[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                     OVERSIGHT OF THE EXPORT-IMPORT
                       BANK OF THE UNITED STATES

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 2004

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-84


                    U.S. GOVERNMENT PRINTING OFFICE
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSSELLA, New York              CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey            CHRIS BELL, Texas
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
 Subcommittee on Domestic and International Monetary Policy, Trade and 
                               Technology

                   PETER T. KING, New York, Chairman

JUDY BIGGERT, Illinois, Vice         CAROLYN B. MALONEY, New York
    Chairman                         BERNARD SANDERS, Vermont
JAMES A. LEACH, Iowa                 MELVIN L. WATT, North Carolina
MICHAEL N. CASTLE, Delaware          MAXINE WATERS, California
RON PAUL, Texas                      BARBARA LEE, California
DONALD A. MANZULLO, Illinois         PAUL E. KANJORSKI, Pennsylvania
DOUG OSE, California                 BRAD SHERMAN, California
JOHN B. SHADEGG, Arizona             DARLENE HOOLEY, Oregon
MARK R. KENNEDY, Minnesota           LUIS V. GUTIERREZ, Illinois
TOM FEENEY, Florida                  NYDIA M. VELAZQUEZ, New York
JEB HENSARLING, Texas                RAHM EMANUEL, Illinois
TIM MURPHY, Pennsylvania             CHRIS BELL, Texas
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 6, 2004..................................................     1
Appendix:
    May 6, 2004..................................................    23

                                WITNESS
                         Thursday, May 6, 2004

Merrill, Hon. Philip, President and Chairman, The Export-Import 
  Bank of the United States......................................     5

                                APPENDIX

Prepared statements:
    King, Hon. Peter T...........................................    24
    Oxley, Hon. Michael G........................................    26
    Lee, Hon. Barbara............................................    29
    Maloney, Hon. Carolyn B......................................    33
    Ney, Hon. Robert W...........................................    35
    Sanders, Hon. Bernard........................................    37
    Merrill, Hon. Philip.........................................    39

              Additional Material Submitted for the Record

Merrill, Hon. Philip
    Ex-Im Bank 2002 Advisory Committee Recommendations to the 
      Board of Directors.........................................    54
    Ex-Im Bank 2003 Advisory Committee Recommendations to the 
      Board of Directors.........................................   116
    Letter to Mr. Norman Taylor, Avondale Mills, Inc., June 9, 
      2004.......................................................   179
    Top 23 Exporters.............................................   180

