May 30, 2015 SIGN IN | REGISTER

Why Ex-Im is Indispensable | Commentary

Debate in Congress over the future of the U.S. Export-Import Bank is coming to a head. Absent congressional action, Ex-Im will be unable to provide new loans or guarantees to American exporters after its charter expires on Sept. 30.

Ex-Imís critics have not been shy, noting that most U.S. exports are financed by the private sector. Thatís true, but in todayís fiercely competitive and highly regulated global markets, the question of trade finance isnít that simple.

In fact, Ex-Im support is often required to secure commercial financing for a small firmís exports. Itís required to qualify for overseas bids on major projects. Itís required to match financing terms provided by competitors from every other major trading nation.

Consider these examples of small, medium-sized, and large companies that would be shut out of export markets or lose major sales without Ex-Im:

ProGauge Technologies in Bakersfield, Calif., makes machinery that injects steam into heavy oil wells to make it easier to pump. President Don Nelson explains how he uses Ex-Imís working capital guarantees: ďWells Fargo requires us to get an Ex-Im guarantee and put up 10 percent collateral. Without Ex-Im, Wells Fargo would require us to put up 100 percent collateral, and we would have no money available for operations.Ē

The challenge for small businesses is that U.S. commercial banks simply do not allow American companies to use foreign receivables or inventory as collateral. Far from crowding out the private sector, Ex-Im working capital guarantees let private banks extend loans and guarantees that they wouldnít be able to make otherwise.

Bridge to Life Solutions in Columbia, S.C., uses the most widely utilized Ex-Im product for small businesses: credit insurance. The firm insures orders for state-of-the-art cold storage organ transplant solutions and began exporting thanks to Ex-Im.

John Bruens, Chief Commercial and Business Development Officer for Bridge to Life, says: ďWithout Ex-Im, I would have to tell my customers, Ďprepay everything up front, or we canít do business.íĒ By purchasing credit insurance from Ex-Im for the firmís foreign receivables, Bridge to Life has been able to extend credit terms to its international customers ó and sales soared. As many small businesses can explain, if you canít offer terms, you wonít make the sale.

South African railway Transnet recently put out a bid for 466 diesel electric locomotives at a total contract price of $750 million. As is common in such bids, one requirement was that the supplier must finance a significant portion of the transaction.

Backed by aggressive export financing provided by Chinaís export credit agency, Chinese locomotive manufacturers won half the order. In March, General Electric won the order for the other 233 locomotives but only because Ex-Im support was available to level the financial playing field. Without Ex-Im, GE would have lost the entire order ó with real world consequences for workers at its Erie, Pa., plant.

Then thereís Saudi Arabiaís Sadara Chemical Company, which will be the largest integrated petrochemical complex ever built in a single phase when all units are up and running in 2016. Like other modern industries such as aircraft manufacturing and nuclear power, vast scale is key to Sadaraís economics.

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