Rejection of U.S. deals and jobs undermines goal of doubling exports

To speed up economic growth and job creation, President Obama has proposed expanding federal assistance for businesses that export, working toward a national goal of doubling U.S. exports within five years.

Why then has one of the federal government's most useful trade-promotion agencies, the Export-Import Bank, had such a difficult time approving projects that could deliver billions of dollars of exports business and thousands of jobs to companies in the United States?

The Export-Import Bank (Ex-Im Bank) promotes U.S. exports by helping to finance the sale of goods and services in international markets. Its transactions are not grants or bailouts, but loan guarantees to existing, reputable companies for projects that are ready to go, quickly creating jobs.

The bank's board provoked a furor recently in Wisconsin and Washington when it voted 2-1 to deny loan guarantees for the sale of U.S.-manufactured mining equipment to an Indian power company, Reliance Power, to develop a mine and coal-fired power plant.

At stake was approximately $600 million in equipment sales for the Milwaukee-based equipment manufacturer, Bucyrus International Inc., and its suppliers, potentially causing the loss of as many as 1,000 jobs in the United States.

The bank appeared to be putting environmental ideology before exports, with coal being the forbidden energy. Ex-Im Bank Chairman Fred Hochberg explained the negative vote by citing the Obama administration's goal of transitioning "from high-carbon investments and toward a cleaner-energy future."

If the United States were the only source of this equipment, you might be able to make the argument, but it's not the case. Similar equipment is available from Asian and European producers. The mine will be dug and the plant will be built. The only question is whether U.S. companies will supply the equipment or if Reliance will turn to suppliers in China or Belarus (two countries not noted for their environmental sensitivities).

Facing intense political pressure reinforced by the president's planned trip to Racine, Wis., to promote the administration's economic agenda, the Export-Import Bank has backed off. The board plans to reconsider the financing package this week in light of Reliance's plans for big solar-energy projects, which would presumably offset the environmental impact of burning coal.

But the decision — however welcome — was a way for the bank board to work around a bad policy in this single case. The policy, elevating environmental concerns over the bank's core mission, remains in place.

The other troubling case involves a potential $2 billion sale of commercial satellite equipment and services by Lockheed-Martin to the Iridium Corporation. Held back by excessive rules and restrictions, Ex-Im could not make its decision in time — even though expedited financing was the competitive factor in determining who would win the bid, Lockheed or Thales, a French company.

Given the same time limitations, the French export credit agency, COFACE, committed to finance the deal and Thales was awarded the contract. The French decided that they wanted their company to get the sale; the same cannot be said about the United States.

This represents a major missed opportunity for the United States. The deal would have supported an estimated 2,000 highly paid, skilled U.S.-based engineering, design and manufacturing jobs. It would have increased U.S. exports by $2 billion, much of that from U.S. small and mid-sized companies in Lockheed's supply chain. A successful U.S. bid would have also supported our domestic satellite advanced technology base — once first in the world but now trailing the European Union's.

Governments of other nations operate similar export-financing programs, but with more substantial government backing and without attaching as many anti-competitive restrictions to projects.

Ex-Im Bank's financial support for exports reached a record $21 billion last year. But its counterpart north of the border, Export Development Canada, provided $80 billion to support Canadian exports, an even more impressive number when you consider the relative size of the U.S. and Canadian economies.

Japan's equivalent agency did nearly $140 billion in support last year!

The Export-Import Bank is also is saddled with restraints that its competitors are not — environmental impact studies, economic impact tests, requirements that U.S.-flagged vessels carry the financed cargo, etc. These non-trade objectives are well-meaning but surrender advantages so other countries get their power plants and other equipment but from non-U.S. suppliers using non-U.S. financing.

To accomplish President Obama's goal of doubling U.S. exports within five years, we have to compete in the global marketplace. It's not enough to say we can't compete because other countries have more effective tools. We have to make our tools more effective and use them more aggressively — starting with the Export-Import Bank.

John Engler is the president and CEO of the National Association of Manufacturers (NAM).