 
                     OVERSIGHT OF THE EXPORT-IMPORT
                       BANK OF THE UNITED STATES

                              ----------                              


                         Thursday, May 6, 2004

             U.S. House of Representatives,
        Subcommittee on Domestic and International 
                                          Monetary,
                       Policy, Trade and Technology
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2128, Rayburn House Office Building, Hon. Peter King 
[chairman of the subcommittee] presiding.
    Present: Representatives King, Biggert, Paul, Manzullo, 
Barrett, Maloney, Sanders, Watt and Velazquez.
    Chairman King. [Presiding.] The subcommittee will come to 
order. The subcommittee meets today to conduct general 
oversight of the Export-Import Bank of the United States. This 
is the first oversight hearing since the 2002 Reauthorization 
Act and we are pleased to have the Honorable Philip Merrill, 
President and Chairman of the Export-Import Bank testifying 
before us today.
    Chairman Merrill brings a broad range of experience in both 
the public and private sector, having served in six previous 
Administrations in various capacities. We are fortunate to have 
such a distinguished witness before the subcommittee today, 
especially since he spent his formative years in New York City. 
He was, as local legend has it, one of the most prominent 
street hockey players in the history of New York City, but not 
quite as good at stick ball as he was at street hockey, but 
there is still time. And also, coming from Queens, I never had 
that much respect for the street athletes of upper Manhattan, 
but they were still pretty good. You and Colin Powell were.
    [Laughter.]
    As the chief U.S. government agency tasked with financing 
American exports, Ex-Im Bank provides American exporters the 
assistance needed to compete with their foreign competitors and 
often serves as a lender of last resort. The need for this 
agency stems from political or commercial uncertainties in 
foreign markets and competing governments subsidizing their 
export financing, thus creating an unfair playing field in the 
marketplace. This is achieved by offering credit insurance, 
working capital, and loan guarantees to U.S. exporters.
    Obviously, the overall goal of the Bank is to use its 
authority and resources to create and sustain American jobs. 
Over the last 5 years, 311 New York companies received 
assistance from Ex-Im. In my district on Long Island, 13 small 
businesses have benefited from the programs offered by the Bank 
and I hope this number will increase in the future.
    The Bank is not without its problems, however, and was made 
aware of them during the 2002 reauthorization. It has been 2 
years since President Bush signed into law legislation 
reauthorizing Ex-Im Bank and I am interested in the Chairman's 
comments on how the Bank has utilized its new authority to 
assist small businesses, while creating and sustaining American 
jobs.
    It is my understanding the Bank reached 19.7 percent of its 
20 percent goal for financing small business exporters. I am 
interested in hearing the Chairman's comments on whether he 
views this 20 percent figure as a floor or a ceiling, and if 
more can be done to increase this level of financing for small 
businesses.
    Lastly, I am concerned over the lack of an inspector 
general for Export-Import Bank. As you know, the 2002 
reauthorization act established a presidentially appointed 
inspector general for the Bank, yet 2 years have passed and it 
does not appear as if this provision of the law has been 
fulfilled. I am not sure if it is an appropriate issue or 
priority issue, but I would like to hear your comments on this 
matter as well.
    Again, thanks for taking the time out of your schedule to 
testify today. I certainly look forward to working with you as 
the Bank celebrates its 70th anniversary.
    With that, I yield to my distinguished colleague, the 
Ranking Member, Mrs. Maloney.
    [The prepared statement of Hon. Peter T. King can be found 
on page 24 in the appendix.]
    Mrs. Maloney. Thank you. I thank my distinguished 
colleague, Chairman King, from the great State of New York, for 
holding this oversight hearing on the Export-Import Bank.
    Good morning, Chairman Merrill. I thank you for joining the 
subcommittee. It is a pleasure to see you again. I enjoyed our 
meeting in my office last year following your appointment.
    I think today's hearing is especially appropriate given the 
importance of the Ex-Im Bank's mission of support of U.S. 
exports abroad. My good friend John LaFalce, the former Ranking 
Member of this committee, always reminded this committee on 
this topic that the Bank is actually improperly named, as its 
sole mission is to support U.S. exports which keep jobs here at 
home. The Bank does not play a role in encouraging additional 
imports to the United States. Your mission is so important 
today because our country is handicapped by a massive trade 
deficit. In the era of half-billion dollar trade deficits and 
outsourcing of information-based jobs, I believe support for 
Ex-Im Bank is more important than ever. I am pleased to have 
played a role in the Bank's latest reauthorization.
    In the authorization in 2002, we included some very 
important mandates that I believe will make the Bank stronger. 
Specifically, Congress dictated that 20 percent of bank support 
must go to small business. I see my good colleague, Nydia 
Velazquez, who was one of the leaders in achieving this goal. I 
am pleased that the Bank has come close to this goal, hitting 
19.7 percent in 2003.
    I do look forward to the Chairman's comments on why the 
Bank has not yet fully implemented its automation program for 
small business that will make it easier for them to access the 
Bank. Talking to my constituents, I have been informed that the 
Bank may be attempting to shift more risk for small business 
lending onto private banks within the working capital program. 
I would like very much to hear from Chairman Merrill on this 
issue.
    I am also pleased that the authorization included a new 
commitment to the Bank's existing mandate to support exports to 
Africa and imposition of new safeguards on transactions that 
may fall under existing countervailing duty, antidumping, or 
section 201 ruling. The authorization also included an 
amendment I offered in the Financial Services Committee giving 
the Bank explicit authority to turn down an application for Ex-
Im Bank support for companies that have a history of engaging 
in fraudulent business practices. Unbelievably, in a prior time 
with a prior Chairman, they insisted on giving a loan to such a 
company, even though they had all kinds of allegations against 
them, because they said they were required by law to do so. So 
I am glad that this was included. I am interested to see if 
this is being used.
    Finally, I am very pleased that the Bank decided against 
supporting the controversial Camisea project in Peru. More 
generally, I am also interested in the role that Ex-Im is 
playing on OECD environmental standards. One of the main 
reasons that I believe the Bank is important to the U.S. is 
that it levels the playing field with foreign export credit 
agencies, so-called ECAs, such as those in Japan, Germany, 
France, Canada and other countries. In 2000, the ECA support 
from OECD nations totaled $58 billion in long-term export 
credits.
    In today's increasingly interconnected global economy, the 
U.S. must not fall behind the international competitors. In my 
own district, the Bank has supported over $2 billion in exports 
from October 1994 to April 2004. I thank the Bank for its 
support of New York City, and I look forward to working on 
keeping this relationship strong.
    I thank the Chairman for being here today. I look forward 
to your comments. I yield back the balance of my time.
    [The prepared statement of Hon. Carolyn B. Maloney can be 
found on page 33 in the appendix.]
    Chairman King. I thank the Ranking Member.
    Ms. Velazquez?
    Ms. Velazquez. I ask unanimous consent to include my 
opening statement in the record. Thank you.
    Chairman King. Without objection.
    The gentleman from Vermont?
    Mr. Sanders. Thank you, Mr. Chairman. Thank you for holding 
what is a very important hearing on a very important subject.
    I thank Mr. Merrill for being with us today.
    Mr. Chairman, I think nobody believes that the Export-
Import Bank is a huge colossus agency upon whose success or 
failure the American economy will depend upon. But I think what 
we have got to look at is the fact that in the United States 
today we are seeing a collapse of manufacturing; that in the 
last 3 years we have lost 2.8 million good-paying manufacturing 
jobs, which has resulted in the decline in the standard of 
living of millions of American workers. We have got to 
appreciate that in the United States today we have, the last 
that I have seen, is a trade deficit of some $500 billion, 
including I believe a trade deficit with China alone of over 
$120 billion, and if my memory is correct, the National 
Association of Manufacturers projects that that deficit will go 
up and up and up in the next number of years.
    Given the fact that the function of the Export-Import Bank 
as I understand it is to create good-paying jobs in America 
based on exports, while I am not here to blame the Export-
Import Bank alone for all of these issues, I think, Mr. 
Chairman, what is obvious to anybody who looked for 3 seconds 
at the issue is they are irrelevant in the process; that we 
have to re-think our entire approach toward manufacturing in 
America, and understand why we are failing so abysmally, and 
that the Export-Import Bank is irrelevant in terms of the 
entire process.
    Mr. Chairman, what particularly upsets me about the Export-
Import Bank, without blaming them for all of the problems, I do 
not mean to do that, is that year after year the Export-Import 
Bank provides billions of dollars in corporate welfare, 
taxpayer money for the largest corporations in America. You 
know what those corporations say, Mr. Merrill? They say, thanks 
America; thanks, taxpayers, for your money; we are off to 
China; we will send you a postcard from China.
    I would like Mr. Merrill when he does his response to tell 
me how he feels about corporation after corporation, which is 
very public, these guys do not hide it, who are saying, 
America, good-bye; we are going to China; we are hiring people 
for 30 cents an hour. I would like Mr. Merrill to tell me 
specifically how he feels about the head of General Electric, 
the CEO of GE, a gentleman named Jeff Immelt, who says a year 
ago in speaking to GE investors, this is what he says: ``When I 
am talking to GE managers, I talk China, China, China, China, 
China. You need to be there. You need to change the way people 
talk about it and how they get there. I am a nut on China. 
Outsourcing from China is going to grow to $5 billion.''
    And yet, guess what, taxpayers of America? Export-Import 
Bank funds General Electric. They fund Motorola. They fund 
corporation after corporation that treats the American worker 
with contempt and goes abroad. This is absurd.
    So I think, Mr. Chairman, that if we are serious, and I am 
again not here to blame Export-Import for all of these 
problems. They are a small part of the problem. But we have to 
say, enough is enough. You cannot continue to give out 
corporate welfare to corporations who treat American workers 
with contempt. It is not good enough to say, oh, we have saved 
12 jobs over here, when the largest corporations in America 
that receive your funding are laying off hundreds and hundreds 
of thousands of workers.
    I hope that is an issue, Mr. Chairman, that we will begin 
to discuss.
    [The prepared statement of Hon. Bernard Sanders can be 
found on page 37 in the appendix.]
    Chairman King. The gentleman's time has expired.
    Mr. Merrill, it is a privilege to have you here today. We 
have a copy of your full opening statement. If you could 
possibly keep your opening remarks to 5 or 10 minutes, we would 
appreciate it. Without objection, your full statement will be 
made part of the record.
    Mr. Merrill, thank you.

 STATEMENT OF HON. PHILIP MERRILL, PRESIDENT AND CHAIRMAN, THE 
            EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Merrill. Thank you for all those kind words about me, 
and even the moderate words from Congressman Sanders about the 
Bank.
    Chairman King. That is as good as you are going to ever get 
from Mr. Sanders.
    [Laughter.]
    Mr. Merrill. Thanks. Maybe we can engage him later in a 
discussion about stickball, wall ball, slug, roller hockey and 
four corners, but otherwise let me proceed.
    Congressman Maloney, Members of the Subcommitte, I am 
pleased to be here today to report on the progress the Export-
Import Bank of the United States has made in achieving our 
mission as set forth in our Charter. I want to especially 
acknowledge the role of this subcommittee, as well as the full 
Committee on Financial Services in our 2002 reauthorization.
    The Act reaffirmed the Bank's basic roles and 
responsibilities in financing and facilitating exports of goods 
and services and in so doing contributing to the employment of 
U.S. workers, and establishing a reasonable assurance of 
repayment before approving a transaction, and in supporting all 
businesses, large and small, in their efforts to create jobs 
through exports.
    We are focusing on three key priorities: putting customers 
first, improving cycle time and transaction time, and expanding 
support for knowledge-based and services exports. President 
Bush has set forth three guiding principles for government, 
namely that it should be citizen-centered, results-oriented, 
and market-driven. Those are the right principles to follow.
    The Bank supported $12.95 billion in exports in fiscal year 
2002; $14.3 billion in fiscal year 2003; and we estimate $15.6 
billion for fiscal year 2004, this year; and $16.3 billion in 
fiscal year 2005, also an estimate. As you know, Ex-Im Bank 
provides insurance, guarantees and direct finance on behalf of 
U.S. exports and exporters. Our purpose is to create and 
maintain American jobs. Indeed, our motto is jobs through 
exports; and our mantra, of course, is jobs, jobs, jobs.
    We require a reasonable assurance of repayment. We only go 
to markets where the private sector will not go alone, and are 
accordingly demand-driven. We do business in 90 countries and 
are open in 150. We also seek to level the playing field for 
American exporters who have to compete with 28 other OECD 
developed countries that have export credit agencies supporting 
their exporters.
    Let me review some of the matters raised in our 
reauthorization and a number of the matters that you raised in 
your comments already provided. First, Mr. Chairman, small 
business is a major central concern for the Bank. In fiscal 
year 2003, the last full year we have numbers, the Bank 
authorized 2,258 transactions directly supporting small 
business, a figure representing over 80 percent of the Bank's 
financings, actually 83 percent, and accounting for 19.7 
percent of the total dollar volume value of Ex-Im Bank's 
business. That is very close to the 20 percent target in our 
Charter.
    Also, Ex-Im Bank announced at its recently concluded annual 
conference, the signing of a co-guarantee agreement with the 
Small Business Administration. This enables the financing of 
transactions of up to $2 million with one single set of 
documents, so customer-friendly. I might add, no double 
counting. They take the first $500,000; we take the second $1.5 
million up to $2 million, or whatever is appropriate.

