[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
TRADE PROMOTION AGENCIES AND
U.S. FOREIGN POLICY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MAY 19, 2015
__________
Serial No. 114-40
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California
DANA ROHRABACHER, California GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio ALBIO SIRES, New Jersey
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas BRIAN HIGGINS, New York
MATT SALMON, Arizona KAREN BASS, California
DARRELL E. ISSA, California WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina ALAN GRAYSON, Florida
MO BROOKS, Alabama AMI BERA, California
PAUL COOK, California ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas GRACE MENG, New York
SCOTT PERRY, Pennsylvania LOIS FRANKEL, Florida
RON DeSANTIS, Florida TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas
TED S. YOHO, Florida ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
TOM EMMER, MinnesotaUntil
5/18/15 deg.
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
------
Subcommittee on Terrorism, Nonproliferation, and Trade
TED POE, Texas, Chairman
JOE WILSON, South Carolina WILLIAM KEATING, Massachusetts
DARRELL E. ISSA, California BRAD SHERMAN, California
PAUL COOK, California BRIAN HIGGINS, New York
SCOTT PERRY, Pennsylvania JOAQUIN CASTRO, Texas
REID J. RIBBLE, Wisconsin ROBIN L. KELLY, Illinois
LEE M. ZELDIN, New York
C O N T E N T S
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Page
WITNESSES
Mr. Fred P. Hochberg, chairman and president, Export-Import Bank
of the United States........................................... 6
The Honorable Elizabeth L. Littlefield, president and chief
executive officer, Overseas Private Investment Corporation..... 14
The Honorable Leocadia I. Zak, director, U.S. Trade and
Development Agency............................................. 29
Mr. Daniel J. Ikenson, director, Herbert A. Stiefel Center for
Trade Policy, Cato Institute................................... 53
General James L. Jones, USMC, Retired, founder, Jones Group
International (former National Security Advisor to the
President of the United States)................................ 67
Ms. Susan Jaime, founder, Ferra Coffee International............. 76
Carly Seidewand Eppley, vice president, Global Sales and
Administration, Resin Technology, LLC.......................... 82
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Mr. Fred P. Hochberg: Prepared statement......................... 8
The Honorable Elizabeth L. Littlefield: Prepared statement....... 16
The Honorable Leocadia I. Zak: Prepared statement................ 31
Mr. Daniel J. Ikenson: Prepared statement........................ 56
General James L. Jones, USMC, Retired: Prepared statement........ 70
Ms. Susan Jaime: Prepared statement.............................. 78
Carly Seidewand Eppley: Prepared statement....................... 85
APPENDIX
Hearing notice................................................... 96
Hearing minutes.................................................. 97
General James L. Jones, USMC, Retired: Material submitted for the
record......................................................... 98
TRADE PROMOTION AGENCIES AND
U.S. FOREIGN POLICY
----------
TUESDAY, MAY 19, 2015
House of Representatives,
Subcommittee on Terrorism, Nonproliferation, and Trade,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 o'clock
a.m., in room 2172 Rayburn House Office Building, Hon. Ted Poe
(chairman of the subcommittee) presiding.
Mr. Poe. This subcommittee will come to order. Without
objection, all members will have 5 days to submit statements,
questions, and extraneous materials for the record, subject to
the length limitation and the rules.
I will now make my opening statement. Trade is critical to
the national economy of the U.S. For example, manufacturing
jobs related to trade pay 18 percent more than manufacturing
jobs that are not. Trade plays a key role in new jobs. If a
company wants to expand, it has to reach new customers because
95 percent of the customers are outside the United States.
Trade is the lifeblood of my hometown of Houston, Texas.
Over half of Houston's economy depends on trade. Houston has
one of the largest ports in the world and it is the only gas
capital of the world. Overall, trade supports more than one out
of five jobs in Texas and Texas has been the top exporting
state for 12 consecutive years. This is not just for large
businesses either. Ninety-three percent of Texas exporters are
small- and medium-size businesses. Texas is the number one
state and Houston, Texas is the number one city when it comes
to receiving support from EXIM.
There is no question about the importance of trade. We need
trade to grow. What we are looking at today is the Federal
Government's role in trade. Before us today we have three
agencies in the Federal Government that promote trade and
investment.
The Export-Import Bank is the official U.S. export credit
agency. It provides direct loans, loan guaranties and export
credit insurance to help finance U.S. exports of goods and
services.
The Overseas Private Investment Corporation, or OPIC, is
the official U.S. development finance institution. OPIC seeks
to promote economic growth and developing economies by
providing political risk insurance, project and investment fund
financing, and other services to U.S. firms investing in those
countries.
The U.S. Trade and Development Agency, or TDA, seeks to
link U.S. businesses to export opportunities overseas that lead
to economic growth and development in middle income countries
by funding a range of pre-export activities.
The question before us today is do we need these agencies?
Sixty other countries have export credit agencies of their own.
Supporters of reauthorizing EXIM Bank argue that if Congress
allows the EXIM Bank to expire, then these 60 other countries
will be happy to jump in, put our American companies at a
competitive disadvantage, and take business away from the U.S.
Some users of EXIM say they will go out of business without
EXIM. Critics of the bank respond that subsidizing companies
has no place in a free market system. But some of these same
critics support government subsidies for terrorism risk
insurance, flood insurance, they support the FDIC, and the
National Credit Union Share Insurance Fund.
There is also substantial disagreement about exactly what
this costs the taxpayer. Critics say due to some tricky
accounting standards, taxpayers are left holding the bag, while
the agencies themselves argue they return a surplus to the U.S.
Treasury every year. Critics argue that Congress enacted
reforms during the EXIM Bank's 2012 reauthorization, but
claimed that these reforms were never implemented. EXIM
disagrees, saying that it has completed and implemented all
reforms.
While trade promotion agencies are supposed to promote
trade that helps the U.S., many Americans have questions about
helping foreign companies that are in the U.S. economy. Do big
State Owned Enterprises, or SOEs, deserve taxpayer dollars on
top of the money they get from their own governments? And what
about American companies that are trying to compete against
these industries?
At the same time, these agencies have a special focus on
helping small business. Twenty-five percent of EXIM authorized
money went to small businesses last year, exceeding its 20
percent requirement. Over the past 5 years, 75 percent of
OPIC's supported projects have involved a U.S. small- or
medium-size business.
Just last month, a former Export-Import Bank loan officer
pled guilty to taking more than $78,000 in bribes for fast
tracking unqualified loan applications. OPIC has similar
examples of fraud. This is a good sign that fraud is identified
and perpetrators are punished, but there seems to me that more
could be done to prevent fraud in the first place.
So my hope is that this hearing can bring some clarity to
this debate.
The American companies just need a level playing field to
compete. No one innovates as well as the U.S. from the iPhone
to hydraulic fracturing the United States is the world's leader
in coming up with new ideas that create new jobs and a higher
standard of living for everyone. For example, if you add up the
20 countries the United States has a trade agreement with,
American manufacturers run a $50 billion trade surplus with
them. That is what happens when we combine the strength of
American spirit with a level playing field. American companies
win.
Before turning to the ranking member for his opening
remarks, I would like to submit to the record the testimonies
in support of reauthorizing EXIM Bank from the Nuclear Energy
Institute, Texas Association of Business, Texas Association of
Manufacturers, and over 300 businesses in Texas. Hearing no
objection, all of these testimonials from these 300 different
groups in support of the EXIM Bank will be made part of the
record.
Now I will turn to the ranking member, Mr. Keating, and the
gentleman from Massachusetts may give his opening statement.
Mr. Keating. Thank you, Mr. Chairman, for conducting this
timely and bipartisan-spirited hearing. And thank you to our
witnesses for taking the time to testify here today.
The agencies that are the subject of this hearing, the
Export-Import Bank, the Overseas Private Investment
Corporation, and the Trade and Development Agency each serve
vital U.S. interests. Since its founding over eight decades
ago, the EXIM Bank has helped finance U.S. exports of goods and
services and contribute to U.S. employment where alternative
financing is unavailable or to counter government backed export
financing by foreign competitors.
It is estimated that the EXIM Bank helped to finance
approximately $27.5 billion worth of American exports and
supported more than 164,000 American jobs in Fiscal Year 2014
alone.
Small- and medium-size U.S. business benefit greatly from
EXIM Bank's products, particularly its working capital
guarantee, which enables small businesses to obtain loans, to
purchase raw materials and supplies, and its export credit
insurance, which covers the risk of nonpayment by international
buyers and extends credit to qualified foreign customers.
The businesses that use these products aren't Fortune 100
companies. They are companies like Decas Cranberry Products,
Inc., a family owned, small business in Carver, Massachusetts,
in my district, that sells cranberries and cranberry products
to Europe, Canada, Mexico, South America, and Asia as a direct
result of the support provided by EXIM. Since using EXIM Bank's
export credit insurance, Decas cranberry sales have reached $60
million, approximately 15 percent of which is export related.
The companies like Resin Technology of Groton, Mass., whose
vice president, Carly Seidewand, is attempting to be here today
and to share in how EXIM's working capital guarantee has helped
her company, the company founded by her father. It increased
sales and it expanded its workforce as a result.
As our economy continues to grow, it is essential that the
EXIM Bank continue to provide its valuable services to
thousands of American exporters and their families. For this
reason, I am the co-sponsor of H.R. 1031, Promoting U.S. Jobs
Through Export Act of 2015 which would reauthorize the EXIM
Bank charter through 2022.
I am often intrigued by the answers I receive when I ask my
peers and colleagues which company they believe is the largest
American auto exporter? In today's ever connected global
economy the answer should not surprise you. It is BMW
Manufacturing Company. In 2014 alone, BMW exported $9.2 billion
worth of passenger vehicles through the Port of Charleston,
accounting for more than 260,000 vehicles. BMW's facility in
Spartanburg, South Carolina remains the largest U.S. automobile
exporter another year running. Last year, this facility
announced $1 billion investments in production capacity
increased to 450,000 vehicles, making it the largest BMW plant
in the world.
In this increasingly global economy, it would be
irresponsible for this Congress to fail to reauthorize the EXIM
Bank which pays for itself and enables U.S. manufacturers to
sell more products abroad and create new good jobs here at
home.
Thank you, Mr. Chairman, and I yield back.
Mr. Poe. The Chair recognizes the gentleman from South
Carolina, Mr. Wilson.
Mr. Wilson. Thank you, Mr. Chairman, for holding this
important and timely bipartisan hearing. Within the 2nd
Congressional District of South Carolina which I represent, is
Zeus Corporation of Orangeburg, Prysmian Cable of Lexington,
and HEY of Aiken. These three companies share a common bond.
They all produce parts for the Boeing 787 Dreamliner which is
currently being built outside of Charleston, South Carolina.
And in just in the last 5 years, they now have 8,000 employees
at the facility in Charleston. Zeus Corporation manufactures
the tubing for the aircraft. Prysmian Cable makes the internal
cable. And HEY produces the key interior components of the
Dreamliner. Additionally, Thermal Engineering of Columbia
provides composite painting of the Dreamliners creating jobs.
