firms that receive it then, the 
subsidy may hurt the overall economy.
    It is hard to imagine how the Government could understand 
all the interlocking parts of the economy well enough to know 
whether the subsidy is a net positive for the United States.
    The existence of capital market deficiencies and 
imperfections, and the export credit behavior of foreign 
Nations, do not nullify general equilibrium concerns about 
information and uncertainty.
    Political economy presents other concerns as well. The 
default assumption of the Congress should be that well-
connected, influential corporations will be in a better 
position to exercise influence over whether they receive Ex-Im 
Bank financing than other less-connected corporations. This 
creates important issues that the Congress cannot ignore.
    To conclude, let me offer final thoughts.
    First, it is reasonable to describe the Eximbank as 
dispensing so-called corporate welfare, but the Eximbank is 
hardly the chief offender. After the Eximbank's fate is 
resolved, the Congress should oppose crony capitalism in other 
sectors of the economy, where its magnitude is often larger, 
just as vigorously.
    Second, in the realm of trade policy, future negotiations 
and arrangements should stress the need for foreign Nations to 
limit their provision of export credit.
    Finally, supporters of the Eximbank have a reasonable 
argument that there may be times when limited, temporary, 
strategic trade policy may be appropriate. But such policy 
should address specific, identifiable actions of foreign 
Governments or other strategic goals in a very targeted way. It 
should not be left to an open-ended export credit agency such 
as the Eximbank.
    But regardless of progress on these three fronts, the 
Eximbank should not be reauthorized.
    Chairman Shelby. Mr. Murphy.

    STATEMENT OF JOHN G. MURPHY, SENIOR VICE PRESIDENT FOR 
         INTERNATIONAL POLICY, U.S. CHAMBER OF COMMERCE

    Mr. Murphy. Mr. Chairman, Ranking Member Brown, Members of 
the Committee, I am very pleased to be here today to testify on 
the importance of reauthorizing the Eximbank.
    I represent the U.S. Chamber of Commerce, the world's 
largest business federation, representing the interests of more 
than three million businesses of every size, sector, and State.
    You have heard the fundamentals from my colleague, Linda 
Dempsey: Eximbank, last year, supported more than $27 billion 
in American exports, more than the merchandise exports of the 
State of Alabama, more than the merchandise exports of 
Arkansas, Idaho, Nebraska, and South Dakota combined. Eximbank 
is especially important to the small- and mid-sized companies, 
which account for nearly 90 percent of its transactions.
    The idea that Congress would even consider making the 
United States the one major trading Nation in the world without 
an official export credit agency has left many in the U.S. 
business community baffled. Consider how this would put 
specific sectors and industries at a comparative disadvantage 
in global markets.
    First, shutting down Eximbank would mean many small 
businesses could not even export because commercial banks often 
refuse to accept foreign receivables as collateral for a loan 
without an Eximbank guarantee. For these small firms, Eximbank 
is often indispensable.
    In fact, buyers overseas nowadays expect vendors to offer 
financing. Without Eximbank's account receivables insurance and 
lines of credit, many U.S. small businesses would be unable to 
extend terms to foreign buyers and would have to ask for cash 
in advance. In such a case, the business will most likely go to 
a firm from another country that is able to offer financing.
    For these small businesses, Eximbank is not just nice to 
have--it is indispensable--nor is there any assurance that 
eliminating Eximbank would cause commercial banks to step into 
the breach.
    In addition to these direct small business beneficiaries, 
tens of thousands of smaller companies that supply goods and 
services to large exporters also benefit from Eximbank.
    Second, it is par for the course for expensive capital 
goods, such as Canadian planes, Chinese trains, and Russian 
nuclear reactors, to be sold worldwide with unashamed backing 
from these firms' national export credit agencies.
    In the past few years, we have seen major tenders for 
locomotives in African countries and elsewhere hang in the 
balance. These tenders, worth hundreds of millions of dollars, 
required that the supplier finance a significant portion of the 
transaction. Chinese competition in these cases has been 
fierce, and they come well-prepared with generous financing 
from one of China's several export credit agencies.
    Again, in these circumstances, the calculus is clear; no 
Eximbank, no sale.
    Third, foreign infrastructure opportunities are another 
area where export credit agency support is often required. 
Closing Eximbank would shut American exporters out of huge 
business opportunities overseas because ECA support is required 
for a company even to bid on overseas infrastructure projects.
    Fourth, nuclear power is another sector where the fate of 
Eximbank will have a major impact. According to the Nuclear 
Energy Institute, just 5 nuclear power plants are under 
construction in the United States, but 61 new plants are under 
construction overseas. So for the U.S. nuclear industry, which 
directly employs more than 100,000 Americans in high-skill, 
high-wage jobs, it is export or die.
    But here is the rub. Export credit agency support is always 
a bidding requirement for international nuclear power plant 
tenders. Without Eximbank, U.S. nuclear power companies will 
not even be able to bid for business overseas.
    Make no mistake; executives in a number of these industries 
will face hard questions of whether to shift production abroad 
where export credit agency support is available.
    Eximbank's critics would like to have it both ways. On the 
one hand the Bank is a colossus with the power to distort free 
markets, but on the other it is such a small agency that its 
abolition would do no harm to the U.S. companies that depend on 
it. It cannot be both.
    In fact, Eximbank is modestly and appropriately scaled, 
acting mostly in the circumstances I have described, where it 
is necessary to U.S. competitiveness.
    In closing, Eximbank does not skew the playing field. It 
levels it for U.S. exporters facing head-to-head competition 
with foreign firms backed by their own export credit agencies. 
Often, it acts even as a deterrent in cases where it is not 
even used but its availability can make a determination.
    Eximbank does not pick winners and losers, but refusing to 
reauthorize Eximbank is picking foreign companies as winners 
and U.S. exporters as losers.
    The Bank's opponents have attempted to tie it to unsavory 
customers overseas. This is only an attempt to divert attention 
from the true beneficiaries of Eximbank, the tens of thousands 
of American workers whose jobs depend on the Bank's support for 
their exports. Their voice must be heard in this debate.
    Thank you.
    Chairman Shelby. Mr. Ikenson.

