Without EXIM Bank, US companies fight with a hand tied behind their backs

Without EXIM Bank, US companies fight with a hand tied behind their backs
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The U.S government is actively working to level the playing field for U.S. firms competing in the international marketplace.

This is a complex endeavor with many challenges, only some of which can be influenced by the U.S. government or by the American business community that exports goods and services abroad.

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But there is something the United States can do right now to increase the global competitiveness of U.S. firms: Put the U.S. Export-Import Bank (EXIM) back into the business of supporting American jobs.

 

However you measure it, U.S. companies operating abroad face a brutally competitive world. International buyers recognize the value and quality of U.S. products, but first they evaluate our competitiveness on capital, financing and procurement costs.

We must be competitive in all these respects. U.S. companies need every tool available to compete and win against aggressive foreign competitors who enjoy generous support from their governments. Consider this: Today, the U.S. is the only Group of 20 (G20) memberstate without a functioning export credit agency (ECA).

Some EXIM opponents argue that the bank is a form of corporate welfare, or that it picks winners and losers. They also argue that the bank puts taxpayer money at risk and that it can be replaced by private banks. The facts do not support these conclusions.

First, EXIM does not give money to companies. It makes loans to creditworthy buyers. These loans are repaid and (through interest fees) earn a fair return for U.S. taxpayers — about $2 billion over the past decade.

While being a net contributor to the U.S. Treasury is a nice benefit, EXIM’s primary mission is to create and sustain U.S. jobs, and every EXIM loan helps to keep high-value manufacturing and services jobs in the U.S.

Second, commercial banks will not fill the space vacated by EXIM. Commercial banks will not commit the dollars required for many of these long-term international projects because today’s financial regulations force banks to make difficult trade-off decisions about where to allocate constrained credit capacity.

This is why many U.S. and international banks support the effort to restore EXIM to full operations. Without EXIM, many transformational projects in emerging markets won’t happen, or they will be awarded to foreign competitors who have access to aggressive export credit financing from their home countries.

When it comes to picking winners and losers, opponents have one part of that argument correct: There are winners and losers, but it’s global competition in the international marketplace, not EXIM, that picks them.

Unfortunately, that means thousands of American companies are losing out to their international competitors who enjoy strong national advocacy and aggressive export financing — increasingly from China.

For example, Chinese construction contractors have grown from zero to four to seven of the top 10 global construction contractors over the last two decades, enabled in part by aggressive export support. This is the competitive reality for U.S. companies in the global marketplace.

In 2016, China provided a staggering $34 billion in export credit, the world's largest amount. 

Over the coming decade, China is expected to invest $1 trillion in Africa alone, where export financing is a key requirement for international companies. Imagine the political and economic influence this kind of investment affords.

Consider the negative consequences if U.S. goods and services can’t fairly compete for Africa’s business during this crucial decade of its economic growth and development.

In 2014, the last year the U.S. EXIM bank was fully active, it provided more than $20 billion in export credit to U.S. firms, which supported 164,000 U.S. jobs and generated $675 million in returns for the U.S. Treasury.

During its most recent years of activity, EXIM supported Bechtel in our bid to build two major LNG plants in Australia. This meant small, medium and large American firms from 29 states provided more than $630 million in U.S. products in support of the project.

Today, with EXIM effectively closed, we — and our customers — must look to other nations for export credit, which means that in order to compete and win, our purchases and jobs might have to go elsewhere.  

Virtually every developed economy except the U.S. supports a highly functioning export credit agency, and our closest friends and allies are ramping up their ECAs. They are courting companies to relocate supply chains and move jobs.

Permanently disabling EXIM will not improve the global export credit system and make it more competitive. To the contrary, it will make us (as a nation) less competitive. Even worse, it will eliminate a key tool for projecting U.S. “soft power” abroad and abdicate U.S. economic and business leadership around the globe.

Many people around the world embrace the U.S. commitment to responsible, sustainable development and improving lives. One of the key ways we deliver that is through the reach of our EXIM Bank. Unfortunately, EXIM has been relegated to the bench, on “injured reserve.”

Meanwhile, American companies are today forced to compete with one hand tied behind our backs. This tilts the playing field in favor of our international competitors, which means lost American jobs and “going out of business” signs on main streets across the country.

We can change this, and the time for change is now. Let’s get the U.S. EXIM bank re-opened for business so that we can fairly compete abroad to bring good jobs home.

Brendan P. Bechtel is the chairman and CEO of Bechtel Corporation, an engineering, procurement, construction and project management company.