As we continue to debate reauthorization, I hope we can
focus on the fact of jobs and that there are more than 60
competing international export credit agencies that undercut
and destroy American jobs daily. In a perfect work, the Export-
Import Bank would not not be needed, but unfortunately, Mr.
Chairman, we do not live in a perfect world.
I am really grateful to hear my colleague from
Massachusetts. We share a real appreciation of BMW. It is the
largest single facility of BMW and South Carolina is the
leading export of cars. We are also the leading manufacturer
and exporter of tires. And so with Michelon, with Bridgestone,
Continental, Giti, our state has made such progress and I am
particularly grateful to find out that our friends and
neighbors of Massachusetts appreciate this too. I yield back.
Mr. Poe. I thank the gentleman and I would request that
members keep their statements to 1 minute, but indeed of
bipartisan equal time, Mr. Sherman, you have 1 minute and 30
seconds.
Mr. Sherman. Mr. Chairman, thank you for holding this
hearing. I have been very involved in export administration
agencies. When I sat in that chair, this subcommittee wrote a
new charter for OPIC which passed the House of Representatives,
and of course, the full committee overwhelmingly.
Unfortunately, for reasons that escape me, there is the United
States Senate. But I want to commend you, Ms. Littlefield, for
following through regulation many of the policy provisions that
were in the bill that passed this committee and the full
committee by an overwhelming vote.
The hot issue now is EXIM. Mr. Chairman, unlike you, I gave
100 speeches in favor of the candidacy of George McGovern. But
even I don't believe----
Mr. Poe. That is a true statement.
Mr. Sherman. That is a true statement. All my statements
are true. I do not believe in unilateral disarmament. Germany,
Japan, Korea, and China have export promotion authorities which
as a percentage of their economy dwarf EXIM Bank. And the idea
that American companies should be trying to export and face
competition from those agencies without the help of Mr.
Hochberg would astound me.
Finally, the EXIM Bank actually makes money. You will hear
that there is something called fantasy accounting in which they
lose money. Let me assure you, as a CPA, and I will agree with
the CBO, if we didn't have EXIM, we would have to cut the
budget assuming we didn't want to increase the deficit. And
those cuts might very well come from foreign operations. I
yield back.
Mr. Poe. The Chair recognizes the gentleman from
Pennsylvania, Mr. Perry, for his opening statement.
Mr. Perry. Thank you, Mr. Chairman. Folks, thanks for being
here. President Roosevelt created the Export-Import Bank in
1934 to promote U.S. sales overseas by providing loans to
foreign entities looking to purchase American goods. Sounds
like a good deal. However, when the government subsidizes an
export for one company, other companies in the same sector
might not get the same benefit and oftentimes hurts their sales
and job creation.
The EXIM Bank may help a few American businesses, but at
times it is definitely at the expense and hurting of others and
we have heard from them. Some people categorize this as
corporate welfare programs and pick winners and losers and have
no rightful place in U.S. trade policy agenda. Although I think
that unilateral disarmament as has already been stated is
concerning, I think we should also be focusing on reducing the
burden of domestic regulations and taxes which will spur
productivity and employment while reducing the role and the
necessary role of the Federal Government in the U.S. economy
and understanding that 98 percent of sales abroad are done
without the EXIM and I yield back.
Mr. Poe. The gentleman yields back. The Chair recognizes
the gentleman from New York, Mr. Higgins.
Mr. Higgins. Thank you, Mr. Chairman, for holding this
hearing. The U.S. trade promotion agencies play a critical role
in boosting U.S. exports. They provide the bulwark against
foreign governments that heavily subsidize their own domestic
industries. In my western New York community, the Export-Import
Bank has supported over $100 million in exports and more than
600 jobs.
Furthermore, the Export-Import Bank is self-sustaining and
has generated more than $7 billion in excess revenues to the
United States Treasury. Failing to undertake a long-term
reauthorization of the Bank would only serve to hurt American
businesses and workers. I look forward to the discussion today.
Thank you for being here.
Mr. Poe. The gentleman yields back. Does anybody else wish
to be recognized for an opening statement?
Without objection, all witnesses' prepared statements will
be made part of the record. I ask that each witness please keep
your presentation to no more than 5 minutes. We have two
panels. And I will introduce the first panel and then they can
give their opening statements.
Fred Hochberg is chairman and president of the Export-
Import Bank of the United States. Mr. Hochberg has previously
served in a variety of positions in the private and public
sector including Acting Administrator for the Small Business
Administration.
Ms. Elizabeth Littlefield is president and chief executive
officer of the Overseas Private Investment Corporation. Ms.
Littlefield previously held several positions relating to
finance and development and was a recipient of the Secretary of
State's Distinguished Service Award in 2012.
Ms. Zak is director of the U.S. Trade and Development
Agency. Prior to joining the USTDA, Ms. Zak was partner in the
Washington and Boston Offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. and taught at several law schools
around the United States.
Mr. Hochberg, we will start with you and you have 5
minutes.
STATEMENT OF MR. FRED P. HOCHBERG, CHAIRMAN AND PRESIDENT,
EXPORT-IMPORT BANK OF THE UNITED STATES
Mr. Hochberg. Chairman, Ranking Member, and distinguished
members of the subcommittee, thank you for inviting me to
testify about the role that EXIM plays in promoting commercial
diplomacy, a critical component of American foreign policy.
In May 2012, EXIM was reauthorized with overwhelming
bipartisan support, 330 members in the House and 78 in the
Senate. The 2012 Reauthorization all put in place a number of
reforms. And let me underscore, each and every one of those
reforms has been implemented.
Since then, the Bank has continued to support U.S. private
sector job growth including 164,000 jobs last year alone. We
have also generated as has been stated, billions of dollars for
the taxpayers including $675 million sent to the Treasury for
deficit reduction in 2014.
EXIM fully believes and works with the private sector to
support U.S. job growth. We do this in two ways. One, when the
private sector is unwilling or unable to provide financing to
exporters; and secondly, when U.S. exporters face foreign
competition backed by other governments, EXIM works to level
the playing field for U.S. businesses and their workers.
At one time, EXIM financed defense exports. However, since
1968, Congress has prohibited the Bank from financing most
military sales. While almost all of EXIM's financing is
commercial, U.S. companies with a defense presence can still
benefit from EXIM nonetheless.
W.S. Darley is a fire equipment producer, headquartered in
Illinois that manufactures in both Wisconsin and Iowa with a
supply chain throughout America. Darley is a company that works
in both the commercial and defense sectors. One way that Darley
keeps its workforce fully deployed is by balancing between the
two with roughly half their business being commercial.
Recently, EXIM financing empowered them to sell 32 fire
trucks to Nigeria supporting 100 jobs. On top of that, the sale
included training services for public service employees in
Lagos. This transaction is but one example of how when
countries build things together, they often form lasting bonds
that go far beyond the commercial to serve our national
interests.
In addition, as directed by Congress, the Bank requires
some of our larger transactions to be shipped on U.S. flagged
vessels, thereby supporting a strong merchant marine. Over the
past 2 years alone, more than $90 million in shipping fees have
been paid by foreign buyers to the U.S. Merchant Marine.
U.S. businesses operate in the global economy. American
businesses and workers aren't simply competing against Chinese,
Russian, or French counterparts. Often, they are competing
against whole nations.
Last week, I met with my foreign counterparts, discussed
the future of export credits. Congress has made it clear they
would like the Treasury Secretary to ratchet down export
credits. However, what I heard from Europe to Asia to South
America was just the opposite. Our foreign counterparts intend
to accelerate financial backing for their exporters as well as
serving as a much-needed backstop.
When commercial banks withdraw from regions or sectors that
are experiencing downturns, export credit agencies step forward
and fill the gap so that domestic exporters don't lose sales or
workers. In some way, EXIM is like a fire truck. You don't sell
of a fire truck just because you haven't had a fire in the past
few years.
We appreciate the widespread support, bipartisan support of
EXIM and we are eager to continue to support American jobs as
the Bank has done effectively and efficiently for over eight
decades, providing long-term certainty to U.S. businesses,
seeking to compete in overseas markets is imperative.
Businesses need to make long-term plans to grow global sales,
hire more workers, and invest in innovation. Those sales, in
turn, lead to greater economic stability, both in the U.S. and
abroad. And for all nations, economic stability is the
foundation of security and peace.
In closing, as Congress considers reauthorization of EXIM
Bank, I trust this committee will keep American competitiveness
at the forefront. We appreciate the subcommittee's interest. We
look forward to working with you to empower your constituents
to export more, hire more American workers, and strengthen
America's economic resilience to the global age ahead.
Thank you and I look forward to answering your questions.
[The prepared statement of Mr. Hochberg follows:]
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----------
Mr. Poe. Thank you, Mr. Hochberg. The Chair recognizes Ms.
Littlefield for her opening statement.
STATEMENT OF THE HONORABLE ELIZABETH L. LITTLEFIELD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER, OVERSEAS PRIVATE INVESTMENT
CORPORATION
Ms. Littlefield. Mr. Chairman, Ranking Member Keating and
members of the committee, thank you for inviting me here to
testify before you today.
I am Elizabeth Littlefield, the President and CEO of the
Overseas Private Investment Corporation (OPIC). OPIC is the
U.S. Government's development finance institution. It mobilizes
private capital investment flows into poor and developing
countries to help solve critical development challenges and in
so doing, it advances U.S. foreign policy and national security
objectives. We do this by providing long-term loans, guarantees
and political risk insurance to businesses investing much
needed capital into these developing countries, capital that
would not be invested there without OPIC's financing and risk-
mitigating services.
And because businesses are willing to pay the full cost of
our services and more, OPIC generates income for the taxpayer
and has done so reliably for 37 straight years.
Since the end of World War II, a strong, bipartisan
consensus has recognized the fundamental link between poverty,
economic instability, and conflict. In conflict, vulnerable
nations, foreign direct investment helps to create jobs,
opportunity, hope, and stability. At the same time, OPIC
support helps our U.S. clients, a large majority of whom are
small businesses, to tap into those fast growing, dynamic,
emerging markets creating jobs both at home and abroad.
Today, OPIC manages just under 600 long term investment
projects in over 100 developing countries, principally in
critical infrastructure, in power, private education, private
healthcare, low-income housing, and microfinance and other
financial services, all of these being sectors that contribute
powerfully to sustainable economic development.
In every one of these projects, our private investors also
have their capital at risk. Every one of these projects is
centered on achieving positive and measurable development
impact and every one of those aims to be commercially viable.
So OPIC uses the power of the markets and business to tangibly
deliver American development and foreign policy goals. The
Agency provides an effective development that pays for itself
and more.
More than one third of OPIC's entire portfolio is invested
in post-conflict nations or nations currently vulnerable to
conflict. My own work at OPIC reflects these national security
priorities. While I have been at OPIC, I have been on the
ground in Haiti, Liberia, South Sudan, Afghanistan, Jordan,
Egypt, Tunisia, and others to help draw investments into those
fragile countries.