      [Subsequently Mr. Merill provided the following information]

        They take the first $1.5 million or up to their statutory 
        limit, and we take the remaining amount minus the lender's risk 
        on any transaction up to $2 million.

    Second, technology improvements. The Bank is developing its 
business automation project in order to process applications 
more quickly. We are working away on it. We also participate in 
the Trade Promotion Coordinating Committee's one-stop/one-form 
registration system, an Internet-based system enabling small 
businesses to apply electronically for all government export 
programs, including ours.
    Third, Africa. In fiscal year 2003, Ex-Im Bank authorized 
152 transactions, supporting nearly $700 million in U.S. 
exports to 20 sub-Saharan African countries. Just 5 years 
earlier in fiscal year 1998, the Bank authorized 91 
transactions that supported only $61 million in exports; $61 
million to $700 million in U.S. exports to sub-Saharan Africa. 
Over the last 6 fiscal years, Ex-Im Bank has authorized 
transactions supporting nearly $2 billion in U.S. exports to 
sub-Saharan Africa. We have also made a special effort to reach 
African buyers through our ongoing Short-Term Africa Pilot 
Program. This program offers Ex-Im Bank support in an 
additional 16 African countries in which the Bank would 
otherwise not be open for business, raising the total number of 
sub-Saharan Africa countries eligible for Ex-Im Bank financing 
to 39.
    Fourth, Ex-Im Bank has continued its outreach to woman-
owned and minority-owned businesses through participation in a 
wide range of trade shows, seminars, and conferences focused on 
this important area.
    Fifth, economic impact. Ex-Im Bank's charter requires the 
Bank to assess whether extending its finance support is likely 
to yield a net adverse economic impact on U.S. production and 
employment, or would result in the production of substantially 
the same product that is the subject of specified trade 
measures.
    If a transaction is deemed by Ex-Im Bank to meet the 
legislatively specified standards, then economic impact can be 
the basis for denial of bank support. I want you to know that 
we are very much aware of this responsibility and we are 
scrupulously applying these procedures.
    In conclusion, Mr. Chairman, we take seriously the goals 
Congress set before us. We have made real progress toward 
meeting the changes to our Charter enacted in 2002 and 
fulfilling the purposes for which the Bank was created 70 years 
ago. We have done so through the diligent efforts of exporters 
and the hard work of the dedicated staff at Ex-Im Bank.
    I would now be happy to respond to any questions you may 
have. I wrote down four or five, some of which were covered in 
my remarks. I will proceed in any manner you feel comfortable 
with.
    [The prepared statement of Hon. Philip Merrill can be found 
on page 39 in the appendix.]
    Chairman King. Thank you, Chairman Merrill. I appreciate 
your statement. As I said, the full text of your statement will 
be made part of the record.
    Mr. Merrill. Thank you.
    Chairman King. I just have several questions. One, I 
mentioned in my statement and you mentioned in yours, that is 
the targeted number of 20 percent to be allocated toward small 
business. Do you look upon that 20 percent as a floor or a 
ceiling? Right now, you are at 19.7 percent, so obviously you 
are on-target, but do you anticipate going beyond that target 
or staying at 20 percent?
    Mr. Merrill. As a practical matter, it is about the right 
number. It is a good question, floor or ceiling. The answer is 
neither. It is, rather, the right place to be. If you 
incorporate the small businesses that are subcontractors for 
companies like GE or Bechtel or Caterpillar and so forth, 83 
percent are small business. It is hard for me to see how we can 
go a lot further upwards without one single contract utterly 
distorting the 20 percent number. In other words, suppose we 
went to 99 percent, what would happen if one energy plant, one 
airline deal would substantially distort the numbers? So I 
think we are about right.
    Chairman King. In the 2002 Reauthorization Act, a major 
provision was calling for a presidentially appointed inspector 
general. That has not happened yet. Could you explain why? Is 
that an appropriation matter? Have you requested it?
    Mr. Merrill. It is in the President's budget. It is in our 
submission. That is a White House issue. We do not make the 
appointment.
    Chairman King. Are you pushing for it?
    Mr. Merrill. We are neither pushing or not-pushing. We put 
it in our budget request. We are not against it. The committee 
directed us to do it. The President has it in his budget 
request.
    Chairman King. Okay. From your dialogue with the 
Administration, do you expect it to happen?
    Mr. Merrill. I do not know. I do not have a good feeling 
for that. I think this is really more a Congressional issue 
than a Bank issue. I think it is fair to say that last year, 
the appropriators sought places to cut. We got cut. We got cut 
in several places and one of those was that, or so I am told.
    Chairman King. Okay.
    Mr. Merrill. I do not know whether that was the Senate or 
the House that did it. It is between the two.
    Chairman King. There is probably enough blame to go around.
    I just have one final question. The Reauthorization Act 
allows the Bank to consider the extent to which a nation has 
been helpful in combating terrorism when you take action. Can 
you tell me if you have looked into that at all?
    Mr. Merrill. I am sorry. I did not hear the first part of 
the question.
    Chairman King. The reauthorization act allows the Bank to 
consider the extent to which a nation has been helpful in 
eradicating terrorism.
    Mr. Merrill. The extent to which a what, a nation?
    Chairman King. A nation has been helpful in eradicating 
terrorism, when you offer your services. I am just wondering, 
have you set up any way of looking into whether or not 
countries you have been dealing with----
    Mr. Merrill. We deal with the State Department on those 
issues. In a general sense, State, Commerce, USTR, OMB, 
Treasury generally attend our Board meetings and a couple of 
them are ex officio members of our Board. With respect to the 
issue you raised, we have a regular representative from the 
State Department. We deal through him with the relevant 
agencies, in this case the Human Relations Assistant Secretary 
in the State Department.
    Frankly, I have several years in the State Department, as 
you know, but when I was there they had five assistant 
secretaries. Now, they have 26, and I cannot keep all their 
names straight. But we do deal with the State Department on 
such issues.
    Chairman King. Okay. So basically, you have been dealing 
through the State Department when it comes to this.
    Mr. Merrill. We take their lead. We do consult them. We are 
very interested in what they have to say about that, what they 
have to say about bad people what they have to say about doing 
business in countries that either have helped us or hurt us.
    Chairman King. Okay. Thank you.
    Mrs. Maloney?
    Mrs. Maloney. Thank you, Chairman Merrill.
    As part of our reauthorization in 2002, we put a great deal 
of emphasis on increasing Ex-Im support of small businesses. I 
am glad to see that you have almost met the binding minimum 
target. I hope that you will be giving us assurances that the 
Bank's efforts in this area are serious and sustained.
    Part of this, a critical component of Ex-Im's efforts to 
assist small business exporters are the private banks that play 
the role of ``delegated authority lenders.'' These particular 
lenders are granted special discretionary authority by Ex-Im to 
grant credit following Ex-Im guidelines. Under this agreement, 
transactions can be approved more quickly, with less 
bureaucracy. My understanding is that these delegated lenders 
currently account for 90 percent of lending through the working 
capital program, the core program for small business exporters.
    Unfortunately, some of these lenders have grown concerned 
about Ex-Im's efforts to change the nature of the relationship 
so that more of the risk for these transactions will be borne 
by the delegated lenders themselves. My understanding is that 
these lenders are so concerned about this shift in attitude and 
potentially in practice that they are now contemplating a 
termination of their relationship with the Ex-Im Bank. Given 
the strong role that they played in small business finance for 
Ex-Im, the loss of these lenders would obviously hurt Ex-Im's 
small business export programs.
    Could you comment on these concerns of these lenders? What 
are you doing to address them?
    Mr. Merrill. Yes, I can. Of course, in the context here, it 
is an anonymous set of concerns so I cannot address an 
anonymous thing specifically, but let me make this point. 
First, the culture of this Bank or this institution is really 
totally committed to serving the small business person. I was 
once a small business person myself so I understand small 
business problems.
    More importantly, it is the totality of the culture of the 
Bank. That is, serve the customer, the small business person. 
So this is not a thing that is just directed by this Committee. 
This thing is woof and warp of how our people think. So we are 
singing the same song to one another with respect to attitude 
and culture.
    With respect to the concerns you are reflecting, my guess 
is that this is about the fast-track program that we have put 
in to increase the lending authority, delegated authority to 
nine principal banks where we delegate authority. I call your 
attention here that there are 240,000 exporters in the United 
States and slightly more than 400 employees of this bank. If we 
were to call on every one of them, we would not get there in 
this century, that is, the 21st century. The Board approved 
expanded lending authority at a greater level to a number of 
banks which were qualified.
    Mrs. Maloney. What is the level it expanded it to?
    Mr. Merrill. It went from $10 million to $25 million, under 
the authority of the board.
    Among the Banks, that is, among them there were different 
interpretations of some of the criteria that incorporated going 
from $10 million to $25 million. These are within weeks not 
months, 1 or 2, 3, whatever, short term, of being worked out. 
They are very minor things. They are things like, would an 
audit be quarterly or semiannually. That would be the kind of 
issue that remains to be worked out.
    Mrs. Maloney. Could you tell us where things stand? I am 
interested in knowing how close the program is to being up and 
running.
    Mr. Merrill. Weeks.
    Mrs. Maloney. Weeks? So it will be in operation----
    Mr. Merrill. We have to come back to the board with it.
    Mrs. Maloney. Okay.
    Mr. Merrill. The differences were between the Banks, not 
between the Banks and us. There are different issues within the 
Banks and between the banks on getting consistency.
    Mrs. Maloney. My colleague, for whom I have the greatest 
respect, Mr. Sanders, really raised some very important issues, 
the collapse of manufacturing in America; the outsourcing of 
jobs; a trade deficit that is not beneficial to our country. I 
would like you to respond to that.
    It is my understanding that the whole reason for the 
Export-Import Bank is to help manufacturing in America. We do 
not help manufacturing abroad. We only give loans to 
manufacturing to jobs that are here in America, and part of the 
agreement, if I understand it correctly, is that we save or 
create American jobs.
    Mr. Merrill. That is exactly right.
    Mrs. Maloney. And that none of this goes to a foreign 
country, but it stays in America, trying to help us get those 
jobs and keep those jobs.
    I also understand that part of the criteria is that you do 
not give a loan if they can get it from a private source, so 
this possibly would be a job that we may lose in America. Could 
you elaborate more on this, that possibly this will be helping 
us maintain American jobs? Could you comment?
    Mr. Merrill. Yes, Congresswoman. Yes, I will. First, we are 
in the business very simply, I repeat it again, of creating 
American jobs. The issues that Congressman Sanders raises are 
legitimate issues, and indeed they are issues in the campaign 
being carried on right now, but these are issues in which our 
government, the Treasury Department and other government 
agencies are responsible for dealing with.
    We are not in the business of outsourcing any jobs. We are 
only in the business of supporting jobs here. I think a quick 
but perhaps aphoristic answer would be this. We just financed a 
deal for a large American corporation, the one that Congressman 
Sanders mentioned; $700 million worth of locomotives from the 
Erie plant of General Electric to Kazakhstan.

