[Senate Report 107-52]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 141
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-52
_______________________________________________________________________


                         THE EXPORT-IMPORT BANK

                      REAUTHORIZATION ACT OF 2001

                               __________

                              R E P O R T

                                 OF THE

                     COMMITTEE ON BANKING, HOUSING,

                           AND URBAN AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1372

                                     


                                     

                 August 3, 2001.--Ordered to be printed
                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
89-010                     WASHINGTON : 2001


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  PAUL S. SARBANES, Maryland, Chairman
CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia                 CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware           RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey           MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii              JOHN ENSIGN, Nevada

           Steven B. Harris, Staff Director and Chief Counsel
             Wayne A. Abernathy, Republican Staff Director
                  Martin J. Gruenberg, Senior Counsel
      Brian J. Gross, Republican Deputy Staff Director and Counsel
                  Adrienne Vanek, Republican Economist

   Catherine Cruz Wojtasik, Staff Director, International Trade and 
                          Finance Subcommittee
         Daniel M. Archer, Republican Professional Staff Member
             Heather O. West, Republican Legislative Fellow


                            C O N T E N T S

                              ----------                              
                                                                   Page

Introduction.....................................................     1
History of the Legislation.......................................     1
Overview.........................................................     2
    Tied Aid Credit Fund.........................................     4
    Term of Reauthorizaion.......................................     5
    Market Windows...............................................     5
    Small Business Financing by the Ex-Im Bank...................     7
    Inspector General For Ex-Im Bank.............................     8
    Ex-Im Bank's Economic Impact Standard........................     8
    Ex-Im Bank's Competitiveness Report..........................     9
Section-by-Section Analysis of S. 0000: ``The Export-Import Bank 
  Reauthorization Act of 2001''..................................    10
    Section 1. Short title.......................................    10
    Section 2. Extension of authority............................    10
    Section 3. Sub-Saharan Africa Advisory Committee.............    10
    Section 4. Guarantees, Insurance, Extension of Credit........    10
    Section 5. Financing for Small Business......................    10
    Section 6. Market Windows....................................    10
Appendix.........................................................    15
Regulatory Impact Statement......................................    10
Changes in Existing Law..........................................    13
Cost of Legislation..............................................    10

                                                       Calendar No. 141
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-52

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



 
           THE EXPORT-IMPORT BANK REAUTHORIZATION ACT OF 2001
                                _______
                                

                 August 3, 2001.--Ordered to be printed

                                _______
                                

 Mr. Sarbanes, Mr. Bayh, and Mr. Hagel, from the Committee on Banking, 
          Housing, and Urban Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1372]

                              introduction

    On July 18, 2001, the Committee on Banking, Housing, and 
Urban Affairs marked up and ordered to be reported an original 
bill, the Export-Import Bank Reauthorization Act of 2001. This 
Act reauthorizes, for a period of five years through September 
30, 2006, (1) the charter of the Export-Import Bank of the 
United States (Ex-Im Bank), and (2) the sub-Saharan Africa 
advisory committee. The Act also requires the Ex-Im Bank to 
submit the Bank's annual competitiveness report to Congress not 
later than June 30 each year. The Ex-Im bank is also required 
to include a compilation and analysis of data regarding 
``market windows'' and their effects on the Bank's 
competitiveness in the report and to estimate the annual amount 
of export financing available from other government and 
government-related agencies for the Bank's annual 
competitiveness report. An amendment by Senator Allard, as 
modified by a second degree amendment by Senator Sarbanes, was 
adopted by voice vote which would require that 18 percent of 
the Ex-Im Bank's aggregate loan, guarantee, and insurance 
authority be used to finance small business exports. An 
amendment by Senators Hagel, Bayh, and Sarbanes was adopted by 
voice vote which would authorize Ex-Im Bank to match foreign 
market windows financing. The Committee voted 21-0 in favor of 
adopting the bill.

                       history of the legislation

    The Export-Import Bank of the United States was created in 
1934 and established under its present law in 1945 to aid in 
financing and promoting U.S. exports. The Bank operates under a 
renewable charter, the Export-Import Bank Act of 1945, as 
amended, and was last authorized in 1997 through September 30, 
2001.
    The Subcommittee on International Trade and Finance of the 
Committee on Banking, Housing, and Urban Affairs held two 
hearings on the reauthorization of the Ex-Im Bank. The 
principal issues raised in the hearings were the value of the 
Ex-Im Bank to U.S. exporters, the use of the Tied Aid Credit 
Fund, market windows financing, adverse economic impact 
determinations, and the impact of the Administration's proposed 
25 percent budget cut for the Ex-Im Bank.
    On May 17, 2001, the Subcommittee on International Trade 
and Finance held a hearing to solicit the views of 
representatives of small and large exporting companies, the 
banking community, as well as academic experts. Testifying 
before the Subcommittee were: Darin P. Narayana, President of 
Bank One International (representing the Bankers' Association 
for Finance and Trade); Dean R. Dort II, Vice President of 
Deere & Company (representing the Coalition for Employment 
through Exports and the National Foreign Trade Council); C. 
Fred Bergsten, Director of the Institute for International 
Economics; Thomas McKenna, Executive Director of the Indiana 
Department of Commerce; E. Robert Meaney, Senior Vice President 
of Valmont Industries; Peter Bowe, President of Ellicott 
Machinery Corporation International (representing the U.S. 
Chamber); and Terrence D. Straub, Vice President of 
Governmental Affairs of USX Corporation.
    On June 19, 2001 the Subcommittee held its second hearing 
on the reauthorization of the Ex-Im Bank to solicit the views 
of the Administration. Witnesses included: John Robson, 
President and Chairman of the Export-Import Bank and John 
Taylor, Under Secretary of the Treasury for International 
Finance.

