Testimony of James A. Harmon before The Subcommittee on Domestic and International Monetary Policy, Trade and Technology Hearing on “The Reauthorization of the Export-Import Bank of the United States”
Wednesday, April 5, 2006
Madam Chairman and Members of the Subcommittee, I was honored to serve as Chairman and President of the Export-Import Bank of the United States (Ex-Im Bank) from 1997 to 2001, and I appreciate this opportunity to be here today to testify on the Bank’s reauthorization.
In the five years since I left the public sector, I have spoken to many groups in and outside the United States about the important role that Ex-Im Bank plays in promoting U.S. exports and fostering global stability by creating sustainable economic opportunities in the developing world. In carrying out its vital mission in these challenging times, I give credit to the excellence of the Bank’s career staff. However, you may be surprised to learn that I also credit the wisdom and the vigilance of Congress and the Charter it established.
Congress has a strong track record of helping keep the Ex-Im Bank relevant and valuable in a changing world.
It was the United State Congress in 1983 that established the first Ex-Im Bank target for small business exports. During my tenure, we worked hard to expand support for small business exporters. This subcommittee is wise, again, to focus on this area for the Bank.
It was the United States Congress in 1992 that mandated Ex-Im Bank have environmental procedures. If it were not for this decision, and the subsequent leadership that Ex-Im Bank and the U.S. government took within the G7, the health of this planet would be significantly poorer.
The AGOA legislation in 1998 obligated Ex-Im Bank to have a sub-Saharan Africa Advisory Committee and sub-Saharan Africa Task Force and to report to Congress each year on its progress. This encouraged greater focus on sub-Saharan Africa as a market for U.S. products and services. In four years, we increased support for exports to sub-Saharan Africa from less than $50 million to more than $800 million to sub-Saharan Africa and increased the number of countries in sub-Saharan Africa that were open from 13 to 34. These were often health care, transportation and other meaningful exports that not only created opportunities for U.S. companies, but did so by advancing the infrastructure and other vital development needs of sub- Saharan Africa.
Maybe most of all, Congress deserves credit for making Ex-Im Bank an independent government and sunset agency in 1945.
I submit that this reauthorization should be equally significant. It is no secret that we live in a different world today. New opportunities are emerging…as are new competitors and new challenges. Virtually every institution in our government is challenged to evolve and to adapt. Ex Im Bank is no exception.
If Ex-Im Bank is to be a more effective tool for facilitating exports to the developing world, it is incumbent upon Congress to bring precise and clear guidance to many parts of the Ex-Im Bank charter. I draw your attention now to, specifically, the following:
- Economic Impact needs more precise definitions and a designated referee. For example, the ITC on issues like oversupply.
- Tied Aid needs a clarified purpose (and control) in today’s world; if not, give the money to the controlling authority (Treasury) and save exporters and Ex-Im Bank hundreds of hours of wasted time. I wish I had time today to share with you my own frustration working on tied aid cases during my last year at Ex-Im Bank.
- Sub-Saharan Africa Advisory Committee needs to be extended for an additional period.
- Small business needs deserve enhanced resources and greater focus by Bank leadership.
- Environment - I have three specific recommendations for your consideration.
- Create a 15% target for renewable energy products and services. [In this calculation, I exclude hydro and apply the 15% against all long- and medium-term energy authorizations.]
- Create a Renewable Energy Advisory Committee to meet at least semi-annually each year for the next five years, with five members, at least two of which should come from relevant NGOs. Each year, the committee must issue a report to Congress on progress in and constraints to, increasing renewable energy activity by Ex-Im Bank.
- Report language from Congress on the Common Approaches. Congress should send a clear signal to Ex-Im Bank and the Executive Branch to keep pushing for the highest environmental standards in the OECD Common Approaches process this year. The US government should continue its longstanding bipartisan effort to raise the bar on environmental standards for exports, while creating a level playing field in the ECA community.
- Lastly, and a key question, is how Congress expects Ex-Im Bank to navigate on Competitiveness between the newly emerging/frequently highly subsidized (and likely soon to be dominant) ECAs such as China and Brazil and break even mandates of WTO/highly constrained US budget situation.
Since I left the public sector, I have assisted many U.S. companies to expand into the developing world and to channel institutional and individual savings into the emerging markets. These are critical markets to the future of U.S. businesses, and we must focus on reforms to the Ex-Im Bank charter that allow the Agency to meet the changing nature of the competition of the world.
I support what the subcommittee wants to do regarding small business, although I am somewhat concerned about the lack of funds available for Ex-Im Bank to execute this program. I always believed that delegated authority concurrent with some risk sharing was the key to dramatically increasing/marketing to small business exporters. This public/private form of joint effort could achieve what all of us want for small business exporters.
Tied Aid and Economic Impact are important but are yesterday’s issues. Today, business and labor face a new and much greater challenge. China’s ECA is much bigger than the U.S. Ex-Im Bank, and is, in my opinion, the largest ECA in the world. Moreover, it is growing faster than all other G7 ECAs. Without OECD restrictions and without environmental standards, China is playing on a different field.
The world may be flat but because of China’s industrial policy, it is tilted in its favor. If you add India, Brazil and other large developing countries, I am concerned that the US and in fact, the G7 are no longer competitive. This is today’s and tomorrow’s challenge and this subcommittee should be studying the impact of this development. Congress should commission a study on this matter.
The current Ex-Im Bank reauthorization is focused more on old business – some of which you must do - but Congress has the responsibility to look ahead and to think long term. If the level playing field continues to be tilted, what will happen to our industries and to our jobs? I believe these questions can have positive answers with real leadership today. I believe we can restore U.S. export competitiveness. And, I believe—with the appropriate guidance and support of this body—that Ex-Im Bank can play a defining role in achieving this goal. I appreciate the opportunity to share my perspective today, and I would be happy to answer any questions you may have.
(The Executive Summary of the 2005 World Resources Institute Report Diverging Paths: What Future for Export Credit Agencies in Development Finance? was included in Mr. Harmon’s official testimony.)
- Jon Sohn, Senior Associate IIIJon Sohn is Senior Associate on the International Financial Flows and the Environment Project, and leads WRI’s Financial Flows Objective. He works with commercial banks and public financial institutions on environmental and social risks and opportunities