[Subsequently Mr. Merill corrected the figure from $700 million to 33.1 
                                million]

    There was a reasonable assurance to repay. I personally 
worked my way through every minister literally without 
exception of the Kazakhstan government, about 12 of them, all 
of whom were market-oriented, Western-oriented and interested 
in doing business with us.
    That represented approximately 700 locomotive kits at $1 
million apiece, I am rounding the number, from the GE plant in 
Erie, Pennsylvania.

    [Subsequently Mr. Merrill corrected that figure from 700 to 54 
          locomotive kits at $600,000 instead of $1 million.]

    GE also operates in New York. I have been through that 
plant. In its high year, it produced 400 locomotives; here at 
700 locomotives. I fail to see how the outsourcing issue which 
is a legitimate political issue playing in the national arena 
helps or hurts, if you will, the workers at the Erie plant. The 
choice is very simple. We can finance GE in Kazakhstan or the 
French or the Russians, who also build locomotives, will 
finance their exporters in the same place. That is a lot of 
jobs in Erie. It is a hell of a plant. So I think that what we 
do is appropriate for the circumstances.
    Mrs. Maloney. Mr. Merrill, my time is up, but since you 
mentioned a New York company, I would like more specifics on it 
and how many jobs it created in New York. New York is very 
economically devastated upstate, and I would like more 
information on the jobs that it created in New York State.
    Thank you.

    Chairman King. The gentlelady from Illinois?
    Mr. Merrill. We will get back to you. I cannot answer that 
right here, but we will get back to you.
    Mrs. Maloney. My time is up. Thank you.
    Mr. Merrill. I understand.

     [Subsequently Mr. Merrill provided the following information.]

        General Electric estimates that the locomotive exports financed 
        with this Ex-Im Bank supported financing helped to sustain 130 
        jobs during 2003 and is projected to sustain 168 jobs during 
        2004.

    Chairman King. Mrs. Biggert?
    Mrs. Biggert. Thank you, Mr. Chairman.
    Chairman Merrill, I understand that the Ex-Im Bank has an 
advisory committee that provided recommendations for 
improvements in 2002 and 2003. Could you tell us a little bit 
about this committee and what their recommendations were?
    Mr. Merrill.  There is a general advisory committee made up 
of a cross-section of businessmen, 16 people on it, that has 
been really very helpful to us. They have been chaired the last 
2 years by the Chairman of the Houston Port, Ed Manto. It has 
had a series of suggestions for how we could be doing what we 
are doing, that is, be more customer-friendly; support more 
exporters. We found them very useful. They are actually all 
very able people. With their help, we identified three states 
where we ran a test program to see what we could do for the 
local banks in those states. The three states happen to be, we 
wanted states not like New York and California, which are so 
complex, but Maryland, Colorado and Arizona, in which we tried 
to look at how we could reach more exporters.
    We took Colorado as an example. There are five major banks; 
substantial exports. All five banks were doing business for 
their exporters with banks in Seattle, with such banks as the 
Southwest Bank of Texas. So as a result, we identified roughly 
of the 14,00 banks in the United States, the 175 that do some 
trade finance, applied it back to state levels, and we are 
working with city-state partners and so forth, all of this as a 
result of the work of the advisory committee.