                                overview

    The Committee on Banking, Housing, and Urban Affairs last 
reauthorized the charter of the Ex-Im Bank in 1997. The 
Committee has strongly supported the Ex-Im Bank's role in 
helping U.S. exporters compete in international markets.
    In the Committee's view, there are two compelling market-
based reasons for the existence of the Ex-Im Bank. First, the 
Ex-Im Bank has a critical role to play in leveling the playing 
field for U.S. exporters by matching the public financing made 
available by foreign governments. In addition, the Ex-Im Bank 
provides leverage to U.S. negotiators seeking to achieve 
international agreements to limit the use of government export 
subsidies. U.S. exporters are able to compete effectively in 
international markets on the basis of price and quality. When 
foreign governments provide subsidized financing for their 
exporters, U.S. exporters are placed at a competitive 
disadvantage.
    Second, emerging market economies can pose credit risks of 
such magnitude that commercial banks are reluctant to finance 
U.S. exports to those countries even though they may present 
extraordinary opportunities for U.S. exporters. The Ex-Im Bank 
has the difficult but important task of weighing the project in 
light of the country risk rating and determining if a guarantee 
should be provided for a commercial export loan that would make 
possible an export deal that otherwise would not occur.
    The Ex-Im Bank has also played a role in helping to cope 
with international financial crises. In 1997, during the Asian 
financial crisis, Ex-Im Bank was one of the first banks to 
finance exports to the most severely impacted Asian countries, 
providing them with important inputs and machinery that helped 
improve their economies.
    It is also worth noting that over the past five years the 
interest and fees collected by the Ex-Im Bank have earned the 
federal government over $4 billion.
    When the Banking Committee last reauthorized the Ex-Im Bank 
four years ago, there was a sense that progress was being made 
in controlling the growth of export credits offered by national 
governments. The Organization for Economic Cooperation and 
Development (OECD) Arrangement on tied aid credits seemed to be 
having some effect, and there was a hope that further progress 
could be made. Tied aid transactions (excluding Japan) have 
decreased from $9 billion in 1992 to $3.8 billion in 2000. 
However, Japan has shifted some of its financing from untied 
aid to tied aid, and now represents 70 percent of all financing 
attributable to tied aid.
    In addition, according to the most recent international 
data, in 1998 there was nearly $500 billion in export credit 
issued around the world by export credit agencies of other 
governments. Ex-Im Bank's share of that was only $13 billion. 
The U.S. now ranks seventh in export credit activity behind 
Japan, France, Korea, Canada, Germany, and the Netherlands. 
Foreign governments have also been utilizing other mechanisms 
such as market windows and untied aid to get around the OECD 
Arrangement.
    In light of these developments, the proposal in the 
Administration's budget to reduce funding for the Ex-Im Bank by 
25 percent was a subject of concern raised by members of the 
Committee present at the hearings held on May 17 and June 19. 
Given the growing use of export credits by foreign governments 
and efforts to get around the restrictions that exist, concern 
was expressed that this was not the time to reduce the 
resources of the Ex-Im Bank. Concern was also expressed about 
proposals floated by OMB to compensate for the proposed 
reduction in funding by raising the fees on Ex-Im Bank loans, 
reducing the proportion of Ex-Im Bank financing in export 
deals, and imposing a more stringent standard on whether an 
export deal really requires Ex-Im Bank financing. It was not 
clear that these proposals were being developed with 
consideration of the lending policies of the export credit 
agencies of other countries to determine how these proposals 
would affect the competitiveness of Ex-Im Bank financing.
    During the Committee's consideration of the Export-Import 
Bank Reauthorization Act of 2001, seven issues were the focus 
of attention and action: the Tied Aid Credit Fund of the Ex-Im 
Bank; the term of the reauthorization of the Ex-Im Bank; the 
competitive challenge to the Ex-Im Bank posed by foreign market 
windows; Ex-Im Bank financing for small business; the need for 
an Inspector General for the Ex-Im Bank; the Ex-Im Bank's 
policy on the domestic economic impact of exports financed by 
the Ex-Im Bank; and the collection of information on the 
activities of foreign export credit agencies as part of the Ex-
Im Bank's annual competitiveness report. Following is a 
discussion of these issues and the actions taken by the 
Committee.

