Export Promotion: Observations on the Export-Import Bank's Efforts to Achieve U.S. Policy Goals
Published: 2010-09-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony discusses the role of the U.S. Export-Import Bank (Ex-Im) in promoting exports and achieving other U.S. policy goals. As Congress considers policies to achieve more robust growth in the U.S. economy, it must consider the full range of tools available to further growth and create new jobs for U.S. workers. Some of these tools are related to promoting exports, which can have broad benefits to the U.S. economy. As the official export credit agency of the United States, Ex-Im has a key role in helping many U.S. firms achieve sales in foreign markets. In addition to establishing Ex-Im's broad mandate of supporting U.S. employment through exports, Congress has laid out specific, targeted goals for the bank in areas such as increasing financing for environmentally beneficial exports and expanding services to small and minority-owned businesses. This testimony provides some broad observations regarding Ex-Im's contribution to the export promotion goals announced in the President's National Export Initiative. It also describes progress Ex-Im has made in achieving the specific targets set by Congress, as well as some challenges the bank faces in meeting those targets. The statement also provides some background information concerning the ways in which exports can enhance U.S. economic output.
section_title: What GAO Found
paragraphs: The President's National Export Initiative has put forth an ambitious goal of doubling exports in the next 5 years. Ex-Im has been identified as having a key role in the initiative, and a recent administration report identifies a number of specific actions for Ex-Im. Our work on Ex-Im's financing with respect to small business found areas where Ex-Im needed to improve its data systems for accurate reporting as well as its tracking of efforts to increase small business financing. Regarding Ex-Im's environmentally beneficial exports financing, we found that the bank could benefit from more consistently following strategic planning practices. Ex-Im has taken a number of steps in response to GAO recommendations, but opportunities for improvement remain. Additional attention to these issues will enable Ex-Im to develop better communication with Congress and other stakeholders regarding the balance between the small business and environmental export targets and the broader priorities in the National Export Initiative.

section_title: Letter
paragraphs: Thank you for the opportunity to appear today before the subcommittees  to provide our perspective on the role of the U.S. Export-Import Bank (Ex- Im) in promoting exports and achieving other U.S. policy goals. As  Congress considers policies to achieve more robust growth in the U.S.  economy, it must consider the full range of tools available to further  growth and create new jobs for U.S. workers. Some of these tools are  related to promoting exports, which can have broad benefits to the U.S.  economy. As the official export credit agency of the United States, Ex-Im  has a key role in helping many U.S. firms achieve sales in foreign markets.  In addition to establishing Ex-Im’s broad mandate of supporting U.S.  employment through exports, Congress has laid out specific, targeted  goals for the bank in areas such as increasing financing for  environmentally beneficial exports and expanding services to small and  minority-owned businesses.
Today, I will provide some broad observations regarding Ex-Im’s  contribution to the export promotion goals announced in the President’s  National Export Initiative. I will also describe progress Ex-Im has made in  achieving the specific targets set by Congress, as well as some challenges  the bank faces in meeting those targets. In my statement, I will also  provide some background information concerning the ways in which  exports can enhance U.S. economic output, and I would be happy to  provide insights from our recent work on other key agencies’ export  promotion efforts.
These observations are based on a range of work that we have conducted  for Congress over recent years on Ex-Im as well as on the numerous other  U.S. agencies involved in export promotion. We conducted this work in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: Ex-Im’s mission is to support U.S. exports and jobs by providing export  financing on terms that are competitive with the official export financing  support offered by other governments. It had about 350 full-time staff  positions in fiscal year 2010. Between fiscal years 2003 and 2008, Ex-Im  authorized financing averaging $12.8 billion annually. In fiscal year 2009,  Ex-Im had a record year, financing more than $21 billion in 2,891  authorizations. Since fiscal year 2008, Ex-Im has been “self-sustaining” for  appropriations purposes, financing its operations from receipts collected  from its borrowers.
Exports, and trade more broadly, contribute to the U.S. economy in a  variety of ways. Trade enables the United States to achieve a higher  standard of living by exporting goods and services that are produced here  relatively efficiently and importing goods and services that are produced  here relatively inefficiently. An indication of this is that firms engaged in  the international marketplace tend to exhibit higher rates of productivity  growth and pay higher wages and benefits to their workers than  domestically oriented firms of the same size. U.S. exports of goods grew  from $820 billion in 2004 to $1.30 trillion in 2008, and were $1.1 trillion in  2009.
In addition to the longer-term benefits of trade and exports, exports can  serve as a countercyclical force for the U.S. economy—that is,  strengthening the economy when other parts of it are relatively weaker.  For a number of years, as the United States increasingly imported more  than it exported, the U.S. economy was an engine of growth for other  nations. In contrast, from December 2007 through June 2009—what has  been officially labeled a recession period—U.S. economic growth was  boosted by an improving trade balance. More recently, strong U.S. exports  have been outpaced by import growth.
section_title: The National Export Initiative Sets Ambitious Goals for Increasing U.S. Exports and Contains a Key Role for Ex-Im
paragraphs: The President created the National Export Initiative on March 11, 2010,  with an ambitious goal of doubling exports in the next 5 years to support  job creation. To facilitate achieving this goal, the National Export Initiative  established an Export Promotion Cabinet that includes Ex-Im as well as 15  other agencies and executive departments. On September 16, 2010, the  White House released a report on the initiative that provides an overview  of progress made and lays out a plan for reaching the President’s goal.