     [Subsequently Mr. Merrill provided the following information]

        There is a general advisory committee made up of a cross-
        section of businesspeople, 16 people on it, that has been 
        really very helpful to us. It has been chaired over the last 2 
        years by Edward Monto, Director of Metrobank, in 2003, and in 
        2004 by H. Thomas Kornegay, Executive Director of the Houston 
        Port Authority. It has had a series of suggestions for how we 
        could be doing what we are doing, that is, be more customer-
        friendly; support more exporters. We found them very useful. 
        They are actually all very able people.
        With their help, we identified two States where we ran what 
        might be called a test program to see what we could do for the 
        local banks in those States to reach mor exporters. The two 
        States happen to be Maryland and Colorado.
        Take Colorado as an example. There are five major banks; 
        substantial exports. All five banks were doing business for 
        their exporters with correspondent banks such as Southwest Bank 
        of Texas.
        Of the approximately 14,000 banks in the United States, 175 of 
        them do some trade finance. In addition to the banks, we are 
        working with City/State Partners.

    Mrs. Biggert. So that was your implementation of their 
recommendations.
    Mr. Merrill. Yes, exactly.
    Mrs. Biggert. Do you think that you could provide us with 
copies of the advisory committee's report?
    Mr. Merrill. Sure.
    [The following information can be found on pages 54 and 116 
in the appendix.]
    Mrs. Biggert. Okay. And can you give an itemized list of 
the recommendations?
    Mr. Merrill. I do not know whether there is an itemized 
list, but we will give you whatever we have.
    Mrs. Biggert. Okay. And just the steps that you used to 
implement?
    Mr. Merrill. Advice is advice. Some things are doable. Some 
things are advice that they would like to have. For example, 
they would like to have a change in the MARAD requirements, PR 
17. That is Greek to anybody here, but it is the requirement to 
ship certain exports on American bottoms. We understand the 
requirement. I personally served in the Merchant Marine. I 
shipped out when I was 16, so I understand the U.S. Merchant 
Marine. But we would like to get some waivers on an easier 
basis on these. Again, just to stick with GE, when they ship a 
turbine and it takes a special ship to ship it, it may not be 
available in the time sequence and so forth, so making waivers 
easier was one of the recommendations and we would like to do 
that. But implementing it is not within our control, so a lot 
of the recommendations we agree with, but do not have total 
control. It is things we have to push on other people for. I 
will stop there.
    Mrs. Biggert. Would you consider doing that? Let's say, you 
need statutory change or regulation change. Is this something 
you look at then and then proceed to either come to the 
Congress or the regulatory body?
    Mr. Merrill. Yes.
    Mrs. Biggert. Okay. Thank you, if you would do that.
    You talked about the 19.7 percent, or almost reaching the 
mark figure for assessing the amount of small business support 
pursuant to the last authorization legislation. Is this the 
same methodology that was used prior to 2002?
    Mr. Merrill. Yes, it is exactly the same methodology, with 
one minor exception, not an exception, but the sample is larger 
just to be certain that it is accurate, but nothing was changed 
in the methodology, just a larger sample.
    Mrs. Biggert. Are you planning to make changes in the 
future to the methodology?
    Mr. Merrill. No, not that I know. Nobody has consulted me 
on that, but I do not see why we would. Just as a private 
businessman, I do not like to change methodologies lightly 
because I like the comparisons from year to year.
    Mrs. Biggert. Then how will you account for transactions 
that originated under the memorandum of understanding with the 
SBA?
    Mr. Merrill. We would account for them, assuming a $2 
million transaction, the first $500,000 would be credited to 
SBA; the second $1.5 million would be credited to us. It would 
not be double-counted.

     [Subsequently Mr. Merrill provided the following information.]

        We would account for them, assuming a $2 million transaction, 
        the first $1.5 million or their statuary limitation would be 
        credited to the SBA and the remanining amount minus the 
        lender's portion of the risk would be credited to us. It would 
        not be double-counted.

    Mrs. Biggert. So there is no change there. Okay. Thank you 
very much.
    I yield back.
    Chairman King. The gentlelady from New York, Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    In your exchange or answering the question to Carolyn 
Maloney, you said that you are in the business, Ex-Im Bank is 
in the business of supporting jobs.
    Mr. Merrill. Yes, ma'am.
    Ms. Velazquez. We all know that small businesses produce 75 
percent of all new jobs. Small businesses account for 50 
percent of all sales in this country. Small businesses employ 
nearly 53 percent of the American workforce. In the last 
recession, small business fast-growth companies created nearly 
3.8 million jobs, compared to 3.3 million jobs created by big 
companies.
    So if you are in the business of creating jobs, how could 
you come here and say that you so proud about the 19.7 percent 
financing achieved by Ex-Im Bank, and then to say that the 20 
percent is neither the ceiling nor the floor? But if we are 
facing a jobless recovery in this country, don't you think that 
then you should focus or reassess what your institution is 
doing in providing more financing for small companies?
    Mr. Merrill. Madam Congresswoman, the committee's dictate 
or mandate or instruction was to target 20 percent.
    Ms. Velazquez. At least 20 percent.
    Mr. Merrill. Not including, not counting the 
subcontractors.
    Ms. Velazquez. Look, sir.
    Mr. Merrill. Look, subcontractors are small businesses.
    Ms. Velazquez. The 20 percent is regarding prime 
contractors, not subcontractors. You know that.
    Mr. Merrill. By definition----
    Ms. Velazquez. Your definition.
    Mr. Merrill. Well, anybody's definition. It is not likely 
that a small business is going to be a prime contractor. You 
are not going to build a power plant----
    Ms. Velazquez. What I am saying to you, sir, is that 20 
percent, the law, the reauthorization of 2002, says 20 percent, 
at least 20 percent. It is just common sense that what we need 
in this country is to create jobs.
    Mr. Merrill. I agree.
    Ms. Velazquez. You should amend what you are doing and 
reassess, and make sure that we have more financing for small 
business.
    Mr. Merrill. We are doing everything. I do not know how I 
can change and improve the culture of this Bank beyond its 
focus on small business because we are totally focused on 
increasing small business. We agree with you. We are almost 
totally focused.
    Ms. Velazquez. Are you prepared, based on the reality of 
the economy, to reassess the 20 percent, instead of being the 
ceiling, instead of being the floor?
    Mr. Merrill. The problem is that we are the lender of last 
resort. They have to come to us.
    Ms. Velazquez. Okay, sir. In light of the fact that the 
face of small business in America is changing, that we have 
more, that women are the fastest-growing sector in terms of 
small businesses in our economy; there are more women, more 
Latinos, more Blacks. Do you have any data as to how much money 
from the 19.7 percent of finance has gone to minority 
contractors?
    Mr. Merrill. Yes, ma'am, I do. I would actually like to 
read it to you. We have the measurement for the whole Bank. We 
do not have a measurement on the 19.7 percent.
    Ms. Velazquez. Okay. Would you be prepared to send us, this 
subcommittee, data?
    Mr. Merrill. Yes, ma'am. I would also like to answer the 
question.
    Ms. Velazquez. But you said that you do not have the data?
    Mr. Merrill. Not on the basis of the 20 percent, but on the 
basis of the whole Bank.
    Ms. Velazquez. No. I am referring to the 20 percent.
    Mr. Merrill. In that case, I will have to get back to you.
    Ms. Velazquez. Would you please submit to this committee in 
writing?

     [Subsequently Mr. Merrill provided the following information.]

        In terms of number of transactions, minority and woman-owned 
        businesses accounted for 219 of the 2,258 small business 
        transactions or 9.7 percent.
        In FY 2003, Ex-Im Bank provided $2.1 billion in small business 
        support. Of the $2.1 billion, minority and woman-owned 
        businesses accounted for $135,808,144, or 6.54 percent of Ex-Im 
        Bank's small business support.