In Afghanistan, OPIC's large portfolio of investments
includes a cashmere processing facility, a state-of-the-art
water bottling facility, and a highly successful small and
medium enterprise lending facility, created in partnership with
USAID which now supports successful job creating businesses in
and around Kabul.
In Iraq, OPIC's investment portfolio supported the
reconstruction of that country in many, many ways, ranging from
microfinance lending to low-income housing to a dredging
project to clear Iraq's water ways.
In Haiti, OPIC worked with USAID and a U.S. company to
deliver micromortgages and housing reconstruction loans after
that earthquake.
Even South Sudan. I traveled to Juba immediately following
the initial peace agreement to identify critical infrastructure
projects that could potentially be financed, taxpayer-free,
with the private sector investment.
So in closing, OPIC's goal is to help fragile market
economies grow and stabilize so that the odds of conflict are
reduced or to help restore the foundation of the market economy
after a conflict as our troops begin to come home. As former
Secretary of Defense Robert Gates once put it, ``Development is
one of America's great giant force multipliers.'' We agree.
Every single dollar that OPIC extends has a multiplier
effect for national security. It has a multiplier effect for
development and it has a multiplier effect for the taxpayer, as
every $1 into OPIC's operations has generated up to $8 back to
the Treasury, back in that deficit reduction.
Mr. Chairman, this is why we believe that OPIC is smart,
lean, and market-driven development. Thank you very much and I
welcome your questions.
[The prepared statement of Ms. Littlefield follows:]
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----------
Mr. Poe. Thank you, Ms. Littlefield. The Chair recognizes
Ms. Zak for opening statement.
STATEMENT OF THE HONORABLE LEOCADIA I. ZAK, DIRECTOR, U.S.
TRADE AND DEVELOPMENT AGENCY
Ms. Zak. Chairman Poe, Ranking Member Keating, and members
of the subcommittee, thank you for your interest in USTDA's
work to help U.S. companies create jobs here at home while
promoting sustainable development abroad.
As we were preparing for today, my staff came across a
quote. It was incredibly relevant to the topic of this hearing.
It is from former Secretary of State Cordell Hull who said,
``When goods and products cross borders, armies don't.''
Secretary Hull understood what we at USTDA strongly believe,
that robust, diplomatic trade relationships mean resilient
economies and secure nations.
Now more than ever, given the impact of globalization,
America's prosperity depends on trade with strong, stable
states. Establishing secure markets and fostering trade ties is
exactly what we do. In fact, it is part of the unique dual
mandate that Congress gave us. That is to promote U.S. private
sector participation in development projects in emerging
markets with an emphasis on sectors with significant U.S.
exports.
USTDA approaches this mission in three important ways.
First, we help to build infrastructure for economic
development, stable markets for U.S. exports, and secure routes
for global trade. Colombia, for example, has been a strategic
focus of U.S. engagement in Latin America for decades. As part
of this engagement, USTDA maintained an active portfolio to not
only build the infrastructure in Colombia, but also to
strengthen diplomatic and economic ties. During the
negotiations of the U.S.-Colombia Trade Promotion Agreement,
USTDA helped the Port of Cartagena comply with the U.S. Customs
Container Security Initiative. The port implemented changes
from USTDA's technical assistance with the help of goods and
services from several states. Moreover, Cartagena's designation
as a CSI port strengthened commercial relations while enhancing
the safety and security of cargo.
Second, our activities facilitate strategic partnerships to
build long term trade ties. USTDA's public/private partnerships
help U.S. industry establish long-lasting connections with
leaders from the world's fastest growing markets. In fact, for
those of you who have traveled to India, you probably didn't
realize you were benefitting from the Agency's U.S.-India
Aviation Cooperation Program. The ACP has enabled U.S. and
Indian officials to collaborate in several critical areas,
including safety and security. Because of the relationships
that the ACP has developed, the Government of India asked USTDA
for help in successfully restoring their Category 1 safety
rating from the FAA. They have also asked us to help them
develop the technical capacity to test, certify, and procure
state-of-the-art aviation security equipment.
These projects present a significant opportunity for U.S.
industry to provide India with the solutions necessary to
achieve international standards and to meet its security needs.
The India ACP is critical to the success of these efforts. That
is because they, like our other PPPs, foster person-to-person
connections, provide access to key stakeholders, and strengthen
bilateral trade ties.
Third, and finally, I could not agree more with the
chairman's statement regarding leveling the playing field and
U.S. business doing the rest. That is why USTDA helps level the
playing field for U.S. firms competing in international
tenders.
Both our U.S. and foreign partners have told us about
challenges presented by low cost procurement systems. I know at
first blush this doesn't sound exciting, but relying on lowest
cost often means that a host country is forced to acquire poor
quality goods and services which is not in their long-term
interest. We believe there is nothing low cost about buying
something twice. Because we pride ourselves on listening to the
needs of our stakeholders, we responded to this challenge by
partnering with George Washington Law School to launch our
Global Procurement Initiative. The GPI delivers customized
solutions that target specific procurement issues.
One of our first GPI countries was Vietnam, a long-term
partner of USTDA. They asked for our help in implementing their
national procurement law which they revised to include low
cost.
The GPI embodies our Agency's mandate. It responds to our
partner countries' efforts to develop sustainable
infrastructure projects. It also answers U.S. industry's call
to level the playing field for greater international
competition. Activities like these produce results for our
foreign partners and for U.S. industry. And they provide a
demonstrable return on taxpayer investments.
USTDA's current multiplier, $76 in exports for every $1
programmed is the highest in the Agency's history.
Mr. Poe. Ms. Zak, I would ask you to sum up your statement,
because it is a part of the record.
Ms. Zak. Certainly. USTDA leverages the private sector. In
what we have before us is a development model that is new and
it is effective. And with this development model, we lay the
foundation for strong, stable states, states capable of
preventing conflict, states capable of managing crises, capable
of promoting prosperity. USTDA's development model advances
economic interests of the United States and even more
importantly, it safeguards U.S. national security. It ensures
that U.S. goods and products cross borders so our military
doesn't have to.
Chairman Poe, subcommittee members, thank you very much for
having us here this morning. I look forward to your questions.
[The prepared statement of Ms. Zak follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
----------
Mr. Poe. Thank you. Thank all the witnesses for being here.
I will start with myself and would ask that the witnesses be as
brief as possible under the time restraints.
Chairman Hochberg, I want to start with you. You may know
that while we are having this hearing, there is a press
conference down the next building over, a pep rally if you
will, talking about the demise and end of EXIM Bank as we know
it. Controversy here in Congress and we have heard a lot on
both sides as you know.
A few questions. Is the statement true that Houston, Texas
is the number one city in the U.S. that uses EXIM Bank for its
businesses, small businesses?
Mr. Hochberg. Yes, it is.
Mr. Poe. And Texas is the number one state, is that
correct?
Mr. Hochberg. Texas is the number one state in the country
for exports.
Mr. Sherman. Mr. Chairman, I would like to withdraw my
support for EXIM Bank.
Mr. Poe. Okay, you may do that. I don't know if you have
ever heard of Olney, Texas or not. I know you are from New
York. Have you ever heard of Olney, Texas?
Mr. Hochberg. Absolutely. One of our great American
exporters is from Olney, Texas.
Mr. Poe. Air Tractor.
Mr. Hochberg. Air Tractor.
Mr. Poe. Air Tractor makes small planes that fertilize the
fields and also does other things, fight fires. Olney is a town
that is near Burnet and Flower Mound in case you were
interested where they are. David Ickert owns it. Two hundred
plus employees. And I would like your answers to be based upon
this statement by him that ``Air Tractor has been using EXIM
for 20 years. Has never filed a claim for money from the Bank.
In places such as Spain, Air Tractor has been selling for
years. EXIM helped us to get a firm footing and they no longer
need to use the Bank. In other countries in South America, the
company needs EXIM to get financing because smaller banks don't
pay any attention to Air Tractor in Olney, Texas.''
Using this business as an example, the statement has been
raised and I think it is a fair question, using EXIM Bank, how
does that, if it does, deny equal competition from other
businesses that don't use EXIM Bank in the U.S., other
businesses that need financing as well?
Mr. Hochberg. I don't believe it does, sir. I mean when we
support Air Tractor, it is a great company. They have less than
300 employees in a town with about 3,000 people. It is a big
business for a town of Olney, Texas with three traffic lights.
We support their exports to farmers in Argentina, Brazil, a lot
of their farmers in Latin America that are not credit worthy
without our export support, without our guarantee. We are not
helping them when they compete in the United States. When they
compete in the United States, they compete in a free and open
market. The only time we help them is how they compete against
other foreign competitors who are trying to take that sale away
from them.
Mr. Poe. All right, does EXIM Bank give loans to foreign
companies?
Mr. Hochberg. We will do buyer financing. In the case with
Air Tractor, we have actually provided a guarantee that the
foreign buyer will pay over a 5- to 6-year period and then that
is transferred over to--actually Wells Fargo Bank is the one
bank that will work with them on these transactions.
Mr. Poe. Does EXIM work with American banks in the loan
process like Amegy in Texas, Wells Fargo, and other banks or
not?
Mr. Hochberg. Actually, Amegy Bank, we named our lender of
the year this past year--in 2015. But we also work with foreign
banks. We will work with the bank that the buyer needs to work
with in order to make sure we can provide the guarantee that
will make the transaction go forward.
Mr. Poe. If EXIM works with foreign companies, how does
that help the United States?
Mr. Hochberg. Well, in the case of Air Tractor, using that
as an example, it is a foreign buyer who has a choice. They can
buy either American made crop dusters and firefighting
equipment or foreign. So in that case, we--if the financing is
the one thing that is needed to make that sale, the customer,
the exporter has to deal with price, quality, value, service.
We only can step in if financing is the one stumbling block and
the private sector can't or won't do it. We can step in and
make sure there is a level playing field so that they can buy
an American product versus a foreign product.
Mr. Poe. How about state-owned enterprises? Some of the
concern is that EXIM Bank helps foreign state owned enterprises
with financing. Comment on that if you would.
Mr. Hochberg. Well, occasionally, yes. In many other
countries, much more so than the United States. There are a lot
of state-owned enterprises in transportation, in power, in
utilities, in a number of those fields. And in that case, those
state-owned enterprises have a choice, to buy an American
product or a Chinese or a Russian or a French product,
particularly in the utility field. So if that is the case, we
want to make sure there is a level playing field that American
companies, American workers get an even shot at making that
sale.
Mr. Poe. Last question, let us go back to Air Tractor in
Olney, Texas. There is no EXIM Bank. What are the
possibilities--what would happen to Air Tractor in Olney, Texas
without EXIM Bank?
Mr. Hochberg. Well, Dave Ichert recently said when I asked
him, he said it is a matter of 68 jobs. That is the number of
people likely to lose their positions at Air Tractor if the
Bank isn't reauthorized by June 30th because right now half
their sales, more than half their sales are export sales.