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

    Mr. Ikenson. Good morning, Chairman Shelby, Ranking Member 
Brown, Members of the Committee.
    I am Dan Ikenson, Director of the Herbert A. Stiefel Center 
for Trade Policy Studies at the Cato Institute, and I 
appreciate the invitation to share my perspectives on the 
Export-Import Bank of the United States with you today. The 
views I express are my own and should not be construed as 
representing any official positions of the Cato Institute.
    To the extent that today's hearing will help illuminate the 
full impact of Eximbank on the economy and on the market 
process, I am pleased to participate and offer some assistance.
    Americans tend to view the global economy as an us-versus-
them proposition where exports are ``Team U.S.A.'s'' points, 
imports are the foreign team's points, the trade account is the 
scoreboard, and the deficit on that scoreboard means the home 
team is losing at trade.
    But trade is not a competition between us and them. It is 
not a national sport played by countries but a cooperative 
exercise between billions of people seeking to obtain value 
through exchange.
    The purpose of trade policy is not to secure a trade 
surplus but to increase potential for economic growth.
    Why should U.S. taxpayers underwrite, and U.S. policymakers 
even promote, the interests of exports anyway when the benefits 
of those exports accrue primarily to the shareholders of the 
companies enjoying the subsidies?
    There is no national ownership of private export revenues. 
As Milton Friedman used to say, exports are the things we 
produce but do not get to consume while imports are the things 
we consume but do not have to produce.
    But given the exalted status of exports in Washington's 
economic policy narrative, Eximbank's self-portrayal as 
indispensable to U.S. export success makes for a good survival 
strategy. Never mind that on that metric Eximbank is scarcely 
relevant and Eximbank supported $27.4 billion in exports last 
year, which is less than 2 percent of the total U.S. export 
value.
    But policymakers should stop conflating the interests of 
exporters with the national interest and commit to policies 
that reduce frictions throughout the supply chain, from product 
conception to consumption.
    For example, over 55 percent of the value of U.S. imports 
last year consisted of intermediate goods, capital goods, and 
other raw materials--the purchases of U.S. businesses. Yet, 
many of those imports are subject to customs duties which raise 
the cost of production for the U.S.-based companies that need 
them, making those firms less competitive at home and abroad.
    U.S. duties on products like sugar, steel, magnesium, 
polyvinyl chloride, and other crucial manufacturing inputs have 
made it more difficult for U.S. companies to compete at home 
and abroad, and it has chased companies to foreign shores where 
those inputs are less expensive, and it has deterred foreign 
companies from setting up shop stateside.
    And just as import duties on intermediate goods adversely 
impact downstream consuming industries, subsidies for exporting 
intermediate goods have the same adverse impact.
    Just as U.S. steel tariffs hurt U.S. manufacturers of 
appliances and auto parts by raising their cost of production 
and lowering the cost of production of foreign competitors, 
subsidies to export steel have the same kind of adverse effect 
on steel-using industries--diverted supply leading to higher 
domestic input prices and lower input costs for competitors 
abroad.
    What is seen and celebrated as the tariff or export subsidy 
that benefits the steel industry, what goes unseen but is every 
bit as real, are the costs imposed on downstream industries.
    Eximbank financing helps two sets of companies--U.S. firms 
whose exports are subsidized through direct loans or loan 
guarantees and the foreign firms who purchase those subsidized 
exports. So high fives all around for the beneficence of 
Eximbank.
    But those same transactions impose costs on two different 
sets of companies--competing U.S. firms in the same industry 
who do not get Eximbank backing and U.S. firms in downstream 
industries whose foreign competition is now benefiting from 
reduced capital costs courtesy of the U.S. Government.
    Eximbank is an exercise in picking winners and losers, 
nothing more.
    Eximbank financing reduces the cost of doing business for 
the lucky U.S. exporter and reduces the cost of capital for his 
foreign customer, but it hurts U.S. competitors of the U.S. 
exporter. It is what I call industry costs.
    It also hurts U.S. competitors of its foreign customer--
that is what I call the downstream industry costs--by putting 
both groups at relative cost disadvantages.
    According to the findings of a recent Cato Institute study, 
the downstream costs alone amount to a tax of approximately 
$2.8 billion every year.
    And the victims include companies in each of the 21 broad 
U.S. manufacturing sectors and 189 of 237 specific 
manufacturing sectors as defined at the 6-digit level of the 
North American Industry Classification System, and the victims 
are in every State.
    In other words, the average firm in four of every five 
manufacturing industries is made worse off by the Export-Import 
Bank.
    Market interventions like these, no matter how well-
intentioned, have secondary effects that have to be taken into 
account when rendering judgment about the benefits and costs of 
the policy.
    The auto bailout, to give another example, may have helped 
the workers and shareholders at GM and Chrysler, but it denied 
the spoils of competition to Ford, Honda, Toyota, Nissan, 
Hyundai, Kia, and BMW. A market process that rewards worthy 
firms and punishes less capable ones was subverted.
    So Congress should allow Eximbank to expire at the end of 
the month and refrain from subsequent reauthorization.
    Thank you.
    Chairman Shelby. Mr. Ikenson, you mentioned in your 
testimony that Eximbank may reward some companies but penalize 
others whom you described as collateral damage of the Bank.
    Dr. de Rugy, you also alluded to numerous Eximbank losers 
in your testimony.
    Could you explain in more detail, both of you, why most of 
the cost of Eximbank subsidies are unseen, and how do you 
identify the so-called victims of Eximbank in the U.S. economy?
    I will start with you.
    Mr. Ikenson. OK. Well, the costs to downstream industries, 
I think, are manifest through two channels: Diversion of 
domestic supply, which tends to raise the prices of the input, 
and that raises the cost of production for downstream firms. 
Two, the subsidized export of that input reduces the cost of 
production for the U.S. downstream firms' foreign competitors.
    Often, these costs are small. For example, if a U.S. Steel 
export is subsidized and the cost of steel accounts for only 1 
or 2 percent of the total cost of production for that firm, 
that firm--it may be imperceptible to that firm than to a firm 
for whom steel accounts for 40 or 50 percent of the cost of 
production.
    So this is perpetrated in an insidious way. It is like 
being pickpocketed or getting an extra item on your telephone 
bill for some small tax.
    There are costs that result from the diversion of supply, 
from the underwriting of foreign competition. Sometimes 
companies do not realize it.
    In Delta's case, Delta realized it, but airplanes--Boeing 
aircraft--are a major cost component for Delta. So they were 
able to call Boeing out and complain about the subsidies to Air 
India and other foreign carriers.
    But a lot of other companies do not see that. They might 
detect that their costs are rising or that their revenues are 
being impeded, but they might not know that they can attribute 
that to Eximbank subsidies for their suppliers.
    Chairman Shelby. Doctor.
    Ms. de Rugy. I would add to what Mr. Ikenson said by saying 
that we know who the beneficiaries of Eximbank are, and there 
is no denying that they are liking it. I mean, they like it 
enough, and they would like to keep the benefit enough that 
they have an incentive to organize and to spend considerable 
amount of resources coming and lobbying Members of Congress all 
the time.
    But, in fact, for the victims who, as Mr. Ikenson said, do 
not necessarily realize it and are spread out throughout the 
country, this incentive does not exist.
    And, actually, the cost of doing such a thing is way too 
high.
    Think about in your State, Mr. Chairman, Eximbank backs 
only 34 percent last year of exports. So it means that over 99 
percent of exports without export subsidies.
    These exporters, I mean, they are not marching to your 
office all of the time. They may not even realize; some of them 
do, but they may not realize. And yet, some of these exporters, 
they lose in different ways.
    Maybe some exporters are actually using Boeing planes to 
export their goods, and so they are getting, you know, the 
financing at a higher rate but also--than their competitors, 
but also they pay more for the export of their goods by using 
Boeing planes than they would otherwise.
    But they may know, and certainly, they certainly do not 
have the incentive to come fly to Washington and lobby you.
    Chairman Shelby. I will direct this next question to--I 
will start with Dr. Strain.
    According to the Bank, nearly 90 percent of its customers 
last year were small businesses as a percentage of 
transactions.
    Congress set a 20 percent mandate on the dollar value of 
direct small business export assistance, which the Bank has not 
consistently met.
    The lion's share of the dollar amount of transactions last 
year remained with a handful, as you pointed out, of very large 
companies.
    Dr. Strain, how would you grade the Bank's assistance to 
small business?
    Mr. Strain. Well, I think it has to be acknowledged that if 
you are going to have an export credit agency that a lot of the 
resources are going to flow to large exporters. So when you 
look at the amount of credit provided in dollar figures, a 
large, large share of that goes to big firms. If you look at 
the number of authorizations, a much smaller share goes to big 
firms.
    But I think it is the dollar figure that actually matters, 
certainly to the macroeconomy and to the way that we think 
about economic policy. And so I think it is very accurate to 
characterize the Eximbank as being a bank that primarily 
assists very large corporations that have access to credit 
unlike small competitors.
    And as a consequence, to answer your question directly, I 
would grade the Bank fairly poorly on its congressional mandate 
to help small businesses to a large degree.
    Chairman Shelby. Do you agree with that, Doctor.
    Ms. de Rugy. Yes, I do.
    Chairman Shelby. Thank you.
    Senator Brown.
    Senator Brown. Thank you.
    I found Mr. Ikenson's--one of the last comments he made 
about the auto rescue interesting, and I know that Senator 
Donnelly cares a lot about this, too--that you spoke of that it 
may assisted or helped GM and Chrysler but not the others even 
though we were all lobbied pretty heavily by Honda, big in my 
State because of the supply chain, and Ford, big in my State 
and around the country.
    Senator Donnelly. Mr. Chairman, if I could just say one 
thing, Toyota manufacturing came to my office and sat down with 
me in my office and said it is critical for Chrysler and 
General Motors to survive in order for the supply chain and all 
the suppliers downstream to survive as well, and they asked us 
specifically to make sure we would stand up for Chrysler and 
General Motors as well.
    Senator Brown. And the supply--thank you, Senator Donnelly.
    Let me--and he is right.
    Mr. Ikenson, I understand, too, that in your study you cite 
Nucor as an example of collateral damage in an agreement for 
foreign manufacturers to purchase steel from U.S. Steel. Well, 
the fact is Nucor is supportive of the reauthorization of the 
Eximbank.
    But I want to get to questions with Mr. Murphy and Ms. 
Dempsey.
    The June 30th expiration is, what, 4 weeks away? Your 
testimony touched on some of the consequences of that 
expiration, Ms. Dempsey.
    If Mr. Murphy and Ms. Dempsey would give me thoughts on 
what the economic impact would be if it does expire at the end 
of the month, especially for your members.
    And, Mr. Murphy, it is nice to hear the Chamber of Commerce 
talk so much about its workers, something I do not know that it 
is always focused on, but I appreciated those comments today.
    If you would both give me your thoughts on what exactly it 
means to your companies, especially your smaller businesses and 
to your workers.
    Ms. Dempsey. Well, thank you, Senator Brown. Thank you, 
Senator Brown.
    You know, I think it is important to hear what actually is 
happening on the ground, not just economic theory, because the 
failure to reauthorize the Eximbank on a long-term basis is 
going to put at risk tens of billions of dollars of exports.
    We are not at full employment in this country, and we are 
certainly not at full manufacturing output. In fact, we have a 
lot of industries that have had to shutter or slow down 
facilities.
    We can produce a lot more if we have those export markets 
and if we have the Eximbank continue. But given the amount of 
exports that Eximbank finances on an annual basis, we will be 
putting tens of billions of dollars at risk and tens of 
thousands of U.S. jobs across America because we are going to 
lose those sales to foreign competitors.
    And when I think about a small business company like 
Special Products and Manufacturing, whose CEO said the future 
of American manufacturing is in jeopardy of being seriously 
hurt if the Eximbank is not reauthorized, other companies are 
going to lose sales--small business, large businesses, and this 
is going to have a direct impact on manufacturing in our 
country.
    Senator Brown. Mr. Murphy, your thoughts.
    Mr. Murphy. Out in the global marketplace, amid the tough 
competition we see from new firms and old, from different 
countries around the world, the theoretical concerns that we 
have heard here ring hollow.
    Out in the marketplace, the choice is not one between 
Eximbank on the one hand and the perfection of free markets on 
the other. It is a choice between U.S.-made aircraft, nuclear 
reactors, turbines, locomotives, a host of products and their 
competing products from other countries. And, often tipping the 
balance is official export credit agency support.
    So if Eximbank's critics have their way, the U.S.-made 
products will no longer have that support, and it really could 
tip the balance.
    Stan Veuger, who is an AEI scholar and an expert in applied 
microeconomics and who has participated in what I understand is 
a vigorous debate at AEI on this topic, was asked the question: 
Well, why should we have an Eximbank? His answer: Because the 
world is not one frictionless credit market.
    Faced with foreign ECAs, we have an Eximbank, a Federal 
Government program of, at most, negligible cost that helps U.S. 
exporters compete with foreign firms on a level playing field.
    He warns against the utopian views of some Libertarians who 
believe that a fallen world can make due with the Garden of 
Eden's governing institutions.
    For American companies, they want customers. They do not 
care if they have pointy ears and green blood. They want 
customers who can pay.
    And those customers have alternatives from many other 
countries around the world. And, without Eximbank, those other 
companies are going to have an advantage.
    And I would like to quote, finally, former CBO head, 
Douglas Holtz-Eakin, who has echoed this view. He says, ``I 
would love to live in a world where we do not need the 
Eximbank, but this is not that world.''
    Chairman Shelby. We have a vote on the floor. So we are 
going to recess for about 20 minutes to give us a chance to 
vote.
    So we are in recess.
    [Recess.]
    Chairman Shelby. The Committee will come back to order.
    Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    There is a constant debate over whether or not Eximbank 
helps small businesses. I do not expect to settle the argument 
today.
    But, can you tell me what types of small businesses benefit 
the most from Eximbank and why? And that would be to the panel.
    Ms. Dempsey. I am happy to start, Senator.
    I will say that there are a wide variety of manufacturers 
in all different sectors of the economy. We have food product 
manufacturers. We have companies in Pennsylvania that make wall 
coverings. We have small agricultural airplanes down in Texas. 
And it cross-cuts all of the different sectors.
    In every single State represented on this panel and every 
single State in this country, there are small businesses that 
are using the Eximbank.
    Mr. Strain. If I could add, Senator, it certainly benefits 
the small businesses that receive the credit.
    And so if you imagine a small business--small businesses 
which operate in much more competitive environments than a 
duopolostic market like for large wide-body aircraft--and one 
firm gets the subsidy, gets an Eximbank financing deal, and 
another firm competing in exactly the same industry, trying to 
attract exactly the same customers, does not.
    It is true that this firm is helped; it is also true that 
this firm is placed at a disadvantage.
    And I think that what makes this complicated is that it is 
very easy to say if we let the Bank go these specific 
businesses will be hurt and they will be in a worse position 
than they are in today.
    But we have to take into account this other guy who is 
competing against the small business that receives the export 
financing, whose playing field will be more level, who will be 
better able to compete, and the overall effects in that market 
very well may likely be positive.
    Ms. Dempsey. Could I add something there?
    So the Export-Import Bank is open to any exporter that 
meets very objective qualifications. If there are two exporters 
in the same industry that both want to get Export-Import Bank 
services, they can do so. And, they do do so.
    And in cases where you have foreign bidding overseas for an 
infrastructure project or some other Government activity where 
Governments are looking for bids from around the world, 
Eximbank will actually go in with two or three or any U.S. 
company, any U.S. exporter, that seeks its services and back 
them up and give them that same offer.
    It is not picking winners or losers. This is available to 
everyone.
    You do not need special access to get a loan or a loan 
guarantee or working capital out of the Eximbank. You can go 
onto their Web site and apply. This is something that is widely 
available and does not have that sort of negative impact.
    Mr. Strain. And just 10 seconds, I am sorry.
    If that is true in theory, which it is, it does remain the 
case that some businesses get it and some businesses do not. So 
there must be some reason why these businesses that do not get 
it and are not going through this extremely easy process of 
doing it. And I think the fact that not all businesses are 
subsidized means that the simple story is not actually as 
simple in reality.
    Mr. Murphy. It has been fascinating over the past couple of 
years to prepare a library of interviews with 80 small business 
users of the Bank and their real-world experiences.
    So, for instance, Bridge to Life Solutions in South 
Carolina, they provide cold-storage organ transplant solutions. 
One of their executives says: Without Eximbank, I would have to 
tell my customers, prepay everything up front or we cannot do 
business.
    It is only when they were able to purchase credit insurance 
from Eximbank, which they could not get from a commercial bank, 
that they were able to extend terms to foreign customers. And 
without being able to extend terms, they could not make these 
foreign sales.
    Similarly, Eagle Labs in Rancho Cucamonga, California, they 
use credit insurance to sell their surgical equipment for 
cataract surgery around the world. They explained that despite 
receiving regular payment from foreign customers their local 
commercial banks would not extend them credit based on their 
foreign receivables, but once they were able to get that 
guarantee from Eximbank they were able to double their sales 
and double their workforce.
    Senator Rounds. Mr. Ikenson.
    Mr. Ikenson. Yes. Thank you.
    Just to respond to Ms. Dempsey's point, yes, Eximbank is 
available to whomever qualifies.
    However, some firms have better recourse to exporting. They 
have infrastructure in place. They are more inclined to do so.
    So if two companies are in one firm--in one industry. One 
may be ready to expand abroad where another is not, and the 
availability of the subsidy to that exporter might hasten the 
gap in performance between the two companies.
    Yes, there are small businesses that win--the 
beneficiaries. But there are costs, and I could go through a 
list of companies in many States, as John just did, pointing 
out that these are likely victims and that they should have a 
seat at the table as well.
    Senator Rounds. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman.
    First and foremost, I would like to say this is about jobs. 
This is about Indiana jobs. This is about American jobs and 
whether we stand up and fight for them.
    And I feel--as a kid, as I know probably some of you were, 
I was a big fan of Superman comics. And there was a character 
in there, and he was known as Bizarro Superman. And in Bizarro 
Superman's world, up was down and down was up.
    And, Mr. Chairman, I feel like I am in the Bizarro 
testimony here sometimes, where sending money back to the 
Treasury is a bad thing and seeing jobs go overseas is a good 
thing. Well, I would disagree with that.
    And I will say that this Senator will fight, and fight 
nonstop, to try to make sure that the Eximbank survives because 
it is critical to jobs, to families in my State, that when they 
go home want to put food on the table, take care of their 
family, and have a decent life for their children. That is what 
the Eximbank helps do.
    And with that note, Doctor, I would like to ask you: Do you 
know who ABRO Industries is?
    Ms. de Rugy. Are you talking to me?
    Senator Donnelly. Yes.
    Ms. de Rugy. No.
    Senator Donnelly. Do you know who Vertellus is?
    Ms. de Rugy. No.
    Senator Donnelly. Do you know who Polymer Technology 
Systems is?
    Ms. de Rugy. No.
    Senator Donnelly. Do you know who Advanced Machine and Tool 
is?
    Ms. de Rugy. No.
    Senator Donnelly. Those are all companies that have 
benefited from Eximbank. They are not huge multinationals. They 
are companies in South Bend, in Indianapolis, in Ft. Wayne.
    And for them this is not about a theoretical exercise. This 
is about whether or not they have work to do and whether or not 
they have products to export.
    And so I would say that this is the real world. These are 
the people who the Eximbank is helping.
    And then I would like to ask you: You had mentioned that 
part of the people who are victimized are taxpayers.
    Well, here is the taxpayer victimization that has occurred 
in the last years: 2012, $803 million returned to the Treasury 
in profits; 2013, $1.056 billion returned to the Treasury in 
profits; 2014, $675 million returned to the Treasury in 
profits.
    Here in Washington and in our Government, it drives you 
crazy sometimes to see programs that we run deficits time after 
time after time. And here we are with a program that is 
returning money to the Treasury to help reduce the deficit, and 
we are attacking the program. It does not seem to make any 
sense to me.
    And, Dr. Strain, those companies I mentioned, they are not 
politically well-connected. They are just businesses back home, 
who are trying to make ends meet and who are trying to sell 
products.
    So I think that these are the kind of things that are the 
real world that we deal with on a constant basis.
    And, Ms. Dempsey, I would like to ask you a question, that 
as we look at this there was talk about businesses being 
penalized by the Eximbank.
    One of the companies that I mentioned sells motor oil to 
Nigeria, sells automotive aftercare products to Saudi Arabia.
    Do you think that those products, if the Eximbank went 
away, that products like that and products sold around the 
world--do you think it would be a company from Ohio who lost 
the opportunity, or do you think it would be from somewhere 
else?
    Ms. Dempsey. Thank you, Senator.
    I think it would be from somewhere else. As I noted in my 
testimony, you know, we have over 60 export credit agencies 
operating worldwide and much more aggressive than the U.S.
    The U.S. has been much less export-intensive. But when our 
companies export it does support jobs; it supports 
manufacturing. And the companies you cited in Indiana--I would 
mention Draper as well, a window shade manufacturer--they have 
all been able to grow their operations by exports.
    We have not heard of the type of theoretical subsidy or 
problem that Mr. Ikenson is talking about or those types of 
losers.
    The only question is, when there is a foreign deal is that 
deal going to go forward? And that is something the Eximbank 
takes a look at because the Eximbank is not going to operate to 
provide services if that deal were not going forward.
    But if you have a deal going forward overseas and the 
question that the Eximbank answers is not whether someone in 
some other industry or any industry in the U.S. is going to be 
hurt, that deal is going to go forward.
    The question is whether a U.S. manufacturer or other 
business is going to participate, whether U.S. workers will be 
able to work on the products and services that Eximbank would 
support.
    And so this is really just about, from our perspective, 
being able to boost U.S. exports which is all--there is a huge 
amount of gain there. And we are growing exports, but we are 
not growing them fast enough.
    Senator Donnelly. Thank you.
    And, Mr. Chairman, I would just like to say one more thing 
in the matter of setting the historical record straight, and 
that would be this--that last week General Motors held a $1.2 
billion expansion in the Silverado and Sierra Truck plant in 
Ft. Wayne, that in Kokomo, Indiana, in 2009 we went from over 
5,000 transmission workers to almost zero, and that today there 
are over 7,000 people building Chrysler transmissions, and on 
top of that that we had to build an extra plant to contain all 
the work. So that is a little bit of a historical correction as 
to what happened.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman and Ranking Member 
for having this hearing.
    I am in the category of just trying to understand and to 
try to make a good decision on behalf of the people that I 
represent. You know, the context within which I look at this 
is, you know, with others on this Committee.
    On one hand, I have led the charge to wind down Fannie and 
Freddie, you know, which have $5 trillion in mortgages, and to 
create a more dynamic system where you do not have two 
behemoths that basically dominate the housing industry. So that 
is one end of the spectrum.
    On the other end, we have this entity that it is hard for 
me to determine, you know, exactly why there have not been 
greater reforms, and yet, I understand some of the things that 
Senator Donnelly is pointing out.
    So let me just--Ms. Dempsey, if you would, on Boeing, since 
everybody wants to talk about Boeing--and I have nothing 
against Boeing. I like flying in the airplanes that they build.
    But give me an example of a transaction where Boeing, which 
is a very sophisticated company, would be doing business with 
an entity. We mentioned that many of the entities are State-
owned enterprises; in many cases, very wealthy countries that 
own these State-owned enterprises.
    Give me an example of a transaction where Boeing really 
would be concerned about the credit on the other side of the 
deal and, therefore, would need to operate through the Bank in 
this way.
    Ms. Dempsey. Thank you, Senator. I think that that is a 
great point to bring up here.
    One of the things that I think gets misunderstood in this 
debate is it is not Boeing that is necessarily going out and 
saying, well, I need Eximbank. Our companies, whether it is a 
large company or a small company, they are getting demands from 
their customers about how that customer wants to purchase.
    In the case of Boeing, you have two major wide-body 
aircraft producers in the world. One is here in the United 
States, supporting tens of thousands of small businesses----
    Senator Corker. Now, if you could--I have got 5 minutes--I 
want you to give me an example. I understand all that.
    Ms. Dempsey. So you have a foreign airline that says: I 
want this type of financing. I know that the French and the 
Germans are going to finance the Airbus. Boeing, can you meet 
that? Can the Eximbank meet that?
    Senator Corker. So it is not that they are worried about 
the credit. It is that the Eximbank is able to give these 
companies--these countries, companies, State-owned 
enterprises--terms that are comparable to what Boeing's 
competition is using. Is that what you are saying?
    Ms. Dempsey. Yes.
    Senator Corker. OK. You want to say something? Yes, ma'am.
    Ms. de Rugy. Yeah. I mean, this assumption is that the 
only--the driving factor for choosing a Boeing plane as opposed 
to an Airbus plane is the existence of credit subsidies.
    I mean, it is worth noting that last year 90 percent of 
Boeing planes were sold without any export subsidies. In fact, 
it is a general rule.
    According to GAO, 85 percent of all airplanes are sold 
without these types of export subsidies. We have ample 
examples.
    I mean, there is no denying that the companies abroad, like 
Air Emirates or Ryanair, who are just like the top 
beneficiaries, foreign beneficiaries of Eximbank, they like 
getting cheap subsidies no matter how wealthy they are.
    That being said, we have ample examples of these companies. 
In the same month for instance, Air Emirates in June 2012, 
bought Boeing planes with export subsidies, 2 of them at the 
same time they bought 4 Airbus planes without any subsidy, 
which says a lot about the banks' willingness to lend without 
export subsidy, the willingness of Air Emirates, and the 
ability for it to actually lend, and also the fact that it is 
not the primary and only deciding factor in buying a plane.
    Senator Corker. So, if I could--you all have been very 
fulsome in your answers, and we may want to follow up.
    But so in that case--and I understand some of the smaller 
enterprises that Donnelly was talking about, that it would be 
difficult for them maybe to go to a sophisticated lender and 
deal with the $50,000 transaction; I got it.
    But in this case it is really about they are dealing with 
other countries, and the other countries want, obviously, the 
best arrangement they can get. And so it gives Boeing, in those 
cases, a competitive, level playing field.
    Ms. Dempsey. Level playing field.
    Senator Corker. All right. So let me ask you this: One of 
the things we have looked at in our office is Eximbank being 
truly the lender of last resort, which would do away with this 
whole scenario you are talking about because Boeing could get 
credit. It is just that they would not be as competitive 
without this type of credit.
    But we have looked at the form that people fill out, and 
you know, you do not really have to be--Eximbank does not 
really have to be the lender of last resort. I mean, you are 
not like violating an oath when you fill this thing out. It is 
pretty loose.
    Is there a way to truly make Eximbank for entities like 
Donnelly was talking about, an entity that deals with folks 
where they are the lender of last resort, and we did not have 
to worry about the level playing field issue?
    Ms. Dempsey. I would say I hear from a lot of the small 
businesses that there is already a lot of paperwork; there is a 
lot of delay.
    One of the things that we constantly have in the U.S. as a 
problem is our paperwork and delay, and because of that we 
sometimes lose the sale. So I think anything that one might 
consider on that you have to be careful.
    But, lender of last resort? Does that mean that when, you 
know, Air Emirates wants to buy a plane, we are--you know. 
Perhaps there is credit available on the commercial market, but 
they are going to get a better deal out of Europe from Airbus, 
from their export credit agencies over there.
    And I think, you know, people keep throwing around the word 
subsidy constantly. Where is this subsidy?
    This is a Government entity that pays fully for itself with 
the fees and the interest it takes in. It raises those fees. It 
raises those interests.
    And in the area of aircraft, the U.S. has led the 
industrialized world at the OECD to have a new aircraft sector 
understanding that has raised the interest rates on this to get 
rid of the market distortions.
    Just saying it is a subsidy does not make it so.
    Senator Corker. Well, if I could, in closing, I think what 
some people may say is a subsidy is the true cost of Eximbank's 
capital is not calculated, and therefore, other private 
entities that might want to do that business are knocked out of 
that business. That might be the subsidy they are talking 
about.
    But, thank you, sir.
    Chairman Shelby. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    The first thing I just want to point is it is always easy 
to talk about Boeing, but behind Boeing is a supply chain where 
very small manufacturers, very small businesses are also 
benefited kind of long-term, and those folks are deeply 
concerned about what is happening right now with the Eximbank.
    In fact, most of the push that I get in North Dakota is 
coming from our very small businesses, whether it is a 
wheelchair manufacturer who said: Look, I have maximized my 
effect in the market today. I need to have access to the 
international market. I do not know about to do it.
    And you say, we have got this great tool.
    I think there is no question that small business is a huge 
beneficiary. Now in proportion to their position in terms of 
their contribution to gross domestic product, they might even 
be in excess of what you might see compared to multinational 
corporations.
    So let's take a couple things off the table, and one of 
those is that there are somehow companies that have been 
disadvantaged, who are pounding the table. In fact, the 
testimony of one of the panelists raises the issue of a couple 
companies, both of which who are outrageous supporters of the 
Eximbank.
    And so what we really have here is a philosophical 
difference. And we are hearing from people who represent an 
ideology that is free enterprise above all else, no 
interference at all of Government, and we are hearing from 
people who actually create jobs.
    And the question is, are we going to listen to the ideology 
of, you know, get rid of all subsidies, which in a perfect 
world might make sense, when we are not operating in a global 
economy where we have institutions exactly like this pouring 
money into their export credit agencies?
    And so we are not in a perfect world.
    And so to me, today, what we need to do is we need to have 
a conversation with the people who are actually on the ground 
with American manufacturing.
    And, Ms. Dempsey, I want to ask you about our current state 
of affairs, which is we are looking like we are going to, for 
the first time in 70 years, let the charter of the Bank expire. 
Expire this year. That is outrageous to me.
    And I want you to tell me what the injury is to American 
manufacturers if we do that.
    Ms. Dempsey. Thank you, Senator, and I could not agree 
more. You know.
    Today starts the NAM manufacturing summit, and we have over 
500 people who have flown in, and they are going to be talking 
to your offices and others about the Export-Import Bank and how 
critical it is.
    This is an issue where my phone rings off, you know, the 
system because this----
    Senator Heitkamp. Not just calls from Boeing?
    Ms. Dempsey. No. This is from small businesses. These are 
emails from small businesses about whether they are going to be 
able to continue to get, you know, assurances that they are 
going to get paid when they send their product overseas, that 
they are going to have the working capital so that they can pay 
their employees and export at the same time--something that 
commercial banks do not provide.
    Senator Heitkamp. Are they recounting to you the disruption 
that is happening as a result of this uncertainty, as a result 
of us not doing our job in a timely fashion?
    Ms. Dempsey. There is a lot of harsh words, and there is a 
lot of uncertainty and fear.
    One of the things we see is foreign competitors to our 
companies here in the United States using the fact that Export-
Import Bank may shut down at the end of this month to tell 
foreign customers, hey, you cannot trust the Americans; you 
cannot necessarily be guaranteed that they are going to come 
through on this sale.
    And there has been a lot of uncertainty for big sales but 
small sales. This will cost U.S. exports, make no mistake, and 
the jobs that they support.
    Senator Heitkamp. Currently, the last time I checked, there 
is $18 billion in the pipeline that will be stalled out if we 
do not do this. And so while we are arguing philosophically, 
the people you represent are trying to keep people working. 
They are trying to keep their product moving into a market 
where 95 percent of all consumers live outside this country.
    I want to ask Mr. Murphy: When you try and explain the 
resistance to an entity that returns money to the Treasury, 
that actually supports American jobs, what argument do you 
provide for why we are stalling out?
    Mr. Murphy. Well, it is difficult to be able to explain 
that, I think, particularly with the small business users of 
the Bank. They are baffled by it.
    I think that they are a very handful of three of four 
companies that have been identified across the country that do 
not support the Export-Import Bank, that have spoken out 
against it, including Delta, for instance.
    But I work for the broadest business organization in the 
country, an underlying membership of three million companies of 
every size, sector and region. I cannot tell you how broad the 
support is for this and how difficult it is to explain what is 
going on.
    Senator Heitkamp. I think that is a point that we need to 
make, which is that this is not a 51-49 in your membership. 
This is hugely supported compared to everything else.
    Mr. Murphy. It is completely uncontroversial.
    Senator Heitkamp. Yes. And I guess I just want to make one 
final pitch, which is we have got to reauthorize the Eximbank 
before the end of the year, or before the end of this month, or 
else we have crated a huge disruption. We have done something 
again in this body and in this Congress that is so disruptive 
to the marketplace that it is unfathomable that we would risk 
these jobs.
    And so I want to thank you for your testimony.
    Mr. Murphy. Senator, if I could just say briefly, thank you 
to you, Senator Donnelly, Senator Kirk, for your leadership on 
a bill to reauthorize the Bank.
    Chairman Shelby. Senator Kirk.
    Senator Kirk. Thank you, Mr. Chairman.
    I just want to show the Committee the sign that you see 