    Mr. Merrill. I will have to get back to you with that. I 
would like to say that among the larger corporations, that is 
the Fortune 500 crowd, if you will, the GEs of the world, GE 
has 11 percent minority contracting. It is 30 percent for Case 
New Holland. The Bank's administrative contracting awards to 
small business are 57 percent, and the awards to African 
American businesses are 18 percent. That is out of the total of 
the Bank, not out of the 20 percent. I will have to get back to 
you on the 20 percent.
    Ms. Velazquez. Thank you.
    If I may, Mr. Chairman, this is a very important question 
because of the arrangement between SBA and Ex-Im Bank. You know 
that the Administration's fiscal year 2005 budget drastically 
cuts the 7(A) guarantee loan program, out of which the small 
exporters obtain funding such as export working capital. Now 
that less funding is going to be available for small exporters 
through the SBA export working capital, is the Ex-Im Bank going 
to start handling smaller loan requests?
    Mr. Merrill. Yes, ma'am. We will handle them. Last year, we 
financed $67,000 worth of used clothing to Ghana. We will 
finance any small business at any level from any State.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman King. The gentleman from South Carolina?
    Mr. Barrett. Thank you, Mr. Chairman.
    Mr. Merrill, thank you for coming today. I appreciate it.
    One of my constituents asked a question the other day. I 
did not know the answer and it was very timely. Does the Ex-Im 
Bank offer standby letters of credit to foreign purchasers of 
U.S. goods?
    Mr. Merrill. To foreign purchasers of U.S. goods?
    Mr. Barrett. Yes.
    Mr. Merrill. Yes, we would do that. It is a technical arm, 
but in a general sense certainly we would lend to a Russian 
company or Kazakh company or a Vietnamese company, Vietnam 
Airlines, that was going to purchase something from the United 
States. Certainly. We will finance 85 percent of an export, 
whoever buys it. And we will finance 100 percent of working 
capital for an export. But it has to be the export of goods or 
services from the United States that creates American jobs. Who 
the buyer is, the buyer is either sovereign governments or 
private businesses or banks in 90 foreign countries.
    Mr. Barrett. How does that work? What do you think about 
that policy?
    Mr. Merrill. It is the basic business of the Bank.
    Mr. Barrett. We had a gentleman, a Mr. Taylor from Avondale 
Mills, that had a proposal that was very similar to this. I 
think he had some twists in it or was asking a couple of 
different things. We faxed that proposal to your office.
    Mr. Merrill. I see a head nodding behind me here. We did 
2,707 transactions.
    Mr. Barrett. I understand that. But what I would like for 
you guys to do, just since it is a practice that you all are 
doing, if you would take a serious look at that proposal and 
get me back something in writing on it, I would greatly 
appreciate that.
    Mr. Merrill. I have a note here that says we will. I will 
just read it to you.
    [The following information can be found on page 179 in the 
appendix.]
    Mr. Barrett. Okay. Great.
    Mr. Merrill. This is information, not secrecy.
    Mr. Barrett. Absolutely.
    Mr. Merrill. We insure LCs. We do not issue them. A letter 
of credit would be from a foreign bank. We would insure it.
    Mr. Barrett. Okay.
    Mr. Merrill. The staff is reviewing it. This proposal is 
under review. The case you referenced is obviously known to our 
General Counsel and our Chief Financial Officer.
    Mr. Barrett. And you guys have been extremely helpful, your 
whole staff. Mr. Chairman, I want to thank you. But if you all 
could, as quickly as possible, get that to me and my staff, I 
would greatly appreciate it.
    Mr. Merrill. Let's see what we can do. When you raise 
something here, I will put a searchlight on it.
    Mr. Barrett. Thank you, Mr. Chairman.
    Mr. Merrill. Thank you.
    Chairman King. Mr. Sanders?
    Mr. Sanders. Thank you, Mr. Chairman.
    Let me just read for the record something and let the 
American people determine how successful the Export-Import Bank 
has been in creating jobs, jobs, jobs. Is that your motto?
    Mr. Merrill. Yes.
    Mr. Sanders. Okay, here we go. Jobs, jobs, jobs.
    Mr. Merrill. Jobs through exports is the motto.
    Mr. Sanders. Since 1975, General Electric has eliminated 
more than 260,000 American jobs, while receiving $2.5 billion 
in loans and guarantees from the Export-Import Bank. It does 
not sound too successful to me. Boeing is, I believe, the 
largest recipient of Export-Import taxpayer subsidies and 
grants. Since 1990, Boeing had laid off 135,000 American 
workers, increasingly outsourcing design work to China, Russia 
and Japan, while receiving $18 billion in direct loans and loan 
guarantees. Now, maybe the loss of 135,000 jobs does not 
concern Export-Import, but some of us worry a little bit about 
that. Motorola has laid off close to 43,000 workers since 2001, 
and received $190 million in direct loans and loan guarantees 
from the U.S. Export-Import Bank.
    Jobs, jobs, jobs. You are right. We are losing jobs, jobs, 
jobs big time. Now, General Motors since 2001, 3 years ago, GM 
has laid off 37,500 workers, while receiving over $500 million 
from the U.S. Export-Import Bank, and in fact, as you know, 
they are now going to be manufacturing a lot of auto supplies 
in China, so we expect job loss to go way down.
    So the first question, and I am going to ask you several 
questions, the first question is, why do taxpayers in this 
country provide billions of dollars in loans and loan 
guarantees and subsidies to companies that are throwing 
hundreds and hundreds of thousands of American workers out on 
the street?
    Mr. Chairman, I used to be the Mayor of a city. We dealt 
with the business community. The fallacy of the Export-Import 
Bank is that Mr. Merrill will come and say, look what we did in 
Erie, Pennsylvania; we created 700 jobs. But they are not 
looking at what General Electric did in its entirety. The way 
sensible government works is you say to the business community, 
we are prepared to help you. What are you going to do for 
workers in America? How are you going to grow jobs? Don't tell 
us you are growing jobs in Erie, New York, when you are laying 
off hundreds of thousands of people elsewhere, because we do 
not pay attention to that. We are just looking project by 
project. That is an absurd philosophy.
    I think Ms. Velazquez was right a moment ago in saying job 
creation is taking place among small businesses, medium-size 
businesses. What about telling the large corporations that if 
they are not interested in growing jobs in the United States of 
America, you are not going to support them; that if they want 
money from the taxpayers of this country, we will help them 
when they tell us and promise us they are going to start 
growing jobs in America, not one project while they are laying 
off hundreds of thousands of people elsewhere.
    Now, to add insult to injury, I gather with a straight 
face, Mr. Merrill, you are telling us that the Export-Import 
Bank, did I hear you correctly, is the agency of last resort 
for loans?
    Mr. Merrill. Yes.
    Mr. Sanders. Okay. You are telling the American people.
    Mr. Merrill. We are the lender of last resort.
    Mr. Sanders. Excuse me. I heard what you said. You are 
going to tell me with a straight face that General Electric, 
which itself is one of the largest financial institutions in 
America, cannot get loans anyplace else but from the taxpayers 
and the workers of America, many of whom have lost their jobs 
from General Electric? Are you going to tell me that with a 
straight face that GE is a struggling small business, a 
minority business in the barrio of New York, and they just 
cannot find financing, look as hard as they can. Poor GE. You 
are going to tell me that and the American people with a 
straight face?
    Last question that I would have for you, okay. This is such 
an absurd argument that only in Washington, D.C. would anyone 
regard this as a vaguely rational argument. I would hope and 
appreciate your giving me a list of the top 10 recipients of 
Export-Import funding and tell me how many hundreds of 
thousands of jobs those companies have lost, laid off; how many 
hundreds of thousands of American workers they have laid off.