Tied Aid Credit Fund

    Perhaps the issue that gained the most attention during the 
subcommittee hearings on May 17 and June 19 was the Tied Aid 
Credit Fund. In particular, the experience of Valmont 
Industries of Omaha, Nebraska, a leading irrigation equipment 
manufacturer, was the subject of considerable discussion.
    The senior vice president of Valmont was a witness at the 
May 17 hearing. According to his testimony, Valmont had applied 
to the Ex-Im Bank for tied aid financing to match the bid of an 
Austrian company supported by government tied aid financing. 
Ex-Im Bank staff carefully reviewed the application and 
determined that the application had merit and could lead to 
significant follow-on sales for Valmont. At a meeting of the 
Ex-Im Bank Board on March 1, Ex-Im Bank staff joined with the 
Commerce Department representative present in recommending 
approval of the application. Disagreeing with the Ex-Im Bank's 
analysis, the Treasury Department recommended against approval. 
After considering the recommendations, the Ex-Im Bank Board 
voted 4-0 in favor of the application. However, after the 
Board's vote, discussions were held between representatives of 
the Ex-Im Bank and Treasury. Ex-Im Bank afterward sent Valmont 
a letter indicating that the Bank was unable to take favorable 
action on its request. Subsequently Valmont lost the deal.
    At the June 19 hearing with the Ex-Im Bank and Treasury, 
members of the Committee expressed deep concerns over the 
handling of the case. First, there appeared to have been a lack 
of consultation between the Treasury Department and Ex-Im Bank 
prior to the meeting of the Ex-Im Bank Board on March 1. 
Second, most previous disagreements between the Ex-Im Bank and 
the Treasury Department had been resolved prior to Board 
meetings. Never before had a case approved by the Board been 
overturned.
    The Ex-Im Bank Charter provides that the tied aid credit 
program shall be administered by the Ex-Im Bank ``in 
consultation with the (Treasury) Secretary and in accordance 
with the Secretary's recommendations on how such credits could 
be used most effectively and efficiently to carry out the 
purposes'' described in the charter. These purposes are focused 
on efforts to enforce and facilitate new international 
agreements restricting the use of tied aid. The Charter was 
amended in 1992 to give the Ex-Im Bank additional authority to 
match foreign tied aid credits when it determines that ``United 
States trade or economic interests justify the matching'' even 
if the foreign credits are in compliance with an international 
agreement.
    As noted, in the past Ex-Im Bank and the Treasury 
Department have collaborated closely on the use of the Tied Aid 
Credit Fund. The Treasury, which has lead responsibility in 
negotiating arrangements in the OECD to limit export credits, 
has provided general guidance to Ex-Im Bank on how the Tied Aid 
Credit Fund could be used to advance the negotiating 
objectives. While agreement has usually been reached on 
individual tied aid cases, when disagreements have arisen in 
the past, Treasury has deferred to the judgment of the Ex-Im 
Bank Board. That did not occur in this case.
    The Valmont case therefore generated serious concern among 
members of the Committee. It is the view of the Committee that 
while the Treasury Department has responsibility to provide 
overall policy guidance to the Ex-Im Bank on the use of the 
Tied Aid Credit Fund as it relates to furthering international 
negotiations to restrict the use of tied aid credits, final 
case by case decisions on the use ofthe Tied Aid Credit Fund, 
after consultation with the Treasury, are the responsibility of the Ex-
Im Bank. The members of the Committee at the June 19 hearing strongly 
urged the Ex-Im Bank and the Treasury Department to work out a set of 
procedures for consultation that would avoid a recurrence of what 
happened in the Valmont case.
    Subsequent to the hearing, Ex-Im Bank and the Treasury 
Department engaged in an extended effort to address this 
problem. As a result, a written set of procedures and 
principles were worked out by Ex-Im Bank and Treasury. The 
procedures provide for extensive consultations between Ex-Im 
Bank and Treasury over all tied aid credit applications, 
including direct consultations between the Ex-Im Bank and 
Treasury over all tied credit applications, including direct 
consultations between Ex-Im Bank and the Secretary of the 
Treasury. The procedures also provide that the ``Ex-Im Bank's 
Board will not take any final action on any tied aid 
application unless the procedures for Ex-Im Bank/Treasury 
cooperation'' are followed. In the view of the Committee this 
means that once the procedures are followed, the final case by 
case decisions on the use of the Tied Aid Credit Fund are the 
responsibility of the Ex-Im Bank Board.
    The principles provide that ``Tied aid matching cases are 
reviewed by Ex-Im Bank's Board of Directors, with input from 
other agencies, especially from the Treasury Department, which 
has policy oversight responsibility.'' This is consistent with 
the Committee's understanding of Treasury's role in the Tied 
Aid Credit Fund.
    A copy of the procedures and principles is contained as an 
Appendix to this Committee Report. The Committee hopes that the 
implementation of these procedures and principles will avoid a 
recurrence of the kind of problem illustrated by the Valmont 
case.

Term of reauthorization

    The Export-Import Bank Reauthorization Act of 2001 provides 
a 5-year reauthorization of the Export-Import Bank. The 
Administration recommended a 4-year reauthorization.
    The Committee intentionally provides a 5-year authorization 
in order to take the reauthorization of the Ex-Im Bank out of 
the Presidential election cycle. When the reauthorization of 
the Ex-Im Bank falls in the first year of a President's term, 
it runs the risk that a new President will be taking office, as 
occurred this year. In that case, a new Administration must 
struggle not only to put in place a new Chairman of the Ex-Im 
Bank but also cope with providing leadership for the 
reauthorization of the Ex-Im Bank as well. The Committee 
believes that it makes more sense to put the reauthorization of 
the Ex-Im Bank in the second year of a President's term to 
assure that a new Ex-Im Bank Chairman has been put in place and 
has been on the job with sufficient time to provide leadership 
for the reauthorization of the Bank.

