The US Export-Import Bank (Ex-IM Bank) warns in its latest annual competitiveness report that the “increasingly aggressive approach” by foreign competitors in the export financing marketplace poses a threat to the American jobs market.
Ex-Im Bank’s competitiveness report for 2013 shows that while for decades, global export competition was governed by international standards to ensure that companies could compete on free-market factors like price and quality rather than on aggressive government financing, the marketplace is changing.
It claims that 100% of official support for trade operated under these international rules 15 years ago, but today the percentage has steadily fallen to 34%. “Currently Russia, China and other countries offer subsidies and financing terms – including support of their state-sponsored companies – that threaten American jobs and export opportunities,” the report states.
The report highlights the rapid growth of export financing from three of the US’s Asian competitors: Korea, Japan and China. Each country provided significantly more export-credit support to its respective domestic companies and industries than did the US in 2013, the report claims.
The report also underscores two trends: unregulated competition is expanding and commercial banks have largely withdrawn from pockets of the export-finance arena, including providing support for small businesses. The US faces more robust competition from export-credit agencies offering terms that are not regulated by the Organisation for Economic Co-operation and Development (OECD), which encourages global export competition based on free market principles and mutually agreed-upon standards.
“For example, Ex-Im Bank support for all of its US$15bn in medium- and long-term financing was regulated by the OECD Arrangement, but other OECD member countries offered more than US$60bn alone of unregulated export financing support (on top of US$83bn in export financing governed by the OECD Arrangement),” the report states.
“Nations that are not subject to the OECD framework, including Brazil, Russia, India and China, provided US$115bn in trade-related financing. Unregulated support totaled substantially more than all OECD-regulated support, a trend the report expects to continue and one which is poised to place US exporters at a competitive disadvantage absent the tools made available by Ex-Im Bank.”
Ex-Im Bank also states that the appetite of commercial banks for long-term projects has continued to diminish since the implementation of Basel III and other banking reforms. “As liquidity sources for certain projects remain scarce, export-credit agency support has become more necessary to fill gaps in the trade finance marketplace and ensure that American exporters remain competitive,” it observes.
“Consequently, US exporters will continue to rely upon Ex-Im Bank support as they seek to take advantage of emerging economies and the 95% of consumers that live abroad.”
The latest report comes when the future of Ex-Im Bank, an independent federal agency, is uncertain. Critics in the Republican party are lobbying for its activities to be wound down and calling for reforms to protect taxpayers if Congress is to reauthorise the bank later this year.
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