Don’t write off the Export-Import Bank of the United States just yet.
Congress went into recess last week without reauthorizing the bank’s charter, but some members of the Senate and House of Representatives may resurrect the 81-year-old financial institution, Devex has learned.
Congressional advocates of the bank — which extends loan guarantees to U.S. businesses seeking to export and invest overseas, often in developing markets — will likely attach an Ex-Im reauthorization to the first bill of the new session with enough bipartisan support to carry the controversial trade agency back into existence, experts told Devex.
Brian Diffell, former legislative director for Republican Sen. Roy Blunt and now senior vice president of the Washington Tax and Public Policy Group, said the success of the plan will largely depend on both the strength of the chosen vehicle — likely a “must-pass,” bipartisan highway bill due for a vote in July — and to what degree reforms could affect companies hoping to benefit from Ex-Im’s services.
Can the private sector replace Ex-Im Bank in developing economies?
Ex-Im Bank's authorization expires June 30, and its critics claim the private sector can fill the bank's shoes.
“For the development community there’s a real risk that you’ll have some backsliding about what’s available to these companies that rely on the bank for their ability to sell products overseas in places that need the export help to be economical,” he said.
Reforms included in the amendment are still unknown. But based on terms set out in largely bipartisan reform legislation by Democrat Sen. Heidi Heitkemp and Republican Sen. Mark Kirk and later endorsed by Senate Majority Leader Mitch McConnell and House Speaker John Boehner, these may include caps on U.S. contributions to the bank and changes in the way the bank subsidizes trade deals. Reforms on subsidies would limit Ex-Im to subsidizing only the last stages, or the “final dollar” on transactions, rather than providing seed money at the early stages.
The Republican Party is currently split between those who want to close the bank and those who want to reform it, Kate Eltrich, a partner at Sixkiller Consulting, told Devex. Nonetheless, Ex-Im critics from both sides of the party — including Financial Services Committee Chairman Jed Hensarling — point to the fact that the bank largely benefits big companies, such as Boeing and General Electric, as one reason to close the trade agency. According to Hensarling, Ex-Im neglects “millions and millions of small U.S. companies” hoping to expand overseas.
But Eltrich argued that providing only the “final dollar” on deals and leaving companies to fend for themselves in the early stages could further alienate smaller businesses, which may find it more difficult to come up with seed money on their own. Other slated reforms could also present greater challenges to small businesses hoping to invest overseas through the bank.
Ex-Im's $5B checkbook for Power Africa has few takers — for now
Power Africa's financing juggernaut, the U.S. Export-Import Bank, has pledged more to the initiative than any other U.S. government agency. Bruised by a divisive reauthorization battle, will the bank meet its ambitious $5 billion commitment? The early returns suggest it will be an uphill climb.
“The bigger companies are usually going to have the ability to work their way through new hoops, which might take longer or be more complicated,” Diffell added. “It’s the smaller businesses that may not have the time or the legal skills to accommodate major changes.”
If the bank is reauthorized, Congress could restart Ex-Im retroactively to July 1, meaning the bank would experience no gap in operations.
“Our hope is that this lapse is short-lived and that Congress will do the right thing by American workers and hold a vote to reauthorize the Bank,” Nicole Woods, a spokeswoman for Ex-Im Bank, told Devex in an email. As of June 30, Woods added, “the impacts of the lapse are already being felt.”
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