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Amb. Jendayi Frazer: Ex-Im Bank Key to Economic Diplomacy

The Ex-Im Bank is a necessary tool to involve American companies in emerging market growth and deepen economic ties.

 

Right now, there are 500 million people without power and 200 million without access to clean water in Sub-Saharan Africa. As the region continues to grow and develop, those hundreds of millions of people are going to need both. This translates into a near-limitless demand for new hydroelectric dams, power generation plants and other projects in the region. While the private sector has shown some willingness to finance these large, long-term infrastructure projects that will meet this massive demand for power and water in Africa, a $48 billion gap in infrastructure funding remains annually.

That’s where the Export-Import (Ex-Im) Bank steps in. The Ex-Im Bank is a little-known government agency that helps finance U.S. trade deals abroad. It serves as a last resort for companies that are unable to gain private sector financing, loans or insurance to facilitate trade deals in other countries. It has helped U.S. businesses compete abroad for over 80 years and has been involved in historic projects such as the Pan-American Highway and the rebuilding of Europe after World War II. As a lender of last resort, Ex-Im works to provide financing only where the private sector cannot, such as for deals to build infrastructure, in emerging markets.

In addition to connecting American exporters to world markets, Ex-Im also has a significant impact on jobs here in the U.S., as well as on deficit reduction. In 2014 alone, Ex-Im supported or sustained 164,000 jobs and returned $675 million to the Treasury. In fact, in the last two decades Ex-Im financing has supported more than one million jobs and sent $7 billion back to taxpayers.

The Ex-Im Bank is particularly important for companies that do business in countries in Sub-Saharan Africa — like South Africa, Cameroon and Nigeria — because oftentimes commercial banks, due to regulations like Basel III, are unable to finance these deals. And the private sector will tell you exactly that: the Bankers Association for Finance and Trade and the Financial Services Roundtable recently co-signed a letter that called the Bank a “vital” partner in trade and went as far as to say that without Ex-Im “private-sector lenders often could not provide reasonable financing terms, which would result in lost sales for clients.”

In some cases, U.S. companies are not even permitted to bid on business without Ex-Im involvement in the deal. Commercial banks face restricted lending to South Africa without a loan guarantee from the U.S. Ex-Im Bank, for example. Moving forward, the Bank will be a necessary tool to involve American companies in emerging market growth and deepen economic ties as countries around the world develop.

When I was the U.S. Ambassador to South Africa, part of my job was to continue fostering a successful business relationship between the two countries. The Ex-Im Bank was and continues to be a crucial tool in developing this relationship, and America’s relationships with numerous other countries. It enables American manufacturers to sell their products to people all across the world who want to buy them, while simultaneously fostering closer economic and political ties between America and other nations.

But other nations, our allies and rivals alike, have also taken notice of the massive economic opportunities in Africa and other emerging markets. Just recently, the Chinese government announced a new initiative to provide an additional $10 billion in export credit to the continent of Africa, bringing their total available export credit agency (ECA) financing in Africa to $30 billion – larger than all U.S. Ex-Im financing for the entire world. China’s ECAs have also agreed to finance large-scale infrastructure projects not only in Africa but also in South America and Europe.

In total, there are more than 60 ECAs that are operating globally in both developed and developing nations. Each of these agencies works to boost exports for their local industries, oftentimes offering far more than Ex-Im. According to a recent NAM/EUI study, for example, the U.S. ranks last in ECA financing as a percentage of GDP among OECD and BRIC nations.

Counteracting these foreign agencies, Ex-Im balances the international playing field for American exporters, allowing them to maintain fair access to customers around the world. U.S. businesses risk losing their competitive edge in global markets if Congress allows Ex-Im to expire on June 30. In some cases, American companies will simply be ineligible to compete because they lack ECA financing, meaning lost jobs and opportunities here in the U.S.

We cannot willingly cede our leadership role in the global economic community. Congress must reauthorize the Ex-Im Bank and encourage U.S. companies to compete abroad. Ex-Im is a necessary tool for U.S. involvement in both international commerce and economic diplomacy.

 

Amb. Jendayi Frazer is an Adjunct Senior Fellow for Africa studies at the Council on Foreign Relations. Frazer was a distinguished public service professor at Carnegie Mellon University from 2009 to 2014, where she was on the faculty of Heinz College’s School of Public Policy and Management. Frazer served as the U.S. assistant secretary of state for African affairs from 2005 to 2009. She was special assistant to the president and senior director for African affairs at the National Security Council from 2001 until her swearing-in as the first woman U.S. ambassador to South Africa in 2004. 

 

 

 

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