Mr. Poe. The Chair will recognize the ranking member, the
gentleman from Massachusetts, Mr. Keating.
Mr. Keating. Thank you, Mr. Chairman. Unlike California, we
are not worried about competition from Texas or any state. In
Massachusetts, we are prepared to take on any comers. But I
would like to deal with the critics.
Chairman Hochberg, get right to the point. Things that are
heard are that EXIM is corporate welfare and it is for big
business. I want you to address--I have demonstrated one of my
districts. It is not a big business. Demonstrate how it is for
medium and small businesses. Number two, do the U.S. taxpayers
bear this cost? And number three, how do you address the
critics that say well, this can be done in the private sector?
They could just step in and provide the same kind of export
financing instead of EXIM and take on those three with some
information that you would have in detail.
Mr. Hochberg. Well, thank you, sir. Well, your first
question you asked about corporate welfare. I frankly find that
term confusing. Customers--people who use the Bank, foreign
buyers or corporations, they pay a fee. They pay a fee just as
Elizabeth Littlefield said at OPIC. People pay a fee for that
service. They pay a fee for the service. We fulfill the service
and we turn over to Treasury the excess. Last year, $675
million. Welfare implies taking money from one group of people
and handing it to somebody else. We have actually customers,
clients of the Bank, giving us money for a service. We render
the service and then the excess we send to the taxpayer. So it
goes the exact opposite direction.
Ninety percent of our customers are small businesses like
Air Tractor that the chairman mentioned, like Darley, a company
I mentioned in my oral testimony. So I am not sure I understand
what that charge is. It has a nice ring to it, but it doesn't
really have any meaning. In terms of taxpayer, we have reserves
that are paid for. We collect a fee. We put aside low loss
reserves like any responsible lending institution would do.
Congress, we are a zero appropriation. We are totally self-
sustaining which is required by WTO. However, Congress still
appropriates about $100 million. The excess goes to the
taxpayer. That low loss reserve account is there as a backstop
in the rare cases we have a default. It is about $5 billion
today and our default rate which we report is one of the
reforms from Congress in 2012. Every 90 days we report on
defaults to Congress. They are currently running at 0.167
percent, less than \1/5\ of 1 percent. But those reserves are
all paid for by customers and clients of the Bank. They are not
coming out of the taxpayer.
And your last question about the private sector, the
private sector is who brings us in. When a company needs
support to make a sale and to make sure we have the jobs in
America, they will usually go to a bank or they will go to an
insurance broker. The bank or insurance broker is the one that
calls us in, generally, and says we can't do this transaction
without a government guarantee. That is certainly the case with
Air Tractor. They cannot make those sales. A lot of banks are
not anxious to make loans to farmers in Brazil and Argentina
and other developing countries.
Darley has made it very clear, they have said if we are
going to compete with our competitors in China, Austria and
Germany, we have to come to the table with government-backed
financing just like our competitors do. So again, it is the
private sector that has called us in in order to make sure
there is a level playing field.
Mr. Keating. Thank you, Mr. Chairman, I think you were
really concise on those criticisms. I don't think really
warrant much material consideration, but it is good we address
them because I think too many of us here are--it is not a bad
thing, are all on the same page on this issue.
Now a question for Ms. Littlefield, you mentioned about
OPIC's work in developing countries and how much that centered
on conflict in at-risk areas. You mentioned specifics about
Afghanistan and Iraq. Could you give us a few specifics about
Pakistan, Jordan, Egypt, or Tunisia as well? Because I think
when people hear the details, they will get a sense of how this
can ameliorate the different conflicts around the world. Could
you touch on some more examples and then how you find it
helpful in terms of resolving these conflicts?
Ms. Littlefield. Absolutely, thank you very much,
Congressman. I can give you an example or two of each of those
countries, but perhaps I will start with Jordan because, as we
all know, Jordan is one of the U.S.' staunchest allies and has
been extraordinarily brave and outspoken against the forces of
extremism. That tiny country is extremely poor. They are one of
the most water insecure countries on the Planet Earth. Ever
since the pipeline from Egypt, where they were getting their
gas, has been blown up repeatedly, they are getting all of
their fuel shipped up from Eilat to Amman in trucks, heavy fuel
oil. And they have got anywhere between 750,000 and 1.2 million
Syrian refugees all pouring into this tiny little country.
This is a country where we have made a significant effort
to identify U.S. partners that would help us invest in critical
infrastructure there. For example, now our OPIC projects
provide 25 percent of the power in that country of Jordan; 22
percent of the water flowing into Amman, its capital; and in
partnership with USAID, we have created a small and medium
enterprise lending facility in Jordan that is made 200 loans
that are supporting enterprises, that are creating 6,000 to
7,000 jobs, including jobs for Syrian refugees.
Mr. Keating. My time is up. But that is a great detailed
explanation of just one country. In just the last several days,
I have seen the refugee settlements in Jordan. And I would just
like to emphasize our Subcommittee of Terrorism and Trade, how
today's hearing shows the connection between those things. With
that, I will yield back, Mr. Chairman.
Mr. Poe. The Chairman yields back his time. The Chair
recognizes Mr. Perry from Pennsylvania for his questioning. Mr.
Perry.
Mr. Perry. Thank you, Mr. Chairman. Mr. Hochberg, in your
prepared testimony you stated that ``EXIM fills gaps when the
private sector is unable or unwilling to provide financing for
U.S. exports,'' a particularly important role for small
business of which there are several in the district I
represent.
What would you say your proportion of EXIM financing goes
to small business?
Mr. Hochberg. Well, it is 90 percent of the transactions
and last year, 39 percent of the exports we financed were
shipped directly from small businesses and then, of course,
there are many other small businesses in the supply chain of
larger companies.
Mr. Perry. Let me ask you this. How does EXIM define small
business?
Mr. Hochberg. We actually follow the Small Business
Administration's definition, so however the SBA, and I was at
that agency in the 1990s, they define what a small business is
and we use their definition.
Mr. Perry. Which is?
Mr. Hochberg. Well, it varies industry by industry.
Basically, it is 500 employees or less or a net worth of $15
million or less. But it does have some variation depending on
unique industrial classifications.
Mr. Perry. I will go with you on the 500 employees, but it
is my understanding that EXIM defines small business as having
fewer than 1500 employees which skews the ratios. What can you
elucidate about that?
Mr. Hochberg. We follow precisely the SBA definition. We do
not have any--there is no variance whatsoever between our
definition and the SBA's definition.
Mr. Perry. I will hold you to that in the future. Mr.
Gutierrez, a former Export-Import Bank loan officer, of course,
pled guilty to taking more than $78,000 in bribes for fast
tracking unqualified loan applications for approval. And he
also admitted that in one case he ignored that a company had
defaulted in ten, ten prior deals backed by EXIM at the cost of
$20 million. Twenty million dollars is real money to me, real
money to taxpayers, but still recommended the company for
approval. I guarantee if I default on one loan, on one, much
less than $20 million, I am out at the bank. I am out.
How many open fraud investigations and indictments are
there currently involving EXIM Bank? Do you know?
Mr. Hochberg. The Inspector General stated most recently
that there are 31 investigations, none of which have to do with
employees. All have to do with outside companies that are
trying to defraud the government.
Mr. Perry. And I understand that. Let me ask you that in
this vein then because I think sometimes we hear that it is--
and there are plenty of anecdotes on either side, but some in
particular is the appearance of some kind of professional
nepotism when we look at former New Mexico governor, Bill
Richardson, regarding his association with the Spanish energy
company Abengoa's International Advisory Board. An
investigation by the Daily Caller found that fully half, fully
half of EXIM's advisors on the board in 2014 were executives at
companies or unions that directly benefitted from EXIM
financing during their term. What is EXIM's plan to fix that?
Or should there be a plan?
Mr. Hochberg. The advisory committee was established by
Congress to advise the Bank and a report is going to Congress
in a few weeks on how competitive we are versus other export
creditors.
Mr. Perry. Does it require people to sit on both EXIM's
advisory board and work for the companies of which are
receiving the loans from EXIM?
Mr. Hochberg. Generally speaking, they are clients of the
Bank because they are in the best position to advise us.
Mr. Perry. But does it require that they sit on both? I am
asking you what is EXIM--Congress requires an advisory board.
But what is EXIM doing to ensure that there is not a quid pro
quo, that there is not someone on both sides of the arrangement
putting taxpayer dollars in peril?
Mr. Hochberg. There are strict ethical rules in place that
none of them influence whatsoever any----
Mr. Perry. Do you believe that none of them influence that?
Mr. Hochberg. Absolutely.
Mr. Perry. I sleep with my wife. Do you think she doesn't
influence me on my daily decisions regarding my children, my
bank account or what clothes--I am serious. Do you believe
that? And do you think it deserves further scrutiny in that
regard?
Mr. Hochberg. Every advisory committee member is fully
vetted. We have a full ethics briefing----
Mr. Perry. All right, I hear you.
Mr. Hochberg. None of them have anything to do with any
transactions whatsoever.
Mr. Perry. Let me ask you this. Why does EXIM understate
the risk regarding being tied to Treasury securities and it
kind of inflates the appearance of profit because you don't
consider the changes in the market based on Treasury
securities? Why does EXIM do that particularly?
Mr. Hochberg. I am not following your question, sir. We
completely comply with U.S. accounting rules, FCRA. We have
been audited by currently Deloitte Touche, previously by
PricewaterhouseCoopers.
Mr. Perry. Why does EXIM have a different standard of
default than every other bank that I have checked with?
Mr. Hochberg. We follow the default rules that have been
promulgated by Congress and sent to us. That is how we report
to Congress every 90 days. That 0.167 percent is in full
compliance with the way Congress has defined it.
Mr. Perry. Thank you, Mr. Hochberg. Thank you, Mr.
Chairman. I yield.
Mr. Poe. I thank the gentleman from Pennsylvania for his
questions. The Chair recognizes the gentleman from California,
Mr. Sherman.
Mr. Sherman. Mr. Hochberg, I think it is entirely
reasonable that you have an advisory board made up in chief of
your customers. You know, there are very few vegans who are on
the Ruth's Chris Advisory Board. You want to survey your
customers to see if you are doing a good job.
Ms. Zak, you quoted, I guess it was Cordell Hull about the
trade, a beautiful, poetic, often false characterization of
history. If you make a list of Germany's chief trade partners
in 1938, then you make a list of the countries they were at war
with in 1942, it is the same list. Same with Japan having as
its chief trading partners, China, Britain, and the United
States, so trade is wonderful, but the idea that it prevents
wars is more poetry than history.
Mr. Hochberg, why it is in our national interest that our
allies buy weapons from us some of the times? Do our weapons
exporters face foreign governing financing in competition? Do
we lose military sales because there is a provision now in your
charter that prevents you from financing military objects?
Mr. Hochberg. I can't verify whether we lose military
sales, but I can state that Britain, France, Italy, Germany,
their export credit agencies do finance their defense sales.