when you arrive at Beijing Airport. It says, ``Welcome From the 
Export-Import Bank of China.'' It shows exactly what happens 
when we leave the battlefield to the other team.
    I want to show you another picture of the C919. It is the 
competitor to the Boeing 737. This aircraft has now been booked 
400 times over, representing billions in sales lost by the 
United States.
    I would say if you represent the State of Illinois, as I 
do, you think about all the families that depend on Boeing and 
Caterpillar, Caterpillar being based in Peoria.
    Mr. Chairman, I would definitely say that Eximbank plays in 
Peoria.
    So let me ask Dempsey. I just want to go through the panel 
here.
    For Mr. Ikenson, for your think tank, about how many people 
work there?
    Mr. Ikenson. How many people are employed at Cato?
    Senator Kirk. At Cato, yes. About 200?
    Mr. Ikenson. Fewer. About 100 to 150.
    Senator Kirk. And for Ms. Dempsey, you represent about 12 
million Americans, right?
    Ms. Dempsey. Manufacturers do throughout the--there are 12 
million manufacturing workers throughout the American economy.
    Senator Kirk. Well, let's just ask the panel. If you 
represent more than 10 million workers, raise your hand.
    [Ms. Dempsey and Mr. Murphy indicating.]
    Senator Kirk. So, Mr. Murphy, I do not know if you have got 
10 million people at your firm there.
    Mr. Murphy. Well, the underlying membership of the Chamber, 
we estimate is----
    Senator Kirk. It certainly would be.
    Mr. Murphy. ----more than 20 million workers at companies 
that are members of the Chamber.
    Mr. Strain. I would like to think that I represent millions 
of Americans who love the free enterprise system, Senator.
    Senator Kirk. I would say now when we look at the makeup of 
this panel it seems to be a lot of insider, Beltway folks who 
represent very tiny employer bases.
    When you look at the entire employment base of the United 
States, for Eximbank, it supports about 46,000 jobs in the 
State of Illinois. For our State, which could ill afford to 
lose any more, this is the impact on the country.
    We are under the logo of ``ship goods, not jobs.'' For the 
United States, about 164,000 annual jobs supported by Eximbank, 
exports of $27.5 million.
    In the case of Illinois, I have already talked about 
Peoria. Supporting jobs in Chicago and Burr Ridge and 
Lincolnshire and Moline and Decatur and Mount Prospect, I would 
say the impact is pretty huge in my State, right in the middle 
of the Heartland.
    With that, I will yield back, Mr. Chairman.
    Chairman Shelby. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    You know, there has been a lot of talk about who is 
supported by the Export-Import Bank. And as you all know, under 
the terms of the congressional charter, Eximbank is supposed to 
focus on helping America's small businesses grow and export 
goods. In fact, by law, at least 20 percent of the Bank's 
spending each year must go directly to supporting small 
businesses.
    Now in fiscal year 2014, the Eximbank met that target, but 
in the 3 previous fiscal years it did not. That means that 
small businesses in Massachusetts and across the country were 
not receiving the level of support that Congress explicitly 
requires the Bank to provide.
    I am concerned about the Bank's performance in this area.
    Mr. Murphy, I imagine that the Chamber of Commerce must be 
as well. After all, the Chamber often notes in its literature 
that it represents more than 3 million American businesses of 
which more than 96 percent are small businesses with fewer than 
100 employees.
    So I want to ask, Mr. Murphy: I know the Chamber supports 
the reauthorization of Eximbank; you have made that clear 
today. But given the Chamber's overwhelming small business 
membership, does the Chamber also support substantially raising 
the Bank's small business spending requirement from 20 percent 
to some higher number?
    Mr. Murphy. Well, thank you for the question, Senator.
    Our small business members are very active in advocating 
for reauthorization of the Bank, and we have worked closely 
with the Bank to try and forge connections between its staff 
and the small business community so that companies that want to 
export can get their services.
    It is--we kind of scratch our heads about the decline in 
support for small business. However, it does----
    Senator Warren. Well, Mr. Murphy.
    Mr. Murphy. Yes.
    Senator Warren. Let me just--since our time is limited 
here.
    The question I am asking is whether or not you would 
support, you the Chamber of Commerce would support, increasing 
the statutory requirement for what----
    Mr. Murphy. No, we do not. We are----
    Senator Warren. The percentage goes to small businesses.
    I am a little surprised by your answer. I would think that 
the Chamber would strongly support a change that would help 
more than 95 percent of your membership.
    Mr. Murphy. Our close interaction with the Bank has left me 
with the conviction that the Eximbank is doing everything it 
can to track down and find and identify small businesses that 
need its service.
    Senator Warren. So you are----
    Mr. Murphy. In many cases, they can find commercial banking 
services.
    Senator Warren. Well, then let me ask the question a 
slightly different way, Mr. Murphy. Would the Chamber support 
including a stronger enforcement mechanism so that the Bank 
would face some serious consequences if it did not reach the 20 
percent target for small businesses?
    Mr. Murphy. I do not believe it is the sort of objective 
that should have some sort of a punishment as a result for 
failure to comply with it.
    Senator Warren. Well, I am talking about enforcement. You 
know, we ask them to do something. We direct them here in 
Congress to do something.
    And we have talked about the history from the past 4 years. 
In three out of 4 years they have not met the objectives, and 
there evidently has been no consequence that comes from that.
    You are supposed to be here, I thought you always say, 
representing small businesses, and I have just offered you two 
alternatives: Increase the percentage. Add some enforcement to 
it.
    And you are telling me the Chamber is not interested in any 
of that?
    Mr. Murphy. And if I had a folder of examples of companies 
that were seeking Eximbank support so that they could grow 
their exports that were somehow unmet, then I would express it.
    Senator Warren. So you are telling me the Eximbank is not 
responsible for its inability to reach these small businesses?
    Let me just ask you, Ms. Dempsey: How about you? I have the 
same question. Given the overwhelming number of small 
businesses that NAM claims to represent, would you support 
increasing their percentage, the percentage that Ex-Im is 
required to do for small businesses, above 20 percent?
    Ms. Dempsey. Senator, we do not support increasing a 
mandate.
    What we support is the types of tools and getting out the 
information. And like the Chamber, we work to connect Eximbank 
with small businesses.
    But what we----
    Senator Warren. So I am sorry. Let me just make sure I am 
understanding. Are you supporting any change then in the 
authorization, an authorization that has been in place when 
Eximbank has failed to meet even the 20 percent standard?
    Ms. Dempsey. In terms of the mandate, we are not seeking a 
change in that because what we want is for Eximbank to be more 
effective in that and just mandating a higher level is not 
going to succeed in that.
    The U.S., as a Nation----
    Senator Warren. Well, then would you support greater 
enforcement mechanisms?
    Ms. Dempsey. I just agree with focusing on this as 
enforcement.
    The U.S., as a Nation, is much less export-intensive. 
People--our small businesses are very used to selling 
domestic----
    Senator Warren. Ms. Dempsey, if I could stop you there----
    Ms. Dempsey. Sorry.
    Senator Warren. ----because my question is how--who it is 
that Eximbank is supposed to support, and you come in here and 
tell me it is supposed to support small businesses.
    I believe that Eximbank helps create jobs in Massachusetts 
and across America, the kinds of good manufacturing jobs that 
we are losing to other countries far too often, and the Bank 
does that while consistently making money for taxpayers. I 
understand this point.
    But I also believe there is significant room for 
improvement in the Bank's operations, including a commitment to 
make these loans more easily available for small businesses. 
More often than not, big businesses can find private funding 
options for their export deals, but that is not usually the 
case for small businesses.
    I believe that we should push the Bank to do more for small 
businesses, and I would think the people who represent small 
businesses would be strong supporters of that.
    And I believe we should hold the Eximbank accountable if it 
fails to reach those goals, and I would expect the Chamber and 
NAM to support that.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Cotton.
    Senator Cotton. I just want to say for the record to the 
panel that I have been on the receiving end of Senator Warren's 
challenging questions before. She was my professor in law 
school. And you did a much better job handling her questions 
than I ever did when I was in law school.
    We live in a globalized world. America is competing with--
American companies are competing with companies around the 
world.
    One argument you hear in favor of the Eximbank commonly is 
a reference to arms control language, that we cannot 
unilaterally disarm. Between the Europeans and the Chinese and 
the dozens of other export credit agencies around the world, it 
would be unwise for the United States to let the Eximbank 
unwind its operations and wind down.
    Ms. de Rugy, could you respond to that argument with the 
strongest counterargument you have?
    Ms. de Rugy. So this argument assumption is that it would 
hurt the United States overall to disarm, to drop these export 
subsidies, and I think there is a pretty strong case to be made 
that it is not very clear-cut.
    I mean, I think, as Dr. Strain has shown--I mean, there are 
ways in which actually this type of export subsidies are 
damaging to the economy as a whole.
    Moreover, I think that what we should aspire to do if we 
want to promote export is to do it in a more general basis. And 
there are a lot of actually sound policies that we should be 
implementing rather than actually just targeting on special 
winners without considering the cost, such as, for instance, 
the reform of the corporate income tax, which is extremely 
punishing, especially for companies that are competing abroad.
    Why don't we stop this type of targeted subsidies to a few 
and expand and implement policy that would benefit everyone, 
even the nonexporters?
    Senator Cotton. Mr. Strain, do you have anything to add?
    Mr. Strain. I do, Senator. I agree with that.
    I think that the argument about unilateral disarmament is a 
strong argument that supporters of the Eximbank have. I think 
that the argument presupposes that the policies of the Eximbank 
are a net positive and are engaging in this battle, you know, 
in an effective way.
    And I think that that really is not well-supported by the 
evidence. It very well could be the case that so-called 
unilateral disarmament actually is better for the United States 
as a whole even if it is worse for the, you know, particular 
companies that we have heard from, from the Chamber and from 
NAM.
    And so I think we have to maintain some level of humility 
about what it is exactly that the Government is able to know 
will happen when an economic policy is put in place. We are 
talking about, essentially, a situation of concentrated 
benefits and diffuse costs, and we have heard quite a bit from 
the Chamber and from NAM about who benefits in a concentrated 
way.
    And the question simply is, are the diffuse costs greater 
than the concentrated benefits? They are much harder to 
measure. It is much harder to know.
    And I think that the weight of the evidence suggests that 
with export subsidies they probably are greater than the 
concentrated benefits. And so unilateral disarmament may be bad 
for these specific companies, but it may be good for the United 
States as a whole.
    Senator Cotton. Ms. de Rugy.
    Ms. de Rugy. I am sorry; I forgot to add that it is worth 
pointing that it is not a majority of what Eximbank does. I 
mean, according to its own justification data, only 30--roughly 
a little over 30 percent of what Eximbank does is justified as 
countervailing export subsidies. So almost 70 percent of what 
Eximbank does has nothing to do with competing with export 
subsidies abroad.
    Mr. Strain. And, Senator, if I could just add very 
quickly----
    Senator Cotton. Actually, I would like to hear the other 
side.
    Mr. Murphy.
    Mr. Murphy. So over the weekend I was reading Chairman 
Hochberg's testimony for the House Financial Services 
Committee, and he recounted how he was recently at a meeting of 
the 79 export credit agencies from around the world. Dozens of 
them explained how they plan to be expanding the export finance 
that they make available. Precisely, two said they intended in 
the years ahead to be cutting it; that was Austria and Norway. 
The Chinese were silent.
    China has three, what they call, policy banks. One is China 
Eximbank. Two other banks provide similar levels of support.
    There is a gusher of export credit agency support coming 
out around the world.
    And in our experience, what we hear from our member 
companies time and again is that it can make a determination 
even in cases where it is not used, as a kind of deterrent 
effect. The fact that it could be used in some cases, it can 
turn the sale away from the American exporter to a competitor 
from abroad, and that is why we think we should not be the only 
country in the world not to have one of these agencies.
    Senator Cotton. Ms. Dempsey, you look as if you wanted to 
add something.
    Ms. Dempsey. You know, thank you. I totally agree.
    I wanted to point out that when Dr. de Rugy was talking 
about that a certain percentage of Eximbank's transactions are 
not dealing with subsidies or dealing with market failures, in 
fact, yes, they are.
    The pie chart that she put in her testimony--and I am happy 
to provide one as a follow-up--ignores the small business side, 
ignores the types of loans where the OECD says that Eximbank 
can only finance up to 85 percent, and so that other 15 percent 
is what is unaccounted for. Those loans, of course, would not 
happen but for Eximbank, and they are areas where there is 
market failure.
    The U.S. has led the world in trying to eliminate market 
distortions in export credit. We have been pretty successful at 
the OECD in all--overall and then in sectors like aircraft and 
renewables and lots of other sectors.
    We are having a hard time with the developing world. They 
are trying to increase, as Mr. Murphy explained. And, if the 
U.S. takes itself out, if we do not have an Export-Import Bank, 
what do we think is going to happen?
    You do not know the theory of what is going to happen 
there?
    What we are seeing on the ground is exactly what Mr. Murphy 
was saying. They are expanding. They want to grow their 
economies, and they want to grow it through exports. And they 
are going to go forward regardless. But it is probably going to 
get worse, and it is going to make it harder for manufacturers 
to be able to win these sales overseas.
    Senator Cotton. If in a more perfect world the United 
States could actually persuade all of the countries around the 
world with the ECAs to eliminate theirs, would you then believe 
that we should eliminate the Eximbank?
    Ms. Dempsey. As long as the market can deal with the issues 
that exporters in our country need.
    Small businesses cannot use their exports as collateral 
when they are trying to get a loan from a commercial bank, and 
that means they are not--you know. We have got companies who 
mortgage their personal house.
    We need to deal with that type of failure. We need to deal 
with commercial banks that are not able to do long-term loans 
or loans into emerging countries. So we have got those issues 
to deal with.
    But, yes, if we can move to a system where we have--we 
discipline out these export credit agencies, let's go forward.
    Senator Cotton. Thank you all.
    Chairman Shelby. A couple of observations.
    In Senator Warren's question about reforming the Bank, both 
Mr. Murphy's and Ms. Dempsey's answers were troubling because 
you obviously like the status quo.
    And in your answers, she gathered and I gathered that you 
are not representing small business; you are representing one 
or two big companies that are getting most of the business, 
using the Bank the most. That is troubling.
    So if somebody wanted to reform the Bank, you all would be 
against it, basically, unless you could write the reform. That 
is one of the problems that the Bank has today.
    That was not a question. That was a comment.
    Some of our witnesses have referred to the arguments 
against the reauthorization of the Bank as economic theory 
whereas arguments in favor of the Bank are based on reality--
quote.
    Certainly, arguments in favor of the Bank benefit from 
real-world examples--we know that--whereas arguments against 
the Bank are more attenuated because the potential economic 
damage done by Government-backed lending is not easily 
measured, as one would expect, but that does not mean it does 
not exist.
    Ms. Dempsey, does the National Association of Manufacturers 
reject all economic theory?
    Ms. Dempsey. Of course not, Senator.
    Chairman Shelby. OK. In other words, you do not reject the 
theory that says Government-backed loan guarantees have 
negative as well as positive effects on American markets and 
manufacturers?
    Ms. Dempsey. Well, Mr. Chairman, you know, we have not 
actually heard that complaint, as Mr. Ikenson and other 
panelists were detailing. That is not the complaint that we 
have actually heard from our businesses.
    We like to ground our views and our policy, which are 
decided by our members, based on our members' experiences. And 
so something like the small business issue, I think we need to 
figure out why Eximbank is not getting more loans and services 
to small businesses before we, you know, dramatically increase 
mandates.
    I will say as well, though, that the NAM supports the 
reform bills that have been introduced by Senators Heitkamp and 
Donnelly, by Senator Kirk, that includes some reform on small 
business as well.
    Chairman Shelby. Dr. Strain.
    Mr. Strain. Well, I agree, Mr. Chairman, that if the point 
of the Eximbank is to help small businesses then presumably 
those who support the Eximbank should be in favor of increasing 
its assistance to small businesses. I think that is a fairly 
common-sensical view, and I think Senator Warren articulated it 
very well.
    I think that with respect to defending economic theory, 
which I am happy to do, you know, sometimes it is very hard to 
measure things. We have a very big economy, a lot of moving 
parts.
    It is very easy for politically connected organizations to 
come to Washington and to find organizations that will say, 
hey, you know, these policies help me; do not get rid of them.
    And it is much harder for organizations and individuals 
that do not have those kinds of resources or who are injured in 
slightly--in slighter ways, in smaller ways, but when you 
aggregate all that up, you end up doing some damage to come and 
organize.
    I think that the fact that the overwhelming majority of 
exports occur in this country without access to special export 
financing----
    Chairman Shelby. About 98 percent.
    Mr. Strain. Something about 98 percent without access to 
export financing does cast doubt on predictions of horrible 
destruction and gloom and doom that will take place if that 2 
percent of deals have to operate under the same circumstances 
as the other 98.
    Chairman Shelby. Senator Brown.
    Senator Brown. Two questions, Mr. Chairman. Thank you.
    And thanks again for the patience of all of you.
    And, again, thanks to Senator Heitkamp for her leadership 
on this, with Senator Kirk.
    Ms. Dempsey, I want to ask you about the supply chain.
    GE Aviation in Evendale, Ohio, provides engines for 
commercial and military aircraft. Some 7,500 employees in the 
Cincinnati area. They are also in Nela Park in Cleveland--
electric lighting and many other--several other sites around.
    We hear the Export-Import Bank largely benefits, we hear, 
eight or so large corporations.
    Understanding GE has told me they have 19,000 suppliers in 
my State alone, and we are one of the GE States. But 19,000 
suppliers in one State.
    Talk about what--sort of dispel--take 90 seconds and dispel 
this myth that it is all about these 8 large companies.
    Ms. Dempsey. Well, that is exactly right, Senator, and it 
is true. It is true with our biggest exporters. It is true with 
our medium-size exporters. But a company like Boeing or a 
company like GE that has tens of thousands of suppliers around 
the country, some of those are companies with 20 employees, 
with 50 employees.
    One of our companies, Click Bond, is here this week as part 
of our NAM summit. They do not export directly. They provide to 
large capital equipment exporters. Their business grows when 
our exports, and that company's exports, are able to grow 
overseas.
    This benefits all of those companies. It does not, as we 
have seen, you know, impact negatively others.
    It creates more opportunity for manufacturers across all of 
the supply chains, whether you are primary metal or equipment, 
or you are tool and die. If you are talking capital equipment, 
power train, all of those items that go into a large piece of 
capital equipment overseas, they all benefit, and those 
benefits are around the country.
    I will say one of the things that has been difficult is 
identifying those suppliers. We have a lot of companies. Until 
the last year and this debate really heated up and we really 
started spending a lot of time looking for them--they do not 
even know that their product is being exported overseas because 
they are sending on. They might not even be a first-tier 
supplier to a Boeing or Eximbank, but they are benefiting; 
their employees are benefiting.
    And we have seen, you know, real good growth in 
manufacturing in the United States, and we want to keep that 
going because those are really good, high-paying jobs in our 
country, and we want to continue growing them.
    Senator Brown. Thank you, Ms. Dempsey.
    Before my last question, I would ask unanimous consent of 
the Chair that a statement from the Bankers Association for 
Finance and Trade and the Financial Services Roundtable be 
included in the Committee document.
    Chairman Shelby. Without objection, so ordered.
    Senator Brown. Thank you.
    Mr. Murphy, some of the other witnesses argue that Ex-Im--
crowds out was the term I think being used--crowds out private 
financing, but BAFT and FSR member banks offer financing 
through the working capital and credit insurance programs at 
Eximbank.
    Would these banks use these programs if they could finance 
these transactions through other means?
    Mr. Murphy. I believe there is a real consensus in the 
commercial bank community that Eximbank does not crowd them 
out.
    There was a recent letter that the Business Association for 
Finance and Trade and the Financial Services Roundtable sent to 
Congress that explained that Eximbank cannot be replaced solely 
by the private sector, and they explained balance sheets 
constraints arising from prudential capital and liquidity 
requirements, among other factors, along with institutional 
credit, country and counterparty limitations are among the 
factors that limit the ability of commercial banks to provide 
export finance.
    So there is a niche for Eximbank.
    And the fact that it finances, in fact, a small portion of 
American exports is not a problem; it is a virtue. It is a 
virtue that in the vast majority of cases commercial banks are 
able to provide this.
    However, as I think we have outlined in great detail, there 
are particular circumstances for small business and specific 
industries, where in head-to-head competition or because of 
foreign buyers' requirements Eximbank is necessary.
    Senator Brown. Thank you. Thank you all.
    Chairman Shelby. Senator Rounds, do you have another 
question?
    Senator Rounds. I do, Mr. Chairman.
    It would appear to me in the discussion here that we all 
agree, or we appear to agree, that the Eximbank is a tool which 
is utilized.
    It seems to be a question as to who utilizes the tool, but 
nonetheless, it is a tool which is utilized to compete with 
other similar types of entities throughout the world.
    If that tool simply goes away, it would appear that we find 
our own people who are in the business of exporting to be a 
competitive disadvantage. I understand that the economics would 
suggest then that there are tradeoffs to that.
    But I am just curious because it seems to me that if it is 
such a serious issue that it hurts our economy and, yet, it 
only accounts for 2 percent of the total amount of imports out 
there, it does not appear to have had a major impact on the 
rest of the economy. Nonetheless, for the organizations who are 
exporting, it is of critical importance, or at least that is 
what we are led to believe.
    I am just curious. There were some items brought up here 
that I think kind of stick out.
    Number one, we have heard that there is a subsidy in sort 
for, in particular, Boeing and other organizations, that in 
terms of competitive financing as provided by this particular 
bank that other banks cannot compete with.
    I just--but I am also hearing that there has been an 
agreement internationally that there is not a competitive 
disadvantage provided by this particular bank and that it is a 
fair competition right now.
    So there is not--from what I am hearing, there is not a 
competitive advantage for the interest rates being provided, 
but rather, because this is the way the other people who are 
accepting our exports, they are expecting as a part of business 
to have this tool available in some situations.
    So what--when we get right down to it, what damage is this 
particular entity doing to our economy, and what is the cost 
that we are trying to avoid?
    Sir?
    Mr. Murphy. In 2011 at the OECD, an agreement was reached 
on how export credit agencies, such as Eximbank, would provide 
support for wide-body aircraft. So, basically, Boeing and 
Airbus. That agreement obligated Eximbank to significantly 
raise the fees that it charges Boeing for its--to use its 
services.
    That is--as a result of that, the interest rate implied 
there that Boeing is receiving is actually quite comparable to 
what is available on the public market.
    However, there are many circumstances around the world that 
we continue to see where foreign airlines insist that official 
export credit agency support be part of any deal. They are in a 
position to demand it, and the competition is certainly 
prepared to show up with that support.
    So, in a sense, this is a criticism in the past that was 
addressed.
    Senator Rounds. OK. Let me just move on to just two other 
thoughts here.
    We have just heard--and I want to just verify this one more 
time--that there are, right now, areas in which commercial 
banks are simply not able to utilize these exported products as 
collateral for loans. Could you get into that just a little bit 
for me, please?
    Anyone of you is welcome to, I think.
    Ms. Dempsey. So, you know, private lenders, private 
commercial lenders are prohibited from accepting export 
receivables as collateral.
    Senator Rounds. Under existing U.S.----
    Ms. Dempsey. Commercial. Financial. You know, the rules and 
regulations set by this Committee and beyond.
    This restriction limits credit options, creates a market 
failure, especially for small businesses that do not have other 
collateral that they can use to guarantee that loan, and this 
is where Eximbank steps in with what is called its working 
capital loan.
    Senator Rounds. OK. So then the last item is the discussion 
here about Eximbank and its operational capabilities and 
whether or not there ought to be additional items put on it.
    I am of the opinion, starting out looking at this, that if 
you simply tell them they have got to increase the percentage, 
what you end up doing is either decreasing the total amount 
that they can lend in order to comply with a particular 
arbitrary number or there is a way around it by simply have 
more of the final product broken out into smaller businesses 
coming through. There are ways around it when they want to.
    Are there issues within Eximbank that have to be looked at 
in terms of reforms that should be made to make it work better 
than it does today?
    Ms. Dempsey. So I will say there are two bills that have 
been introduced in the Senate by Members of this Committee that 
have a number of reform provisions as part of that. Our 
organization supports moving forward on both or either of these 
bills. We want to see a long-term Eximbank.
    There are certainly areas where Eximbank's services and 
operations can be improved, and there is a lot of----
    Senator Rounds. What you are telling me is that none of you 
can look at it and say right now that there is a specific 
issue----
    Ms. Dempsey. No.
    Senator Rounds. ----which stands out that needs to be fixed 
at this time.
    Ms. Dempsey. Not on that level. Not on the small business 
level.
    I think the small business level is more a function of our 
economy and how companies operate. And they do not look abroad 
as much as they should. There are ways we can work on that, but 
I agree with you that just mandating a new cap for small 
business is not necessarily going to achieve that.
    Chairman Shelby. I think the doctor wants to comment on 
that.
    Ms. de Rugy. I think it is important to point out that the 
underlying assumption of this conversation is that without the 
export subsidies the sale would not happen.
    Well, let's look at Boeing. Again, Boeing is a primary 
beneficiary, domestic beneficiary. There is a subsidy for the 
foreign companies abroad buying Boeing airplanes because they 
get really a preferential treatment with lower rates and better 
terms. That is where we call it a subsidy.
    I mean, there is an advantage.
    And I like Senator Donnelly's Bizarro superhero because, I 
mean, there was a time where the Democrats were actually very 
concerned about the Export-Import Bank not too long ago, in 
2002, because of U.S. workers and because we were giving such 
an advantage to foreign companies who then compete.
    But if this assumption that without Eximbank, right, planes 
would not be sold, then you would not actually see that 98 
percent of Boeing planes are sold without a subsidy; you would 
not see that Air Emirates actually makes a decision to buy 
Airbus planes without any export subsidies.
    I mean, the fact that companies demand it and like it, I 
mean, it is totally understandable. Wouldn't you want a cheap 
loan that reduced your financing costs? Of course, you would. 
Right?
    But making it sound as if you take it away the business 
would disappear and everyone would be hurt--there is no doubt 
that it is possible that Boeing would sell fewer planes, but 
that the world would collapse or the sky would fall is just a 
wrong assumption.
    Senator Rounds. Thank you.
    Chairman Shelby. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    Just a couple points because I think it is important that 
we kind of understand the reforms that are in the provisions 
that are in the Kirk-Heitkamp bill, but I do want to make the 
point following up on Senator Rounds' point.
    It is always a little difficult for me when somebody comes 
with the argument, look how insignificant it is in the real 
world, 2 percent, and then says, but it is catastrophic to the 
free enterprise system. You know, those are just two really 
inconsistent notions and not particularly persuasive.
    I want to run through some of the concerns that Senator 
Warren expressed.
    The Kirk-Heitkamp bill actually does raise the target for 
small business from 20 percent to 25 percent and requires 
reporting. And we say target, and we understand that the more 
we can tell potential manufacturers and potential exporters 
about the resource so that they can, in fact, increase their 
exports.
    And there are thousands of stories about the pickle lady 
who doubled her order of pickles because she all of a sudden 
found out that she could finance it through the Eximbank. And 
so we have got some great small business stories. I think we 
can build on those if we really make a concerted effort.
    And, I look forward to hearing from Mr. Hochberg.
    But as we look at kind of taxpayer protection and making 
sure, as Senator Corker talked about, eliminating or at least 
reducing the amount of exposure, there are a number of 
provisions in the Kirk-Heitkamp bill that basically allow for 
some restrictions, some backstops, and the one I am 
particularly interested in, which is a pilot program for 
reinsurance so that in fact the taxpayers are not backstopping 
at all, that we are actually looking in the private market for 
reinsurance.
    So I guess my question is to Ms. Dempsey and Mr. Murphy. At 
this point, you have been fairly supportive of the Kirk-
Heitkamp bill. Can you reinforce that today, that we are 
looking at a reform package?
    It may not be things that you agree with, but you 
understand everything is a compromise and that you are in fact 
supporting these compromises.
    Ms. Dempsey. The NAM strongly supports moving forward with 
the long-term Export-Import reauthorization, and the bill that 
you and Senator Kirk have introduced is going to do that, is 
going to keep the Eximbank functioning at an important level 
that is going to grow manufacturing in the United States.
    Senator Heitkamp. Mr. Murphy.
    Mr. Murphy. Similarly here, we have been pleased to express 
our support for the bill. There are a number of common-sense 
reforms included in it, relating to closer audit scrutiny and 
stronger supervision, a stronger board, that we think make a 
lot of sense going forward.
    My comment earlier to Senator Warren, which was perhaps not 
captured fully, was I simply do not have on behalf of the 
Chamber's membership a compilation of pleas for support from 
small business to the Eximbank that have gone unanswered. My 
point is simply that the Eximbank has actually done a pretty 
good job in terms of outreach there and receiving those.
    But, by all means, we appreciate the bill's contribution to 
moving forward, including in its outreach to small business.
    Senator Heitkamp. And we can continue and build on that 
outreach, and I think we will meet these targets if we make a 
concerted effort, whether it is the manufacturers or the 
chambers, if we are able to get reauthorization.
    I just want to reiterate a point. You know, nothing like 
repetition in terms of communication. We are on track right now 
to allowing the charter of the Eximbank to expire and the 
disruption that we have, whether that is a short-term or long-
term.
    There are obviously people here in the Congress who want to 
put a stake through the heart of the Eximbank.
    And I understand the other panelists. You know, the sky is 
not--you know, that the sky will not fall tomorrow if that 
happens.
    But there is $18 billion of potential export investment 
that will go unanswered if we allow this to continue.
    And so I just want to put in a plug for getting something 
done in June, getting something done long-term. We will live to 
fight this. Let's go with these reforms. See if they address 
some of the concerns.
    And I just want to reiterate my support for my bill. 
Surprise, surprise.
    Chairman Shelby. Thank you, Senator.
    Because a lot of people do not believe, Senator, with all 
due respect, that the Kirk-Heitkamp is a real reform bill. And 
it does not even have a sunset in it either, among other 
things, but that is neither here nor there.
    We have a hearing on this on Thursday. We will have the 
head of the Bank to testify, and I am sure there will be a lot 
of interest in this.
    I ask unanimous consent at this point to put four articles 
in the record. One is a Washington Post article that is called 
``A Bank with Congress in Its Pocket;'' two, the Wall Street 
Journal, ``The Bank to Nowhere;'' three, the Wall Street 
Journal article, ``The Peculiar Uses of a Taxpayer Bank;'' and 
four, Roll Call, ``What Happens if the Export-Import Bank 
Expires?''
    Without objection, so ordered.
    I thank all of you for your testimony here today and your 
patience in the interruption because of votes.
    This Committee is adjourned.
    [Whereupon, at 12:11 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
                PREPARED STATEMENT OF VERONIQUE DE RUGY
    Senior Research Fellow, Mercatus Center, George Mason University
                              June 2, 2015
    Good morning Chairman Shelby, Ranking Member Brown, and Members of 
the Committee. Thank you for the opportunity to testify today on the 
important topic of the Export-Import Bank of the United States.
    My name is Veronique de Rugy, and I am a senior research fellow at 
the Mercatus Center at George Mason University, where I study the U.S. 
economy, the Federal budget, homeland security, taxation, tax 
competition, and financial privacy.
    We don't agree on much in Washington. In view of the all of the 
economic and social problems facing our Nation, we should agree that 
the Federal Government ought not direct our limited public resources to 
subsidies that benefit successful politically connected corporations at 
the expense of thousands of companies and millions of American workers 
who compete in the global marketplace without Government favors. This 
is why Congress should not reauthorize the Ex-Im Bank.
    The policy debate surrounding the Ex-Im Bank has focused on 
maintaining the privileges long enjoyed by Boeing and a few other 
similar large corporations. It is vitally important, however, to 
recognize the many unseen costs of political privilege, whether it 
takes the form of market distortions, resource misallocation, destroyed 
potential, higher prices, or the competitive disadvantages imposed upon 
Main Street businesses that lack connections in Washington or access to 
press offices and lobbyists. These Main Street businesses matter, too.
    Contrary to what you will hear from its supporters and 
beneficiaries, the Ex-Im Bank plays a marginal role in export 
financing--backing a mere 2 percent of U.S. exports each year. The vast 
majority of exporters secure financing from a wide variety of private 
banks and other financial institutions without Government interference 
or assistance. With U.S. exports hitting record high levels, it is 
obvious that such financing is abundant and Government assistance is 
superfluous.
    Furthermore, letting the Ex-Im Bank's charter expire won't disturb 
existing deals. Failure to reauthorize will prevent the Ex-Im Bank from 
extending new loans, which would be a win for taxpayers who are 
ultimately on the hook for a total of $140 billion if bank reserves 
fail to cover defaults.
    In this testimony, I would like to address the following points:

