Last week the 2015 EXIM Bank Competitiveness Report was released, which is a report to the U.S. Congress on the Global Export Credit Competition for the period of January 1, 2015, through December 31, 2015.
The competitiveness report is split up into the following categories:
- Section 1: Overview of Export Credit Agencies and Emerging Issues
- Section 2: Key Determinants of Competitiveness
- Section 3: Major Program Competitiveness
- Section 4: Public Policy Mandates and Stakeholder Views
Here are the major takeaways from the 2015 EXIM Bank Competitiveness Report:
- The global export marketplace is changing rapidly and highly competitive
The effects on U.S. businesses and workers from a lack of domestic political support for EXIM are exacerbated by the extraordinary steps other countries are taking to support their own exporters and national interests. Export credit agencies (ECAs) abroad expanded product offerings allowing exporters to compete more aggressively, and more countries opened new ECAs of their own. China, for example, increased its trade-related investment support by an estimated 13%.
- US Businesses of all sizes are being squeezed
The impact of decreased EXIM competitiveness on the small businesses that power communities and jobs across our country is especially worrisome. All businesses and their employees suffer when financial uncertainty is allowed to prevail. For small- and medium-sized enterprises, however, EXIM’s uncertainty over the past year has been particularly damaging. Specifically, these smaller exporters are now fighting competitors backed by strong ECAs, and many had to reduce or eliminate their export business without EXIM financing. There are medium- and long-run scarring effects because it is not just a single transaction at stake, but the business relationship, as well as maintenance contracts, which are major employment generators. Larger investment banks simply do not offer the kinds of financing tools that small business exporters need to compete.
- Regulations impact the competitiveness of EXIM financing for some exporters
As ECAs around the world ramp up services to compete in an environment of unprecedented competition, EXIM continues to be limited by government regulation. As a result, this year’s report finds EXIM more generally uncompetitive. The report shows that EXIM ranks behind all of its peers — Germany, Japan, France, Italy, Canada, UK, Korea, and China — in two areas and behind the majority of its peers in another three areas.
- A competitive and consistent EXIM helps to smooth the business cycle.
While the economic situation in the United States has improved since the 2008 credit crisis — when EXIM financing surged to support US exporters in the face of a historic withdrawal of credit — the global picture is not as rosy. Global growth rates continue to stagnate, commodities prices have declined and uncertainty abounds beyond our borders. In this challenging environment, exporters and buyers that use EXIM are reporting ECA support is increasingly required of companies looking to bid on transactions and projects. They worry their credibility has become strained as competitors are able to use “unreliable” financing against them. As it has been since its formation 84 years ago, EXIM competitiveness relies on it serving as a countercyclical lender, providing confidence and security for exporters and their employees who might otherwise lose opportunities and jobs when commercial banks experience periods of tight lending.
Within the report, observations and recommendations are made to help support the role that EXIM Bank holds in the export credit market. To read the entire copy of the 2015 EXIM Bank Competitiveness Report,click here.