Mr. Sherman. So unless they are stealing sales from us,
they are wasting their time and the efforts of those European
governments. I mean obviously we want to be careful, but we are
careful as to who we export weapons to and once the State
Department determines that it is in our interest to export
weapons, it is very much in our interest to export those
weapons rather than see those other competing finance agencies.
So I look forward to working with you after the demonstration
dies down the hall, not only to keep you in business, but to
allow you to do the work that will build American export
capacity, build our defense infrastructure and I love those
other countries you mentioned, but I would just as soon have
all the defense infrastructure here. Now and then they are
going to export weapons to countries we wouldn't want to see.
Ms. Zak, sometimes companies are going to come to you and
say we need your effort to help our supply chain, our globals.
And what they are really doing is they are saying we want you
to help offshore jobs. Do you ever get sucked into providing
assistance where in the name of a global supply chain for an
American company you are helping to build the infrastructure,
otherwise help exports from other countries to the United
States?
Ms. Zak. USTDA's mandate is very clear. We focus on U.S.
jobs, not jobs abroad. And we do not help with jobs abroad.
Mr. Sherman. And Mr. Hochberg, I am sure you listen to the
opponents of the Bank. They have their rallies. Are any of them
rallying for the elimination of the export financing
authorities of Britain or Germany or China? Do you see any
signs on that?
Mr. Hochberg. Not a single one, sir.
Mr. Sherman. And are any of them, any of those signs saying
let us increase the U.S. budget deficit by $670 million per
year?
Mr. Hochberg. I haven't heard that either, sir.
Mr. Sherman. Are any of them proposing tax increases that
would generate $670 million per year?
Mr. Hochberg. I have not seen that either.
Mr. Sherman. So there is a sign shortage. I yield back.
Mr. Poe. Thank the gentleman from California. The Chair
recognizes the gentleman from South Carolina, Mr. Wilson.
Mr. Wilson. Thank you, Mr. Chairman, and I thank each of
you for being here and the opportunities really provided to
create jobs and as was stated by Mr. Keating, the State of
South Carolina, we are so grateful to be the number one
exporter of cars. Who would imagine in 20 years from zero with
BMW and the last 3 years the leading manufacturer of tires and
the leading exporter. And this is by Michelin which has the
largest single investment in the world in the district I
represent. Also, we are grateful for Bridgestone Japanese,
Continental German, and Giti Singapore. So over and over, we
see the benefit of trade.
With that, Ms. Littlefield, with the Overseas Private
Investment Corporation, how is the corporation funded?
Ms. Littlefield. Thank you very much, Congressman. OPIC was
capitalized back in 1971 in the Nixon administration and
subsequently paid back all the capital with which we were
capitalized in the Reagan administration. And in the ensuing
years since then, we have generated capital every single year
back to the Treasury.
Mr. Wilson. And this would be through fees?
Ms. Littlefield. Through fees and commissions. We charge
cost covering fees and commissions and interest rate spreads
which our clients are more than happy to pay since we are the
only source of financing or insurance for them in these
markets.
Mr. Wilson. And so it is not taxpayer funded?
Ms. Littlefield. It is not taxpayer funded. We are a net
reduction of the deficit every single year, sir.
Mr. Wilson. And how much would be the net reduction on
average?
Ms. Littlefield. In the last few years, it has ranged
between $325 million and $425 million.
Mr. Wilson. Thank you, and Mr. Hochberg, the same. How is
the EXIM Bank financed?
Mr. Hochberg. By WTO in order to be an allowable government
support for exports, we have to be self sustaining. We have
been self sustaining since 2007. We have sent to the Treasury
just under $7 billion over the last 20 years. Last year, as the
congressman mentioned, it was $675 million. The year before it
was more than $1 billion that was sent to the Treasury.
Mr. Wilson. But there are accusations that you are
conducting crony capitalism. But yet it is actually a payback
for the benefit of the taxpayers.
Mr. Hochberg. Well, we actually--we don't receive the
money. We actually just send the money to the taxpayers for
deficit reduction each year and CBO scores our budgets so it is
actually used by the appropriators in budgeting for 2016.
Mr. Wilson. Well, that is certainly a story that the
American people and my constituents need to know. So thank you
very much.
And Ms. Zak, what types of criteria must a business meet to
qualify for trade promotion and investment programs? What types
of factor might prevent a company from receiving assistance?
Ms. Zak. Thank you very much. The first thing that USTDA
looks at is one, that it does create jobs in the United States.
We focus on exports and we also focus on development
opportunities. We also ensure that there is additionality, that
our services are needed to be able move an active forward to
implementation. Then we undergo a very serious due diligence
process and we look at everything from the financial aspects to
the legal aspects, and our due diligence process as well. But
we look for mutual interest, but jobs are one of our number one
criteria.
Mr. Wilson. And again, Mr. Hochberg, the EXIM Bank charter
specifically states that you will not compete with the private
sector. And because of this, it is a bank of last resort. How
do you ensure that people have attempted to use the private
sector and not succeeded?
Mr. Hochberg. Well, the customers actually have to state
that on their application. They have to assert and certify that
they are coming to us because they cannot get financing
elsewhere. We verify that. I mean frankly, candidly, with small
businesses, I ran a small business for 20 years. It is pretty
clear small businesses don't have a lot of options. But again,
they are coming to us because a bank is bringing to them or an
insurance broker is bringing them because they cannot secure it
independently.
And sometimes we also have to level the playing field. When
we see the kind of financing that China, Russia, France,
Germany, others do in different fields, when we see evidence of
that, we want to make sure there is a level playing field that
U.S. companies can compete and we don't lose jobs because of
outsized government financing on the other side of the
transaction.
Mr. Wilson. Thank you. And as I conclude, I appreciate
again Mr. Keating giving me the opportunity to talk about the
Port of Charleston. Just in the last month, Governor Nikki
Haley secured from Daimler $\1/2\-billion investment for
trucks, and then last Monday, Volvo Corporation announced its
first North American manufacturing facility at Ridgeville,
South Carolina in the district of Congressman Jim Clyburn. So
we see a huge benefit. Thank you very much.
Mr. Poe. The gentleman yields back. The Chair recognizes
the gentleman from Texas, Mr. Castro.
Mr. Castro. Thank you, chairman. And thank each of the
witnesses for your testimony today.
I want to pick up where the congressman left off, Mr.
Hochberg. Can you describe some of the infrastructure for
financing that foreign countries use that are comparable to
EXIM? What are we competing against basically?
Mr. Hochberg. Well, we are competing for power,
transportation. We have got a company called Acrow that builds
bridges in Cameroon and Ghana. There is intense Chinese
competition to build that kind of infrastructure in Africa. We
did a transaction of locomotives just last year. Half the order
was split between the United States and China for locomotives
in South Africa. We have done a power project where we also
competed in West Africa, so I am not just focusing on Africa,
but frequently developing countries are where we face intense
competition in the infrastructure.
Mr. Castro. What are the European governments or the Asian
governments doing for their businesses?
Mr. Hochberg. Well, to just give you an example, when I
have met with the Customer TransNet in South Africa, and
inquired what were the Chinese terms for the loan so I would
make sure that we were competitive, I was told well, they asked
me what I would like, would I like a 10-year, a 15-year, a 20-
year loan? Do I need a grace period? It was somewhat of a menu
pricing. That was not the case what we can provide. We adhere
to international standards and it is either 12 or 14 years for
locomotives and there are very fixed fees attached to that.
Mr. Castro. Sure. I come from Texas as the chairman does,
and Texas does more trade than any other state in the nation.
So this is obviously a very big deal for us. We have companies,
big and small, but some like Boeing and Caterpillar who have a
significant presence around San Antonio who benefit from EXIM.
But I would ask all of you what is at stake for us for a state
like Texas if your services go away?
Mr. Hochberg. Well, on the second panel you actually have a
witness, Susan Jaime, who is from San Antonio who can speak for
herself about her coffee exports that--we chatted just before
the hearing about 40 percent of her sales are exports.
When I talked to Air Tractor, a company mentioned
previously from Texas, Dave Ichert talked about the potential
of laying off 68 employees that are attributed to their export
sales which we are pleased working with them. We have grown
from 10 percent of sales to 50 percent of sales. And most
importantly, in the oil and gas field which is laboring over a
drop in prices, keeping that industry vital is important to
America's national interest in terms of us having a presence
globally and keeping our technology up. We do extensive work
with the oil and gas companies, exploration, engineering,
equipment manufacturers in the Houston area.
Ms. Littlefield. Thank you, Congressman. We know that when
U.S. companies invest capital in emerging markets, that creates
a magnet in future years for exports to then flow. And we also
know that 95 percent of the world's customers, as the chairman
said in the beginning, are outside of these borders. This is
where the markets are the most dynamic. They are growing and
this is where the future for American businesses is.
In Africa alone, we don't talk about Africa much when we
talk about trade, but in the next 10 years the number of
households with disposable income is going to grow by 50
percent. All of those households have reached the tipping point
beyond subsistence where they can begin to invest in consumer
goods and other things that U.S. companies are making. So it is
critically important that we be able to have a level playing
field as my colleagues have said and provide the services that
U.S. companies need to access these markets, both in terms of
their investments which is the business of OPIC as well as the
exports that may follow which is, of course, the business of
EXIM.
Ms. Zak. And just following on from what the chairman
mentioned at the beginning and President Littlefield mentioned,
95 percent of the consumers are outside of the United States.
This is a very important market and that there is a need to
level the playing field which is one of the things that our
agency does.
And last year alone, for every dollar programmed, we are
seeing $76 in U.S. exports, we noted that there were $5.8
billion associated with our program which supports
approximately a little over 32,000 jobs. So it is important to
jobs, exports, and the future.
Mr. Castro. Sure. And then I will just make one last remark
in my last 15 seconds. I support the reauthorization of EXIM
and support the work that you all are doing. I think every
agency in the U.S. Government deserves a thorough vetting and
quite frankly to be improved probably, but you are running in
the black. You are doing a great service for American companies
and I hope that this Congress can find a way to preserve the
services that you are providing. I yield back, Chairman.
Mr. Poe. The gentleman from Texas yields. The Chair
recognizes the gentleman from Wisconsin, Mr. Ribble, for his
questioning.
Mr. Ribble. Thank you, Mr. Chairman. Mr. Hochberg, I will
go ahead and start with you and then go on to Ms. Littlefield.
Just to kind of give you my own historical perspective, I am a
former business owner and I have voted in support of
reauthorizing EXIM in the past. I am a little bit more sanguine
today than I was 2 or 3 years ago and in part I am sanguine
because of the CBO's fair value accounting method to determine
the actual cost to the taxpayer.
I am going to quote from the CBO's 2014 report: ``For
Fiscal Years 2015 to 2024, CBO found that EXIM Bank's six
largest credit programs would generate budgetary savings of
about $14 billion under FCRA accounting, but costs about $2
billion on a fair value basis.'' They then go on to say later
in the report, ``In CBO's view, fair value estimates provide a
more comprehensive measure of the cost of Federal credit
programs and CBO has provided fair value estimates for many
programs to help lawmakers more fully understand the tradeoffs
between certain policies.'' That is a big swing, $14 billion
plus to $2 billion negative over a decade. Would you care to
comment on that?