  1.  The Ex-Im Bank distorts the market by creating privilege, 
        undermining the legitimacy of both Government and the market.

  2.  The Ex-Im Bank fails on its own grounds.

  3.  The Ex-Im Bank suffers from massive transparency issues.
1. The Ex-Im Bank: The Poster Child of Government-Created Privilege
    There is abundant research about the negative effects of cronyism. 
For example, in a book called The Pathology of Privilege: The Economic 
Consequences of Government Favoritism, my colleague Matt Mitchell 
explained that ``Whatever its guise, Government-granted privilege [to 
private businesses] is an extraordinarily destructive force. It 
misdirects resources, impedes genuine economic progress, breeds 
corruption, and undermines the legitimacy of both the Government and 
the private sector.'' \1\
---------------------------------------------------------------------------
     \1\ Matthew Mitchell, ``The Pathology of Privilege: The Economic 
Consequences of Government Favoritism'', Arlington, VA: Mercatus Center 
at George Mason University, 2014, 1-2, http://mercatus.org/publication/
pathology-privilege-economic-consequences-government-favoritism.
---------------------------------------------------------------------------
    The Ex-Im Bank is one of those destructive Government-granted 
privileges. This shows up in two forms, one strikingly visible, and the 
other invisible. Among the top 10 domestic beneficiaries of the Ex-Im 
Bank is Boeing. At a 40 percent share of total Ex-Im Bank loan 
authorizations in 2014, Boeing dwarfs the 25 percent combined share of 
all small businesses. What we do not see are the higher costs borne by 
American exporters, due to the Ex-Im Bank being one of those 
destructive Government-granted privileges.
A. Government Privilege and ``Boeing's Bank''
    A look at the top 10 domestic beneficiaries for all Ex-Im Bank 
transactions between 2007 and 2014 shows that the Ex-Im Bank lives up 
to its nickname of ``Boeing's Bank''. The aviation giant, which has a 
market capitalization of $100 billion, is by far the biggest 
beneficiary of the Ex-Im Bank's largesse, which provides $66.7 billion 
in subsidized financing to foreign purchasers of Boeing planes. General 
Electric, a company with a market cap of $279 billion, also ranks among 
the biggest beneficiaries, with $8.3 billion in export assistance. The 
$2.2 billion in Ex-Im Bank financing that benefits Caterpillar, a 
company with a market cap of $54 billion, is boosted by the $2.7 
billion loan guarantee to its subsidiary, Solar Turbine Inc. (also on 
the Top 10 list).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

B. Big Buyers Go With Big Exporters
    On the foreign side, things aren't much different--the subsidized 
financing largely benefits very large companies that either collect 
massive subsidies as State-controlled entities or could easily access 
private financing. The following table shows the top 10 foreign buyers, 
based on the total amount of financing authorized from FY2007 through 
FY2013.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The number one buyer was the Mexican State-owned petroleum company, 
Pemex, which has a market cap of $416 billion but has somehow needed 
more than $7 billion in U.S. taxpayer-backed financing to facilitate 
deals with American exporters in recent years. Pemex, in fact, received 
some 30 percent of the more than $23 billion of Ex-Im Bank financing 
that flowed to foreign buyers in the oil and gas sector between 2007 
and 2013. Overall, 21 percent of Ex-Im Bank financing went to this 
sector, a policy that seems at odds with the current Administration's 
less than favorable view of fossil fuels. In fact, the financing to 
foreign oil and gas firms exacerbates the regulatory burdens imposed by 
the Obama administration, which favors Ex-Im Bank reauthorization, on 
the domestic oil and gas industry. \2\
---------------------------------------------------------------------------
     \2\ Veronique de Rugy and Diane Katz, ``The Export-Import Bank's 
Top Foreign Buyers'', Mercatus Research, Mercatus Center at George 
Mason University, Arlington, VA, April 2015, http://mercatus.org/
publication/export-import-bank-s-top-foreign-buyers.
---------------------------------------------------------------------------
    Other top buyers include foreign companies such as Emirates 
airline, which has benefited from $3.4 billion in U.S.-backed financing 
and proudly boasts on its Web site that it has ``recorded an annual 
profit in every year since its third in operation.'' \3\ Other foreign 
airlines also get cheap loans from the Ex-Im Bank, prompting charges of 
unfair competition. According to the lawsuit filed by Delta Airlines, 
along with the Airline Pilots Association, the unfair competition 
granted to Air India alone has resulted in the loss of some 7,500 U.S. 
airline jobs. \4\
---------------------------------------------------------------------------
     \3\ ``The Emirates Story'', Emirates, http://www.emirates.com/
english/about/the_emirates_story.aspx.
     \4\ ``Examining Reauthorization of the Export-Import Bank: 
Corporate Necessity or Corporate Welfare?'' Hearing before the House 
Financial Services Committee (June 25, 2014) (testimony of Richard H. 
Anderson, Chief Executive Officer, Delta Air Lines), http://financial-
services.house.gov/calendar/eventsingle.aspx?EventID=385048.
---------------------------------------------------------------------------
    These subsidies have prompted several American carriers and their 
employee unions to demand a rescission of the open-skies agreements \5\ 
with several airlines charging that the subsidies constitute unfair 
competition, including interest-free loans, discounted airport charges, 
Government protection on fuel losses, and below-market labor costs. \6\
---------------------------------------------------------------------------
     \5\ The open-skies agreements promote ``increased travel and 
trade'' and enhanced productivity by ``eliminating Government 
interference in the commercial decisions of air carriers about routes, 
capacity, and pricing, freeing carriers to provide more affordable, 
convenient, and efficient air service for consumers.'' See U.S. 
Department of State, Open Skies Agreements, http://www.state.gov/e/eb/
tra/ata/.
     \6\ ``Emirates, Qatar Airlines and Etihad Airways in Violation of 
U.S. Agreement?'' ETurbo News, March 7, 2015, http://
www.eturbonews.com/56263/emirates-qatar-airlines-and-etihad-airways-
violation-us-agreement.
---------------------------------------------------------------------------
    The subsidies are largely captured by large producers, domestic and 
foreign, and the subsidies result in a policy mix that is contradictory 
in the goals it seeks to achieve. But there is more to the story.
C. The Unseen and the Unconnected Victims
    It is difficult, but extremely important, that we consider the 
unseen costs of political privilege. Ex-Im Bank supporters tout 
subsidized firms' successes, but they do not consider the unseen costs 
imposed on the other 98 percent of unsubsidized exports.
    In these cases, it is firms' own Government--not a foreign 
Government--that puts them at a competitive disadvantage. That is, 
foreign firms are receiving subsidized financing, which lowers their 
cost of business. But their American counterparts are paying market 
rates for financing, which means their cost of business is higher. The 
Ex-Im Bank also gives lenders an incentive to shift resources away from 
unsubsidized projects and towards subsidized ones--regardless of the 
merits of each project.
    These capital market distortions have ripple effects. Subsidized 
projects attract more private capital while other worthy projects are 
overlooked. The subsidized get richer while the unsubsidized get 
poorer--or go out of business.
    Unfortunately, we will never see the businesses that could have 
been. Perhaps they would have been better, more efficient, or more 
responsible than politically connected firms. But we will never know as 
long as the Ex-Im Bank exists and continues to distort the market 
through privilege.
    Visible and invisible, this is how the Ex-Im Bank has come to 
exemplify ``the extraordinarily destructive force'' of Government-
granted privilege, in the words of my colleague Matt Mitchell.
2. The Ex-Im Bank: Not What It Is Made Out To Be
    Some say that there are good reasons to continue the Ex-Im Bank's 
subsidies and Government privilege. They say that the Ex-Im Bank 
promotes U.S. exports and supports small businesses while leveling the 
playing field and filling an important ``financing gap.'' They also 
claim that jobs would instantly disappear absent the Ex-Im Bank. But 
none of these arguments withstand scrutiny.
A. The Ex-Im Bank Can't Affect the Trade Balance Overall
    Economists tend to be extremely suspicious of export-subsidy 
schemes like those provided by the Ex-Im Bank and their ability to 
meaningfully boost exports. Sallie James, trade policy analyst at the 
Cato Institute, notes, ``Export promotion programs for certain goods--
marketing programs for certain commodities, say--may have beneficial 
effects for that industry but cannot affect the trade balance 
overall.'' \7\ The Government Accountability Office (GAO) stated, 
``Export promotion programs cannot produce a substantial change in the 
U.S. trade balance, because a country's trade balance is largely 
determined by the underlying competitiveness of U.S. industry and by 
the macroeconomic policies of the United States and its trading 
partners.'' \8\
---------------------------------------------------------------------------
     \7\ Sallie James, ``Time to X Out the Ex-Im Bank'', Trade Policy 
Analysis No. 47, Cato Institute, Washington, DC, July 6, 2011, http://
www.cato.org/publications/trade-policy-analysis/time-x-out-exim-bank.
     \8\ Allan I. Mendelowitz, ``Export Promotion: Federal Programs 
Lack Organizational and Funding Cohesiveness'', GAO/NSIAD-92-49, 
Washington, DC: Government Accountability Office, January 1992, http://
www.gao.gov/assets/220/215530.pdf.
---------------------------------------------------------------------------
    The data confirms this point: the Ex-Im Bank backs less than 2 
percent of U.S. exports each year. Considering who a vast majority of 
the buyers and sellers are, it is unreasonable to assume that these 
exports will disappear if the Ex-Im Bank vanishes.
    Also, while there is no doubt that the selected exporters 
benefiting from the subsidies enjoy them, the impact on the overall 
economy should not be overlooked. A review of the academic literature 
on the topic suggests that in most cases export subsidies reduce the 
total income of the country paying the subsidies. In other words, the 
GDP of the country issuing the subsidies is very likely to be 
negatively affected. In all cases, export subsidies reduce worldwide 
income by increasing the wealth of those, and only those, who are 
subsidized--at the expense of other exporters and taxpayers. \9\
---------------------------------------------------------------------------
     \9\ Salim Furth, ``The Export Import Bank: What the Scholarship 
Says'', Backgrounder No. 2934, Heritage Foundation, Washington, DC, 
August 7, 2014, http://www.heritage.org/research/reports/2014/08/the-
export-import-bank-what-the-scholarship-says.
---------------------------------------------------------------------------
    Reforming the broader macroeconomic policies that are more likely 
to harm the U.S. trade position, such as the corporate income tax 
system, will help U.S. exports far more than anything the Ex-Im Bank 
could do. \10\
---------------------------------------------------------------------------
     \10\ Veronique de Rugy, ``The Right Way To Help Exporters: Kill 
Ex-Im, Reform the Corporate Income Tax'', The Corner, National Review 
Online, April 30, 2014, http://www.nationalreview.com/corner/376826/
right-way-help-exporters-kill-ex-im-reform-corporate-income-tax-
veronique-de-rugy.
---------------------------------------------------------------------------
B. Jobs Will Not Vanish If the Ex-Im Bank Charter Expires
    The Ex-Im Bank takes credit for supporting 164,000 jobs in 2014, 
but this number should be viewed with skepticism. In addition, 
economists have shown \11\ that in most cases schemes like the Ex-Im 
Bank redistribute jobs from nonsubsidized industries to subsidized 
ones. \12\
---------------------------------------------------------------------------
     \11\ Ike Brannon and Elizabeth Lowell, ``Export-Import Bank: 
Obstacles and Options for Reform'', Research, American Action Forum, 
Washington, DC, May 16, 2011, http://americanactionforum.org/research/
export-import-bank-obstacles-and-options-for-reform.
     \12\ These increased costs and decreased profits manifest 
themselves through different channels: First, nonprivileged exporters 
lose when their competitors get help, and so do nonexporters. Second, 
anyone who competes with the privileged foreign buyers loses market 
share. Third, consumers trying to buy the good whose demand is 
artificially high must pay a higher price. Finally, anyone trying to 
obtain capital loses since the Ex-Im Bank subsidy raises the cost of 
capital for nonsubsidized firms, and lenders are likely to prioritize 
demand for capital from borrowers with a Government guarantee, 
independently of the merits of their projects. When the higher interest 
rates paid by the nonsubsidized firms are factored in, the net impact 
of the Ex-Im Bank is probably a net loss in terms of jobs and growth.
---------------------------------------------------------------------------
    Many in Congress, however, are still worried that letting the Ex-Im 
Bank charter expire will have an immediate impact on existing jobs 
supported by the Ex-Im Bank. They shouldn't worry because even if the 
Ex-Im Bank is not reauthorized, it will have to honor the loans it 
already extended to companies. An orderly wind down means that the Ex-
Im Bank won't be able to extend new loans.
    The biggest beneficiaries of the Ex-Im Bank know that their 
employees and their suppliers are perfectly safe in the event the 
charter is not reauthorized. That's because Boeing, Caterpillar, 
General Electric, and the like all have billions of dollars of 
backorders that will keep their workers busy for years to come.
    Diane Katz and I have released new research that shows the 
companies' backlogs as reported in their latest annual reports. \13\ 
Boeing Co. posted a ``record'' backlog of $441 billion (in 2013); 
General Electric Co. recorded a backlog of $261 billion (in 2014); 
Caterpillar Inc.'s backlog is $16.5 million (in the first quarter of 
2015); and Bechtel Corp. posted a ``strong'' backlog of $70.5 billion 
(in 2014).
---------------------------------------------------------------------------
     \13\ Veronique de Rugy and Diane Katz, ``Export Jobs Won't 
Disappear Absent Ex-Im Bank'', Mercatus Center at George Mason 
University, May 21, 2015, http://mercatus.org/publication/export-jobs-
won-t-disappear-absent-ex-im-bank.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    This means that absent subsidies from the Ex-Im Bank, these 
corporations have production backlogs that will take years to fulfill--
some with Ex-Im Bank financing in place and others without. Shutting 
down the Ex-Im Bank will not result in job losses--except, perhaps, 
among the ranks of lobbyists who are trying to scare members of 
Congress into maintaining this fount of corporate welfare.
C. The Ex-Im Bank Does Not Mostly Support Small Businesses
    In recent years, the Ex-Im Bank has tried to recast its role away 
from export subsidies towards other priorities. For instance, Ex-Im 
Bank defenders argue that 90 percent of its deals benefit small firms. 
Of course, this shouldn't be a reason for renewing the Ex-Im Bank's 
charter, since its main function (export subsidies) is harmful to the 
U.S. economy.
    In addition, the Ex-Im Bank's small business claim is dubious. By 
dollar value, in 2014, some 25 percent of the Ex-Im Bank's activities 
benefited small businesses (defined as a company with 1,500 employees 
or less than $21 million in annual revenues).
    Also, even using the Ex-Im Bank's definition, the vast majority of 
U.S. small businesses--over 99.9 percent--receive no benefits from the 
Ex-Im Bank and are placed at a competitive disadvantage against large, 
subsidized competitors.
    Finally, it is worth noting that the Ex-Im Bank has been caught 
mislabeling its data to make it look as if more lending has gone to 
benefit small businesses, \14\ and it has been touting small business 
successes of companies that were large \15\ or already successful 
before any involvement with the Ex-Im Bank. \16\
---------------------------------------------------------------------------
     \14\ Howard Schneider and Krista Hughes, ``U.S. Ex-Im Acknowledges 
Errors in Politically Sensitive Small Biz Data'', Reuters, November 14, 
2014, http://www.reuters.com/article/2014/11/14/us-usa-trade-exim-
idUSKCN0IY11Y20141114.
     \15\ Diane Katz, ``Ex-Im Misrepresents Subsidies to Prominent 
Billionaire'', Daily Signal, May 1, 2015, http://dailysignal.com/2015/
05/01/ex-im-misrepresents-subsidies-to-prominent-billionaire/.
     \16\ Diane Katz, ``The Real Story Behind the Small Business the 
Export-Import Bank Claims It Built'', Daily Signal, June 4, 2014, 
http://dailysignal.com/2014/06/04/real-story-behind-small-business-ex-
im-claims-built/.
---------------------------------------------------------------------------
D. The Ex-Im Bank Is Not Really Leveling the Playing Field for U.S. 
        Exporters or Filling a Financing Gap
    A common argument about the Ex-Im Bank is that without the export 
subsidies, foreign companies would not purchase U.S. goods and would 
instead buy goods from companies whose countries offer such subsidies. 
For instance, without Ex-Im Bank, Emirates airline wouldn't buy any 
Boeing planes but would instead buy Airbus planes to benefit from 
European subsidies. Defenders of the Ex-Im Bank also claim that private 
lenders are unwilling to risk lending to foreign companies. In our 
example, it implies that lenders would only extend loans to Emirates to 
buy a plane if the U.S. Government or one of the three EU Governments 
offering export credits backs the deal.
    This fear is reflected in the Ex-Im Bank charter. It spells out 
three criteria for Ex-Im Bank financing: (1) ``to assume political or 
commercial risk that exporter and/or financial institutions are 
unwilling or unable to undertake''; (2) ``to overcome maturity or other 
limitations in private-sector export financing''; or (3) ``to meet 
competition from a foreign, officially sponsored export-credit 
agency.''
    However, the data demonstrate that there is a gap between what the 
Ex-Im Bank claims it should be doing and what it actually does. As a 
condition of its most recent reauthorization in 2012, Congress required 
the Ex-Im Bank to designate the purpose served for certain financing 
deals. While the bank still does not provide justifications for all 
transactions in its portfolio, its current charter compels it to 
provide at least some explanation by category for all loans and long-
term loan guarantees in its annual report. \17\
---------------------------------------------------------------------------
     \17\ Export-Import Bank Reauthorization Act of 2012, Pub. L. No. 
112-122, 108 Stat. 4376.
---------------------------------------------------------------------------
    The data show that less than one-third of the estimated export 
value of the Ex-Im Bank's portfolio is intended to counteract 
competitive disadvantages created by foreign Governments' own export 
subsidies. Moreover, more than 98 percent of U.S. exports occur without 
Government financing through the Ex-Im Bank, demonstrating that the Ex-
Im Bank is not critical for helping U.S. exports thrive globally.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    As for the claim that the Ex-Im Bank fills an important ``financing 
gap'' by supporting U.S. exports, it is not supported by data. The Ex-
Im Bank designates only 16.4 percent of its financing as necessary to 
address a lack of private capital. \18\ That means that most of what 
the Ex-Im Bank does has nothing to do with ``filling a financing gap.''
---------------------------------------------------------------------------
     \18\ Veronique de Rugy and Rizqi Razmat, ``Export-Import Bank 
Portfolio Broken Down by Stated Goal'', Mercatus Center at George Mason 
University, http://mercatus.org/sites/default/files/C1-Prop-Export-
Value-large.jpeg.
---------------------------------------------------------------------------
    What about the claim that foreign carriers will not purchase Boeing 
planes without subsidized financing from the United States and would 
instead buy Airbus planes with export credits from foreign Governments?
    The reality is that there is no shortage of private capital to 
finance aircraft purchases, and airlines would continue to purchase 
Boeing products in the absence of Ex-Im Bank subsidies. In my recent 
paper with Diane Katz, we look at the example of Emirates airline. The 
UAE State-owned company is the second biggest recipient of Ex-Im Bank 
financing. We write: \19\
---------------------------------------------------------------------------
     \19\ De Rugy and Katz, ``The Export-Import Bank's Top Foreign 
Buyers''.