    [The following information can be found on page 180 in the 
appendix.]
    Mr. Chairman, I want you to respond. Mr. Chairman, I think 
it is time to end this joke of the Export-Import Bank. What we 
need is serious help for small-and medium-size businesses in 
this country who want to grow decent-paying jobs in America, 
who are proud of American workers, not companies like GE who 
are announcing to the world that they are going to China; they 
are going all over the world; and they are going to lay off 
American workers.
    Mr. Merrill, tell me why the American taxpayer should be 
supporting a company like GE who has laid off hundreds of 
thousands of workers and whose CEO announces to the world he is 
going to China. Tell me why.
    Chairman King. The gentleman's time has expired. Mr. 
Merrill will have the opportunity to answer the question.
    Mr. Merrill. There is limited time. I can only say that I 
agree absolutely with Congresswoman Velazquez that the job 
creation in the United States for a very long time, quite a few 
years before I got here, has been mainly or almost completely 
small business. That is why we are so focused on small 
business. I could not agree more. Our object is to create as 
many small-and medium-size business jobs as we possibly can and 
support as many of the 240,000 exporters as we can. I want to 
put that on the record.
    Second, I think the quickest answer is with a number. I 
will just leave the one number here. Thirty-five years ago, the 
U.S. exported $42 billion worth of things. For the last 3 or 4 
or 5 years, we have exported $1.1 trillion worth of things, out 
of an $11 trillion economy. Roughly speaking, $1.1 trillion is 
about the same size as the entire economy of China. It is three 
times the total economy of Russia. It is a lot of exports. So 
the movement toward exports, any way you want to measure it, 
has substantially created American jobs with or without Ex-Im 
Bank support. I will just stop there.
    Mr. Sanders. You did not answer my question.
    Mr. Merrill. Say again?
    Mr. Sanders. You did not answer my question.
    Chairman King. The time of the gentleman has expired.
    Mr. Manzullo?
    Mr. Manzullo. Thank you.
    Before I ask my question, perhaps I can answer it. In the 
district that I represent, we have a $256 million Boeing 
presence; $110 million Caterpillar presence; $95 million John 
Deere presence. Those companies support hundreds and hundreds 
of small machine shops and mom-and-pop shops throughout the 
entire district. Whenever one of those machines goes over, 
whenever an aircraft goes over, that represents thousands of 
jobs in my district that are all small businesses.
    Mr. Merrill. Thank you.
    Mr. Manzullo. I know that perhaps this will not help Mr. 
Sanders in his answer, but I do know this, that every time a 
Boeing aircraft is sold to China or any other place in the 
world, and China is buying more Boeings this year than America, 
that represents thousands and thousands of jobs. In the 
district that I represent, we are at 11 percent unemployment. 
It just dropped to 10.6 percent, and hopefully next month we 
will be in the single-digit unemployment. Were it not for the 
sale of aircraft and this giant machinery which is supported by 
Ex-Im, I can tell you our unemployment would be 20 or 30 
percent.
    So thank you for your leadership of the Ex-Im Bank. I 
especially want to thank you for the job that you are doing 
with regard to small businesses. I do not know of one small 
business that has been turned down by Ex-Im Bank because they 
are too little. Perhaps they did not fit into the parameters, 
but they are always given a fair shake. They get good service 
on it, and I think you are doing a great job just to be off .03 
percent on your goal for the total dollar amount. I think that 
is exemplary what you are doing there.
    Did you like that?
    Mr. Merrill. I thank you for the support.
    Mr. Manzullo. You bet.
    Mr. Merrill. I am honored and flattered. Thank you, thank 
you, thank you.
    Mr. Manzullo. You bet. Now, I have just a couple of very 
short questions of Phil. Last year, the Ex-Im Bank, normally 
they designate one person on the board that is the small 
business person. We heard that former Senator Cleland was going 
to be that person.
    Mr. Merrill. Yes.
    Mr. Manzullo. Is that correct?
    Mr. Merrill. That is correct. He wants to do it.
    Mr. Manzullo. Okay.
    Mr. Merrill. He served on the Small Business Committee.
    Mr. Manzullo. That is correct. So he is still the 
designated person on that?
    Mr. Merrill. Yes.
    Mr. Manzullo. Great.
    The second question is, Ex-Im has been working with the 
business community to develop a new and approved dealer-
distributor financing program over the past year that will 
benefit the small-and medium-size equipment manufacturers, sort 
of floor financing overseas. Given the strong support for the 
program, can you tell us when we can expect the dealer 
financing program to be available to our manufacturers?
    Mr. Merrill. Very shortly is the answer. The floor planning 
issue is one I understand. The issue at stake is being 
resolved. I cannot say definitively, but we think it will be 
resolved. The issue is whether the creditor, the floor planner, 
that is, the distributor in let's just say Ecuador that takes 
the Caterpillar tractor, or the ultimate customer to which they 
are sold are the buyers. And that is being worked out. That is 
the remaining issue.
    Mr. Manzullo. Okay. So it is working out the legals of it, 
but the desire to do it is all set there?
    Mr. Merrill. The desire to do it is there. We are going to 
get it.
    Mr. Manzullo. Thank you.
    I yield back my time.
    Mr. Merrill. We are going to get it, with as much executive 
force as I can put behind it, which is not inconsiderable. We 
are going to try to get it done.
    Mr. Manzullo. Okay. I appreciate it.
    Thank you. I yield back.
    Chairman King. Thank you, Mr. Manzullo.
    Mr. Watt?
    Mr. Watt. Thank you, Mr. Chairman.
    Thank you, Mr. Merrill, for being here. I have generally 
been a supporter of the Ex-Im Bank, but have a couple of 
questions that hopefully will help me understand a couple of 
things.
    First of all, the name of the Bank is Export-Import Bank. I 
notice that you gave us all the figures on exports and no 
figures on imports. Is the name of the Bank inappropriate or do 
you all keep some records having to do with the extent of 
imports that the Bank supports? Or do you all support any 
imports?
    Mr. Merrill. It is a wonderful question. Obviously, you 
think clearly and logically. The answer is that to change the 
brand name of Ex-Im would be like taking the ``Cola'' off Coca-
Cola.
    Mr. Watt. I understand that. That is the public relations 
statement.
    Mr. Merrill. Yes, I understand.
    Mr. Watt. Are you saying that the name of the Bank is 
misleading? You do not do any support of imports? Is that the 
bottom line?
    Mr. Merrill. No, we do not.
    Mr. Watt. Okay. That is fine.
    Mr. Merrill. I will tell you separately later why.
    Mr. Watt. Okay. It was not a trick question.
    Mr. Merrill. No imports; all exports.
    Mr. Watt. All exports.
    The second question was, you indicated, and I tried to find 
it in your prepared testimony, but could not find the exact 
wording of what you said in your oral testimony, that Ex-Im 
Bank operates only where businesses will not or cannot go 
without assistance or something to that effect.
    Mr. Merrill. Can I straighten it out?
    Mr. Watt. Yes, tell me what you said, first, and then I 
want to ask a question.
    Mr. Merrill. I am very careful not to interrupt a 
Congressman when he is talking.
    What I said was that we only go, we only finance where 
private capital will not go alone.
    Mr. Watt. Okay. I thought that is what you were saying. In 
this context, I think Mr. Sanders's question about loans to GE 
and other major, particularly companies that provide financing 
themselves, either puts you in a situation where the statement 
that you just made is not true, or the Export-Import Bank is an 
influence in markets that if you think theoretically would not 
be an appropriate influence in a free trade context. You are 
shoring up things that if the market would take care of itself, 
which most free traders think it should, would resolve itself. 
Am I missing something here?