Market windows

    In hearings held in the International Trade and Finance 
Subcommittee on May 17 and June 19, witnesses from industry, 
academia, and the Administration commented on the growing 
challenge to U.S. exporters posed by foreign market windows.
    For the purposes of this reauthorization, the term ``market 
windows'' means any government-supported entity or any facility 
provided by a government-supported entity that provides export 
financing that is claimed not to be subject to the disciplines 
of the Arrangement on Guidelines for Officially Supported 
Export Credit established through the Organization for Economic 
Cooperation and Development (OECD). Since the OECD Arrangement 
has not agreed upon a definition of market windows, the 
Committee refrained from including a definition in the statute. 
This definition is provided in the Committee Report as guidance 
for implementation of the statute with the expectation that the 
international understanding of the meaning of the term may 
evolve.
    Market windows are government-sponsored enterprises (for 
example, government owned or directed financial institutions) 
which provided export financing at below market rates. However, 
the foreign governments--notably Germany and Canada--which 
support them claim that these enterprises are not official 
export credit agencies, and thus not subject to the disciplines 
of the OECD Arrangement. Currently, two government entities 
operate very active market windows. They are the German market 
window KfW and the Canadian market window, the Export 
Development Corporation (EDC). The result is that these foreign 
market windows can provide subsidized export financing outside 
the OECD Arrangement and give their exporters a competitive 
advantage over U.S. exporters. Also, because these foreign 
market windows are not subject to the OECD disciplines, there 
is often a transparency problem--it is difficult to find out 
the terms of the financing they provide.
    The Ex-Im Bank Act currently authorizes the Ex-Im Bank to 
``provide guarantees, insurance, and extensions of credit at 
rates and on terms and other conditions which are fully 
competitive with the Government-supported rates and terms and 
other conditions available for the financing of exports of 
goods and services from the principal countries whose exporters 
compete with the United States.'' Since market windows are 
government-supported entities, the Ex-Im Bank views its current 
statute as providing Ex-Im Bank authority to match market 
windows financing (but not to create its own market windows 
institutions). The Committee agrees with that view. However, 
the Committee believed it would be helpful to make this 
authority explicit so as to remove any question about Ex-Im 
Bank's authority and also to send a message to the foreign 
market windows of U.S. concern about their operations.
    As a result, the Committee adopted by voice vote at its 
markup on July 18 an amendment offered by Senators Hagel, Bayh, 
and Sarbanes. The amendment had two provisions. First, it 
directed the executive branch to seek increased transparency 
over the activities of market windows in the OECD Export Credit 
Arrangement. If it is determined that market windows are 
disadvantaging U.S. exporters, the U.S. would be directed to 
seek negotiations in the OECD for multilateral disciplines and 
transparency for market windows.
    Second, the amendment explicitly authorized the Ex-Im Bank 
to provide financing on terms and conditions that are 
inconsistent with those permitted under the OECD Export Credit 
Arrangement to match financing terms and conditions that are 
being offered by market windows if such matching advances 
negotiations for multilateral disciplines and transparency 
within the OECD, or when market windows financing is being 
offered on terms that are more favorable than available from 
private financial markets. Ex-Im Bank could also match market 
window financing when the market window refuses to provide 
sufficient transparency to permit Ex-Im Bank to determine the 
terms and conditions of the market window financing. The 
Committee understands that Ex-Im Bank has the authority to 
match market windows financing that is consistent with the 
terms of the OECD Arrangment.
    In addition, the Committee held the view that increased 
information was needed on the activities of foreign market 
windows. As a result, Section 3 of the bill specifies that the 
Bank's annual report to Congress on export credit competition 
should include information on export financing available to 
foreign competitors through market windows.
    The Committee believed that it was very important to make 
clear that Ex-Im Bank has the authority to match market windows 
financing in order to allow U.S. exporters to compete on a 
level playing field, and to direct the executive branch to seek 
negotiations in the OECD for multilateral disciplines and 
transparency for market windows financing.

Small business financing by the Ex-Im Bank

    The Committee has strongly supported the Ex-Im Bank's 
efforts to provide export financing for small business. The Ex-
Im Bank Act currently requires that ``the Bank shall make 
available, from the aggregate loan, guarantee, and insurance 
authority available to it, an amount to finance exports 
directly by small business concerns which shall not be less 
than 10 percent of such authority for each fiscal year.''
    During the Committee's markup on July 18, Senator Allard 
offered an amendment which would have increased to 25 percent 
by 2004 the portion of Ex-Im Bank's financing devoted to small 
business. Senator Sarbanes offered a second degree amendment, 
which was adopted, to increase the amount to 18 percent.
    According to the Ex-Im Bank, in FY 2000 small business 
comprised 18 percent of the total value of all Ex-Im Bank 
financing authorizations and 86 percent of all transactions 
supported by Ex-Im Bank. In FY 1999 these numbers were 16 
percent and 86 percent respectively. In FY 1998 they were 21 
percent and 85 percent respectively.
    The Committee believed that the requirement for Ex-Im Bank 
small business financing could reasonably be raised to a level 
of 18 percent without causing disruption to Ex-Im Bank's 
lending programs. Ex-Im Bank remains free to go above this 
level, as it has in the past, but the Committee was concerned 
that requiring a higher level could have the unwanted effect of 
tying up available Ex-Im Bank resources if the Ex-Im Bank could 
not achieve higher levels of small business financing in a 
given year.

Inspector General for Ex-Im Bank

    During the Committee markup on July 18, Senator Allard 
offered an amendment that would establish an Inspector General 
for the Ex-Im Bank. Members of the Committee agreed in 
principle that Ex-Im Bank could benefit from having an 
Inspector General. Senator Dodd suggested, however, that it 
might be a better use of Ex-Im Bank's limited resources for Ex-
Im Bank to share an Inspector General with the Agency for 
International Development, which already has such a sharing 
relationship with the Overseas Private Investment Corporation 
(OPIC). Senator Gramm suggested that the Ex-Im Bank share an 
Inspector General with OPIC, as both are independent agencies 
with related purposes. Senator Allard withdrew his amendment 
with the understanding that an effort would be made to reach an 
agreement so that this issue could be addressed on the Senate 
floor.