        In June 2012, Emirates bought two Boeing 777s using Ex-Im Bank 
        financing, and four Airbus A380s using private financing. \20\ 
        Obviously, the State-controlled airline could afford to buy 
        planes without subsidies, and subsidies are not the only factor 
        in the carrier's choice of aircraft.
---------------------------------------------------------------------------
     \20\ ``Examining Reauthorization of the Export-Import Bank: 
Corporate Necessity or Corporate Welfare?'' Hearing before the House 
Financial Services Committee (June 25, 2014) (testimony of Richard H. 
Anderson, Chief Executive Officer, Delta Air Lines) http://
financialservices.house.gov/calendar/eventsingle.aspx?EventID=385048.

    This is consistent with the results of a study by the GAO that 
found 85 percent of Boeing and Airbus large-aircraft deliveries were 
not subsidized by export-credit agencies. \21\
---------------------------------------------------------------------------
     \21\ Government Accountability Office, ``Export-Import Bank: 
Information on Export Credit Agency Financing Support for Wide-Body 
Jets'', July 8, 2014, http://www.gao.gov/assets/670/664679.pdf.
---------------------------------------------------------------------------
3. The Ex-Im Bank Is Suffering From Massive Transparency Issues
    Scholars have been critiquing the poor quality of the Ex-Im Bank 
data for years. A 2014 report by the American Action Forum notes: 
``There continues to be areas needing additional transparency. For 
instance, publicly available data on program authorizations can often 
be incomplete and inadequate.'' \22\
---------------------------------------------------------------------------
     \22\ Andy Winkler, Douglas Holtz-Eakin, ``Reauthorizing the 
Export-Import Bank: A Policy Evaluation'', Research, American Action 
Forum, Washington, DC, May 20, 2014, http://americanactionforum.org/
research/reauthorizing-the-export-import-bank-a-policy-evaluation.
---------------------------------------------------------------------------
    My own research has documented in detail that the dataset stored at 
Data.gov, a Federal Web site launched in 2009, was spotty and 
incomplete--the GAO and the Ex-Im Bank's own inspector general have 
repeatedly found that the agency's recordkeeping is subpar and needs 
improvement. The dataset available at Data.gov is missing a great deal 
of information, and it is common to find beneficiaries marked as 
``unknown'' or ``various U.S. companies''. It is also common to find 
the names of companies misspelled or identified differently on 
different forms, which makes working with the numbers even harder.
    Let me illustrate how that should present a major problem for 
Congress. The Ex-Im Bank isn't allowed to lend money to customers in 
certain countries, such as North Korea, Libya, and Iran. Russia was 
added to the list last year. But in order to know whether the Ex-Im 
Bank is actually complying with these restrictions and limitations, we 
need to be able to check its data. Unfortunately, as I have mentioned 
before, the Ex-Im Bank's data, when available, are a mess. So much of 
the data are labeled ``unknown'' and ``various countries'' that it is 
hard for Congress to utilize the Ex-Im Bank's data for proper 
oversight.
    The following chart displays the top foreign buyers of exports 
financed by the Ex-Im Bank from 2007 to 2013. (We had to use the old 
dataset that used to be on Data.gov but was one day mysteriously 
removed and later replaced with an abridged dataset that did not list 
critical fields such as ``Primary Buyer.'') This chart shows the total 
dollar amount of deals financed by the Ex-Im Bank in which the Primary 
Buyer is marked as ``unknown'' or ``various'' in data made available to 
the public--33 percent of buyers by dollar value are not named.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    How do we know that some Ex-Im Bank loans didn't go to companies in 
restricted countries if we don't know which companies are getting 
loans? In some cases, the dataset shows the name of a country 
associated with the unknown deal. But how can we be sure that it is 
actually accurate without the name of the company?
    I would like to trust the Ex-Im Bank, but it is hard to in light of 
how it has intentionally mislabeled its data to make it look as if more 
lending was going to benefit small businesses than actually was; how it 
has employees being investigated for taking bribes in exchange for 
loans; and how it indulged in collusion with top corporate executives 
at Boeing by asking for input on bank policies that could benefit their 
firm. \23\ Even without the Ex-Im Bank's past missteps, it's hard to 
see why we should trust it when it does not even release accurate data.
---------------------------------------------------------------------------
     \23\ Brody Mullins, ``Boeing Helped Craft Own Loan Rule'', Wall 
Street Journal, March 12, 2015, http://www.wsj.com/articles/boeing-
helped-craft-own-loan-rule-1426203934.
---------------------------------------------------------------------------
Conclusion
    Beyond its operational lapses and its economic inefficiency, the 
problem with the Ex-Im Bank is that the many groups who its activities 
affect are people who don't have connections, lobbyists, and press 
offices in Washington. These unseen victims matter, too.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             PREPARED STATEMENT OF LINDA MENGHETTI DEMPSEY
Vice President, International Economic Affairs, National Association of 
                             Manufacturers
                              June 2, 2015
    Chairmen Shelby, Ranking Member Brown, and Members of the 
Committee, thank you for the opportunity to testify today. I appreciate 
the chance to highlight on behalf of the National Association of 
Manufacturers (NAM) the importance of reauthorizing the U.S. Export-
Import Bank to help manufacturers compete in the global marketplace 
that will enable them to support and sustain good-paying manufacturing 
jobs throughout every State.
    The NAM is the Nation's largest industrial association and voice 
for more than 12 million women and men who make things in America. 
Manufacturing in the U.S. supports more than 17 million jobs, and in 
2014, U.S. manufacturing output reached a record of nearly $2.1 
trillion. It is the engine that drives the U.S. economy by creating 
jobs, opportunity and prosperity. The NAM is committed to achieving a 
policy agenda that helps manufacturers grow and create jobs. 
Manufacturing has the biggest multiplier effect of any industry and 
manufacturers in the United States perform more than three-quarters of 
all private-sector R&D in the Nation--driving more innovation than any 
other sector.
Importance of Exports to U.S. Manufacturing and Jobs
    Since its origin, the United States has recognized the importance 
of exports to promoting industrial and economic growth and supporting 
jobs. The ability of U.S. companies to export has also been a critical 
issue for the NAM since its founding. With 95 percent of consumers 
outside the United States and global demand for manufactured goods that 
far exceeds domestic demand, manufacturers in the United States need to 
win more sales overseas if they are going to sustain and grow 
operations and employment.
    World trade in manufactured goods reached $11.8 trillion in 2013 
\1\ and greatly exceeds U.S. consumption of manufactured goods 
(domestic shipments and imports), which totaled $4.1 trillion in 2014. 
U.S. manufactured goods exports have more than doubled in the past 
decade, reaching a record $1.6 trillion in 2014. While that growth is 
impressive, U.S. manufacturers and exporters are facing an increasingly 
challenging global economy where growth has slowed. America lags behind 
many of its largest trading partners when it comes to exporting. U.S. 
exports comprised only 9.5 percent of global trade in manufactured 
goods in 2013. We can and must do more to expand U.S. exports if we are 
going to grow manufacturing and the jobs it supports in the United 
States.
---------------------------------------------------------------------------
     \1\ Data from the World Trade Organization Statistical Database, 
accessed on Jan. 29, 2015. Most recent data available.
---------------------------------------------------------------------------
    The importance of exports to the bottom line for manufacturers 
across the United States is not a theoretical issue. More than 40 
percent of respondents in a recent National Association of 
Manufacturers (NAM) survey cited exports as a primary driver of growth 
for their company. \2\ Those survey respondents who were more positive 
about their export potential over the next 12 months were also more 
optimistic in their company's economic outlook, sales and capital 
spending plans.
---------------------------------------------------------------------------
     \2\ Moutray, Chad, ``NAM/lndustryWeek Survey: Manufacturers 
Bullish, But Frustrated With Washington'', lndustryWeek, June 9, 2014. 
See http://www.industryweek.com/global-economy/namindustryweek-survey-
manufacturers-bullish-frustrated-washington?page=1.
---------------------------------------------------------------------------
    Nor are exports a theoretical issue for the workers employed in 
every State by our Nation's manufacturers. As new export opportunities 
emerge overseas, manufacturers in the United States are able to both 
sustain and create American jobs. According to the latest figures from 
the U.S. Department of Commerce, every $1 billion in exports creates or 
supports 5,796 jobs.
    Recently, exports have played a significant role in the ongoing 
manufacturing recovery. Since the end of 2009, export-intensive sectors 
with substantial export growth have seen the largest job gains. U.S. 
manufactured goods exports support higher-paying jobs throughout the 
United States. Moreover, jobs supported by exports pay, on average, 18 
percent more than other jobs. \3\ Employees in the ``most trade-
intensive industries'' earn an average compensation of nearly $94,000, 
or more than 56 percent more than those in manufacturing companies that 
were less engaged in trade. \4\
---------------------------------------------------------------------------
     \3\ David Riker, ``Do Jobs in Export Industries Still Pay More? 
And Why?'' International Trade Administration, U.S. Department of 
Commerce, July 2010, accessed at www.trade.gov/mas/ian/build/groups/
public/@tg_ian/documents/webcontent/tg_ian_003208.pdf.
     \4\ Calculations From the Manufacturers Alliance for Productivity 
and Innovation (MAPI) Foundation, using 2013 input output data from the 
Bureau of Economic Analysis, accessed at 
www.themanufacturinginstitute.org/Research/Facts/About-Manufacturing/
Foreign-Trade-and-lnvestment/Impact-on-Compensation/Impact-on-
Compensation.aspx.
---------------------------------------------------------------------------
Importance of Ex-Im Bank to Growing U.S. Exports
    One vital tool that thousands of manufacturers use to compete 
successfully in global markets is the Ex-Im Bank. The NAM strongly 
supports Ex-Im Bank's mission to support U.S. jobs through exports and 
views the Bank as one of the most important tools the U.S. Government 
has to help grow U.S. exports and jobs.
    The Export-Import Bank is essential to boosting exports of U.S. 
products. In FY2014, Ex-Im Bank enabled more than $27 billion in 
exports--leveraging about $20.5 billion in authorizations. Nearly 90 
percent of those transactions directly supported small businesses, with 
an estimated $5 billion in support for small business exporters. 
Furthermore, the Bank has maintained its incredibly low default rate of 
through the recession and through several years of record growth. At 
the end of FY2014, the Bank's default rate was less 0.2 percent. 
Notably, Ex-Im's activities are already targeted and, by law, must not 
compete with private sector lending activity.
    Ex-Im Bank helped promote just under two percent of total U.S. 
exports in FY2014. While it does not need to finance the great majority 
of U.S. exports, it is considered vital in certain areas of significant 
growth, particularly for small- and medium-sized business exporters, 
long-term financing for large projects, sales to emerging markets, and 
sales to foreign State-owned entities.

    Small- and Medium-Sized Business Exports. Ex-Im is vital to 
        many and medium-sized businesses to enable them to start to 
        export overseas. Small businesses, both those that are direct 
        exporters and those that supply domestically to larger U.S. 
        exporters, will feel the blow if Congress fails to reauthorize 
        Ex-Im Bank. Those companies that utilize Ex-Im Bank insurance 
        programs to enable their working capital will be faced almost 
        immediately with a dilemma about how to pay their workers and 
        make the mortgage payments on their facilities, let alone 
        consider growing and hiring. Suppliers whose U.S. customers 
        lose out on large infrastructure, aerospace and energy projects 
        overseas because they cannot bid without access to Ex-Im Bank 
        will also see their orders shrink. Of the Bank's 3,300 small 
        business transactions in FY2014, 545 companies were first-time 
        Ex-Im users. Ex-Im's role in jump-starting new small- and 
        medium-sized exporters is particularly important.

    Many small- and medium-sized manufacturers across the 
        country have turned to Ex-Im Bank to take advantage of new 
        international trade opportunities and grow their workforce. 
        Special Products & Mfg., Inc. (SPM) in Rockwall, Texas, is a 
        second generation, family owned business that has grown--with 
        the help of exports--from a small garage shop in the 1960s into 
        a firm with more than 200 machine operators, welders, 
        assemblers, engineers and other associates in a 140,000 square 
        foot state-of-the-art factory. Over the past several years, SPM 
        has seized opportunities to expand their business into the 
        world marketplace. From Europe to South America, SPM is 
        exporting products ranging from new and improved gas station 
        pumps to large steel enclosures for drill rig drives. SPM also 
        supplies many companies like General Electric and Caterpillar, 
        and SPM's Chief Operator Officer Ed Grand-Lienard made the trip 
        to Washington earlier this year to let Congress know that the 
        future of American manufacturing is in jeopardy of being 
        seriously hurt if the Ex-Im Bank is not reauthorized. This 
        company is just one of the many small businesses that have 
        reaped the benefits of expanded market access and tools like 
        Ex-Im Bank, and the NAM would be happy to provide others to the 
        Committee.

    Long-Term Project Finance. Ex-Im Bank, like foreign export 
        credit agencies (ECAs), has taken on an increasingly important 
        facilitation role for export financing as the role of 
        commercial banks in financing long-term projects continues to 
        shrink in the wake of the financial crisis. U.S. regulatory 
        guidelines that favor domestic receivables over foreign sales, 
        \5\ implementation of Basel III rules \6\ and the European 
        sovereign debt crisis \7\ have all impacted the ability and 
        appetite of banks to participate in long-term export financing 
        projects at competitive rates. While some banks have been able 
        to restore effectively their balance sheets, commercial bank 
        participation in long-term, high-volume funding (tenors longer 
        than 10 years and over a few hundred million dollars) remains 
        highly selective. Many experts--including top executives from 
        U.K. Export Finance (UKEF), Korea Trade Insurance Corporation 
        (K-Sure) and Deutsche Bank--suggest that Basel III will 
        continue to constrain commercial banks from playing a 
        significant role as long-term funders of large-scale projects 
        and other sales. \8\ As a result, ECAs are increasingly a 
        driving force for large-scale, long-term projects--particularly 
        projects in the infrastructure, energy and aerospace sectors. 
        \9\ Infrastructure Journal data show that ECA lending activity 
        in commercial project finance transactions increased threefold 
        from less than $10 billion in 2009 to more than $30 billion 
        projected for 2013, and ECAs are providing the only project 
        finance available in some markets. In particular, Japan Bank 
        for International Cooperation (JBIC) is a global leader for 
        energy and infrastructure project finance \10\ and Korea 
        EximBank is rising in prominence, particularly in its priority 
        energy sector. \11\
---------------------------------------------------------------------------
     \5\ Office of the Comptroller of the Currency, Treasury 
Department, Comptroller's Handbook, at 17-18, accessed at http://
www.occ.gov/publications/publications-by-type/comptrollers-handbook/
pub-ch-asset-based-lending.pdf.
     \6\ Basel Committee on Banking Supervision, ``Basel III: A Global 
Regulatory Framework for More Resilient Banks and Banking Systems''. 
December 2010, accessed at http://www.bis.org/publ/bcbs189.pdf.
     \7\ Berne Union Yearbook 2012 at 55, accessed at http://
www.berneunion.org/wp-contenl/uploads/2013/10/BerneUnion-Yearbook-
2012.pdf--Quoting Steve Tvardek, Head of the OECD Export Credits 
Division, OECD.
     \8\ Berne Union Yearbook 2014 at 66, accessed at http://
www.berneunion.org/wp-content/uploads/2012/10/BerneUnion-80-Yearbook-
2014.pdf.
     \9\ See, e.g., ``Power Shift: The Rise of Export Credit and 
Development Finance in Major Projects''. November 2013; Baker and 
McKenzie with Infrastructure Journal, accessed at http://
www.bakermckenzie.com/files/Publication/7dc07b54-651f-4168-9c81-
0abdfdc432ca/Presentation/PublicationAttachment/6943f6ae-5718-42f8-
a587-9a06c65902d7/fc_global_powershift_nov13.pdf.
     \10\ ``Power Shift: The Rise of Export Credit and Development 
Finance in Major Projects'' [2013].
     \11\ ``Filling the Funding Gap--Korea Eximbank'', Project Finance 
International (March 2013), accessed at http://www.pfie.com/filling-
the-funding-gap-%E2%80%93-korea-eximbank/21071929.article.

    Emerging Markets. Many U.S.-based lenders also turn to Ex-
        Im to mitigate geopolitical and collateral risk in an effort to 
        provide viable trade financing solutions for exporters. Without 
        Ex-Im, many private lenders have limited options: opt not to 
        finance otherwise viable export activity in emerging markets, 
        charge rates that are uncompetitive globally or place limits on 
        the overall amount of financing to particular emerging markets. 
        Ex-Im Bank, for example, offers medium- and long-term 
        guarantees that provide flexible lender financing options for 
        buyers of U.S. capital goods and services. Ex-Im also supports 
        commercial banks through letter of credit (LC) confirmations 
        that reduce a bank's risks, offering private sector lenders 
---------------------------------------------------------------------------
        greater flexibility in working with their client base.

    Government and State-Owned Enterprise (SOE) Transactions. 
        U.S. exporters from a broad number of sectors increasingly are 
        selling to foreign Governments and State-owned entities. Be it 
        medical equipment sales to foreign State-owned hospitals, power 
        generation equipment to foreign State-owned utilities or 
        communications satellites to foreign Governments for national 
        mobile satellite systems, such sales support greater exports 
        and jobs in the United States, but are difficult to win. In 
        some cases, the foreign purchaser favors suppliers with a 
        Government entity on the other side of the table. In other 
        cases, like a nuclear power plant project overseas, an ECA 
        lending option is a requirement to participate in the initial 
        bidding phase--even if the customer ultimately opts for another 
        financing option. While the Governments of most of the United 
        States' major trading partners are willing to oblige, Ex-Im is 
        the only Government entity able to play such a role for U.S. 
        exporters. Without Ex-Im's presence, U.S. exporters simply 
        would not be eligible to compete for many of these substantial 
        foreign sales.

    In short, while Ex-Im's role is relatively small compared to the 
overall size of U.S. exports, it plays an outsized and highly important 
role in opening the door to U.S. exports for certain types of 
transactions where U.S. exporters continue to see substantial growth 
opportunities.
The Global Export Credit Dimension
    One of the significant roles that the Ex-Im Bank plays is aiding 
U.S. exporters and their workers to compete in a global economy that is 
characterized by dramatically increasing export credit assistance 
provided by Governments in Europe, Asia, and Latin America. As detailed 
in a study released by the NAM in 2014, The Global Export Credit 
Dimension: The Size of Foreign Export Credit Agencies Compared to the 
United States (2014), \12\ there are more than 60 ECAs worldwide and 
the ECAs of our top nine trading partners--Brazil, Canada, China, 
France, Germany, Japan, Mexico, South Korea, and the United Kingdom--
provided nearly half a trillion dollars in annual export support. Other 
key findings of that report include:
---------------------------------------------------------------------------
     \12\ NAM, ``The Global Export Credit Dimension: The Size of 
Foreign Export Credit Agencies Compared to the United States'' (2014), 
accessed at http://www.nam.org/uploadedFiles/NAM/Site_Content/Issues/
Global%20Export%20Credit%20Dimension%20Web.pdf; see also NAM, 
``Forfeiting Opportunity: Ex-Im Bank Reauthorization Is Essential for 
Manufacturers To Compete Globally in the Face of Massive Foreign Export 
Credit Financing'' (2014), accessed at http://www.nam.org/
uploadedFiles/NAM/Site_Content/Issues/
Forfeiting%20Opportunity%20Web.pdf.

    The ECAs of China, Japan, South Korea, and Germany are 
        already individually larger than the Ex-Im Bank, and all of the 
        nine major foreign ECAs are larger as a share of their 
---------------------------------------------------------------------------
        countries' GDP than the Ex-Im Bank is compared to U.S. GDP;

    China's primary ECA provides more than five times the 
        assistance than the U.S. Ex-Im Bank does;

    Major foreign ECAs, including those in Germany, China, and 
        Canada, are expanding exports more successfully than the Ex-Im 
        Bank. The Ex-Im Bank supported 2.42 percent of total U.S. 
        exports in 2013, while Germany (3.63 percent), China (12.50 
        percent), and Canada (20.29 percent) helped to support even 
        more international sales;

    Foreign ECA activity grew sharply in several major 
        countries, including China, South Korea, and Canada, between 
        2005 and 2013; and

    Official ECA activity is particularly critical to key and 
        growing manufacturing sectors of the global economy, including 
        infrastructure and transportation where manufacturers in the 
        United States are well positioned to grow in related exports if 
        competitive financing is available.