Ex-Im has a critical role to play in one of the report’s priority areas— increasing export credit. The report identifies several actions for Ex-Im.  They include, for example, launching new products designed to ensure  credit is available to small and medium-sized enterprises (SME); focusing  efforts on high-potential industries such as medical technology, renewable  power, and transportation; increasing the number and scope of  partnerships with financial intermediaries; and introducing a simplified  application for credit insurance. GAO has not evaluated the report or other  aspects of the National Export Initiative, but would welcome the  opportunity to continue its work with the Congress on oversight of these  efforts.
section_title: Congress Has Set Targets Regarding the Composition of Ex- Im’s Export Financing
paragraphs: GAO has reported on Ex-Im’s efforts to achieve specific targets set by  Congress regarding the composition of Ex-Im’s export financing. For  example, Congress has shown interest in the level of financing Ex-Im  provides to small businesses, including those owned by women and  minorities, and Ex-Im’s efforts to increase that financing. Congress has  also given Ex-Im directives regarding the share of its financing for  environmentally beneficial exports, including renewable energy.
subsections: section_title: Congress Has Asked Ex-Im to Increase Financing for Environmentally Beneficial Exports
paragraphs: Congressional interest in Ex-Im’s financing of environmentally beneficial  exports span many years. In 1989, Congress directed that Ex-Im should  seek to provide at least 5 percent of its energy sector financing for  renewable energy projects and should undertake efforts to promote  renewable energy. In 2008, Congress directed Ex-Im to provide not less  than 10 percent of its annual financing for environmentally beneficial  exports; in 2009-2010, Congress narrowed the targeted environmentally  beneficial categories. Congress has also required Ex-Im to develop a  strategy for increasing its environmental export financing, and to report on  this financing and how the bank tracks it.
GAO recently reviewed Ex-Im’s environmentally beneficial export  financing and its efforts to meet congressional directives in this area. We  found, first, that Ex-Im had fallen far short of achieving the 10 percent  environmentally beneficial financing targets set by Congress. However, we  also found that Ex-Im’s financing for renewable energy has recently  increased; the level of renewable energy financing in the first two quarters  of fiscal year 2010 exceeded its renewable energy financing for all of fiscal  year 2009, which in turn represented a large increase over 2008 financing.
We also reported that Ex-Im needs to further clarify its definitions and  improve its reporting on environmentally beneficial exports. For Ex-Im,  the term “environmentally beneficial exports” constitutes an overarching  category that includes renewable energy, energy efficiency exports  including energy efficient end-use technologies, and a mix of other  products with beneficial effects on the environment. Ex-Im recently  sought to clarify its definitions of energy efficiency exports by publicly  providing examples of products it considers to be in that category, and it  began to track its financing for those exports in its internal data. However,  the examples Ex-Im released do not clearly identify which energy efficient  end-use technologies would count towards their 10 percent financing  target. Given the congressional interest in financing in this area, it is  important that Ex-Im be as clear as possible in its application of terms to  facilitate communicating financing goals to potential exporters and others  and communicating progress in meeting targets to Congress. GAO  recommended that Ex-Im develop and provide clear definitions for its  subcategories of environmentally beneficial exports and report annually  on the level of financing for each of the subcategories.
We reported that while Ex-Im has taken steps to increase financing for  environmentally beneficial exports, it could benefit from more  consistently following strategic planning practices such as involving  stakeholders and realigning resources. Ex-Im routinely shares information  with stakeholders such as other U.S. agencies and lending institutions, but  has not generally involved them in communicating goals or discussing  strategies for achieving them. Ex-Im has considered reorganizing some  staff into more focused teams to target priority industries and countries,  but this effort has not included an analysis of the resources required to  accomplish the goal of increasing certain types of environmentally  beneficial exports. On the other hand, Ex-Im has taken some steps to  assess factors that affect its financing of environmentally beneficial  exports such as conducting analysis of the renewable energy markets to  identify the best sectoral and geographic opportunities for Ex-Im  financing. In order for Ex-Im to provide valuable information for the  Congress and key stakeholders, GAO recommended that the bank  consistently implement key practices for effective strategic planning,  including clearly communicating the bank’s priorities for increasing  financing of renewable energy and energy efficient end-use technologies to  both internal and external stakeholders. Ex-Im agreed with our  recommendations and stated that it would strive to implement them  promptly.
section_title: Small Business Exports Are a U.S. Trade Priority, and Congress Has Required Ex-Im to Provide a Certain Level of Support for These Exports
paragraphs: Promoting exports by small business has been a long-time priority of  Congress as well as the executive branch, given these exports’ role in  generating growth and employment. While many small businesses export,  it is widely recognized that they face a number of challenges in exporting.  For example, they typically do not have overseas offices and may not have  much knowledge regarding foreign markets. Export promotion agencies  have developed various goals with respect to their small business  assistance, and in some cases Congress has mandated specific  requirements for supporting small businesses.