Ex-Im Bank's economic impact standard

    The Export-Import Bank Act requires the Ex-Im Bank to 
assess whether its loans are likely to cause substantial injury 
to U.S. industry, and not to extend such support if the loans 
would have an adverse impact on U.S. production and employment.
    During the Committee markup on July 18, Senator Bayh 
offered an amendment with Senators Shelby, Stabenow, and 
Schumer that would prohibit the extension of a loan or 
guarantee by the Ex-Im Bank to any entity subject to a 
countervailing duty or antidumping order. This is consistent 
with the Bank's current practice.
    In addition, the amendment would also prohibit the 
extension of a loan or guarantee by the Ex-Im Bank to any 
entity subject to an investigation under the countervailing 
duty and antidumping laws unless the Bank determines that the 
loan or guarantee would not result in increased imports of the 
product covered by the investigation and would not adversely 
affect the domestic industry. It is a more heightened level of 
scrutiny than the Bank currently practices. The Bank does not 
currently take preliminary investigations into account. Under a 
proposed revision to current Ex-Im Bank procedures, the 
existence of countervailing duty or antidumping investigations 
could be considered by the Ex-Im Bank when making loan 
guarantee decisions.
    Under the amendment, the Bank would also be required to 
solicit comments from parties who would be substantially 
adversely affected by a proposed loan or guarantee regarding 
the existence and magnitude of excess capacity in the affected 
industry and the potential adverse impact on U.S. production 
and employment. Again a similar approach is being considered by 
the Ex-Im Bank in its proposed revisions.
    The amendment by Senator Bayh was prompted by Ex-Im Bank's 
approval in December 2000 of a loan guarantee for a project 
that will increase by 1.5 million metric tons hot-rolled steel 
capacity at the Benxi Iron and Steel Company in China. That 
decision was made at a time when, in the view of the proponents 
of the amendment, the existence of excessive foreign steel 
capacity was well known and the domestic steel industry was in 
a state of severe crisis caused by foreign steel producers 
dumping into U.S. markets causing the loss of over 20,000 jobs. 
The Ex-Im Bank, which previously has both approved and 
disapproved steel-related projects, in this case approved the 
guarantee based upon its conclusion that the additional 
capacity would not displace U.S. steel production. The 
proponents of the amendment expressed concern that the Ex-Im 
Bank should not fund projects that will lead to increased 
global oversupply and injury to U.S. workers and businesses. 
The loan was extended over opposition from other members of the 
Administration. Secretary of Commerce Norman Y. Mineta wrote to 
the Ex-Im Bank in vigorous opposition to the loan; Secretary of 
the Treasury Lawrence Summers wrote to the World Bank calling 
on all financial institutions to withhold financing for 
overseas steel projects.
    After objections were raised by members of the Committee 
that the amendment was overly broad, Senator Bayh withdrew the 
amendment with an understanding that an effort would be made to 
work out an agreement to address the issue prior to Senate 
floor consideration of the bill.

Ex-Im Bank competitiveness report

    Section 3 of the Export-Import Bank Reauthorization Act 
makes a number of changes to Ex-Im Bank reporting requirements 
to ensure more timely and complete reporting of the activities 
of foreign export credit agencies.
    Section 3 requires the Ex-Im Bank to submit its annual 
competitiveness report to Congress not later than June 30 of 
each year. Currently, the annual competitiveness report comes 
to Congress in late summer/early autumn, too late to be used 
for any oversight or legislation in any given year. Also, with 
the current submission date, the Advisory Committee's annual 
recommendations, completed in December each year, are eight to 
nine months old. Finally, by moving the reporting date to June 
30, the Ex-Im Bank will have ample time to include data on 
other report credit agencies, in light of the fact that the 
Berne Union reports on global export credit agency activity 
come in forty-five (45) days after the close of each quarter.
    As previously mentioned, Section 3 also specifies that the 
Bank's annual competitiveness report to Congress should include 
information on export financing available to foreign 
competitors through market windows. As noted above, for the 
purposes of this Act, the term market windows means any 
government-supported entity or any facility provided by a 
government-supported entity that provides export financing that 
is claimed not to be subject to the disciplines of the 
Arrangement on Guidelines for Officially Supported Export 
Credit established through the Organization for Economic 
Cooperation and Development.
    Finally, Section 3 requires the Ex-Im Bank to estimate the 
annual amount of export financing available from the government 
and government-related agencies and include that information in 
Ex-Im's annual competitiveness report. The Ex-Im Bank shall use 
the quarterly and annual data from the Berne Union or other 
sources in preparing these annual estimates. If the Bank deems 
the sources or information to be sensitive, that information 
may be transmitted to Congress on a confidential, or 
classified, basis.

                      section-by-section analysis

Section 1. Short title

    Section 1 provides that this Act may be cited as the 
``Export-Import Bank Reauthorization Act of 2001''.

Section 2. Extension of authority

    Section 2 extends the expiration date of the Export-Import 
Bank Act from September 30, 2001 to September 30, 2006.

Section 3. Sub-Saharan Africa advisory committee

    Section 3 extends the expiration date for the sub-Saharan 
Africa advisory committee of the Export-Import Bank from 
September 30, 2001 to September 30, 2006.

Section 4. Guarantees, insurance, extension of credit

    Section 4 requires the Ex-Im Bank to submit its annual 
competitiveness report to Congress not later than June 30 of 
each year. Section 3 also specifies that the Bank's annual 
report to Congress on export credit competition should include 
information on export financing available to foreign 
competitors through market windows. Finally, Section 3 requires 
the Ex-Im Bank to estimate the annual amount of export 
financing available from the government and government-related 
agencies and include that information in Ex-Im's annual 
competitiveness report.

Section 5. Financing for small business

    Section 5 increases from 10 percent to 18 percent the 
amount the Ex-Im Bank must make available of its aggregate 
loan, guarantee, and insurance authority each fiscal year to 
finance exports directly by small business concerns.

Section 6. Market windows

    Section 6 directs the U.S. to seek negotiations for 
multilateral disciplines and transparency for market windows 
within the OECD Export Credit Arrangement. It also authorizes 
the Ex-Im Bank to match market windows financing that is 
inconsistent with the Arrangement if the matching advances OECD 
negotiations or the market windows financing is offered on 
terms and conditions more favorable than financing available 
from private financial markets.

                      regulatory impact statement

    Pursuant to rule XXVI, paragraph 11(b), of the Standing 
Rules of the Senate, the Committee has evaluated the regulatory 
impact of the bill and concludes it would result in no net 
increase in the regulatory burden imposed by the Government.