    While the United States is a relatively small player in ECA 
activity, it has worked intensively to negotiate strong rules to 
eliminate market distortions and subsidies that oftentimes characterize 
foreign ECAs. In particular, the United States has led efforts to bring 
developed country members of the Organization for Economic Cooperation 
and Development (OECD) \13\ and non-OECD countries to the negotiating 
table. Largely as a result of U.S. leadership over several decades, 
most of the OECD's industrialized countries have agreed to uniform 
standards for fair and commercially based ECA lending. \14\ Sector-
specific arrangements have also been negotiated to provide even 
stricter discipline on ECA financing related to ships, nuclear power, 
aircraft, renewable energy, climate change mitigation, and water 
projects. \15\
---------------------------------------------------------------------------
     \13\ Members include Australia, Austria, Belgium, Canada, Chile, 
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, 
Hungary, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Mexico, 
Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, 
Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, United 
Kingdom, and United States. OECD, ``Members and Partners'', accessed at 
http://www.oecd.org/about/membersandpartners.
     \14\ Most prominently, OECD members developed the ``Arrangement on 
Officially Supported Export Credits'' (ECA Arrangement) that sets out 
financial disciplines for standard export credits and for export 
credits for certain sectors that reduce and eliminate potential market 
distortions. In particular, the EGA Arrangement--which has been agreed 
to by Australia, Canada, the European Union, Japan, New Zealand, 
Norway, South Korea, Switzerland, and the United States, emphasizes 
that OECD ECAs should be competing ``on quality and price of goods and 
services exported rather than on the most favorable officially 
supported terms''. OECD, ``Official Export Credit Agencies'', accessed 
at http://www.oecd.org/tad/xcred/eca.htm; see also, OECD, ``Official 
Export Credit Agencies'', accessed at http://www.oecd.orq/tad/xcred/
eca.htm.
     \15\ OECD, ``Official Export Credit Agencies'', accessed at http:/
/www.oecd.org/tad/xcred/eca.htm.
---------------------------------------------------------------------------
    Work with non-OECD countries has been more difficult and that is 
where the greatest concern about subsidized ECA financing lies. The 
United States has worked intensively to undertake negotiations with key 
developing countries to agree to operate their ECAs based only on 
commercial considerations. As a result of U.S. efforts, 18 major 
providers of export credits \16\ have been invited to participate in 
the International Working Group on Export Credits (IWG), which held its 
first meeting in November 2012 and has met several times. Work is slow 
as many non-OECD participants have been ``cautious'' and not clearly 
committed to the process. \17\
---------------------------------------------------------------------------
     \16\ The 18 participants are 9 participants in the OECD 
arrangement (Australia, Canada, the European Union, Japan, New Zealand, 
South Korea, Switzerland, and the United States) and 9 non-OE CD 
members (Brazil, China, India, Indonesia, Israel, Malaysia, Russian 
Federation, South Africa, and Turkey).
     \17\ ``Report on Export Credit Negotiations'', U.S. Department of 
the Treasury, December 2013. The IWG held two full meetings (hosted by 
China in May 2013 and the European Union in September 2013) and one 
technical meeting (hosted by Germany in March 2013); European 
Commission, Report from the Commission to the European Parliament and 
the Council--Annual Report on negotiations undertaken by the Commission 
in the field of export credits, in the sense of Regulation (EU) No. 
1233/2011 (May 28, 2014), accessed at http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=COM:2014:299:FIN.
---------------------------------------------------------------------------
    The U.S. Ex-Im Bank's role, while small in the global economy, is 
critical to many thousands of exporters. Failing to reauthorize Ex-Im 
is tantamount to unilateral disarmament and will also negate U.S. 
leadership in seeking to eliminate foreign ECA market distortions and 
subsidies.
Time Is of the Essence
    Last fall, Congress extended Ex-Im Bank's authorization through 
June 30, 2015. Manufacturers need Congress to act quickly on 
legislation to provide a long-term reauthorization of Ex-Im Bank. 
Reliable access to export financing is a vital part of being globally 
competitive, and the Ex-Im Bank has taken on even greater significance 
in today's turbulent financial environment. Manufacturers in the United 
States--and their customers overseas--operate based on long-term plans 
that often involve multiyear projects in which the Ex-Im Bank is a 
critical partner. Without the certainty of a long-term Ex-Im 
reauthorization, U.S. exporters have already been put at a significant 
disadvantage, which will hamper growth here at home and result in lost 
opportunities for American workers and businesses.
    If Congress fails to enact quickly a long-term reauthorization of 
Ex-Im Bank, manufacturers will be forfeiting opportunities to 
competitors overseas and, thereby, risk the loss of not just of 
exports, but of manufacturing growth and good-paying jobs in every 
State.

    If the Ex-Im Bank is not reauthorized, tens of billions of 
        dollars in U.S. exports will be put at risk annually. 
        Manufacturers overseas will increasingly win foreign sales that 
        could have been won by manufacturers in the United States. The 
        loss of U.S.-manufactured exports will be at the expense of 
        thousands of manufacturers in the United States and hundreds of 
        thousands of American workers who rely on Ex-Im services to 
        boost their export sales.

    Weakening America's export competitiveness will be 
        particularly damaging in the face of intense and growing global 
        competition that has already resulted in a substantial decline 
        in America's share of the global manufacturing market.

    Even greater manufacturing export opportunities will be 
        lost on an annual basis as trade expands and U.S. exporters 
        effectively cede foreign sales. The loss of new export 
        opportunities will be particularly severe for small- and 
        medium-sized businesses and for exports to emerging markets and 
        infrastructure sectors where growth is expected to be 
        strongest.

    Time is of the essence. The uncertain future of the Ex-Im Bank is 
already putting U.S. export sales as risk.
Conclusion
    There is broad support for Ex-Im Bank's reauthorization from job-
creators across the country. Over the past year, more than 83,000 
letters from manufacturers, exporters, and constituents have been sent 
to you and your colleagues. In February, more than 700 people from 41 
States--representing a broad spectrum of manufacturing sectors and 
along the breadth of the supply chain--came to Washington, DC, to ask 
their Members of Congress to support a long-term reauthorization of Ex-
Im Bank. This week, the NAM is hosting its annual Manufacturing Summit 
in Washington and hundreds of NAM members are here to advocate for 
policies--including the long-term reauthorization of Ex-Im Bank--that 
benefit manufacturers in the United States.
    The Ex-Im Bank is a targeted tool and a last resort that enables 
U.S. businesses to find a foothold in an increasingly competitive 
marketplace. Failure to reauthorize the Ex-Im Bank is already creating 
uncertainty that is putting U.S. exports at risk. The failure to 
reauthorize the Ex-Im Bank will have even greater, more lasting and 
more damaging effects on manufacturers of every size throughout out the 
United States, threatening tens of billions of dollars in export sales 
as well as the security of hundreds of thousands of American jobs that 
depend directly or indirectly on the Ex-Im Bank's export financing. I 
urge you to move forward quickly on a long-term reauthorization for Ex-
Im Bank to enable it to effectively fulfill its principal mission of 
supporting U.S. jobs through exports.
    Thank you, Chairmen Shelby and Ranking Member Brown for holding 
this hearing and for providing me the opportunity to testify on the 
importance of a long-term reauthorization of the Export-Import Bank to 
our Nation's manufacturers.
                                 ______
                                 
                PREPARED STATEMENT OF MICHAEL R. STRAIN
    Deputy Director of Economic Policy Studies, American Enterprise 
                  Institute for Public Policy Research
                              June 2, 2015
    Chairman Shelby, Ranking Member Brown, and Members of the 
Committee, thank you for the opportunity to appear before you today to 
discuss the Export-Import Bank of the United States. It is an honor.
---------------------------------------------------------------------------
    The views expressed in this statement are those of the author. The 
American Enterprise Institute for Public Policy Research does not hold 
institutional positions on any issues.
---------------------------------------------------------------------------
    I do not believe that the Export-Import Bank should be 
reauthorized. I will spend the next few minutes outlining why, with a 
special focus on the Ex-Im Bank's impact on jobs.
Jobs in a General Economy
    In a healthy economy--one characterized by full employment--the Ex-
Im Bank, an open-ended export credit agency that is properly described 
as offering export subsidies to selected firms, does not create jobs. 
This stands in stark contrast to the rhetoric of some of the Ex-Im 
Bank's supporters. But it is the correct conclusion, at least to a 
first approximation, for informing the Committee as it debates the 
appropriate course of action for the Ex-Im Bank. \1\
---------------------------------------------------------------------------
     \1\ Economist David P. Baron puts it succinctly in his book The 
Export-Import Bank: An Economic Analysis (Academic Press, 1983): 
Employment objectives ``do not provide a sufficient justification for 
Eximbank [Ex-Im Bank] programs''.
---------------------------------------------------------------------------
    Imagine an economy like ours, with some firms that export goods 
abroad and many more firms that sell only within the United States. All 
labor resources are utilized. The Government enters and subsidies the 
exporting firms. This will surely help those firms, and may even 
increase the number of jobs those firms can support. But as labor 
resources were already fully employed, these new jobs must come from 
somewhere. What the export subsidy is doing, in effect, is shifting 
jobs from firms that do not export to those that do. \2\ This does not 
increase employment on the whole.
---------------------------------------------------------------------------
     \2\ Congressional Budget Office, ``The Benefits and Costs of the 
Export-Import Bank Loan Subsidy Program'', March 1981.
---------------------------------------------------------------------------
Jobs in an Economy Without Full Employment
    Now, it must be said that there is considerable debate among 
economists as to whether the U.S. economy is currently characterized by 
full employment. Many economists believe we are quite close to full 
employment, but I am not among them. Despite a rate of unemployment 
that is rapidly approaching one at which the Federal Reserve may be 
properly concerned about inflation, it is still the case that 
employment rates among prime-age workers have not fully recovered from 
the Great Recession, the level of involuntary part-time work remains 
elevated, and wage growth is unsatisfactory.
    In such an environment, it can be argued that export credit may 
help support jobs. To this argument l have three replies. The first is 
that the Congress should not reauthorize a permanent export credit 
agency in order to achieve the temporary goal of tightening a slack 
labor market. Monetary and fiscal policy are much better tools to 
tighten the labor market. The second is that even if the Congress 
chooses to offer financing to selected sectors to support employment, 
exports would not be high on the list of firms or industries to target. 
Finally, failing to reauthorize the Ex-Im Bank would not immediately 
terminate its existing financing arrangements, and the lives of those 
arrangements will likely run longer than our current labor market 
conditions.
The Economy as a Whole: General Equilibrium Concerns
    I will now turn from the employment impacts of the Ex-Im Bank to 
considerations of the broader economy. Textbook models of international 
trade for a large economy such as the United States predict that export 
subsidies will lower national welfare--will make the United States 
worse off-relative to a situation without the subsidies. In contrast, 
some (though far from all) more complicated models set in an 
oligopolistic market environment featuring particular forms of 
strategic competition do find situations in which export subsidies can 
make the Nation better off. \3\
---------------------------------------------------------------------------
     \3\ See, for example: James A. Brander and Barbara J. Spencer, 
``Export Subsidies and International Market Share Rivalry'', Journal of 
International Economics, vol. 18, 1985. Avinash Dixit, ``International 
Trade Policy for Oligopolistic Industries'', Economic Journal, vol. 94, 
supplement: conference papers, 1984. Jonathan Eaton and Gene M. 
Grossman, ``Optimal Trade and Industrial Policy Under Oligopoly,'' 
Quarterly Journal of Economics, vol. 101, no. 2, May 1986. For an 
excellent overview of this literature, see Robert C. Feenstra, 
``Advanced International Trade: Theory and Evidence'', Princeton 
University Press, 2004.
---------------------------------------------------------------------------
    A unifying feature of these models, however, is that the 
Government's policy towards exports requires an incredible amount of 
knowledge that the Government almost surely does not possess in 
reality.
    To illustrate this, consider some general equilibrium effects of a 
simple subsidy. \4\ Much discussion of the Ex-Im Bank focuses on 
partial equilibrium effects--on the effects of the Ex-Im Bank on a 
single market, or on a single set of firms. But economic policy, 
including the decisions of the Ex-Im Bank, can affect many firms and 
many markets, and so general equilibrium considerations must be taken 
into account by the Congress when deciding whether to allow the Ex-Im 
Bank to continue providing export credit.
---------------------------------------------------------------------------
     \4\ Of course, the Government also requires other knowledge in 
addition to that of general equilibrium effects to ensure that export 
subsidies are welfare improving. The type of competition in the 
industry, the appropriate design of the subsidy, and the reaction of 
other Nations, to name a few, can be very difficult things for the 
Government to know.
---------------------------------------------------------------------------
    An export subsidy will give subsidized firms an advantage over 
their foreign competitors, increasing the demand for those firms' 
output. But this, in turn, will increase the demand for inputs to 
production among the subsidized firms, increasing the price of those 
resources faced by other sectors, and putting firms in those sectors--
sectors that do not receive export credit--at a disadvantage relative 
to a situation without the export subsidy.
    Even if the subsidy helps firms that receive it, then, the subsidy 
may hurt the overall economy. It is hard to imagine how the Government 
could understand all the interlocking parts of the economy well enough 
to know whether the subsidy is a net positive for the United States. 
The existence of capital market deficiencies and imperfections and the 
export-credit behavior of foreign Nations do not nullify general-
equilibrium concerns about information and uncertainty.
Political Economy Concerns
    Political economy presents other concerns as well. The default 
assumption should be that well-connected, influential corporations will 
be in a better position to exercise influence over whether they receive 
Ex-Im Bank financing than other, less-connected corporations. The 
default assumption should not be that political connections will not 
play a role in which firms receive export credit. \5\ This creates 
important issues that the Congress cannot ignore.
---------------------------------------------------------------------------
     \5\ For example, Kishore Gawande and Usree Bandyopadhyay, ``Is 
Protection for Sale? Evidence on the Grossman-Helpman Theory of 
Endogenous Protection'', Review of Economics and Statistics, vol. 82, 
no. 1, February 2000.
---------------------------------------------------------------------------
Conclusion: ``Corporate Welfare'' and Trade Policy
    To conclude, let me offer three final thoughts. First, it is 
reasonable to describe the Ex-Im Bank as dispensing so-called 
``corporate welfare''. But the Ex-Im Bank is hardly the chief offender. 
After the Ex-Im Bank's fate is resolved, the Congress should oppose 
``crony capitalism'' in other sectors of the economy (where its 
magnitude is often larger) as vigorously.
    Second, in the realm of trade policy, future negotiations and 
arrangements should stress the need for foreign Nations to limit export 
credit.
    Finally, supporters of the Ex-Im Bank have a reasonable argument 
that there may be times when limited, temporary, strategic trade policy 
may be appropriate. But such policy should address specific, 
identifiable actions of foreign Governments or other strategic goals in 
a targeted way. It should not be left to an open-ended export credit 
agency such as the Ex-Im Bank.
    But regardless of progress on these three fronts, the Ex-Im Bank 
should not be reauthorized.
                                 ______
                                 
                  PREPARED STATEMENT OF JOHN G. MURPHY
    Senior Vice President for International Policy, U.S. Chamber of 
                                Commerce
                              June 2, 2015
    The U.S. Chamber of Commerce is the world's largest business 
federation representing the interests of more than three million 
businesses of all sizes, sectors, and regions, as well as State and 
local chambers and industry associations.
    More than 96 percent of Chamber member companies have fewer than 
100 employees, and many of the Nation's largest companies are also 
active members. We are therefore cognizant not only of the challenges 
facing smaller businesses, but also those facing the business community 
at large.
    Besides representing a cross-section of the American business 
community with respect to the number of employees, major 
classifications of American business--e.g., manufacturing, retailing, 
services, construction, wholesalers, and finance--are represented. The 
Chamber has membership in all 50 States.
    The Chamber's international reach is substantial as well. We 
believe that global interdependence provides opportunities, not 
threats. In addition to the American Chambers of Commerce abroad, an 
increasing number of our members engage in the export and import of 
both goods and services and have ongoing investment activities. The 
Chamber favors strengthened international competitiveness and opposes 
artificial U.S. and foreign barriers to international business.
    Positions on issues are developed by Chamber members serving on 
committees, subcommittees, councils, and task forces. Nearly 1,900 
businesspeople participate in this process.
    Chairman Shelby, Ranking Member Brown, and distinguished Members of 
the Committee, my name is John Murphy, and I am Senior Vice President 
for International Policy at the U.S. Chamber of Commerce (Chamber). I 
am pleased to testify today on the importance of reauthorizing the 
Export-Import Bank of the United States (Ex-Im), the charter for which 
will lapse on June 30. The Chamber is the world's largest business 
federation, representing the interests of more than 3 million 
businesses of all sizes, sectors, and regions, as well as State and 
local chambers and industry associations.
    Ex-Im is one of the most important tools at the disposal of U.S. 
companies to level the playing field for trade finance as they seek to 
increase exports and create jobs at home. The benefits of its programs 
to the U.S. economy are plain: In fiscal year 2014, Ex-Im provided 
financing or guarantees for $27.5 billion in U.S. exports, thereby 
supporting more than 164,000 American jobs.
    Last year alone, the volume of exports supported by Ex-Im was more 
than all U.S. merchandise exports to Italy, India, or Australia. It was 
also more than the total merchandise exports of Alabama and more than 
the merchandise exports of Arkansas, Idaho, Nebraska, and South Dakota 
combined.
    Ex-Im is especially important to U.S. small- and medium-sized 
businesses, which account for nearly 90 percent of Ex-Im's 
transactions. In addition to these direct beneficiaries, tens of 
thousands of smaller companies that supply goods and services to large 
exporters also benefit from Ex-Im's activities.
Competitiveness at Stake
    Unilateral disarmament is rarely a good idea, but this is precisely 
what refusing to reauthorize Ex-Im would accomplish. The Organization 
for Economic Cooperation and Development (OECD) reports that the 79 
official export credit agencies (ECAs) worldwide have extended more 
than $1 trillion in trade finance in recent years.
    Every major trading Nation has at least one official ECA. The ECAs 
of the world's other top trading Nations provided 18 times more export 
credit assistance to their exporters than Ex-Im did to U.S. exporters 
last year, according to a recent report prepared by the National 
Association of Manufacturers with data and analysis from the Economist 
Intelligence Unit.
    However, the competitive challenge is even more daunting in the 
developing world. ECAs in developing countries, which in most cases do 
not abide by the rules of the OECD Arrangement on Officially Supported 
Export Credits, provide far more export financing on much more generous 
terms than Ex-Im does.
    This was especially pronounced during and immediately after the 
2008-2009 financial crisis: In 2008, China's ECAs provided Chinese 
exporters 17 times more export credit as a share of GDP than Ex-Im did 
for U.S. exporters. As late as 2010, Chinese and Brazilian ECAs 
provided 10 times more financing to domestic exporters as a share of 
GDP than Ex-Im did. Even today, ECAs based in China, India, and Brazil 
far outpace Ex-Im in lending volumes.
    Some critics contend that closing Ex-Im would set an example for 
others, or that negotiations could then induce other countries to close 
their ECAs. This is pure fantasy. In discussions at the OECD and in 
other fora, Governments from Germany to China have shown zero interest 
in shuttering their ECAs.
    Even the conservative Government of Canada, which is widely 
recognized for its free-market, free-trade approach to economic policy, 
has shown no interest in placing new limits on its ECA. In fact, 
Canada's equivalent of Ex-Im (Export Development Canada) provided 30 
times more export finance to its exporters than Ex-Im does to U.S. 
firms, relative to the size of its economy.
    The fact that the Treasury has not been able to negotiate an 
agreement to wind down other countries' ECAs is not a valid reason to 
penalize U.S. exporters and the workers they employ. U.S. companies 
produce many of the world's best goods and services, but without Ex-Im 
they would often find themselves at an unfair disadvantage when 
competing with foreign enterprises backed by official export credit 
agencies. For the United States not to have an operating ECA would put 
U.S. exporters at an absolutely unique disadvantage.
A Key Tool for Small Businesses
    These realities play out differently for various sectors and 
industries. The challenge is especially poignant for small businesses 
as commercial banks often refuse to accept foreign receivables as 
collateral for a loan without an Ex-Im guarantee.
    For example, Bridge to Life Solutions in Columbia, South Carolina, 
provides state-of-the-art cold storage organ transplant solutions. As 
John Bruens, Chief Commercial and Business Development Officer for 
Bridge to Life, explains: ``Without Ex-Im, I would have to tell my 
customers, `prepay everything up front, or we can't do business.' '' By 
purchasing credit insurance from Ex-Im for the firm's foreign 
receivables, Bridge to Life has been able to extend credit terms to its 
international customers.
    Indeed, buyers overseas increasingly expect vendors to offer 
financing. Without Ex-Im's accounts receivables insurance and lines of 
credit, many U.S. small businesses would be unable to extend terms to 
foreign buyers and would have to ask for cash-in-advance. In such a 
case, the business will most likely go to a firm from another country 
that benefits from ECA support.
    Similarly, Eagle Labs in Rancho Cucamonga, California, uses Ex-Im's 
credit insurance to insure orders for surgical equipment for cataract 
surgery. Michael De Camp, Vice President of International Sales for 
Eagle Labs, explains that despite receiving consistent payment from 
foreign customers, local banks would not extend credit to Eagle Labs 
based on uninsured accounts. Once Eagle Labs secured Ex-Im credit 
insurance, the firm was able to secure a line of credit from a private 
bank, bought the capital equipment it needed, doubled its sales, and 
doubled its workforce.
Head to Head: Exports of Capital Goods
    Looking beyond small- and medium-sized businesses, it is par for 
the course for expensive capital goods such as Canadian planes, Chinese 
trains, and Russian nuclear reactors to be sold worldwide with 
unashamed backing from these firms' national ECAs. For example, South 
African railway Transnet last year put out a bid for 466 diesel 
electric locomotives at a total contract price of $750 million. As is 
common in such bids, one requirement was that the supplier must finance 
a significant portion of the transaction.
    Backed by aggressive export financing provided by China's export 
credit agency, Chinese locomotive manufacturers won half the order. In 
March 2014, General Electric won the order for the other 233 
locomotives--but only because Ex-Im support was available to level the 
financial playing field. Without Ex-Im, GE would have lost the entire 
order--with real world consequences for workers at its Erie, 
Pennsylvania plant.
    This kind of story plays out time again with capital goods. Last 
month, Reuters reported on another $350 million deal to build 
locomotives for sale in Angola that would be lost if Ex-Im's charter is 
allowed to lapse, endangering 1,800 jobs.
    Foreign infrastructure opportunities are another area where ECA 
support is included in bidding requirements. Closing Ex-Im would shut 
major American exporters out of huge business opportunities overseas 
because ECA support is often required for a company even to bid on 
overseas infrastructure projects. The New York Times reported last 
month that a $668 million drinking water project in Cameroon will go 
not to U.S. vendors but to their Chinese competitors if Ex-Im is not 
reauthorized.
The Nuclear Power Sector: A Case in Point
    Nuclear power is another sector where the fate of Ex-Im will have a 
major impact. According to the Nuclear Energy Institute, five nuclear 
power plants are under construction in the United States, but 61 new 
plants are under construction overseas. An additional 165 plants are in 
the licensing and advanced planning stages--nearly all abroad. NEI 
explains:

        Over the next decade, exports of up to 15 new nuclear plants 
        could hinge on the availability of Ex-Im Bank products. At 
        roughly $3 billion to $5 billion per plant, the projects 
        represent a potential $45 billion to $75 billion in U.S. 
        exports in need of Ex-Im Bank support. Four nuclear power 
        projects--including up to seven plants--are already in Ex-Im 
        Bank's project pipeline. These projects represent $21 billion 
        to $35 billion in potential business that could become 
        committed orders within the next 2-3 years . . .