Since the 1980s, Congress has required that Ex-Im make available a certain  percentage of its export financing for small business. In 2002, Congress  established several new requirements for Ex-Im relating to small business,  including increasing from 10 to 20 percent the proportion of Ex-Im’s  aggregate loan, guarantee, and insurance authority that must be made  available for the direct benefit of small business. When reauthorizing the  bank’s charter in 2006, Congress again established new requirements for  Ex-Im. These included creating a small business division with an office of  financing for socially and economically disadvantaged small business  concerns and small business concerns owned by women, designating  small business specialists in all divisions, creating a small business  committee to advise the bank president, and defining standards to  measure the bank’s success in financing small business.
For the past 4 fiscal years—2006-2009—Ex-Im has met the Congressional  requirement to make available not less than 20 percent of its financing  authority for small businesses. Percentages have ranged from almost 27  percent in fiscal year 2007 to about 21 percent in fiscal year 2009. The  financing amount for small business was actually highest in 2009, given  Ex-Im’s overall record financing that year. In fiscal years 2002-2005, Ex-Im  did not reach the goal, with its small business financing share ranging from  16.9 percent to 19.7 percent.
GAO has reported on several aspects of Ex-Im’s financing for small  business exports. In 2006, we identified weaknesses in Ex-Im’s data  systems for tracking and reporting on its small business financing and  made recommendations for improvement. Ex-Im has implemented those  recommendations. For example, Ex-Im moved to an electronic, web-based  process that allows exporters, brokers, and financial institutions to  transact with Ex-Im electronically. This contributed to more timely and  accurate information on Ex-Im’s financing, and thus a greater level of  confidence in Ex-Im’s reporting on its efforts relative to congressional  goals.
More recently, we reported on the performance standards that Ex-Im  established for assessing its small business financing efforts. We found  that Ex-Im had developed performance standards in most, although not  all, of the areas specified by Congress, ranging from providing excellent  customer service to increasing outreach. We also found that some  measures for monitoring progress against the standards lacked targets and  time frames, and that Ex-Im was just beginning to compile and use the  small business information it was collecting to improve operations.
GAO made several recommendations to Ex-Im for improving its  performance standards for small business. Ex-Im has provided to GAO  information on actions and specific steps it is taking to implement certain  of these recommendations. For example, Ex-Im has identified targets for  reducing the average turnaround time for processing certain types of small  business transactions. GAO looks forward to continuing to work with Ex- Im in documenting that the recommendations have been implemented.
section_title: Conclusions
paragraphs: Mr. Chairmen, the National Export Initiative has focused the spotlight on  U.S. agencies that assist U.S. exporters as a way of expanding economic  growth and creating jobs in the United States. As the nation’s export credit  agency, the Export-Import Bank is a key part of the initiative, and there  are a number of detailed initiatives related to export credit in the report  that was released on September 16, 2010. However, the goal of doubling  U.S. exports in 5 years is an ambitious goal and would require not only  increased activity by agencies such as Ex-Im but also increases in demand  in key nations around the world.
This heightened emphasis on overall exports and increasing the level of  Ex-Im financing takes place in the context of specific congressional  directives regarding the composition of that financing. Our work on Ex- Im’s financing with respect to small business—including minority and  women-owned businesses—and environmentally beneficial exports has  demonstrated that substantial steps have been taken, and Ex-Im continues  to face substantial challenges. While Ex-Im has had more success in  achieving the congressional targets for small business than for  environmentally beneficial exports, opportunities remain for a more  strategic use of resources and for better communication with Congress  and other stakeholders. More broadly, Ex-Im faces the challenge of  contributing to the doubling of U.S. exports along with meeting other  congressional requirements, including operating at little or no cost to the  taxpayer. How any sharp increase in Ex-Im financing levels will affect  specific targets we have described is not clear, and is likely to be an area  requiring further discussion on how to balance these overall priorities.
Chairman Moore, Chairman Meeks, Ranking Member Biggert, and Ranking  Member Miller, this concludes my prepared remarks. I appreciate the  opportunity to discuss these issues with you today.  I would be pleased to  respond to any questions you or other members of the subcommittees may  have at this time.
For further information about this testimony, please contact Loren Yager  at (202) 512-4347 or by e-mail at YagerL@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of the statement.  Individuals who made key contributions to this  testimony include Celia Thomas, Shirley Brothwell, Karen Deans, Emily  Suarez-Harris, Richard Krashevski, Justine Lazaro, Valerie Nowak, and  Jennifer Young.
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