Should Congress Reauthorize & Increase Export Finance Lending for 10 Years? (H.R. 4863)

What is H.R. 4863?

(Updated December 19, 2019)

This bill would rebrand the Export-Import Bank as the United States Export Finance Agency and reauthorize the agency through fiscal year 2029 (its current authorization expires on November 21st). It would also authorize gradual increases in the agency’s lending limit from $145 billion in FY2020 to $175 billion for FY2026-FY2029, and codify policies aimed at helping small businesses. A breakdown of its various provisions can be found below.

The U.S. Export Finance Agency would be required to develop a plan to increase awareness among small businesses of the export tools it makes available to American firms. The plan would be developed with input from the Small Business Administration and regional small business coalitions, and emphasize outreach to businesses owned by women, minorities, veterans, and persons with disabilities. This bill would make $1 million available annually for these outreach activities.

The board of directors of the U.S. Export Finance Agency would prohibited from authorizing financing involving the People’s Liberation Army of the People’s Republic of China, China’s ministry of state security, and persons or entities facing sanctions from federal agencies for arms control or foreign corruption activities.

The bill would also require that the U.S. Export Finance Agency establish an Office of Minority and Women Inclusion, which would develop diversity standards for the agency’s workforce and aim to increase participation by minority-owned and women-owned businesses. The office would also promote outreach activities aimed at supporting exports by socially and economically disadvantaged small business concerns, particularly those owned by women. All of the office’s efforts to promote inclusion would be compiled in an annual report.

The U.S. Export Finance Agency would be required to establish an Office of Financing for Renewable Energy, Energy Efficiency and Energy Storage Exports. Reports on environmental and social impacts of proposed activities would be required in applications for financing, including reports on CO2 emissions, and consultations would be required with potentially impacted communities. Environmental and social due diligence procedures and guidelines would be established. Foreign buyers would be encouraged to seek to seek commercially viable technologies to reduce the CO2 footprint of projects. The agency would have a goal of lending least 5% of the financing available each year to renewable energy, energy efficiency, and energy storage technology exports.

An Office of Territorial Exporting would be established to support exports and provide financial resources to businesses located in U.S. territories. At least one staffer would be responsible for liaising with Puerto Rico and the U.S. Virgin Islands, while at least one additional staffer would be similarly responsible for working with Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa.

If the agency lacks a quorum of Senate-confirmed directors for at least 90 consecutive days, a temporary board of directors would be established consisting of the U.S. Trade Representative, the Treasury Secretary, the Commerce Secretary, and any confirmed directors. If all temporary board members are from one political party, the president would be directed to appoint a qualified member of the opposite political party to a Senate-confirmed post so they can serve on the board. A temporary board wouldn’t be able to operate beyond the point at which this bill’s authorization lapses, FY2029. A quorum wouldn’t be required to authorize funding for all projects exceeding $10 million in size.

Argument in favor

The Export-Import Bank needs to be reauthorized and reformed, so updating the agency and rebranding it as the U.S. Export Finance Agency makes sense. Increasing the lending cap gradually over the course of this 10 year reauthorization is sensible, as are the provisions aimed at helping small businesses, promoting diversity & inclusion, and encouraging energy efficient investments.

Argument opposed

The Export-Import Bank is nothing more than taxpayer-backed corporate welfare. Export subsidies — like those provided by the Ex-Im Bank — don’t create jobs, and serve as fuel for an international subsidy bidding war. Congress should shut down the Ex-Im Bank by allowing its authorization to expire, rather than rebranding and reauthorizing it with a host of requirements that effectively pick winners and losers.

Impact

Domestic and international companies that do business with the Export-Import Bank; the Export-Import Bank and its employees; the Department of the Treasury; Congress; and the Secretary of the Treasury.

Cost of H.R. 4863

The CBO estimates that enacting this bill would have no direct spending effects.

Additional Info

In-Depth: House Financial Services Committee Chairwoman Maxine Waters (D-CA) introduced this bill to reauthorize and reform the Export-Import Bank as the U.S. Export Finance Agency:

“I worked long and hard to reach a compromise with Ranking Member McHenry on this issue, and I can tell you that we entered our negotiations earlier this year with trust and in good faith. But ultimately there were certain provisions that the Ranking Member felt strongly about that undermined the goal of reaching a broad bipartisan consensus in the Committee.”

Waters planned to hold a vote on a similar bill during the summer, but cancelled a markup hearing after it became clear the bill lacked the support needed to pass.

Ranking Member Patrick McHenry (R-NC) announced his opposition to this bill after provisions restricting financing for projects in China were removed from the earlier version of the bill, and said the bill in its current form is “weak sauce.” Those changes were supported by Rep. Denny Heck (D-WA) who hopes to make it easier for Boeing to sell airliners to Air China (Boeing’s headquarters are in Heck’s district). 

Other Democrats, including “squad” members Reps. Alexandria Ocasio-Cortez (D-NY), Ayanna Pressley (D-MA), and Rashida Tlaib (D-MI) oppose the bill because it allows financing for fossil fuel projects.

