The U.S. Export-Import Bank is up for reauthorization and is attracting an unprecedented amount of controversy in Congress. The Ex-Im Bank, which works to finance the export of U.S. goods and services to foreign markets, is an institution that is critical and relevant for supporting U.S. trade—now more than ever in the increasingly competitive global market. Its support is particularly relevant for doing business with emerging markets, where export/import credit is hard to come by or insufficient for some of the large-scale projects taking place. And it’s especially important to U.S. business when doing work in regions like sub-Saharan Africa, where there is a global rush to do more business. Sub-Saharan Africa is, in fact, one of the three congressionally mandated areas of focus for the Ex-Im Bank. Thus, the bank’s role in supporting U.S. business in Africa and, through this, African development, should be taken into consideration as its reauthorization is debated.
To give a broad overview, most leading economies have export credit agencies (ECAs) playing a similar role to that of the Ex-Im Bank. For example, the Berne Union of ECAs, which is a global union of export credit and investment companies, has 49 member companies from all around the world. The Ex-Im Bank in particular serves as an especially effective example of an ECA: It does not cost U.S. taxpayers money given its low delinquency rates, and it received the best global ECA award for the second time in 2013 from the magazine Trade Finance. The Ex-Im Bank, in fact, earns money for the U.S. government; over the last five years it’s earned $2 billion for U.S. taxpayers and has supported the existence of 1.2 million jobs.
When it comes to Africa, the Ex-Im Bank’s efforts on the continent are ever expanding; in 2013 it financed a record 188 transactions in Africa with authorizations totaling over $600 million supporting exports in 35 of 49 sub-Saharan African countries. In the first seven months of the current 2014 fiscal year the Ex-Im Bank authorized $1.1 billion for sub-Saharan Africa, amounting to over $5 billion over the last five years. Its website notes that the majority of its authorizations for sub-Saharan Africa benefit “small-business exporters of spare parts, consumer goods and other products” through short-term export credit insurance, which is contrary to notions that the Ex-Im Bank is just supporting big businesses.
The Ex-Im Bank is working across a range of sectors on the continent, with many large-scale transactions supporting needed infrastructure and construction work, including exports geared at transportation, power and port-related equipment. Highlights from its most recent annual report include authorizations of $155 million towards exports needed for a hospital expansion project in Ghana, $108 million for locomotive kits for a rail, port and pipeline company in South Africa, and $15.7 million for firefighting trucks to Nigeria. In 2012, almost $300 million in authorizations went towards small business-supported exports.
Thus, the work the Ex-Im Bank is doing is important not only to U.S. companies looking to export to the continent, but also to the communities buying U.S. goods. The bank’s annual report goes into detail about the loan to Ghana to finance American exports for a hospital expansion project in the capital, stating that the hospital will serve as the primary hospital for greater Accra and be “among the most advanced medical facilities in West Africa.
Moreover, the Ex-Im Bank works with multiple U.S. government initiatives focused on U.S.-Africa business and African development. It is part of the U.S. Department of Commerce’s Doing Business in Africa campaign, which is working to promote enhanced U.S.-Africa business and also part of the U.S.-Africa Clean Energy Development and Finance Center, which is a “coordinated interagency approach” to help promote the development of clean energy on the continent. The Ex-Im Bank is also playing an important role as part of President Obama’s Power Africa initiative, where it works with other U.S. agencies—the U.S. Agency for International Development, the U.S. Trade and Development Agency, the Overseas Private Investment Corporation, the Department of State and the Department of Energy—with the goal of doubling sub-Saharan Africa’s access to electricity.
If the Ex-Im Bank ceased to exist it is possible that some projects couldn’t proceed or would be delayed due to unavailability of financing or similar constraints, but what is more likely is that one of the many big players outside the U.S. would be the partner of choice instead. As quoted from a statement by Tom Donohue, president and CEO of the U.S. Chamber of Commerce, and Jay Timmons, president and CEO of the U.S. National Association of Manufacturers, “If Ex-Im is not reauthorized, products of all shapes and sizes, from planes to medical equipment, will still be purchased overseas. They just will not be produced in the U.S. [and not] by American workers.” The Ex-Im Bank is facilitating partnerships with U.S. and African businesses that could not exist or be financed without U.S. government support.
As Congress questions whether or not the Ex-Im Bank should be reauthorized, members should contemplate one key question: Does the U.S. want to have the capability to be a partner of choice to emerging markets like those in Africa, home to some of the fastest growing economies in the world, or does it want to stand on the sidelines while the continent continues to rise without it?