                          cost of legislation

    The cost estimate of the Congressional Budget Office 
appears below:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 27, 2001.
Hon. Paul S. Sarbanes,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for a bill to reauthorize 
the Export-Import Bank of the United States.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehill.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 1372--A bill to reauthorize the Export-Import Bank of the United 
        States

    Summary: The bill would extend the authority of the Export-
Import Bank of the United States (Eximbank) to enter into new 
direct loan obligations and new guaranteed loan commitments 
through 2006. The bill would authorize new efforts by the U.S. 
government to bring export financing (so called ``market 
windows'') offered by certain foreign banks owned or supported 
by their governments into compliance with the terms of the 
export credit arrangement among the major exporting countries. 
It would also increase the Eximbank's set-aside for financing 
exports by small businesses from 10 percent to 18 percent of 
its credit obligations and commitments. Finally, the bill would 
continue the sub-Saharan Africa Advisory Committee and add new 
reporting requirements.
    Assuming the appropriation of the necessary amounts, CBO 
estimates that implementing the bill would cost $202 million in 
2002 and $3.2 billion over the 2002-2006 period. Because the 
bill would not affect direct spending or receipts, pay-as-you-
go procedures would not apply.
    This legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) and would not affect the budgets of state, local, or 
tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the bill is shown in the following table. 
The costs of this legislation fall within budget function 150 
(international affairs).

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2001      2002      2003      2004      2005      2006
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending under current law:
    Estimated budget authority \1\..................       910        49        41        37        31        31
    Estimated outlays...............................       813       628       306       186       102        68
Proposed changes:
    Estimated authorization level \2\...............         0       887       918       946       971       993
    Estimated outlays...............................         0       202       571       725       834       889
Spending under the bill:
    Estimated authorization level \1\ \2\...........       910       936       959       983     1,002     1,024
    Estimated outlays...............................       813       830       877       911       936       957
----------------------------------------------------------------------------------------------------------------
\1\ The 2001 level is the amount appropriated for that year.
\2\ The estimate assumes that funding for Eximbank would continue at the 2001 level adjusted for inflation.
  Funding at the 2001 level without adjustment for inflation would lower outlays by $7 million in 2002 and by
  $0.2 billion over the 2002-2006 period.

    Basis of estimate: The Eximbank provides about $12 billion 
annually in loans and guarantees to finance the export of 
United States' goods and services. The bill would extend the 
Eximbank's authority to provide financing through 2006, an 
additional five years. The estimate assumes the Eximbank would 
receive appropriations for administrative expenses and the cost 
of new loans and guarantees, as defined by the Federal Credit 
Reform Act, at the start of each fiscal year and that outlays 
would follow historical patterns.
    CBO's estimate of spending under current law assumes there 
would be no future appropriations for the cost of new credits 
and that administrative expenses would be reduced to the level 
necessary to service outstanding credits. Under the bill, CBO 
assumes that spending by the Eximbank would continue at the 
2001 level adjusted for inflation.
    The bill would encourage the Eximbank to seek negotiations 
that would bring the terms of market windows and the 
information made available about them into compliance with the 
export credit arrangement of the Organization for Economic 
Cooperation and Development. The bill would authorize the 
Eximbank to offer financing on terms and conditions more 
generous than permitted under the arrangement, if necessary, to 
advance these negotiations, or if a foreign government refuses 
to provide information on its market windows. Based on 
information from the Administration, it appears that the most 
likely variances from arrangement terms that could be offered 
under the bill would be longer loan maturities or increased 
financing to cover 100 percent of value of an export.
    Market windows are typically available to borrowers with 
low or moderate risk. CBO estimates that increasing the maximum 
maturity of Eximbank's credits from 12 years to 15 years would 
increase the cost of moderate risk credits by 2 percent. For 
example, providing $1 billion in financing with longer terms 
would require an additional $20 million in subsidy 
appropriations. Similarly, financing 100 percent of the value 
of $1 billion in exports would increase the cost of financing 
by another $10 million.
    Given the uncertainty of how the Eximbank might implement 
the new provision and what its potential future financing 
requirements might be, CBO estimates that Eximbank could 
continue to provide $12 billion to $14 billion a year in 
financing under the bill with a subsidy appropriation at 
baseline levels. This estimate takes into account the fact 
that, while more generous terms would increase the cost of 
financing any particular export, the Office of Management and 
Budget's economic and technical assumptions for 2002 would 
lower the estimated cost of Eximbank financing in general. A 
program level of $13 billion in new credits in 2002 would 
require $100 million less in subsidy appropriations than it did 
in 2001. Higher costs for credits targeted at market windows 
could be offset by the lower estimated cost of lending within 
arrangement terms.
    Increasing the set-aside for exports by small businesses to 
18 percent would bring the statutory floor to about the ratio 
of current operations. Based on information from the Eximbank, 
CBO estimates that increasing the set-aside would not 
significantly affect its lending and that the other provisions 
in the bill would not significantly increase the institution's 
administrative expenses.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: This bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal costs: Joseph C. Whitehill; 
Impact on State, local, and tribal governments: Elyse Goldman; 
Impact on the private sector: Paige Piper/Bach.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                        changes in existing law

    The Committee has determined that it is necessary, in order 
to expedite the business of the Senate, to dispense with the 
requirements of rule XXVI, paragraph 12, of the Standing Rules 
of the Senate, with respect to this legislation.

