Bank's New Report Features Trade Financing Trends in Emerging Markets
FOR IMMEDIATE RELEASE June 14, 2011
Jamie Radice: 202-565-3200
Washington, DC - The Chairman of the Export-Import Bank of the United States (Ex-Im Bank), Fred P. Hochberg, today addressed the unique challenges to U.S. exporting and outlined a strategy on how the U.S. can remain a global leader in exports. For a copy of the Chairman's speech, click here.
The Ex-Im Bank's 2011 Competitiveness Report was released today. The Bank has produced these reports annually since 1972, however, this year is the first time the report provides an in-depth look at the expansive export credit practices being used by emerging markets, such as Brazil, India, and China.
The growth of emerging economies has - and will continue to - raise the standard of living for millions of people around the globe, said Chairman Hochberg. However, the rise of these emerging economies, and their growing influence in export markets, also means the rules of the game have changed ... foreign state-owned enterprises and state-owned banks are playing a growing, more influential role in the global economy.
When we look at export financing, China, India and Brazil provide more support to their exporters than the G7 nations [Canada, France, Germany, Italy, Japan, the UK, and the U.S.] combined. And this trend has hit a tipping point.
Hochberg explained that in order for the nation to lead the world in exports, the U.S. must address market distortions, find additional ways to capitalize on global market opportunities, and tackle domestic issues that hinder our global competitiveness. He outlined the importance of using export financing, trade policy and international enforcement mechanisms to offset market distortions that arise from state-directed capital in order to level the playing field for U.S. companies.
Making sure that we have the tools and flexibility to make international markets work more equitably is critical to building and maintaining American competitiveness in the 21st century, Hochberg said.
Key excerpts from Ex-Im Bank's 2011 Competitiveness Report
- Although Ex-Im Bank programs are competitive with those of its OECD G-7 counterparts, innovative, unregulated programs as well as new, exceptional (non- OECD) players now represent a significant - if not majority share - of export credit financing.
- In previous Competitiveness Reports over the last 5 years, Ex-Im Bank provided details regarding the growing significance of export credit activities of three emerging market ECAs: China, India and Brazil. Since those reports, Ex-Im Bank has continued to gather information and data regarding the nature, terms, and levels of support being offered by the ECAs in these markets. While most of these non-OECD ECAs' core programs operate within or close to OECD parameters, some of these programs - especially in China - appear to consistently operate with a financial edge over standard OECD financing. However, the real threat posed by several of these ECAs is in the truly different and exceptional programs they operate.
- China and its ECAs have shown the most dramatic increase in terms of activity levels. China has two official ECAs (China Eximbank and Sinosure) and another policy bank (the China Development Bank), all of which participate in slightly different functions and in varying degrees in the export credit, foreign investment, or untied financing realm. However, collectively the net effect is the same: each supports the Chinese Government's Going Out policy as a central means to establish long-term mutually beneficial relationships with other foreign governments. Moreover, as China is not a member of any part of the OECD, none of China's ECAs are under any obligation to follow the OECD Arrangement on Export Credits, which sets the guidelines for official export credits.
- China has a team of financial institutions doing vast amounts of short-term and medium- and long-term export finance (MLT) - including massive amounts directly to exporters and multi-billion-dollar concessional activity. In aggregate, the institutions' activity could well total over $100 billion a year in both short-term and MLT business. From the top down, the size, scope, and focus of this team is simply incomparable to anything within the OECD/G-7.
About Ex-Im Bank:
Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance, and financing to help foreign buyers purchase U.S. goods and services. The Bank has generated $3.4 billion for U.S. taxpayers over the past 5 years.
In the first seven months of fiscal year 2011, Ex-Im Bank approved $14.8 billion in total financing authorizations, supporting $17.8 billion in U.S. export sales. These sales will support more than 129,000 American jobs in communities across the country. This seven-month authorizations figure is the highest in the Bank's history.
For more information, visit Ex-Im Bank's Web site at www.exim.gov.