CIAO DATE: 07/2011
May 2011
Peterson Institute for International Economics
Trade finance will play a crucial role in President Barack Obama's goal of doubling US exports by 2015. Almost 90 percent of exports depend on trade finance in some form—direct credit, credit insurance, or loan guarantees. Even though official export credit agencies (ECAs), including the US Export-Import Bank (Ex-Im Bank), play a small part in the whole scheme of export finance, they occupy a crucial niche. They are "lenders of last resort," taking risks shunned by the private market. Ex-Im Bank is up for reauthorization in 2011, so this is a good time to review its prospects and mandate. As new authorization legislation is drafted, the authors recommend that Congress address seven policy issues: (1) enlarge the Ex-Im Bank's funding level to the point where it can finance 5 percent of US exports of goods and services; (2) draw private banks to play a more active role in financing exports of small and medium-sized enterprises; (3) cut the local content requirement from the bank's current level of 85 percent to a maximum of 50 percent; (4) authorize the Ex-Im Bank to support both service components of merchandise exports and stand-alone services exports in a manner similar to the approach of other ECAs; (5) repeal the cargo preference requirement; (6) move the determination of "adverse economic impact" to the US International Trade Commission and limit the review to countries that are subject to antidumping duties, countervailing duties, and safeguard orders; and (7) use concerted pressure to bring China into the OECD Arrangement on Officially Supported Export Credits.
Resource link: Revitalizing the Export-Import Bank [PDF] - 631K