        Export credit agency support is almost always a bidding 
        requirement for international nuclear power plant tenders 
        [emphasis added]. Ex-Im Bank is therefore vital to the success 
        of U.S. exports even in cases where the customer ultimately 
        elects not to use Ex-Im financing. Without Ex-Im Bank, U.S. 
        commercial nuclear suppliers would suffer a major competitive 
        disadvantage or be excluded for failure to meet tender 
        requirements . . .

        U.S. suppliers of nuclear technology, equipment and services 
        compete against a growing number of foreign firms--many of 
        which are State-owned and benefit from various forms of State 
        support. All foreign nuclear energy competitors are backed by 
        national export credit agencies or other State financing.

    Refusing to reauthorize Ex-Im would put U.S. companies selling 
expensive capital goods such as aircraft, locomotives, turbines, and 
nuclear power plants at a unique competitive disadvantage because their 
foreign competitors all enjoy ample financing from their home-country 
export credit agencies--enough to easily knock U.S. companies out of 
the competition. For some industries, executives will face the question 
of whether to shift production to locations where ECA support is 
available.
    Nor does Ex-Im force commercial banks out of the trade finance 
business. In a recent joint letter to congressional leaders expressing 
strong support for Ex-Im, the Bankers Association for Finance and Trade 
(BAFT) and the Financial Services Roundtable (FSR) explained that Ex-Im 
``cannot be replaced solely by the private sector.'' ``Balance sheet 
constraints (arising from prudential capital and liquidity 
requirements, among other factors) along with institutional credit, 
country and counterparty limitations'' are among the factors that limit 
the ability of commercial banks to provide export finance.
    The associations added: ``An Ex-Im Guarantee does not make a bad 
deal `bankable' . . . commercial banks share the risk on transactions 
with Ex-Im and so would not enter into arrangements where the risk 
trumps the viability of the deal.''
No Cost to the Taxpayer
    Ex-Im operates at no cost to the American taxpayer and has amassed 
a $4 billion loan-loss reserve that provides more than adequate 
protection against losses. The fact that Ex-Im loans are backed by the 
collateral of the goods being exported is the principal bulwark against 
losses. Ex-Im's overall active default rate in recent years has hovered 
below one-quarter of 1 percent and stood at 0.167 percent as of March 
31, 2015.
    Ex-Im charges fees for its services that have generated billions of 
dollars in revenue for the U.S. Treasury. In fact, Ex-Im has sent to 
the Treasury $7 billion more than it has received in appropriations 
since 1990. This figure comes from Ex-Im's annual report, which uses 
the accounting method required by law. Contrary to rumor, the 
Congressional Budget Office (CBO) has never denied that Ex-Im continues 
to generate a ``negative subsidy,'' i.e., it is a net contributor of 
revenue to the Treasury.
    Using an alternative ``fair-value'' accounting method, CBO last 
year produced an estimate that Ex-Im might impose costs on the Treasury 
over the next decade. However, this alternative accounting rests on 
questionable assumptions. For instance, this scenario assumed Ex-Im 
would extend loans at a level nearly 40 percent higher than it did last 
year, even though the Bank's lending has been declining steadily as the 
financial crisis of 2008-2009 recedes. Moreover, in 2012, CBO released 
a similar report in which it estimated that Ex-Im would generate a 
``negative subsidy'' for taxpayers even under the fair-value 
methodology. It is unclear what changed in CBO's approach.
    According to the Merriam-Webster Dictionary, a subsidy is ``money 
that is paid usually by a Government to keep the price of a product or 
service low.'' As noted, Ex-Im provides no such subsidy; on the 
contrary, the fees it charges have risen in recent years. In the 
aircraft sector, a new 2011 multilateral agreement doubled the fees for 
export credit financing, thereby addressing the concern that some 
export credit financing was below market rates.
    Some critics charge that Ex-Im picks winners and losers, skewing 
the marketplace. On the contrary, Ex-Im extends loans and guarantees to 
all applicants that meet its strict lending requirements but does so 
only when commercial credit is unavailable or when it is necessary to 
counteract below-market credit from foreign ECAs. Ex-Im also acted to 
fill the void when the availability of private-sector trade finance 
fell by 40 percent during the 2008-2009 financial crisis.
    At times Ex-Im's opponents have attempted to tie it to unsavory 
customers overseas. In the Chamber's view, this is an attempt to divert 
attention from the true beneficiaries of Ex-Im--the tens of thousands 
of American workers whose jobs depend on the Bank's support for their 
exports. Their voice must be heard in this debate.
Conclusion
    The breadth and depth of support for Ex-Im's reauthorization across 
the business community is impressive. With Americans overwhelmingly 
focused on the need to generate economic growth and good jobs, business 
owners are perplexed by the campaign against Ex-Im. In particular, the 
thousands of small businesses that depend on Ex-Im to be able to access 
foreign markets are stunned at the threat that Washington could let its 
charter lapse.
    Ex-Im does not skew the playing field--it levels it for U.S. 
exporters facing head-to-head competition with foreign firms backed by 
their own ECAs. Ex-Im doesn't pick winners and losers--but refusing to 
reauthorize Ex-Im is picking foreign companies as winners and U.S. 
exporters as losers.
    Ex-Im's critics need to take a broader look at the global economy 
and the serious threats to U.S. industrial competitiveness--including 
in many national security-sensitive sectors. America's modestly scaled, 
properly limited Ex-Im Bank plays a vital role in this context.
    The Chamber appreciates the opportunity to provide these comments 
to the Committee. We are committed to working with Congress to secure 
Ex-Im's reauthorization before June 30.
                                 ______
                                 
                  PREPARED STATEMENT OF DANIEL IKENSON
  Director, Herbert A. Steifel Center for Trade Policy Studies, Cato 
                               Institute
                              June 2, 2015
Introduction
    Chairman Shelby, Ranking Member Brown, Members of the Committee, it 
is a great pleasure to have been invited to share my ``Perspectives on 
the Export-Import Bank of the United States'' with you today. My 
intention is to focus primarily on the domestic victims of the Export-
Import Bank (Ex-Im) by describing some of the hidden costs--the 
collateral damage--that are often overlooked or swept under the rug.
    To the extent that today's hearing will help illuminate the 
holistic impact of Ex-Im on the U.S. economy and the market process--in 
contrast to the cherry-picked examples of how Ex-Im has helped 
particular companies meet their particular goals--I am pleased to 
participate and offer some assistance.
    Before turning to that task, however, I would like to applaud the 
Committee for taking up this important subject in a public hearing. 
Committed oversight of the executive branch by the legislative branch 
is crucial to our system of checks and balances, which must remain 
functionally robust to ensure the health of our constitutional 
republic, and protect it from even the most subtle encroachments.
Insulated in Export Rhetoric
    Everyone loves exports. In fact, many Americans think of trade as a 
competition between ``Us'' and ``Them,'' where exports are ``Team 
USA's'' points, imports are the foreign team's points, the trade 
account is the scoreboard, and the deficit on that scoreboard means our 
team is losing at trade. That narrative is wrong, but certainly ripe 
for exploitation by agencies that portray themselves as serving some 
national goal of boosting exports.
    The economic fact of the matter is that the real benefits of trade 
are transmitted through imports, not through exports. As Milton 
Friedman used to say: imports are the goods and services we get to 
consume without having to produce; exports are the goods and services 
we produce, but don't get to consume.
    The purpose of exchange is to enable each of us to focus on what we 
do best. By specializing in an occupation--instead of allocating small 
portions of our time to producing each of the necessities and luxuries 
we wish to consume--and exchanging the monetized output we produce most 
efficiently for the goods and services we produce less efficiently, we 
are able to produce and, thus, consume more output than would be the 
case if we didn't specialize and trade. By extension, the larger the 
size of the market, the greater is the scope for specialization, 
exchange, and economic growth.
    When we transact at the local supermarket or hardware store, we 
seek to maximize the value we obtain by getting the most for our 
dollars. In other words, we want to import more value from the local 
merchant than we wish to export. In our daily transactions, we seek to 
run personal trade deficits. But when it comes to trading across 
borders or when our individual transactions are aggregated at the 
national level, we forget these basics principles and assume the goal 
of exchange is to achieve a trade surplus. But, as Adam Smith famously 
observed: ``What is prudence in the conduct of every private family, 
can scarce be folly in that of a great kingdom.''
    The benefits of trade come from imports, which deliver more 
competition, greater variety, lower prices, better quality, and 
innovation. Arguably, opening foreign markets should be an aim of trade 
policy because larger markets allow for greater specialization and 
economies of scale, but real free trade requires liberalization at 
home. The real benefits of trade are measured by the value of imports 
that can be purchased with a unit of exports--the so-called terms of 
trade. Trade barriers at home raise the costs and reduce the amount of 
imports that can be purchased with a unit of exports.
    Yet, in Washington, exports are associated with increased economic 
output and job creation, while imports are presumed to cause economic 
contraction and job loss. But that is demonstrably false. The first \1\ 
of the two charts below plots annual changes in imports and annual 
changes in GDP for 44 years. If imports caused economic contraction, we 
would expect to see most of the observations in the upper left and 
lower right quadrants--depicting an inverse relationship. Instead, we 
see a strong positive relationship. In 43 of 44 years, imports and GDP 
moved in the same direction.
---------------------------------------------------------------------------
     \1\ Data from the U.S. Bureau of Economic Analysis.
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The second \2\ chart plots annual changes in imports and U.S. 
employment. Similarly, there is a fairly strong positive relationship 
between these variables, as well.
---------------------------------------------------------------------------
     \2\ Data from the U.S. Bureau of Economic Analysis and the U.S. 
Bureau of Labor Statistics.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    In keeping with the conventional Washington wisdom that exports are 
Team America's points and imports are the foreign team's points, in his 
January 2010 State of the Union address President Obama set a national 
goal of doubling U.S. exports in 5 years. That goal was subsequently 
enshrined as the ``National Export Initiative'', which decreed 
establishment of an Export Promotion Cabinet ``to develop and 
coordinate the implementation of the NEI.'' Six months later, the new 
cabinet produced its recommendations in a 68-page report titled ``The 
Export Promotion Cabinet's Plan for Doubling U.S. Exports in Five 
Years'', which became the centerpiece of the Administration's trade 
policy agenda.
    Most prominent in the plan was a larger role for Government in 
promoting exports, including expanded nonmarket lending programs to 
finance export activity, an increase in the number of the Commerce 
Department's foreign outposts to promote U.S. business, an increase in 
Federal agency-chaperoned marketing trips, and other sundry subsidies 
for export-oriented business activities. Ex-Im suddenly had a more 
prominent role to play.
    Shortsightedly, the NEI systemically neglected a broad swath of 
opportunities to facilitate exports by contemplating only the export-
focused activities of exporters. The NEI presumed that the only 
barriers impeding U.S. exporters were foreign made. But before 
companies become exporters, they are producers. And as producers, they 
are subject to a host of domestic laws, regulations, taxes, and other 
policies that handicap them in their competition for sales in the U.S. 
market and abroad.
    For example, nearly 60 percent of the value of U.S. imports in 2014 
comprised of intermediate goods, capital goods, and other raw 
materials--the purchases of U.S. businesses, not consumers. \3\ Yet, 
many of those imported inputs are subject to customs duties, which 
raise the cost of production for the U.S.-based companies that need 
them, making them less competitive at home and abroad. Indeed, U.S. 
duties on products like sugar, steel, magnesium, polyvinyl chloride, 
and other crucial manufacturing inputs have chased companies to foreign 
shores--where those crucial ingredients are less expensive--and 
deterred foreign companies from setting up shop stateside. \4\
---------------------------------------------------------------------------
     \3\ Bureau of Economic Analysis, ``U.S. International Trade in 
Goods and Services, Exhibit 6''. U.S. Exports and Imports of Goods by 
Principal End-Use Category, February 2015, http://www.bea.gov/
newsreleases/international/trade/tradnewsrelease.htm.
     \4\ Daniel Ikenson, ``Economic Self-Flagellation: How U.S. 
Antidumping Policy Subverts the National Export Initiative'', Cato 
Trade Policy Analysis No. 46, May 31, 2011, http://www.cato.org/
publications/trade-policy-analysis/economic-selfflagellation-how-us-
antidumping-policy-subverts-national-export-initiative.
---------------------------------------------------------------------------
    To nurture the promise of our highly integrated global economy, 
policymakers should stop conflating the interests of exporters with the 
national interest and commit to policies that reduce frictions 
throughout the supply chain--from product conception to consumption. 
Why should U.S. taxpayers underwrite--and U.S. policymakers promote--
the interests of exporters, anyway, when the benefits of those efforts 
accrue, primarily, to the shareholders of the companies enjoying the 
subsidized marketing or matchmaking? There is no national ownership of 
private export revenues. And the relationship between revenues 
(domestic or export) and jobs is today more tenuous than in years past.
    Globalization means that companies have growing options with 
respect to where and how they produce. So Governments must compete for 
investment and talent, which both tend to flow to jurisdictions where 
the rule of law is clear and abided; where there is greater certainty 
to the business and political climate; where the specter of asset 
expropriation is negligible; where physical and administrative 
infrastructure is in good shape; where the local work force is 
productive; where there are limited physical, political, and 
administrative frictions; and so on. The crucial question for U.S. 
policymakers is: why not focus on reforms that make the U.S. economy a 
more attractive location for both domestic and foreign investment?
    According to the Congressional Research Service, there are 
approximately 20 Federal Government agencies involved in supporting 
U.S. exports, either directly or indirectly. Among the nine key 
agencies with programs or activities directly related to export 
promotion are the Department of Agriculture, the Department of 
Commerce, the Department of State, the Department of the Treasury, the 
Office of the U.S. Trade Representative, the Small Business 
Administration, the Overseas Private Investment Corporation, the U.S. 
Trade and Development Agency, and the Export-Import Bank.
    Relative to attracting domestic investment, export promotion is a 
circuitous and uncertain path to economic growth and job creation. If 
policymakers seek a more appropriate target for economic policy, it 
should be attracting and retaining investment, which is the seed of all 
economic activity, including exporting.
Problems With Ex-Im's Rationalizations
    The mission of the Ex-Im is ``to support American jobs by 
facilitating the export of U.S. goods and services.'' Given the exalted 
status of exports in Washington's economic policy narrative, it is 
understandable why Ex-Im would portray itself as indispensable to U.S. 
export success. It's a reasonable survival strategy. But on the metric 
of contribution to export success, Ex-Im is scarcely relevant. It 
supported $27.4 billion in exports in 2014, which is less than 2 
percent of all U.S. exports last year. \5\
---------------------------------------------------------------------------
     \5\ http://www.exim.gov/about/facts-about-ex-im-bank
---------------------------------------------------------------------------
    Of course, $27 billion is nothing to sneeze at, but the implication 
that most, if not all, of those sales would never have happened in the 
absence of Ex-Im is pure nonsense. But the more important question is 
not whether Ex-Im supports U.S. exports. That's the political question. 
The relevant economic question concerns the costs and benefits of Ex-Im 
to the U.S. economy.
    Proponents limit their analyses to the impact of Ex-Im on 
taxpayers. In recent years, it has generated positive returns to the 
Treasury, but that myopic focus doesn't come close to approximating the 
appropriate cost-benefit analysis.
    While the benefits of Ex-Im's activities are real to the recipients 
and visible to the public (the value of exports supported, projects 
financed, insurance policies underwritten are all highly touted), the 
costs imposed on nonbeneficiaries usually go unseen by its victims--and 
unacknowledged by Ex-Im and its supporters. Identifying and quantifying 
those costs are necessary to measuring the net benefits.
    Ex-Im supporters claim that the bank fills a void left by private 
sector lenders unwilling to finance certain riskier transactions and, 
by doing so, contributes importantly to U.S. export and job growth. 
Moreover, rather than burden taxpayers, the Bank generates profits for 
the Treasury, helps small businesses succeed abroad, encourages exports 
of ``green'' goods, contributes to development in sub-Saharan Africa, 
and helps ``level the playing field'' for U.S. companies competing in 
export markets with foreign companies supported by their own 
Governments' generous export financing programs. So what's not to like 
about Ex-Im?
    First, by dismissing the risk assessments of private-sector, 
profit-maximizing financial firms and making lending decisions based on 
nonmarket criteria to pursue often opaque, political objectives, Ex-Im 
misallocates resources and puts taxpayer dollars at risk. That Ex-Im is 
currently self-financing and generating revenues is entirely beside the 
point. Ex-Im's revenue stream depends on whether foreign borrowers are 
willing and able to service their loans, which is a function of global 
economic conditions beyond the control of Ex-Im. Given the large 
concentration of aircraft loans in its portfolio, for example, Ex-Im is 
heavily exposed to the consequences of a decline in demand for air 
travel. Recall that Fannie Mae and Freddie Mac also showed book profits 
for years until the housing market suddenly crashed and taxpayers were 
left holding the bag.
    Second, even if taxpayers had tolerance for such risk taking, the 
claim that Ex-Im exists to help small businesses is belied by the fact 
that most of Ex-Im's loan portfolio value is concentrated among a 
handful of large U.S. companies. In 2013 roughly 75 percent of the 
value of Ex-Im loans, guarantees, and insurance were granted on behalf 
of 10 large companies, including Boeing, General Electric, Dow 
Chemical, Bechtel, and Caterpillar.
    Third, the claim that U.S. exporters need assistance with financing 
to ``level the playing field'' with China and others doesn't square 
with the fact that the United States is a major export credit 
subsidizer that has been engaged in doling out such largesse since well 
before the founding of the People's Republic of China. It implies the 
United States is helpless at the task of reining in these subsidies. 
And it implies the United States lacks enormous advantages among the 
multitude of factors that inform the purchasing decision. But, somehow, 
98 percent of U.S. export value is sold without the assistance of trade 
promotion agencies.
    Fourth, and perhaps most importantly, by trying to ``level the 
playing field'' with foreign companies backed by their own Governments, 
Ex-Im ``unlevels'' the playing field for many more U.S. companies 
competing at home and abroad. This adverse effect has been ignored, 
downplayed, or mischaracterized, but the collateral damage is 
substantial and should be a central part of the story.
The Collateral Damage to Ex-Im's Victims
    A proper accounting reveals that Ex-Im's practices impose 
significant costs on manufacturing firms across every industry and in 
every U.S. State. When Ex-Im provides financing to a U.S. company's 
foreign customer on terms more favorable than he can secure elsewhere, 
it may be facilitating a transaction that would not otherwise occur. 
That is the basis for Ex-Im's claim that it helps the U.S. economy by 
increasing exports and ``supporting'' jobs. But the claim is 
questionable because those resources might have created more value or 
more jobs if deployed in the private sector instead. If that is the 
case, Ex-Im's transaction imposes a net loss on the economy. But 
suppose it could be demonstrated that Ex-Im transactions grow the 
economy larger or create more jobs than if those resources had been 
deployed in the private sector instead. Would Ex-Im then be correct in 
its claim? No. Further analysis is required.
    Ex-Im financing helps two sets of companies (in the short-run): 
U.S. firms whose export prices are subsidized by below market rate 
financing and the foreign firms who purchase those subsidized exports. 
It stands to reason, then, that those same transactions might impose 
costs on two different sets of companies: competing U.S. firms in the 
same industry who do not get Ex-Im backing, and U.S. firms in 
downstream industries, whose foreign competition is now benefiting from 
reduced capital costs courtesy of U.S. Government subsidies. While Ex-
Im financing reduces the cost of doing business for the lucky U.S. 
exporter and reduces the cost of capital for his foreign customer, it 
hurts U.S. competitors of the U.S. exporter, as well as U.S. 
competitors of his foreign customer by putting them at relative cost 
disadvantages.
    These effects are neither theoretical nor difficult to comprehend. 
Yet proponents of Ex-Im reauthorization rarely acknowledge, let alone 
concede, that these are real costs pertinent to any legitimate net 
benefits calculation. Instead, they speak only of the gross benefits of 
export subsidies, which they consider to be the value of exports 
supported by their authorizations.
    But there are at least three sets of costs that are essential to 
determining the net benefits of Ex-Im: (1) the ``Opportunity Cost,'' 
represented by the export growth that would have obtained had Ex-Im's 
resources been deployed in the private sector; (2) the ``Intra-Industry 
Cost,'' represented by the relative cost disadvantage imposed on the 
other U.S. firms in the same industry (the domestic competitors) as a 
result of Ex-Im's subsidies to a particular firm in the industry, and; 
(3) the ``Downstream Industry Cost,'' represented by the relative cost 
disadvantage imposed on the U.S. competitors of the subsidized foreign 
customer.
    Opportunity Cost is difficult to estimate, but suffice it to 
recognize that opportunity costs exist. Indeed, opportunity costs exist 
whenever there are foregone alternatives to the path chosen.
    The Intra-Industry Cost is somewhat easier to calculate, in theory. 
If Ex-Im provides a $50 million loan to a foreign farm equipment 
manufacturer to purchase steel from U.S. Steel Corporation, the 
transaction may benefit U.S. Steel, but it hurts competitors like 
Nucor, Steel Dynamics, AK Steel, and dozens of other steel firms 
operating in the United States and competing for the same customers at 
home and abroad. The $50 million subsidy to U.S. Steel is a cost to the 
other firms in the industry, who can attribute a $50 million revenue 
gap between them (aggregated) and U.S. Steel to a Government 
intervention that picked a winner and made them, relatively speaking, 
losers. The $50 million ``benefit'' for U.S. Steel is a $50 million 
cost to the other steel firms.
    But then that distortion is compounded when taking into 
consideration the dynamics that would have played out had the best 
firm--the one offering the most value for the best price--secured that 
export deal instead. Reaching revenue targets, raising capital, and 
moving down the production cost curve to generate lower unit costs all 
become more difficult to achieve on account of the original 
intervention, amplifying the adverse impact on other firms in the 
industry. When Government intervenes with subsidies that tilt the 
playing field in favor of a particular firm, it simultaneously 
penalizes the other firms in the industry and changes the competitive 
industry dynamics going forward. Every Ex-Im transaction touted as 
boosting U.S. exports creates victims within the same U.S. industry. 
Without Ex-Im's intervention, Nucor might have been able to win that 
foreign farm equipment producer's business, which is a prospect that 
undermines the premise that Ex-Im boosts exports at all and reinforces 
the point that it merely shifts resources around without creating 
value, possibly destroys value instead. What is given to U.S. steel is 
taken from Nucor and the other firms, among whom may be the more 
efficient producers.
    The Downstream Industry costs are those imposed by the transaction 
on the U.S. companies that compete with the foreign customer. When a 
foreign farm machinery producer purchases steel on credit at subsidized 
interest rates, it obtains an advantage over its competitors--including 
its U.S. competitors. So, when that subsidized rate comes courtesy of a 
U.S. Government program committed to increasing U.S. exports, it only 
seems reasonable to consider the effects on firms in downstream U.S. 
industries before claiming the program a success: Has the subsidy to 
the foreign farm machinery producer made John Deere, Caterpillar, New 
Holland, or other U.S. farm machinery producers less competitive? Has 
it hurt their bottom lines?
    Delta Airlines has been vocal in its objection to Ex-Im-facilitated 
sales of Boeing jetliners to foreign carriers, such as Air India. Delta 
rightly complains that the U.S. Government, as a matter of policy, is 
subsidizing Delta's foreign competition by reducing Air India's cost of 
capital. That cost reduction enables Air India to offer lower prices in 
its bid to compete for passengers, which has a direct impact on Delta's 
bottom line. This is a legitimate concern and it is not limited to this 
example.
    Consider the generic case. A U.S. supplier sells to both U.S. and 
foreign customers. Those customers compete in the same downstream 
industry in the U.S. and foreign markets. Ex-Im is happy to provide 
financing to facilitate the sale, as its mission is to increase exports 
and create jobs. The U.S. supplier is thrilled that Ex-Im is providing 
his foreign customer with cheap credit because it spares him from 
having to offer a lower price or from sweetening the deal in some other 
way to win the business. The foreign customer is happy to accept the 
advantageous financing for a variety of reasons, among which is the 
fact that his capital costs are now lower relative to what they would 
have been and relative to the costs of his competitors--including his 
U.S. competitors, who are now on the outside looking in. Ex-Im helps 
some U.S. companies increase their exports sales. But it hinders other 
U.S. companies' efforts to compete at home and abroad.
    Moreover, by subsidizing export sales, Ex-Im artificially diverts 
domestic supply, possibly causing U.S. prices to rise and rendering 
U.S. customers less important to their U.S. suppliers. Especially in 
industries where there are few producers, numerous customers, and 
limited substitute products, Ex-Im disrupts the relationships between 
U.S. buyers and U.S. sellers by infusing the latter with greater market 
power and leverage. Delta was able to connect the dots. Other companies 
have, too. But most of the time, the downstream U.S. companies are 
unwitting victims of this silent cost-shifting.
    According to the findings in a recent Cato Institute study that I 
authored, the downstream costs alone amount to a tax of approximately 
$2.8 billion every year. \6\ The victims of this shell game include 
companies in each of the 21 broad U.S. manufacturing industry 
classifications used by the Government to compile statistics. And they 
are scattered across the country in every State.
---------------------------------------------------------------------------
     \6\ Daniel Ikenson, ``The Export-Import Bank and Its Victims: 
Which Industries and States Bear the Brunt?'' Policy Analysis No. 756, 
September 10, 2014, http://www.cato.org/publications/policy-analysis/
export-import-bank-its-victims-which-industries-states-bear-brunt.
---------------------------------------------------------------------------
    Among the stealthily taxed were companies such as Western Digital 
and Seagate Technologies--two California-based computer storage device 
producers that employ 125,000 workers; Chicago-based Schneider Electric 
Holdings, which employs 23,000 workers in the manufacture of 
environmental control products, and; ViaSystems, a St. Louis-based 
printed circuit board producer with 12,000 employees. These companies 
haven't received Ex-Im subsidies, but companies in their supplier 
industries have, which effectively lowers the costs of their foreign 
competitors.
    While it is relatively easy for a big company like Delta to connect 
the dots and see that Boeing is being favored at its expense (airplane 
purchases constitute a large share of Delta's total costs), most 
manufacturing companies are unaware that they are shouldering the costs 
of Government subsidies to their own competitors. But the victims 
include big and small producers--of electrical equipment, appliances, 
furniture, food, chemicals, computers, electronics, plastics and rubber 
products, paper, metal, textiles--from across the country. Companies 
producing telecommunications equipment incur an estimated collective 
tax of $125 million per year.
    The industries in which companies bear the greatest burdens--where 
the costs of Ex-Im's subsidies to foreign competitors are the highest--
are of vital importance to the manufacturing economies of most States. 
In Oregon, Delaware, Idaho, New Jersey, Nevada, and Maryland, the 10 
industries shouldering the greatest costs account for at least 80 
percent of the State's manufacturing output. The most important 
industry is among the 10 most burdened by these costs in 33 of 50 
States. The chemical industry, which bears a cost of $107 million per 
year, is the largest manufacturing industry in 12 States.
    For all the praise Ex-Im heaps upon itself for its role as a 
costless pillar of the economy, it is difficult to make sense of the 
collateral damage left in its wake. Thousands of U.S. companies would 
be better off if Ex-Im's charter were allowed to expire, as scheduled, 
on June 30.
What To Do About Foreign Export Credit Agencies?
    Of all of the arguments put forward by Ex-Im supporters, the 
``leveling the playing field'' rationale seems to carry the most sway. 
It is appealing intuitively. But the implication that the United States 
is an innocent party that has no choice but to follow suit is 
laughable. The United States invented this stuff.
    The notion that because Beijing, Brasilia, and Brussels subsidize 
their exporters Washington must, too, is a rationalization that sweeps 
under the rug the fact that there are dozens of criteria that feed into 
the ultimate purchasing decision, including product quality, price, 
producer's reputation, local investment, and employment opportunities 
created by the sale, warranties, aftermarket servicing, and the extent 
to which the transaction contributes toward building a long-term 
relationship between buyer and seller. To say that U.S. exporters need 
assistance with financing to ``level the playing field'' suggests that 
they lack advantages among the multitude of factors that inform the 
purchasing decision. Moreover, the fact that less than 2 percent of 
U.S. export value goes through export promotion agencies suggests this 
rationale for Ex-Im is bogus.
    There is a way to bring foreign subsidies under control, however. 
The United States should allow Ex-Im to expire at the end of this month 
and then announce plans to bring cases to the World Trade Organization 
against Governments operating their export credit agencies in violation 
of agreed upon limits under the Agreement on Subsidies and 
Countervailing Measures. The combination of the carrot of U.S. 
withdrawal from the business of export credit financing and the stick 
of WTO litigation would likely incent other Governments to reduce, and 
possibly eliminate, their own subsidy programs.
Conclusion
    Most of the rationales for keeping the Export-Import Bank are 
merely rationalizations that don't stand up to close scrutiny. Perhaps 
most problematic are the costs imposed, often on unwitting victims. Ex-
Im subsidies to particular exporters may help those companies succeed, 
but they impose significant costs on other firms in the same industry 
and firms in downstream industries. Accordingly, Ex-Im penalizes many 
smaller, dynamic, up-and-coming businesses that are often the well 
springs of new ideas, better mousetraps, and smarter business practices 
and which the economy needs to spawn subsequent generations of 
businesses in perpetuity.
    That evolutionary process underlies the strength of the U.S. 
economy, and is essential to U.S. success going forward. On the other 
hand, U.S. economic strength is undermined when subsidies are deployed 
in a spiraling race with other Nations to the detriment of the next 
crop of leading U.S. businesses. Let the Export-Import Bank expire.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
                  FROM LINDA MENGHETTI DEMPSEY

