Foreign Policy Competitiveness Summit
As prepared for delivery
Chairman Fred P. Hochberg
Jun 25, 2015 – Washington, DC
Good afternoon, and thank you all for staying to the very end. I want to thank David and the Foreign Policy team for putting this together. David and I first discussed this event several months ago. We talked about how central competitiveness is to our economy, our security, and to America’s standing in the world.
Of course, competitiveness covers a range of issues—everything from education and infrastructure to tax policy and trade authority. It’s about what we decide to do—and what we decide not to do—as a country.
And I’d like to focus on one critical element of our competitiveness that is very much at risk today: the global race for export success.
The agency I head—the EXIM Bank—is the official export credit agency of the United States. Let me start by telling you just a little bit about what we do.
Just like fire or theft insurance, companies frequently need what’s called export credit or accounts receivable insurance to protect their overseas sales. They need working capital to stay competitive and keep innovating. Sometimes, their overseas buyers need loans or guarantees in order to buy American goods and services. And in a lot of cases—particularly when a company is small, or if it wants to sell to the developing world—the private sector isn’t able to offer financing.
We work with companies to equip them with financing they need to go toe-to-toe with foreign rivals. The end result? More good-paying jobs end up in cities and towns here in America, rather than thousands of miles away.
Last year, we supported 164,000 U.S. jobs. At the same time, due to fees and interest paid to us, we generated $675 million for the taxpayers above and beyond all of our costs.
As everyone here today knows, we’ve got the most robust private sector in the world. But just because they can handle financing for most U.S. exports doesn’t mean that they can handle it all. The private sector is Plan A for most exporters—we’re Plan B. Plan C, of course, is China… It’s as simple as ABC.
I was at the Strategic & Economic Dialogue on Tuesday, and met with some of my Chinese counterparts. Make no mistake: they are going full speed ahead. It’s against that backdrop that we find ourselves on the brink of a lapse in EXIM’s authorization. In fact, our Charter is set to expire five days from today. And if you’re wondering what China thinks about that, you don’t have to wonder. A senior official from China’s Export-Import Bank told reporters this week that EXIM going away would be, quote, “a good thing” for China.
Now, in our 81-year history, we’ve been reauthorized 16 times with overwhelming bipartisan majorities. Two weeks ago, 67 senators expressed support for our reauthorization. In the House, a strong majority of 250 members have put their names onto bills reauthorizing EXIM.
In this day and age, that sort of consensus doesn’t happen very often. You might think that would be enough to keep a vital tool that serves job growth at no cost up and running.
Because the reality is that Congress will go into recess today with no vote on EXIM. After 16 reauthorizations, 81 years without controversy, the support of the last 13 U.S. presidents—Republicans and Democrats—and an admirable record of service to the American people, it’s hard to believe EXIM is going to lapse. But we are.
For the last few months, I’ve been asked over and over again: what’s going to happen on July 1st if you aren’t reauthorized? But frankly, I don’t think that’s the right question to be asking. Because the damage caused by this debate has already cost real Americans their jobs, and harmed long-term U.S. global leadership.
And the consequences won’t be limited to the immediate future. They’ll be felt for a long time to come. General Electric is one of the largest employers in America. They do a lot of exporting without EXIM support—but they count on us to handle the deals that private financiers can’t.
A few weeks ago, we learned that GE is at risk for losing out on a major locomotive project in Angola. This is a $350 million project that could very well have led to even more infrastructure projects in sub-Saharan Africa for years to come.
According to GE, the deal was expected to generate 1,800 U.S. jobs across 12 states. But because of the uncertainty surrounding EXIM, the deal is at risk—and China is stepping in with state-sponsored financing for their state-owned locomotive manufacturer. That’s no surprise—I learned last year that China has a lending volume that tops $10 billion in Angola.
That’s 1,800 American families that won’t be able to count on a dependable paycheck… 1,800 jobs that should be going to folks in Pennsylvania, Texas, and Illinois that instead could very well end up in China. And that’s to say nothing of the maintenance, repair, and parts manufacturing jobs that come from follow-on sales for years and years to come—we don’t even count those.
They all may already be lost. All because Congress won’t move to get this done—all because of a vocal minority here in Washington has put ideology ahead of American workers.
