Export-Import Bank
Floor Speech
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Mr. NEWHOUSE. Mr. Speaker, tonight we've heard from Representatives from all over the country--from my home state of Washington, to Oklahoma, to Florida--about the economic importance of the Export-Import Bank to our nation. Before we conclude for the evening, there were three other topics I wanted to discuss--wine, music stands, and mint oil. As unrelated as these three things sound, they have a couple of important commonalities. First, these are small businesses in Washington State that create all three of these products. L'Ecole Winery in Walla Walla makes a fantastic, award-winning Bordeaux blend, and sells their wines in over 20 countries. I had the chance to recently tour the Manhasset Specialty Company, located in Yakima, Washington, which manufactures and sells the gold-standard of music stands the world over. Norwest Ingredients, a company located in Royal City, Washington, grows and refines mint extract, and sells it around the globe to food and pharmaceutical producers for flavoring.
The other thing these three businesses have in common, besides making some of the best products in the world, is that they all use Export-Import Bank financing to share their products with the world. They are great examples of small businesses utilizing the Bank--and for the record, they are definitely small businesses, employing a total of 43 full-time employees between the three of them, and that number is growing. In fact, to clear up a common misconception about the Ex-Im Bank, in fiscal year 2014, an astounding 89% of the Export-Import Bank's loans were to small businesses. When these small businesses are seeking to export their product--that is, to grow their businesses and create jobs--they often need financing to do that. However, selling your product in Sidney or Seoul is not the same thing as selling it in St. Louis or San Francisco. When selling overseas, under a different set of laws, sometimes there's little recourse if you have issues with getting paid for your goods. Or say there's a natural disaster or labor dispute--how then can you access your product or the money you're owed? When your product spends six weeks on a barge, and your money is locked in that product in a crate, sometimes you need capital that's just not accessible. In some countries, just to access their markets and sell your products you have to have an insurance guarantee from your home country. And that's where the Export-Import Bank comes in.
The Export-Import Bank supplements private financiers, providing direct loans, working capital, loan guarantees, and other forms of financial insurance, allowing these businesses to reach markets and sell goods they would be unable to otherwise.
Critics on one side argue this simply means these ventures are too risky, and shouldn't be entered into if private financing can't handle the job. On the other side, they argue the reason private financiers can't handle it is because Ex-Im crowds them out of the market, offering rates private finance can't compete with. But, if we look at the evidence, we can see both of these claims are just not true. If the Export-Import Bank backed inherently risky ventures, then how do we account for the 0.175% default rate on Ex-Im loans? This rate is far below the standard market rate, meaning that the Bank's loans are careful, and judicious with taxpayer dollars. As for the Export-Import Bank crowding private lenders out of the market, right now Ex-Im requires in its charter that the Bank only, and I quote only, ``supplement and encourage, and not compete with private capital.'' It also requires that the Export-Import Bank provide an annual report to Congress with a breakdown of all of their loans, demonstrating that private lenders were either unable or unwilling to offer these loans.
However, I would agree with critics that this isn't enough, and we should go further. That's one of the reasons I'm a cosponsor of Mr. Fincher's Export-Import Reform legislation, H.R. 597, the Reform Exports and Expand the American Economy Act. Mr. Fincher's bill reiterates that the Export-Import Bank is the ``lender of last resort'' to companies, and that companies seeking credit must demonstrate they've tried to procure private financing before they can even be considered for Ex-Im financing.
Mr. Fincher's Export-Import reform bill would make other positive changes to the Bank as well. It would require the Government Accountability Office (GAO) to regularly audit Ex-Im's fraud control measures, as well as their loan, insurance, and guarantee programs. This legislation would require that the Bank's Board of Directors publish an annual list of countries that loan participants should not be doing business with, whether it's because they violate human rights, aid our nation's enemies, or for other foreign policy reason. These are good, ethical reforms that should be made. The reform legislation would also impose capital reserve requirements on Ex-Im so that, while unlikely, should a financial crisis affect the Bank, it will have strong capital reserves to protect taxpayer dollars.
Mr. Speaker, my colleagues and I aren't asking for a straight reauthorization of Ex-Im--we think there are improvements that can and should be made to the Bank. And we would love to work with those who are critical of the Export-Import Bank to join us in reforming the Bank so that it's more accountable, it's more supportive of the free market, and is a better steward of taxpayer dollars.
Speaking of taxpayer dollars, there's another common myth about the Export-Import Bank that I would like to clear up. Critics of the Bank claim that it's a huge consumer of taxpayer dollars, and that it constantly risks those funds. However, this couldn't be further from the truth. When a business takes out a loan, just like everyone else, they have to repay that balance with interest--and that's where the Export-Import Bank, like any other lender, makes its revenue.
To quote from a June 17, 2015 Congressional Research Service report, ``Ex-Im Bank's activities in FY2013 were estimated to reduce the budget deficit by $1 billion in FY2013, and are estimated to reduce the budget deficit by $570 million in FY2014.''
Let me repeat that to let it sink in--two years ago, Ex-Im reduced our federal deficit by a billion dollars, and last year it reduced it by $570 million. Some of the most ardent critics of the Bank are fellow conservative friends of mine, who are just as concerned with federal spending as I am. That's why I have a hard time understanding how they can advocate for ending a program that is helping to curb our deficits by half a billion to a billion dollars annually.
Another misconception I'd like to address is that allowing Export-Import Bank to permanently expire won't cost our country jobs--it certainly will. It's estimated that every year, Ex-Im helps our nation's businesses support about 167,000 jobs. To put this into perspective, that's more than half the population of St. Louis, Missouri.
Those are jobs we will be forfeiting if we allow Ex-Im to permanently expire.
Moreover, allowing expiration of the Export-Import Bank will put our nation at a permanent trade disadvantage. Currently, every other nation in the Organization for Economic Cooperation and Development (OECD) has their own Export-Import Bank to support their country's producers--Britain, Korea, Mexico, Italy, Estonia--you name it. And some of them are enormous. Germany's bank backs $22.6 billion in exports annually--significantly more than the U.S.'s average of $14.5 billion. And China's is off the charts--backing $45.5 billion in exports annually. For those of you keeping track, that's over three times the size of our Bank.
In fact, the Chairman of India's Export-Import Bank in a recent interview with Business Insider was asked for his thoughts on the U.S. Bank expiring. His response? ``With the U.S. Ex-Im Bank closing down, we would now have more market, because Indian products were competed by U.S. products.'' Right now, these other nations are looking for every advantage they can get for their businesses to grow their economies, and they see the U.S. willingly retracting from the global stage and conceding market share. If we would like to maintain U.S. strength abroad, allowing expiration of the Export-Import Bank is a poor strategic decision.
Mr. Speaker, in conclusion, now is the time to reform and reauthorize the Export-Import Bank, and I encourage House leadership to allow us to vote on its reauthorization as soon as possible. The Export-Import Bank helps our nation's small businesses grow and create jobs. It reduces our nation's federal deficit, and makes us more competitive on the global stage. Could it use reforms? Certainly--there isn't an institution out there that couldn't, and I'd love to work with my friends who are critical of the Bank to see these reforms put in place. But we can't willingly remove tools from our arsenal if we want to keep our great nation strong and competitive for decades to come.
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