Q.1. The Export-Import Bank offers a number of different 
products, including loan guarantees, working capital 
guarantees, and direct loans. Should Congress consider 
eliminating a particular line of products, because the product 
is not particularly useful to companies?

A.1. Manufacturers and exporters turn to the Ex-Im Bank when 
they identify gaps in private-sector trade finance and need 
each of the current Ex-Im Bank services to enable lending from 
private-sector institutions--whether that is a loan guarantee 
to extend competitive financing terms to foreign customers that 
purchase U.S. goods, a multibuyer export credit insurance 
policy that enables access to working capital, or structured 
financing to help U.S. exporters compete globally in natural 
resource and infrastructure sectors. While direct loans are 
rarely used, they can help U.S. exporters secure competitive 
financing for international buyers by providing fixed-rate 
financing to creditworthy international buyers in both the 
private and public sector.
    Ex-Im Bank is demand-driven, and a variety of customers and 
exporters rely on different programs for different needs. Ex-Im 
Bank has adjusted existing programs and introduced new 
initiatives in the wake of the global financial crisis, 
including a streamlined ``Express Insurance'' for small-
business exporters. While Ex-Im Bank should continue to 
evaluate its financing tools to ensure they are both efficient 
and effective, the NAM has no recommendations for eliminating 
any line of services.

Q.2. The Export-Import Bank purports to create a ``surplus'' 
for taxpayers, including in 2014.
    Setting aside the debate over the Bank's accounting and 
profits, do all of the Bank's main products have approximately 
the same fiscal record? Or does one program that generates a 
weaker ``surplus'' make up for a program with a weaker track 
record?
    Does each program generate a surplus, under the Bank's 
accounting assumptions?

A.2. It is my understanding that Ex-Im Bank sets its fees and 
interest rates for programs in order to fulfill its primary 
mission to support U.S. jobs by filling gaps in private export 
financing. Starting in FY2008, Ex-Im Bank has operated on a 
self-sustaining basis using program revenue to fund current 
year administrative expenses and program costs. The surplus 
generated by the Ex-Im Bank in recent years--transferred 
annually to the U.S. Treasury--reflects a rate and fee 
structure that is meeting its purpose of ensuring that Ex-Im is 
self-sustaining. Ex-Im Bank includes substantial information 
about its transactions in its Annual Reports. The Bank, 
therefore, would be the best source of information about the 
profile of its programs and about individual transactions.

Q.3. The Bank has a number of lending ``mandates,'' including 
that it must make 10 percent of its authority available to 
renewable energy, 20 percent available to small business 
lending and that it must also promote activity in sub-Saharan 
Africa.
    Should we expect, or do we have evidence to suggest, that 
these transactions have a higher default rate than the 
nonmandated transactions?
    How should this inform Congress' treatment of the mandates 
in the Bank's reauthorization?

A.3. I have no reason to believe those transactions that 
fulfill the congressional mandates to support small business 
exports, renewable energy exports and exports to sub-Saharan 
Africa would be exempt from the Bank's overarching standards--
including a standard for reasonable reassurance of repayment. 
Although the Ex-Im Bank is a demand-drive institution, Ex-Im 
Bank works to identify transactions that would meet its 
standards and also fulfill the mandates set by Congress.
    Ex-Im Bank is required by P.L. 112-122 to report to 
Congress on a quarterly basis its default rate for short-, 
medium-, and long-term financing. Additionally, Ex-Im Bank is 
required to report quarterly to Congress about default rates 
for short-term loans, medium-term loans, long-term loans, 
insurance, medium-term guarantees, or long-term guarantees; 
each key market involved; and each industry sector involved. 
The Bank would be the best source of information about the 
default rates associated with specific transactions.

Q.4. We've heard how the Export-Import Bank ``supports'' job 
and exports. For example, according to the Bank's analysis, in 
2014 the Bank ``supported'' 164,000 jobs and $27.4 billion in 
exports. Notably, there's a difference between ``supporting'' 
jobs and ``creating'' jobs.
    Do we have evidence about what percentage of those jobs and 
exports would disappear without the Bank and why?
    What percentage of this economic activity would exist, but 
in a different sector?

A.4. We hear from manufacturers that their lenders have balance 
sheet constraints that arise from prudential capital and 
liquidity requirements as well as institutional credit, 
country, and counterparty limitations--creating real challenges 
for lenders who work with exporters. Further, Ex-Im Bank 
complements rather than competes with private-sector lenders 
and each transaction undergoes analysis by Ex-Im to determine 
whether its support is necessary to facilitate the financing of 
the company's export sales, including an evaluation of why 
funds are not available from commercial sources. Standalone 
private-sector funding of trade transactions is not always 
available or affordable. The Asian Development Bank released 
its most recent annual report on the trade finance gap in 
December 2014, highlighting results from a 2013 survey. That 
report found trade finance gaps are a persistent feature of the 
global trade landscape--even as the global economy has 
recovered. Their earlier 2012 survey provided evidence that 
trade finance gaps, which had only expanded after the global 
financial crisis, were continuing to negatively impact growth 
and job creation. In 2013, the global trade finance gap was 
estimated at $1.9 trillion. \1\
---------------------------------------------------------------------------
     \1\ ``ADB Trade Finance Gap, Growth, and Jobs Survey'', December 
2014. Found at http://www.adb.org/sites/default/files/publication/
150811/adb-trade-finance-gap-growth.pdf.
---------------------------------------------------------------------------
    Given the competitive nature of foreign export credit 
agencies (ECAs), the tens of thousands of exports that Ex-Im 
supports annually would be put at risk if the Ex-Im Bank is not 
reauthorized. As explained in my testimony and above, Ex-Im's 
services are used when there are gaps in private sector 
financing. Without Ex-Im, many--if not most--of these sales 
would be lost to foreign competitors that have easy access to 
the more than 60 ECAs worldwide that oftentimes provide very 
generous support for their country's exports. As a result, 
there is a strong possibility that these exports would be lost 
to foreign competitors. In turn, the tens of thousands of 
American workers that produce those goods would no longer have 
secure jobs filling those orders.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE
                      FROM JOHN G. MURPHY

Q.1. The Export-Import Bank offers a number of different 
products, including loan guarantees, working capital 
guarantees, and direct loans. Should Congress consider 
eliminating a particular line of products, because the product 
is not particularly useful to companies?

A.1. Based on conversations with our members, particularly 
small- and medium-sized companies that use the services of the 
Export-Import Bank of the United States (Ex-Im), we believe the 
full range of these products offers value and should be 
retained.
    For example, its working capital guarantees allow an 
exporter to tap otherwise excluded collateral in its borrowing 
base to pay for inputs and thus fulfill export orders. Resin 
Technology, located in Groton, Massachusetts, uses this 
program. Carly Seidewand, Direct of Sales and Marketing/Global 
Markets says: ``We're a small business, and we don't have hard 
assets to lend against other than accounts receivable and 
inventory.''
    In the case of many small businesses, commercial banks 
often refuse to accept foreign receivables as collateral for a 
loan without an Ex-Im guarantee. Ex-Im working capital 
guarantees back 90 percent of a private bank's loans to an 
American exporter. With this tool, Resin Technology can 
generate the cash flow it needs to compete with large, 
international trading companies.
    Kim Crooks, Finance Director at Zeigler Bros.--based in 
Gardners, Pennsylvania--observes that when the firm exports, 
particularly to developing countries, payment cycles can take 
60 to 90 days. Zeigler needs to be able to finance those sales, 
but private banks generally will not lend against foreign 
receivables for small businesses. ``We wouldn't be able to get 
bank support without Ex-Im,'' explains Crooks. Once Zeigler 
bought Ex-Im credit insurance for its foreign invoices, it was 
able to secure the working capital it needed to grow.
    Based on our interactions with many American small 
businesses that have used Ex-Im's services, we believe there 
are substantial benefits for the fully array these products.

Q.2. The Export-Import Bank purports to create a ``surplus'' 
for taxpayers, including in 2014.
    Setting aside the debate over the Bank's accounting and 
profits, do all of the Bank's main products have approximately 
the same fiscal record? Or does one program that generates a 
weaker ``surplus'' make up for a program with a weaker track 
record?
    Does each program generate a surplus, under the Bank's 
accounting assumptions?

A.2. Using the accounting method established by the United 
States Congress and required by law, there is wide 
acknowledgment that Ex-Im does not cost the American taxpayer a 
dime. Ex-Im charges fees for its services that have allowed it 
to send to the U.S. Treasury $7 billion more than it has 
received in appropriations since 1990. Regarding the 
performance of different financial products, Ex-Im Bank staff 
are in best situated to answer these questions.

Q.3. The Bank has a number of lending ``mandates,'' including 
that it must make 10 percent of its authority available to 
renewable energy, 20 percent available to small business 
lending and that it must also promote activity in sub-Saharan 
Africa.
    Should we expect, or do we have evidence to suggest, that 
these transactions have a higher default rate than the 
nonmandated transactions?
    How should this inform Congress' treatment of the mandates 
in the Bank's reauthorization?

A.3. Ex-Im Bank staff are in best situated to answer these 
questions regarding default rates. As for past or future 
mandates, the Chamber has argued that Ex-Im should provide 
financing in a nondiscriminatory manner for exporters that can 
meet its rigorous standards.

Q.4. We've heard how the Export-Import Bank ``supports'' job 
and exports. For example, according to the Bank's analysis, in 
2014 the Bank ``supported'' 164,000 jobs and $27.4 billion in 
exports. Notably, there's a difference between ``supporting'' 
jobs and ``creating'' jobs.
    Do we have evidence about what percentage of those jobs and 
exports would disappear without the Bank and why?

A.4. Ex-Im's methodology to calculate the number of U.S. jobs 
associated with exports for which it provides a loan or 
guarantee relies on a number of elements used widely across the 
U.S. Government, including, for instance, the ratio of jobs 
needed to support $1 million in exports (which varies by 
industry). These ratios are provided by the Bureau of Labor 
Statistics (BLS). Ex-Im Bank staff are best situated to address 
this methodology in detail.
    The U.S. Chamber of Commerce is hearing from a growing 
number of companies that the lapse in Ex-Im's authorization is 
causing or will soon cause them to lose sales and may lead 
directly to layoffs in the near term. It is clear that some 
companies were able to take measures before the June 30 lapse 
in Ex-Im's authorization that have blunted the immediate 
impact. For example, one company was able to extend its Ex-Im 
working capital loan before June 30; another requested that a 
foreign Government grant a 30-day extension (to early 
September) for a bid due date. However, these measures will 
hold off the cost of closing Ex-Im only for a short time.
    Press accounts have presented the possibility that some of 
the largest U.S. exporters will consider moving some operations 
overseas to countries where official export credit agency (ECA) 
support is available in the event Ex-Im is not reauthorized. In 
our view, executives are contemplating these moves because ECA 
support is often required even to bid on a wide variety of 
foreign business opportunities. This includes requests for 
tender from both public and private sources, including 
opportunities as diverse as infrastructure projects, nuclear 
power plants, and contracts to provide medical equipment to 
hospitals. U.S. lawmakers and regulators are powerless to alter 
these requirements, which are imposed by foreign Governments.
    Further, it is commonplace for long-lived capital goods 
such as aircraft, turbines, and locomotives to be sold 
worldwide with ECA backing, the availability of which can make 
or break a deal.
    The ripple effects in the U.S. economy could be 
substantial. It is well known that the largest U.S. exporters 
rely on supply chains made up of thousands of small- and 
medium-sized businesses, some of which are only remotely aware 
that the components they manufacture are intended for export 
and reliant on Ex-Im support. In some cases, tens of thousands 
of small firms are involved.
    To take one sector as an example, the U.S. aerospace sector 
employs approximately 1.5 million Americans directly and 
indirectly. Within this ecosystem, smaller companies rely on 
large firms which are in turn highly export dependent. Further, 
it is characteristic of the aerospace sector that the presence 
of ECA support often determines which firm from which county 
wins a sale. The availability of ECA support can be 
determinative even in cases where private finance is ultimately 
used.
    In sum, the costs of closing Ex-Im will be substantial and 
are likely to mount over time as industrial networks are 
rearranged to shift production of costly capital goods and 
other products that tend to rely on ECA support to countries 
where it is available.

Q.5. What percentage of this economic activity would exist, but 
in a different sector?

A.5. Permanently closing Ex-Im will result not in a shift of 
resources from one U.S. industrial sector to another but rather 
a shift in production and employment from a U.S. company to a 
competing company in another country where ECA support is 
available.
    To this point, the D.C. District Court in March ruled 
against Delta Airlines in its suit against Ex-Im, rejecting 
every argument that Delta made. The Court concluded that Ex-Im 
financing for foreign airlines does not affect airlines' 
decision to purchase new airplanes. As the prevalence of air 
travel around the world expands, foreign airlines will 
assuredly purchase aircraft. However, once an airline has made 
the decision to purchase new airplanes, Ex-Im financing does 
affect whether those airlines purchase American- or foreign-
made airplanes, the Court reasoned.
    The Court found that, without Ex-Im support, ``airlines 
simply will purchase from Airbus instead of Boeing due to the 
presence of foreign ECA financing.'' This is certainly the real 
world experience of many Chamber members.
    Delta's complaint is similar to that of Cliffs Natural 
Resources, a U.S. mining enterprise that protested the sale of 
U.S.-made Caterpillar equipment to Australia's new Roy Hill 
mine with Ex-Im support. Crucially, the owners of the Roy Hill 
mine made it abundantly clear to Caterpillar that they would 
buy their heavy equipment from manufacturers in Japan or 
Korea--with support from those countries' ECAs--if Ex-Im 
support for Caterpillar were not made available. The Roy Hill 
mine was clearly going forward; the only choice was whether its 
owners would buy U.S.-made or foreign-made equipment.
    This is the choice before Congress: Will Ex-Im be 
reauthorized, or is Congress content to hand a significant 
competitive advantage to our trade competitors? The 
repercussions for high-skill, high-wage jobs in a number of 
U.S. industries will be significant.

              Additional Material Supplied for the Record
              
              
              
              
            NEWSPAPER ARTICLES SUBMITTED BY CHAIRMAN SHELBY

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 STATEMENT FROM THE BANKERS ASSOCIATION FOR FINANCE AND TRADE AND THE 
        FINANCIAL SERVICES ROUNDTABLE SUBMITTED BY SENATOR BROWN

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
```