Last week, GE’s CEO, Jeff Immelt, reiterated that he and other business leaders will be forced to consider moving jobs overseas if EXIM goes away. Haven’t we offshored enough manufacturing jobs in the last few decades?
These CEOs don’t want to move jobs out of America. But as you heard earlier today from Nancy McLernon, companies don’t build in America if they can’t export from America. And tools like EXIM are one major factor they consider when deciding where to do their manufacturing. And if they can’t rely on American export financing, they can head just about anywhere else on the planet—because every industrialized country has a version of EXIM. But we’re the only country even thinking about disarming in this way.
As for the debate over EXIM, Immelt said the same thing I’ve been hearing from entrepreneurs across the country—from the smallest family business to our largest employers. He said, very simply: “It makes us look small… it makes us look like we are not a power.”
Of course, even though GE families are already being hurt by this, most of the pain will be felt by small businesses. On Monday, I went to Delaware to meet with representatives from a small, family-owned company called Acrow. They manufacture modular steel bridge kits—a core product for developing countries that want to build a reliable infrastructure.
I saw where their bridges get galvanized—it’s basically a giant zinc bath. This technology was developed by the U.S. Army in WWII. The bridge kits helped our troops advance more quickly as the Germans blew up bridges in their retreat. It is truly Yankee technology.
EXIM is guaranteeing a $73 million commercial loan that will empower Acrow to sell 144 bridges to Zambia, where those bridges will help lay the foundation for durable economic growth.
Farmers in Zambia sometimes have to wait 10 hours to cross a river. During that time, frequently 80 percent of their crops rot as they bake in the sun, waiting to get to market. With a modular bridge, it takes two minutes to cross—and 100 percent of the farmer’s crops make it to that market.
This project will support 200 good-paying jobs at Acrow’s manufacturing facilities in Pennsylvania and Delaware—as well as at their suppliers across ten states. But it was only possible because they had access to financing that let them compete and win against their Chinese and European rivals.
Without EXIM guaranteeing the loan, Acrow could find no commercial bank ready to finance the sale to Zambia—none. That’s just not something that commercial banks readily do anymore; Basel III requirements since the crisis have changed the banking landscape.
With EXIM, Acrow has grown their workforce four-fold—and they’ve helped America gain a foothold in the world’s fastest-growing region by offering trustworthy products. Buyers in Zambia want to buy American—they want to buy the best. Other countries do, too—but if EXIM isn’t around, they won’t have that option.
Look, on July 1st, when our charter lapses, you won’t read about massive layoffs in the paper. Small businesses don’t put out press releases when they lose out on a sale. But make no mistake: we’ll be opening our economy up to death by a thousand cuts.
We will be forfeiting real jobs to China and other countries. We know that because it’s already happening just due to the prospect of EXIM going away. U.S. businesses don’t deserve that—they’re already facing an alarmingly competitive world out there.
Two weeks ago, EXIM released its annual Competitiveness Report to Congress. Let me share two highlights.
First, while most of the world held steady last year, China’s export lending grew by more than 40 percent.
Second: there are 85 agencies just like EXIM around the world fighting for sales and export-backed jobs—more than we had previously estimated. Of course, by this time next week, there will be 84… and none of them will be in the U.S.
Nobody’s going to be picking up that slack—nobody except our foreign rivals, that is. I was speaking with a Congressman from Iowa not long ago, and he put it this way: can you imagine a governor—purely for ideological reasons—deciding, “you know what, I’m not going to do anything at all to attract businesses to my state. Even if it doesn’t cost a dime to the taxpayers—even if it’s something that has been proven over and over again to work… I’m just not going to do it.”
That kind of thinking would be great news for all of the neighboring states who would benefit from that governor’s unilateral disarmament. And that’s exactly what America is poised to do right now.
Look, I’ve met a whole lot of entrepreneurs and workers across America, and I’ve never come across one who wanted a handout. All they want is a level playing field.
When U.S. exporters go into global markets armed with financing from EXIM, they have an opportunity to compete on their merits. When they do, they usually win. And that means more jobs for U.S. workers—including the 164,000 that EXIM supported last year.
This is not the time to pull the rug out from under them. And we want to protect and grow those jobs by continuing to empower U.S. businesses to compete globally.