Mr. Hochberg. Sir, we have one accounting system in the
United States Government. Congress passed an accounting system
called Federal Credit Reform Act in 1990. And we fully comply
with that. I ran a company for 20 years. We don't keep two sets
of books. There is one set of books. Those are the books that
Congress has determined. If Congress changes the accounting
system, we will change our operations. But one thing is
unmistakable. We transferred, we sent $675 million to the
Treasury. We sent the year before over a $1 billion. Cash is
cash. If the accounting system were different, some of that
cash would remain at the Bank and would not transfer to the
Treasury. It would build up more and more reserves that would
be sitting at the Bank's balance sheet instead of the Federal
Government's balance sheet.
Mr. Ribble. Wouldn't that go then to reduce taxpayer risk
in case of default when the economy dips?
Mr. Hochberg. Well, first of all, we have over $5 billion
of reserves paid for by customers. These are not taxpayer
monies. It is paid for by customers. We send the default rate
report to Congress every 90 days. Our peak default before the
financial crisis was 1.6 percent in 2006. So if we are looking
for a real stress test, we have had the most real stress test
you can devise in the last 5, 6 years, looking at the financial
crisis we faced. And our default rate has sadly declined from
that 1.6 level in 2006 going through the worst financial crisis
we have ever incurred. So nothing is certain in life, sir, but
I think we have seen one, a demonstration of good underwriting
by our staff and the fact is we do report this to Members of
Congress every 90 days. We just sent a report up for the March
30th period.
Mr. Ribble. What is the current interest rate that you
charge your customers?
Mr. Hochberg. Most of our credit is through either
insurance or a guaranteed loan. So in a guaranteed loan, a bank
essentially pays a premium, an insurance premium, and thereby
we guarantee the loan. Then the Bank makes a direct--makes a
loan to its customer. So most of the loans are either insurance
or guarantee. And the rare cases we make a direct loan which is
an unusual case, sometimes usually government to government or
certain transactions, it is 100 basis points over Treasury
which is the global rules that we have to apply to.
Mr. Ribble. And is that as well what the European Union's
rates would be?
Mr. Hochberg. We all have to charge 100 basis points over
the relevant Treasury rate for that currency.
Mr. Ribble. You have heard the discussion between--it has
been pretty widely publicized that Delta Airlines has got a
problem because they want to buy Boeing airplanes and couldn't
get it at discount. Air India got it at discount, not that they
are competing. And so we gained jobs at Boeing, lost jobs at
Delta. How do you respond to that?
Mr. Hochberg. Well, two ways, sir. One, we voluntarily do
what is called an economic impact study. We are the only credit
agent in the world that does this. We look at the benefits to
the U.S. economy from an export and we compare that against any
potential loss to the U.S. economy. And we actually do that on
every single transaction of the Bank, down to $10 million or
less to make sure we are adding, we are accretive to the U.S.
economy. That is number one.
Number two, Delta has sued us. Four times the courts have
ruled in favor of the Export-Import Bank. And we did double the
fees that we charged foreign carriers back in 2011. And we make
sure that foreign carriers are paying more than any U.S.
carrier pays.
Mr. Ribble. I see I am out of time, Mr. Chairman, so I will
yield back. Mr. Littlefield, I will talk to you offline.
Mr. Poe. I thank the gentleman. The Chair recognizes the
gentlelady from Illinois, Ms. Kelly. Turn on your mic, too.
Thank you.
Ms. Kelly. Thank you. I would say most of us in this room
recognize the importance of trade to the future of our economy.
Accordingly, as we consider future trade deals, we must engage
in a deeper, broader, and more inclusive dialogue about its
impact on American families. This stated objective of U.S.
trade policy is to liberalize markets by reducing trade and
investment barriers, creating a rules-based trading system,
enforcing commitments under trade agreements, and supporting
economic growth.
What role do EXIM Bank, OPIC, and TDA play in supporting
U.S. trade policy goals?
Mr. Hochberg. Well, the Export-Import Bank obviously works
closely with the other two panelists here, Commerce Department,
and U.S. Trade Representative, State Department. Our role is
very narrow and very precise. It is to provide financing when
the private sector is unable, when it cannot handle that
transaction. And our focus is really on U.S. jobs and making
sure that we don't cede jobs to foreign competitors because
they provide financing and U.S. companies don't have access to
it.
Ms. Kelly. Thank you.
Ms. Littlefield. Thank you, Congresswoman. OPIC's role is a
little bit different, a development agency rather than a trade
agency. So I would answer the question slightly differently and
to say that we are all clearly in this room and elsewhere very
concerned about the need to pay for stability and development
in fragile places. And we know that we need to engage in these
places for strategic, economic, and moral reasons. OPIC's model
may not be the only solution for stabilizing these markets, but
it certainly is an incredibly effective one as it calls upon
the private sector to shoulder some of the burden of helping
address these issues and do so in a way that is actually
creating income for those private sector investors as well as
jobs built at home and abroad. Thank you.
Ms. Zak. And USTDA helps to build infrastructure. So with
respect to trade one of the things we do is that we help to
develop infrastructure in other economies. But we want to
ensure that it is done in a way that creates a fair playing
field for U.S. businesses and jobs to be created at the same
time.
USTDA has also helped with respect to the implementation so
that we ensure that standards that are required under trade
agreements are met as well.
Ms. Kelly. I yield back the remainder of my time. I have to
go vote, Mr. Chairman.
Mr. Poe. I thank the gentlelady. Just for Mr. Rohrabacher's
information, there is a vote in another committee, not on the
floor. And with unanimous consent, unless there is an
objection, the Chair will allow a member of the full committee,
but not a member of this committee to ask questions, the
chairman of the European Subcommittee, Mr. Rohrabacher from
California.
Mr. Rohrabacher. Thank you very much, Mr. Chairman. There
is a lot of discussion about trade going on on Capitol Hill
these days. I am glad that you are here. And just a couple of
items just for--in terms of OPIC. Is OPIC policy--there has
been an on-going problem with a constituent that I have had
that his family owned a major company in Ethiopia and frankly,
they have been offering like a pittance as compensation for
this very expensive piece of property and business. OPIC has
decided not to fund that situation. Not to be involved in
Ethiopia until situations like that are corrected. Is that
still the policy that if a government like Ethiopia is engaged
in these type of activities that are denying the U.S. citizens
the right to compensation for property that they have
confiscated, do we still have that policy that we are not
providing loans in that country?
Ms. Littlefield. Mr. Rohrabacher, we spoke about this
before and as it stands now, OPIC continues to operate under
the guidance of the Secretary of State in terms of selecting
the countries in which we operate. That being said, we are not
active currently with any major projects in Ethiopia.
Mr. Rohrabacher. Right.
Ms. Littlefield. I am not involved with the details of
this. We have left it for the State Department, but I know that
the U.S. Government----
Mr. Rohrabacher. Let me ask, that is good, number one,
thank you for that. But is that a standard policy that if we
have outstanding claims by American citizens against a
particular government that we are not going to be improving or
approving transactions in that country?
Ms. Littlefield. That is not one of our policies. We do
believe that when U.S. investors invest in these markets, they
bring with them very high standards of environment, labor, and
human rights standards as well as an improvement in the
governance standards in those countries. So we see a direct
correlation between foreign direct investment flow into
countries and improvements in the business climate.
Mr. Rohrabacher. Well, let me note I believe that that is
encouraging dictatorship and the worst kind of a situation. You
have American citizens themselves who have been denied due
compensation for confiscated property, for us to go in is
ridiculous, but I appreciate the fact that at least in Ethiopia
that that is kept in mind because my constituent is having that
problem.
By the way, I take it that OPIC is engaged in actually
promoting the development of businesses overseas in these
various countries. Is that not creating competition for
American products?
Ms. Littlefield. It is not. We certify that not one of our
projects causes any damage to the U.S. economy nor causes the
loss of any job in the U.S.
Mr. Rohrabacher. So you don't have any projects that you
are financing to develop, to build in a foreign country, that
you are not financing anything that has any competition with
American counterparts. Is that correct?
Ms. Littlefield. That is correct, sir.
Mr. Rohrabacher. All right, we will check into that, but we
will have to see. In terms of the foreign banks that you
mentioned about the Export-Import Bank coming to you with these
banks have come and said well, you are guaranteeing some loans
with foreign banks, but mainly American banks. Do banks benefit
from this guarantee?
Mr. Hochberg. Well, the benefit really goes to the
exporter.
Mr. Rohrabacher. That's not the question. Do the banks
benefit from this?
Mr. Hochberg. The banks pay a fee.
Mr. Rohrabacher. Yes.
Mr. Hochberg. For insurance and in exchange for that fee,
we ensure the loan.
Mr. Rohrabacher. Okay, but the banks aren't benefitting?
Mr. Hochberg. You can say they are benefitting, but they
are paying for it.
Mr. Rohrabacher. The banks are benefitting. Let us just put
it this way, they wouldn't be coming to you with customers if
they were not benefitting?
Mr. Hochberg. Right.
Mr. Rohrabacher. Okay, so we have in some way basically
guaranteed the banks the profit that they will make from the
deal or they at least will not have a loss from that deal. Is
that correct?
Mr. Hochberg. We provide insurance to the banks that make
the loan, exactly.
Mr. Rohrabacher. Let me just suggest that that is crony
capitalism where we take the banks and we make sure that they
are not going to lose money and we put our taxpayers' money at
risk and the question is is whether or not that would happen in
the private sector. In the film business, they have a thing
called bonding. You have a project and they bond it. If you are
making a profit every year, like you suggest, why don't we just
leave that to the private sector then? Can't they do bonding
with these banks that are looking for a guarantee that they are
not going to lose money?
Mr. Hochberg. Congressman, the private sector does a
spectacular job. They just don't do all the job. So we finance
about, as I have said about 2 percent of U.S. exports. A third
of them go to developing countries. The private sector does a
great job. They just don't do it in every market and every
product category.
Mr. Rohrabacher. Right.
Mr. Poe. The gentleman's time has expired.
Mr. Rohrabacher. Thank you.
Mr. Poe. I thank the gentleman. I thank the witnesses for
being here. I want to advise the witnesses that all members
have the opportunity to present written questions to the
witnesses. Several members were not here, could not be here and
I would encourage the members to put those questions in writing
as soon as possible regardless of where they are on this issue
that we have been discussing today. With that, I thank the
witnesses for being here and we will begin with our second
panel as soon as they are seated.
The Chair is ready to begin the second panel if the
witnesses will be seated. The Chair will introduce the next
four witnesses. I want to thank the witnesses for waiting all
morning to give their testimony. It is appreciated.
Mr. Daniel Ikenson is director of the Herbert Stiefel
Center for Trade Policy at the Cato Institute. Mr. Ikenson has
held several positions focusing on international trade
planning, and is widely published in the area of trade policy.