    Mr. Merrill. No, you are not. You got it right. I would 
probably be in that camp.
    Mr. Watt. Okay, well then----
    Mr. Merrill. Wait a minute. I have to get one phrase out 
here. If there were not 28 other countries providing----
    Mr. Watt. Okay. That is actually the question I am driving 
to. Is this really the assistance that the Export-Import Bank 
is providing a subsidy? And if other countries are doing the 
same thing, why wouldn't it be a subsidy if they are doing it, 
and why wouldn't the WTO consider that inappropriate in this 
free trade international trade world that we are living in?
    Mr. Merrill. The WTO has carved out an exception for the 
OECD. We have a common arrangement. It is called the 
Arrangement with the other OECD countries under which we have 
agreed to common terms, that is long-term loans, 12 years 
roughly, medium-term and so forth, and common financing 
arrangements, within certain parameters.
    Mr. Watt. But those are on strictly business terms, I would 
think, not subsidized market terms where ordinary business 
would not go. Isn't this a market subsidy?
    Mr. Merrill. We are not subsidizing anybody. The Bank, does 
not subsidize anybody. They pay a fee for us, for political 
insurance or for risk insurance. If you know somebody who wants 
to take Bechtel's position or the $160 million we put into the 
BTC pipeline in Azerbaijan----
    Mr. Watt. But isn't the whole philosophy of free trade to 
allow the market to take care of its own risk? Why should the 
government be playing that role?
    Mr. Merrill. Theoretically, Congressman, I agree with you. 
Practically, Boeing has to compete with Airbus; Caterpillar has 
to compete with----
    Mr. Watt. But if all countries withdrew from this, wouldn't 
that leave us where you say the market should be in a free 
market context?
    Mr. Merrill. Yes, it would.
    Chairman King. The time of the gentleman has expired.
    Mr. Merrill. Yes, it would. Can I get one crack at your 
final question?
    Mr. Watt. He wants to give it one final context. I think I 
am laying a platform for where Mr. Paul is probably going to go 
anyway. I am sounding very libertarian at this point.
    Mr. Merrill. Just let me say, this is a stretch analogy, 
but you would not need any policemen if there were no criminals 
either. I mean, the fact that you have all these countries----
    Mr. Watt. It sounds like the Export-Import Bank is the 
criminal here, not the policemen.
    Mr. Merrill. That is why it is a stretch analogy.
    Mr. Watt. Okay. All right.
    Chairman King. Now that Mr. Watt has laid the foundation 
and the platform, Mr. Paul?
    Mr. Paul. Thank you, Mr. Chairman.
    Welcome, Mr. Merrill.
    Mr. Merrill. Thank you.
    Mr. Paul. You said the gentleman from North Carolina speaks 
clearly and logically.
    Mr. Merrill. Thanks.
    Mr. Paul. That is good and I will not contest that. But I 
want to see if I can get the same compliment, so I am going to 
try and follow-up. I notice in our memorandum from our staff 
here in the committee, it states tensions exist between the 
Bank's mission and the United States's commitment to free 
markets. I would say yes, there certainly are tensions. There 
is a contradiction. There is a real conflict. I think you 
indicated maybe that we should not use the word ``subsidies'' 
too generously, and yet the Bank would not come to the Congress 
for appropriations and authority if somebody did not get some 
specific benefits. So I think there is always a special benefit 
which is a subsidy, whether or not it is in cash. Maybe it is a 
competitive edge, and there is always a cost. There is involved 
here an allocation of credit, and the victim is never found, 
never seen. Especially in an area where there is tighter 
credit, there are victims that suffer. Although there may be a 
small businessman who gets the benefit, there is some other 
small businessman who is getting a disadvantage from the 
subsidy.
    My question is, how can you rationalize support for this 
organization? Because we on our side, we are supposed to be the 
champions. They are not supposed to be the champions of the 
marketplace. We are. We are supposed to be the champions of the 
marketplace. We are not champions of subsidies. We declare 
freedom and free markets and less government, and yet we are 
pushing all this and we give all these programs.
    So don't you think for your support of this organization, 
don't you have to do a lot of rationalization and reject some 
of the very principles that we stand for?
    Mr. Merrill. There are two answers to that question, 
congressman. Yes, that is a perfectly logical and clear set of 
principles with which it is hard to argue. I would not argue. I 
think that answer number one is practical. When a small 
businessman, I am sorry that Congressman Manzullo left, but 
when a small businessman in Moline, in a specific case, 
exported $20 million worth of trucks to Uzbekistan, no bank is 
going to finance that without a government guarantee. Do we 
want to make the sale or do we want to have a French or a 
German or an Italian company make the sale?
    Theoretically, you are absolutely right. I agree with you. 
Practically, I want the guy in Moline to make the sale.
    Mr. Paul. So your argument is that freedom is impractical, 
which I disagree with.
    Mr. Merrill. I did not say that.
    Mr. Paul. Well, indirectly. But let me follow up with 
another one, and maybe I will get a little bit further on this 
next question. I am interested in the Trade Bank of Iraq. That 
has been set up. We waste no time in trying to get some 
benefits in there, maybe to our corporations. It has been set 
up at $500 million. Has that been used yet? And if it has been, 
has any corporation been participating in Iraq?
    Mr. Merrill. There has only been one use so far, but the 
Trade Bank of Iraq, which basically we initiated. Peter Saba, 
Chief Operating Officer, did the basic legwork, I would say. We 
put $500 million into it, or against it. We raised another $2 
billion, $500 million from Japan, $250 million from Italy, and 
15 other countries. So far, there has only been one, a 
consortium of 13 banks administered by J.P. Morgan which won 
the contract, not with us, but with the Coalition Provisional 
Authority.
    There has only been one contract so far to the U.S.; that 
was $15 million. I hope you have a sense of humor for this, for 
a fogging machine out of the United States; a set of fogging 
machines; 200 of them. The problem is very simple in Iraq. 
First, either the taxpayers are going to put up the money or 
there is going to be foreign investment which is going to pump 
oil or invest there.
    The three issues are sovereignty, security, which is 
obvious, and precedence over existing debt. Under the current 
circumstances, Iraq has $125 billion in existing debt and $30 
billion in unpaid compensation awards plus additinal 
outstanding claims. So companies are understandably unwilling 
at the moment, or reluctant, to invest over the long term 
there. Nevertheless, we want to be prepared for when the 
government, the hand-off takes place and the debt is supposed 
to be written off by the Paris Club at the end of the year. 
Whenever a government comes into Iraq, we want to be prepared 
to make available lending.
    One other thing I have to explain, and that is the Trade 
Bank applies not only for U.S. exporters, but for exporters 
from other countries as well, any country. It is multilateral. 
It is not U.S.-only.
    Chairman King. The time of the gentleman has expired. In 
the interest of fairness, if you want to keep up with your 
partner, Mr. Watt, you can take one more question.
    Mr. Paul. No, I am not going to.
    Chairman King. Okay. Thank you.
    Mr. Merrill. I thank you both.
    Chairman King. This is new access, Mr. Paul, a broad access 
here in the committee.
    Mr. Merrill, I want to thank you for your testimony this 
morning. It has really been helpful to us. I would note that 
some members may have additional questions for you. They can 
submit them in writing and the record will remain open for 30 
days.
    With that, I thank you for your testimony and the 
subcommittee stands adjourned.
    [Whereupon, at 11:09 a.m., the subcommittee was adjourned.]


                            A P P E N D I X



                              May 6, 2004


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