                                APPENDIX

                              ----------                              


    procedures for enhanced ex-im/treasury cooperation on tied aid 
                              transactions

    1. Ex-Im and Treasury staffs shall promptly share with each 
other all written materials received from exporters, other 
government agencies, or third parties, relating to proposed or 
pending Ex-Im Bank tied aid transactions. In particular, Ex-Im 
staff shall provide Treasury staff with a copy of each tied-aid 
application received by Ex-Im Bank within 5 business days of 
receipt.
    2. Within 10 business days of receiving an application or 
inquiry on possible tied aid use, Ex-Im staff (after consulting 
with Treasury staff) will contact the exporter/applicant and 
either provide a preliminary indication on the likelihood that 
the transaction would meet the parameters for tied aid use or 
identify specific information needed for Ex-Im and Treasury 
staff to provide such an indication.
    3. In order to further the negotiations of improved OECD 
tied aid rules or enforce compliance with existing OECD rules, 
Treasury staff may recommend that the Bank support specific 
tied aid applications or that the Bank support tied 
applications countering certain categories of foreign aid 
credits.
    4. Ex-Im staff shall send Treasury staff a report at each 
month's end indicating the status of pending and outstanding 
tied aid transactions. Where there is a significant mid-month 
status change, Ex-Im staff shall alert Treasury staff.
    5. Within 30 business days of receipt of a tied aid 
application, Ex-Im and Treasury staffs shall meet to discuss 
their preliminary views on the merits of the application and to 
develop an approach regarding processing of the application.
    6. Ex-Im staff shall provide Treasury staff drafts of all 
tied-aid Board memos at least 10 business days before the 
projected date for final-memo distribution. Within 5 business 
days of receiving such drafts, Treasury staff shall either 
provide written comments to Ex-Im Bank staff or provide written 
notice that Treasury staff has no comments. Written comments or 
a statement of Treasury staff's views shall be attached to the 
Board memos. Treasury staff may request in writing that 
distribution of the final memo and Board consideration of the 
application be delayed for up to 10 business days in order to 
provide additional time for consultation or for Treasury to 
submit written comments. Any such written request received 
prior to the close of the business day immediately preceding 
the scheduled Board meeting will be honored by Ex-Im Bank. If, 
after these consultations, Treasury and Ex-Im staffs disagree 
on the merits of a particular matching tied aid offer, Board 
consideration of the application shall be delayed for up to an 
additional 10 business days during which time the Under 
Secretary of the Treasury for International Affairs and the Ex-
Im Bank Chairman will meet to seek to resolve the differences. 
Should agreement not be reached following such consultation, 
within 10 business days the Secretary of the Treasury and the 
Ex-Im Bank Chairman shall exchange letters setting forth their 
written views on how agreement might be reached.
    7. Ex-Im Bank's Board will not take any final action on any 
tied aid application unless the procedures for Ex-Im Bank/
Treasury cooperation described above have been followed.
Review
    Treasury and Ex-Im Bank staff will meet on an annual basis 
to review and discuss data and trends on the application for 
and use of the War Chest and the use of tied aid credit 
financing by foreign governments.
    Treasury and Ex-Im Bank staff will meet on a semi-annual 
basis to review Ex-Im Bank and Treasury cooperation with 
respect to the administration of the War Chest and to discuss 
any changes to the procedures outlined above that may be 
necessary to improve cooperation and more effectively 
administer the program.
    The Annual Tied Aid Report to Congress, which Ex-Im Bank 
staff and Treasury together prepare, will henceforth contain a 
section reviewing Ex-Im and Treasury cooperation with respect 
to this Understanding.
                                ------                                


           principles and guidance for the tied aid war chest

    Principle No. 1. The Tied Aid War Chest is a resource that 
should be used purposefully and selectively, with the simple 
standard being that applications would be where there is a 
clear and precise purpose evidenced. Such use not only 
maximizes the probable value of its employment, but also 
enhances the actual deterrence value of the amounts remaining.
    Principle No. 2. The War Chest is not to be applied 
``offensively''; that is, there will be no initiation of Tied 
Aid using the War Chest. Rather, the War Chest will be used to 
counter situations where there is a reasonable evidentiary 
basis that there is (either formally or informally) a foreign 
tied aid offer. In countering such offers the U.S. offer is not 
necessarily contained by the terms of the original offer. 
Moreover, the ``no initiation'' principle does not preclude 
technical initiation when the approach is the only way to 
effectively counter the offer of another country.
    Principle No. 3. A prime use of the War Chest is to 
``police'' the Helsinki accords--aggressively counter such 
actions as de facto tied aid (so called ``untied'' aid), 
absence of mandated notification rules, or refusal to abide by 
Consultation findings. In this context, Treasury has an 
explicit right (or ``put'') to recommend Tied Aid use for 
specific cases--or categories of cases--in support of Tied Aid 
Negotiating objectives.
    Principle No. 4. Another prime (not secondary) use is in 
defending U.S. exporters from examples or patterns of use that 
effectively (whether intentional or not) form a threat to long-
run U.S. market share/access in merging markets. The idea is to 
respond to reasonable evidence of tied aid use that may create 
long-run trade advantage for foreign exporters.
    Principle No. 5. Any use of the War Chest should be for a 
project which meets Ex-Im Bank's environmental guidelines.

Tied aid defined

    Tied aid is government-to-government concessional financing 
of public sector capital projects in developing countries. Tied 
aid is provided by the aid agencies of OECD member governments, 
sometimes in joint financing packages with their national 
export credit agencies (their ex-im banks), or by their export 
credit agencies alone. Tied aid terms are much more 
concessional than the typical export credit terms offered by 
Ex-Im Bank and its counterparts. Tied aid usually involves 
total maturities longer than 20 years; interest rates equal to 
one-half to two-thirds of market rates in the currency of 
denomination; or large grants (equal to 35 percent or more of 
contract value) offered in conjunction with regular export 
credits. Regular export credits--involving terms up to and 
including 10-12 years--are not tied aid, and are not the 
subject of this Fact Sheet.