General Jim Jones is the founder of the Jones Group
International and previously has served as the National
Security Advisor to the President of the United States. General
Jones has served our country with a long, distinguished
military career including leading NATO military operations as
Commander of the United States European Command and Supreme
Allied Commander in Europe.
Ms. Susan Jaime is the founder of Ferra Coffee
International in San Antonio. In addition to roasting coffee,
she has joined with Texas A&M's AgriLife projects to teach
coffee growers around the globe how to grade, roast, and market
their coffee beans.
Carly Seidewand is vice president of the Global Sales and
Administration of Resin Technology, LLC. Ms. Seidewand took
over the global petrochemical trading and compounding company
from her father, an entrepreneur chemist.
We will begin with Mr. Ikenson. You have 5 minutes.
STATEMENT OF MR. DANIEL J. IKENSON, DIRECTOR, HERBERT A.
STIEFEL CENTER FOR TRADE POLICY, CATO INSTITUTE
Mr. Ikenson. Thank you, sir. Good morning, Chairman Poe,
Ranking Member Keating, and members of the subcommittee. I am
Dan Ikenson, Director of the Herbert A. Stiefel Center for
Trade Policy Studies at the Cato Institute. Thank you for the
invitation to share my views with you today concerning trade
promotion agencies and the U.S. foreign policy. The views I
express are my own and should not be construed as representing
any official positions of the Cato Institute. To the extent
today's hearing will help clarify some of these issues and
prompt a serious effort to reform and retire some of the
redundant, distortionary, and frankly, scandal-prone agencies
among the panoply of Federal offerings, I am pleased to be of
assistance.
U.S. trade promotion agencies are in the business of
promoting exports, not trade, in the more inclusive sense. That
is worth noting because despite some of the wrong-headed
merchantilist assumptions that undergird U.S. trade policy that
exports are good and imports are bad, the fact is that the real
benefits of trade are transmitted through imports, not through
exports.
In January 2010, President Obama set a national goal of
doubling U.S. exports in 5 years and prominent net plan was a
larger role for government in promoting exports including
expanded non-market lending programs to finance export activity
and increase in the number of Commerce Department foreign
outposts to promote U.S. business and an increase in Federal
agency chaperoned marketing trips. But the NEI neglected a
broad swath of worthy reforms by ignoring the domestic laws,
regulations, taxes, and other policies that handicap U.S.
businesses and their competition for sales in the United States
and abroad. For example, nearly 60 percent of the value of U.S.
imports in 2014 consisted of intermediate goods, capital goods,
and other raw materials. Those are the purchases of U.S.
businesses, not consumers. Yet many of those imports are
subject to Customs duties which raise the cost of production
for the U.S.-based companies that need them, making less
competitive at home and abroad.
U.S. duties on products like sugar, steel, magnesium,
polyvinyl chloride, and other crucial manufacturing inputs have
chased companies to foreign shores where those imports are less
expensive and they have deterred foreign companies from setting
up shop stateside.
Policy makers should stop conflating the interests of
exporters with the national interest and commit to policies
that reduce frictions throughout the supply chain from product
conception to consumption. Why should U.S. taxpayers underwrite
and U.S. policymakers promote the interest of exporters anyway
when the benefits of those exports accrues primarily to the
shareholders the companies enjoin the subsidized marketing or
matchmaking? There is no national ownership of private export
revenues.
If policymakers seek a more appropriate target for economic
policy, it should be to attract and retain direct investment
which is the seed of all economic activity including exports.
Given the exalted status of exports in Washington's economic
policy narrative, it is understandable why agencies would want
to portray themselves as indispensable to U.S. export success.
But on that metric, none of the subject agencies is scarcely
relevant. EXIM supported $27.4 billion in exports in 2014.
USTDA supports approximately $2.5 billion per year. And OPIC
less than $2 billion. In aggregate, these agencies support less
than 2 percent of all U.S. exports.
But the relevant economic question concerns the cost and
benefits of these agencies to the U.S. economy. So let me focus
a little bit on EXIM. EXIM financing helps two sets of
companies, U.S. firms whose exports are subsidized through
direct loans or loan guarantees and the foreign firms who
purchase those subsidized exports. But those same transactions
impose costs on two different sets of companies, competing U.S.
firms in the same industry who do not get EXIM banking and U.S.
firms in downstream industries whose foreign competition is now
benefitting from reduced capital costs courtesy of the U.S.
Government.
EXIM financing reduces the cost of doing business for the
lucky U.S. exporter and reduces the cost of capital for his
foreign customer. But it hurts U.S. competitors of the U.S.
exporter, as well as U.S. competitors of his foreign customer,
by putting them at relative cost disadvantages. According to
the findings by a recent CATO Institute study, the downstream
cost alone amount to a tax of approximately $2.8 billion every
year and the victims include companies in each of the 21 broad
U.S. manufacturing sectors.
The notion that because Beijing, Brasilia, and Brussels
subsidize their exporters, Washington must too sweeps under the
rug the fact that the United States is a major export credit
subsidizer that has been engaged in doling out such largess
since 1934 well before the founding of the People's Republic of
China.
To say that U.S. exporters need assistance with financing
to level the playing fields suggest that they lack advantages
among the multitude of considerations that inform the
purchasing decision. Moreover, the fact that less than 2
percent of U.S. export value goes through export promotion
agencies, suggest this rationale for EXIM is bogus. Congress
should allow EXIM to expire at the end of next month and the
administration should announce plans to bring cases to the WTO
against governments operating their export credit agencies in
violation of agreed-upon limits under the Agreement on
Subsidies and Countervailing Measures.
The combination of the carrot of U.S. withdrawal from the
business of export credit financing and the stick of WTO
litigation would likely incent other governments to reduce and
possibly eliminate their own subsidy programs. For better or
worse, at different times and for different purposes over the
years, the U.S. trade policy has been a tool of U.S. foreign
policy, trade preference programs, trade agreements, the trade
Trans-Pacific Partnership, investment treaties, trade
sanctions, infrastructure funding and trade financing of all
bid pursuit or deployed for reasons not entirely economic in
nature. Pursuing strategic objectives through trade policy has
a long history.
The State Department's mission is to shape and sustain a
peaceful, prosperous, just, and democratic world and foster
conditions for stability and progress for the benefit of the
American people and people everywhere. That broad mission may
justify one or two export promotion agencies, but according to
the CRS, the Congressional Research Service, there are at least
20 such agencies within the U.S. Government with overlapping
responsibilities and in some cases working at cross purposes.
Thirty seconds.
EXIM's Inspector General----
Mr. Poe. I am sorry, you cannot have 30 seconds. Your
statement is in the record. We all have it.
Mr. Ikenson. Concluding thought, the United States
maintains enormous commercial advantages over other countries.
We have the world's largest market, strong institutions,
including respect to private property and the rule of law,
etcetera, etcetera. These things underlie the strength of the
U.S. economy which is crucial to reaching U.S. security and
foreign policy goals going forward. Thank you.
[The prepared statement of Mr. Ikenson follows:]
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----------
Mr. Poe. Thank you, Mr. Ikenson. You got more in 6 minutes
than anybody I have ever heard in my life. But thank you very
much.
The Chair recognizes General Jones. First of all, General
Jones, thank you for your service to our country.
STATEMENT OF GENERAL JAMES L. JONES, USMC, RETIRED, FOUNDER,
JONES GROUP INTERNATIONAL (FORMER NATIONAL SECURITY ADVISOR TO
THE PRESIDENT OF THE UNITED STATES)
General Jones. Thank you, sir. Mr. Chairman, Ranking Member
Keating, committee members, thank you for holding this very
important hearing and for inviting me to testify before you
today.
With your permission, I would like to submit two items for
the full hearing record; an op-ed I authored on the national
security implications of the Transatlantic Trade and Investment
Partnership and Trans-Pacific Partnership and ``The Task
Ahead'' an article on the dynamics of U.S. global engagement in
the 21st century.
As requested by the committee, I will briefly summarize my
statement and look forward to your questions. I have had the
honor of serving in our Nation's uniform for over 40 years.
Much of that time was during the Cold War when the world was a
very different place, defined by the long struggle between the
West and the former Soviet Union. Ultimately, democracy
prevailed over Communism and our ideals proved superior to
those of our adversaries, as did our resolve and military might
of the United States and the NATO alliance. As a result,
freedom prevailed and despite today's many challenges the truth
is that freer societies, freer markets, and freer trade have
achieved a great leap forward in the human condition and our
values have contributed immeasurably to a better world and to
America's interests around that world.
But today, the geostrategic operating environment of the
21st century is vastly different from that of the past century.
As such, we need a much broader toolkit to be successful.
Maintaining global stability is essential to America's peace
and prosperity, it is no longer a function solely of our
ability to deploy and defeat but of our capacity to engage and
endow, and ultimately, to turn promise and opportunity into
jobs and higher quality of life for those seeking true freedom.
By leading on trade, the United States tightens bonds with
allies around the globe, strengthens influence and would-be hot
spots and bolsters greater global stability through expanding
economic cooperation, the kind envisioned by the Transatlantic
Trade and Investment Partnership, the Trans-Pacific
Partnership, and the African Growth and Opportunity Act
advanced by the extension of trade promotion authority.
So if America wishes to remain a nation of great leadership
and influence in the years and decades ahead, we shouldn't
shrink from competing in the trade-based global economy, the
world mainly of America's making in the last century and one I
think we can be extremely proud of.
But much is riding on our success. Economically and
geostrategically, 95 percent of the world's customers live
outside our borders. Most are hungry for American goods and
services and solutions. And for this reason, America's future
jobs and prosperity depend greatly on trade and global economic
engagement and leadership.
But it is equally true that 95 percent of the hearts and
minds America must win to achieve a more peaceful and
prosperous future also live outside our borders, so commercial
diplomacy, the kind that Secretary of Commerce Penny Pritzker
advocates, is a key ingredient in the strategy for winning
them. Importantly, this hearing was conceived to analyze
whether the U.S. trade promotion agencies play an important
role in U.S. foreign policy. My answer is an unequivocal yes.
They play a crucial role.
Many of the pertinent facts are presented in my full
statement, but I would simply boil down my reasoning to the
following points. One, trade and trade promotion are critical
to American jobs and prosperity. A prosperous America is far
better able to protect this country's values and advance its
interests in a dangerous world.
Two, trade promotion is critical to America's security. As
the former NATO Commander Service Chief and National Security
Advisor, I have seen first-hand the geostrategic importance of
American economic engagement. Where the U.S. private sector is
not present, America's influence suffers. And this vacuum is
filled by economic and geostrategic competitors, and in the
developing world is often filled by those who don't share
either our values or our principles; the result is a less
stable and secure world.
Three, many opponents of trade promotion agencies base
their arguments on a vision of a world with no export financing
and no foreign government support for our competitors, where
markets are untrammeled by state directed export finance and
other support. But in today's real world, approximately 60
export credit agencies are jockeying to offer enticing
financial terms to win more sales for their companies and
workers, often at the expense of U.S. companies.