House Financial Services Committee Republicans explained their opposition to this bill in its committee report, emphasizing that Chairwoman Waters abandoned a bipartisan reform bill in favor of a partisan bill that has no chance of becoming law:

"The fact that this substitute amendment garnered unanimous Republican support highlights that the bipartisan agreement reached between Chairwoman Waters and Ranking Member McHenry represented a commonsense, reform-minded reauthorization around which Ex-Im's supporters and skeptics alike can coalesce. Instead of pursuing this path, Democrats chose to delete reforms from its bill, allowing Ex-Im assistance to be channeled to the Chinese government, and opening the Bank up to future abuse by administrations serving narrow environmental interests. H.R. 4863 represents a missed opportunity to legislate responsibly and will fail to secure a long-term reauthorization for Ex-Im. By pursuing a partisan approach, Committee Democrats do a disservice to the Bank and to American exporters. Instead of celebrating the passage of bipartisan legislation that could become law, the Democrat's failure necessitates a discussion on how to ensure that the Bank's authorities do not lapse on November 21, 2019. To that end, Republicans stand ready to work with Democrats once this unnecessarily partisan exercise concludes."

Washington Examiner columnist Timothy Carney criticized Congress’s willingness to subsidize China through the Ex-Im Bank:

“Ex-Im looks likely to be reauthorized this year. But during the debate over Ex-Im, some Democratic congressman are fighting tooth and nail specifically to save subsidies to China’s government. Washington Democrat Denny Heck, who represents Boeing, has made it clear he opposes any provision that could curb Ex-Im subsidies to China’s state-owned airlines. Democrat Brad Sherman of California said that “If China wants to have government-owned utilities, I hope they buy American turbines.” Yes, some Democrats value subsidizing their corporate allies enough that they’re willing to prop up China’s industrial policy in order to do it. Republicans should have more self-respect than that. Subsidizing the Communist-run government of China does not make America great.”

This bill passed the House Financial Services Committee on a mostly party-line vote of 30-27. It has the support of 22 cosponsors in the House, all of whom are Democrats. The bill is supported by the AFL-CIO, and opposed by the Competitive Enterprise Institute.

Of Note: The Export-Import Bank (or Ex-Im Bank) was established in 1944 by President Franklin D. Roosevelt to serve as the official export credit agency of the U.S. and help American businesses export their goods and services. Here’s how the Ex-Im Bank describes its role:

“When private sector lenders are unable or unwilling to provide financing, EXIM fills in the gap for American businesses by equipping them with the financing tools necessary to compete for global sales.”

In other words, it uses insurance policies, direct lending, and guarantees to facilitate transactions between foreign buyers and American companies to occur that otherwise wouldn’t happen because of credit or country risks.

The Ex-Im Bank is self-funded through user fees it collects, but ultimately it’s backed by the full faith and credit of the U.S. government, which means that taxpayers are liable for losses incurred. Legally, it can only authorize transactions with a “reasonable assurance of repayment” and as a result it reported a default rate of only 0.5% in December 2018.

Proponents of the Ex-Im Bank point out that nearly 90% of the Bank’s total transactions involved small businesses, and in 2014 those transactions were valued at about $5 billion, making up around 20% of the total value of the Bank’s activity that year. It has also been noted by the Bank’s supporters that these activities supported over 160,000 U.S. jobs in 2014.

The Export-Import Bank (or Ex-Im Bank) has been criticized as "corporate welfare" because several of the companies benefitting from its existence are among the largest corporations in the U.S. About 40 percent of the Ex-Im Bank’s 2014 authorizations benefited Boeing alone, and nearly two-thirds of the Bank’s 2013 money went to 10 U.S. companies, including General Electric, Caterpillar, and Ford along with Boeing. Of the $2.3 trillion that the U.S. exported in 2013, the Ex-Im Bank only approved $27.3 billion of loan guarantees — amounting to about 1.2% of the value of that year’s exports.

In addition to the Ex-Im Bank’s benefits being called into question, it has been maligned for its cost — its price tag was estimated at $2 billion between 2015 and 2024 by the Congressional Budget Office.

Doubts about the long-term survival of the Ex-Im Bank date back at least as far as December 2011, when the White House drafted a contingency plan to be put into place if Congress failed to authorize the Bank’s appropriations during that budget cycle.

From 2016 until May 2019, the Ex-Im Bank’s board lacked a quorum, which caused a $40 billion backlog of prospective transactions to accumulate and $20 billion in export opportunities to be missed. The Senate’s confirmation of three board members in May 2019 re-established a quorum.

Rep. Justin Amash (I-MI) introduced a bill to end the Export-Import Bank (H.R. 1910) after a three-year wind down period, saying on its introduction:

“The Export-Import Bank is a prime example of Washington’s addiction to political cronyism. Instead of allowing businesses to compete in a free market, politicians pick winners and losers. Meanwhile, taxpayers assume the financial risk for the bank’s federally backed loans while a few corporations pocket the profits.”

Media:

• House Financial Services Committee Press Release
  
• House Financial Services Committee Report
• CBO Cost Estimate
  
• Countable (Context)
  
• Countable (What is the Ex-Im Bank?)
  
• AFL-CIO (In Favor)
  
• Competitive Enterprise Institute (Opposed)
  
• Washington Examiner (Opposed)