Principles for use of the Tied Aid War Chest

    1. The Tied Aid War Chest is a resource that is governed by 
the simple standard of purposeful and selective use to deter or 
defend against foreign tied aid that distorts trade, and is 
utilized so as to maximize the value of these resources. A 
prime use of the War Chest is to leverage OECD negotiations to 
restrict the scope for aid-financed trade distortions through 
new multilateral rules, and to police existing multilateral 
rules. Another prime use is to defend U.S. exporters from 
examples or patterns of foreign tied aid use that effectively 
(whether intentional or not) form a significant threat to U.S. 
market share/access in emerging markets. In this regard, its 
aim is to deter, or if not possible, to match trade distorting 
foreign tied aid offers by reopening bid opportunities closed 
to U.S. exporters by foreign tied aid offers.
    2. The War Chest is not to be applied ``offensively'' to 
introduce tied aid into an export competition; that is, there 
will be no initiation of tied aid using the War Chest to give 
exporters an advantage over standard export credits. Rather, 
the War chest will be used to counter situations where there is 
credible evidence that a foreign government is offering tied 
aid (formally or informally) to distort trade to provide a 
significant competitive advantage for foreign exporters. The 
War Chest is not an instrument for the routine support of U.S. 
exports and jobs. However, the ``no initiation'' principle does 
not preclude technical initiation when that approach is the 
only way to effectively counter the offer of another country.
    3. The War Chest will be used aggressively to counter 
violations of the OECD tied aid rules. In pursuing this 
objective, the War Chest will be used to counter uses of de 
facto tied aid (so-called untied aid), absence of mandated 
notification rules, exploitation of the OECD exemption for 
small projects, or refusal to abide by Tied Aid Consultations 
findings. More generally, Ex-Im Bank will consider matching a 
foreign tied aid offer if it receives credible evidence that 
another OECD member government's export credit agency or aid 
ministry is violating the internationally-agreed rules in 
letter or in spirit for competitive gain. In using the War 
Chest to leverage negotiations for multilateral agreements to 
restrict aid-financed trade distortions, Ex-Im Bank will work 
with Treasury to identify projects or categories of projects 
where such financing can advance U.S. international negotiating 
objectives.
    4. Any use of the War Chest should be for a project which 
meets Ex-Im Bank's environmental guidelines.

Implementation of War Chest matching policy

            Determination of eligibility for tied aid under the OECD 
                    rules
    Before a foreign tied aid matching offer will be made, the 
Treasury Department (in coordination with Ex-Im) will try to 
determine whether or not the project is eligible for tied aid 
under the OCED rules. If the project appears ineligible for 
tied aid, Treasury will ``challenge'' the project in the OECD 
in order to have it formally declared ineligible for tied aid. 
In this case any OECD government would be prevented from 
offering tied aid for the project under the OECD tied aid rules 
and competition would proceed on market, or standard Ex-Im 
Bank, financing terms. If the donor persists in an offer 
determined by the OECD to be ineligible for tied aid, 
whetherthrough a direct violation of the rules or by seeking formally 
to derogate from the rules, Ex-Im Bank will automatically offer 
matching financing.
    If the project is eligible for tied aid, Ex-Im Bank will 
proceed consistent with timing needs of the case to evaluate 
the matching request against its principles.
    Ex-Im Bank requires credible information about foreign tied 
aid offers before offering specific matching terms. Ex-Im Bank 
has access to formal prior notifications of foreign tied aid 
offers required under OECD tied aid rules. Ex-Im Bank will also 
review recipient governments' written or oral (e.g., to Ex-Im 
Bank or U.S. Embassy) confirmations; press reports; and/or 
copies of correspondence or bilateral aid protocol agreements 
among foreign exporters, donor, and recipient governments. Ex-
Im Bank seeks as much of the following information as 
practicable regarding each foreign tied aid credit for which 
matching is requested: specific financing terms (including 
currencies of denomination, grace periods, repayment terms, 
interest rates, grant amounts); amounts of tied aid financing; 
dates of foreign tied aid offers; descriptions of projects; 
names of donor agencies; names of recipient government 
agencies; names of foreign exporters.
    Ex-Im Bank carefully screens tied aid matching requests. 
Tied aid matching cases are reviewed by Ex-Im Bank's Board of 
Directors, with input from other agencies, especially from the 
Treasury Department, which has policy oversight responsibility. 
Ex-Im Bank prefers to use standard export credits and does not 
seek competitive advantage in approving tied aid. Ex-Im Bank 
does not offer tied aid in order to reserve otherwise 
competitive contracts solely for U.S. exporters; nor to induce 
approval of contracts that would not otherwise be approved.
    Ex-Im Bank will consider as many of the following factors 
as may be relevant to a specific case at a particular time:
          The total budget cost of the transaction;
          The clarity and extent of any pattern or trend 
        indicating intent to use tied aid funds to acquire 
        commercial advantage for specific exporters or 
        products;
          The clarity and extent of any pattern or trend 
        indicating intent by donor country to use tied aid 
        funds as part of a national strategy of trade 
        promotion;
          The economic/developmental feasibility of structuring 
        such transactions in the specific market on standard 
        export credit terms;
          The possible effect of the loss of the sale/access to 
        market/market share on the medium and long-term 
        viability of the supplier(s) as an entity or exporter;
          The small business status of the supplier(s);
          The nature of the export or project in terms of 
        environmental benefits;
          The existence/reality of International Competitive 
        Bidding procedures;
          The extent of competitor displacement;
          The clarity and specificity of documents relating to 
        the foreign tied aid offer;
          The existence and extent of any pattern or trend in 
        terms of tied aid use by the donor country (i.e., is it 
        a ``spoiled market'');
          The ability of any War Chest use to be successful 
        within the bounds of the Helsinki rules;
          The ability of any War Chest use to be successful 
        without posing a danger to the parameters to tied aid 
        use derived from case precedent and laid out in the Ex 
        Ante Guidance; and
          The available War Chest resources.

                                  
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