Strategy

Small Exporters Could Lose Big if Export-Import Bank Shuts

They fear they could lose out on deals to foreign competitors that have the backing of their countries' trade banks.
Katie Kuehner-HebertJune 24, 2015

Small exporters contend they would lose business to foreign competitors if the U.S. Export-Import Bank loses its operating authority next week, Reuters reported Wednesday.

Conservative Republican critics contend that big companies like Boeing and General Electric are on “corporate welfare” courtesy of the ExIm Bank. Boeing alone gobbled up more than half the dollar value of the bank’s support for businesses last year. While 90% of the bank’s 3,700-plus transactions were made with small businesses, ExIm critics contend that private lenders would fill the funding gap if it’s shuttered.

But bankers and their advocates disagreed. Without federal guarantees, commercial lenders would be hard-pressed to make long-term loans on infrastructure projects or aircraft in emerging markets, particularly in light of tougher capital rules implemented since the financial crisis, Matthew Ekberg, vice president of international policy at the Bankers Association, told Reuters.

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Commercial lenders are also reluctant to accept foreign purchase contracts as collateral for working capital loans because of vetting and collection difficulties.

Small exporters such as Newport Beach, Calif.-based FirmGreen are worried that without ExIm financing, they would lose out to foreign competitors that have the backing of their country’s trade banks. Company president Steve Wilburn told Reuters that was he has been trying to persuade the developers of a $203 million, 100-megawatt solar power plant in the Philippines to stick with his Ex-Im-backed design and construction proposal. But FirmGreen might lose out to China’s Trina Solar as an August construction launch date looms.

“We are promising that Ex-Im will be reauthorized and that financing will be available,” Wilburn, whose firm has 11 employees and contracts out its manufacturing work, told Reuters. “Foreign ECAs (export credit agencies) and their supported manufacturers are champing at the bit to feast on FirmGreen’s bones.”

Export-Import Bank of China’s chief country risk analyst Zhao Changhui told reporters at a forum in Yiwu that while he would regret the possible demise of the bank’s U.S. counterpart, it would help China’s competitiveness.

“With respect to competition in strategy and policies between the U.S. and China, this is a good thing” for China, Zhao said.

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