Russia and China have expanded their state backed export
support even as we continue to deliberate on the future on the
EXIM Bank and our desire for expanded trade agreements.
They and the leaders of America's other export competitors
would welcome the United States ending export finance and trade
promotion programs, which means more business for their
companies and more influence for them around the world.
Although I agree that we should aspire to a world of pure
private sector competition, unilaterally disarming by
eliminating the EXIM Bank and our other trade promotion
agencies is not the answer. It would destroy the U.S.
Treasury's leverage at negotiating reductions to state backed
export finance that would be observed by all, creating the
level playing field that we should all seek.
Finally, I agree that Congress has a sacred responsibility
to ensure the taxpayers' dollars are used wisely. Our country
has yet to see an agency or program that couldn't be improved.
In that regard, the constant work of reforming and refreshing
our initiatives is crucial, but let us improve them where we
can and not eliminate them. After four decades of service to
the nation, a strong aversion is ingrained in me as I know it
is in you, to anything that threatens our national well being.
Among them, anything that would set back our country's economic
competitiveness in the world. Thank you, Mr. Chairman.
[The prepared statement of General Jones follows:]
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----------
Mr. Poe. Thank you, General Jones. The Chair recognizes Ms.
Jaime.
STATEMENT OF MS. SUSAN JAIME, FOUNDER, FERRA COFFEE
INTERNATIONAL
Ms. Jaime. Mr. Chairman and Trade Subcommittee of the House
of Representatives, thank you for inviting me to share my
perspective on the importance of the EXIM Bank.
I have been working in the coffee industry for more than 18
years, and started my own company, Ferra Coffee International,
in 2009 with $50 in the bank and a passion for international
trade and soft commodities. From the start, the heart, soul,
and goal of my business has always been to help coffee growers
worldwide. I learned very quickly that the coffee grower is the
last one in the chain of the coffee trade business to get a
fair price for their product and the last, if ever, to get
training to properly assess the quality of their coffee or
effectively negotiate a fair price with international buyers.
To make a lasting difference in the lives of those coffee
growers, by paying them fairly and according to the quality of
their coffee, to prevent families from being broken apart
because parents or young adults must leave their home countries
and families to come to the United States to work illegally, my
business plan had to change.
If Ferra Coffee sold only to distributors in the State of
Texas or any other domestic state, we could only expect to sell
one or two pallets of approximately 1200 pounds at a time. In
contrast, when we are able to secure an international contract
with an international distributor, orders are generally for at
least one full container, which is 48,000 pounds average. It is
easy to see the advantage.
Behind each bag of Ferra Organic Flavor Coffee, or each bag
of Ferra Liquid Coffee, there are seven U.S. small businesses
that supply products and services contributing to our finished
product, that is labeled USDA organic, roasted, Q graded, and
manufactured in San Antonio, Texas.
Ferra Coffee has successfully started offering our roasted
specialty coffees internationally, thanks to the support that
the EXIM Bank has provided. By their doing due diligence in
checking that the distributors with whom we establish
relationships and make contracts are legitimate, and that we do
not get involved with dubious, unreliable, or criminal groups
while conducting international trade, the EXIM Bank has truly
ensured our success.
The EXIM Bank also literally insures payment of our
shipments, and has given my company the peace of mind of
knowing that the value of the product shipped is secure and
legally insured. The EXIM Bank also allows me the ability to
offer products that have a higher quality for the gourmet
market.
Ferra Coffee International, along with the other small
companies that are our partners, completely depends for our
growth and survival on our ability to sell internationally.
Internationally, there is no market saturation, and USA made
and USDA organic products have a great deal of value to the
consumer.
The EXIM Bank is the one and only entity that we can rely
on to help us continue to grow, be competitive in markets that
are not available to us in our own country, and to give us the
necessary competitive edge in international trade.
My small company, by purchasing coffee directly from the
growers is contributing to stopping illegal immigration and the
displacement of family units. We also help seven other small
U.S. businesses with opportunities to hire more workers and
increase their revenue by purchasing more products for
international contracts.
Without the EXIM Bank offering their services that allow my
company to engage in this type of international trade
contracts, I will not be able to grow my business beyond the
saturated coffee market that we have in the U.S.A.
The EXIM Bank can also do so much more. It can help me, and
other companies like mine which conduct businesses that are
usually not funded by the regular bank system because we have
contracts in international markets. By not acting as a
conventional bank to qualify exporters like me for financial
low interest loans. Instead of using only a credit score to
qualify a company for funding, EXIM Bank could look at, and
assess the overall potential, growth, and increased revenue
that can be achieved by additional funding. That is the vision
that is needed, and that what we are asking for.
My company is not able to get loans from conventional banks
because all of my products are bought in cash. That is the way
the majority of specialty coffee and tea companies operate. We
do not have a history of loan payments or credit with coffee or
tea growers. We need the EXIM Bank's support.
The EXIM Bank is a crucial, vital and important entity that
I and many other U.S. exporting companies depend on for
survival, growth, and the ability to compete successfully in
business. Every U.S.A. company that has the capability to
export and do business internationally, whether that company is
small or large, contributes to the health of our national
economy and our country's leadership in innovation, in the
development of more qualified and competitive businesses, and
of individuals who see our potential markets as global
opportunities for the kind of success that is indeed, the
greater good.
Every aspect of the EXIM Bank has the potential to create
positive and strong advancement for the good of all of us, and
the good of U.S.A.
Thank you for your time, kind attention, and for inviting
to share my story on behalf of all exporters in the U.S.A.
[The prepared statement of Ms. Jaime Jones
deg.follows:]
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Mr. Poe. Thank you, Ms. Jaime. Ms. Seidewand.
STATEMENT OF CARLY SEIDEWAND EPPLEY, VICE PRESIDENT, GLOBAL
SALES AND ADMINISTRATION, RESIN TECHNOLOGY, LLC
Ms. Seidewand. Thank you, Chairman Poe, Ranking Member
Keating, and the other subcommittee members for inviting me. I
hope that my story can actually point to the interconnection of
small- and medium-size businesses across the United States as
exporters, some direct, and some indirect.
Resin Technology is a now $100 million global petrochemical
trading and compounding company. It has been in operation for
close to 20 years. I am second generation of my family
business. It was started by my parents and it is still a
father-daughter run business today. We sell about 98 percent
U.S.-made petrochemicals in Houston, Texas. It is an extremely
important area for us. And we export into over 30 countries
worldwide, some developing nations, and more mature economies.
The majority of our sales go into vinyl construction products
worldwide such as water pipe, windows, wire and cable, and even
some more sophisticated engineered parts, all dependent on the
level of development in those import countries.
Today, our largest export markets are Canada, Europe, very
importantly, the Caribbean and Mexico, Latin and South America
account for about 50 percent of 2014 sales. It should be noted
that we started the business at about 70 percent U.S. sales and
with the help of EXIM financing it is now over 70 percent
export sales. So it has made a huge difference in sort of where
our business has gone.
We have fierce competition from large commodity
international trading firms and foreign producers, the largest
ones being between Korea, China, and especially Japan where
they sell very much on price and very low cost to no cost
financing in markets where we have to compete.
Prior to the housing decline, we were solely focused in the
U.S. and Canadian markets with over 70 percent sales in the
U.S. We started exporting at the end of '06, doubled our sales,
year on year for many years. And we didn't really have the idea
that the housing boom would persist, so we knew that export
needed to be a part of our future growth plan. And obviously,
2008, 2009 proved that point very clearly and we needed to
compensate for those lower sales since everything really--the
largest portion goes into construction projects.
In 2011, Bank of America suggested using Export-Import Bank
to back our export receivables and inventory via a working
capital guarantee program where domestic sales remain under
their current structure. We had for probably 2 years tried to
find other ways to finance our exports with Bank of America by
increasing the size of our insurance policies. We looked at
inventory appraisals to try and increase the advance rates. We
do use an external credit insurance agency which is a big
portion of our--what is underwritten. But it never could meet
the size that we needed to really compete in the export market
on the buy and on the sell side because a very important part
of our business is being able to finance the supply side with
these major Fortune 500 companies.
What we did was increase our advance rates up to 90 percent
of receivables and 75 percent of export inventory, affording us
to be able to compete with our Asian counterparts which is the
most important part because oftentimes they have not only
subsidies on their freight, but their financing seems almost
zero to very low in comparison and offer extremely long terms
where we normally try to finance 60 to 90 days. Sometimes they
will finance 120, 270 days. It is a very different Wild West in
certain areas of market. And since our product is a more
commodity element, the 75 percent loan rate than inventory
really isn't considered excessive and our credit that we do
with customers is the Euler-Hermes credit insurance policy or
via letters of credit all with Bank of America or with local
banks in the United States.
In our view, the Working Capital Guarantee Program with
EXIM has been more disciplined. They have audited us more often
than even our domestic program has. They have very detailed,
down to customer level on sales. We have to provide waiver
letters for foreign currency transactions which is very
important in our markets. There is tough management on credit
overseas and we also have to have comprehensive marine and
warehouse insurance policies.
EXIM financing is actually somewhat expensive but where we
couldn't find any other options that didn't include factoring
or discounting by the bank with letters of credit where none of
customers can, there really was no other option for us to
really increase to where we needed to be. And really, Bank of
America said they just couldn't justify the export receivables
because they didn't have the global infrastructure or for
inventory if something did go wrong to actually collect on
those receivables which is a very important point.
But the other point that I first brought up was how we
partner with hundreds of small to medium size U.S. businesses
across the United States. We are in the Boston market and
obviously we have people there, but also we have a lot of
people that are near the ports in Houston and Louisiana that do
trucking, toll blending, packaging, warehousing, freight
forwarding, ones that don't even realize how much they would be
affected if trade by EXIM wasn't financed.
Three such firms that I have mentioned before, Fleur De Lis
Worldwide, which is in Chairman Poe's area; TCI, a packaging
and trucking firm in New Orleans, Louisiana; and JPI South in
Pasadena, Texas, all have doubled and tripled their workforces
from our loyalty in working and partnering together.
Now with the new boom that we may see in front of us,
petrochemicals, it is even more important for us to capitalize
on those. We personally have doubled our workforce from 4 to 12
people and we have actually opened an office in Houston because
of the concentration that we need there.
Mr. Poe. Can you summarize the rest of your comments? We
have your statement for the record.
Ms. Seidewand. No problem. Basically, for us, if EXIM is
not authorized, which I think is really the most important
point for us, personally, as Resin Technology, we would
probably drop back to just a North American business and
probably would be somewhere between $30 million and $50 million
in sales. We wouldn't be able to negotiate the freight, the
actual export contracts. There are about five major U.S.
producers that we work with. Three of them are discussing
export contracts that we have in place now and all of them
continually ask what is happening with EXIM. And if that isn't
reauthorized that would obviously--actually signing those
contracts for expert, so we would have to reduce in sales,
reduce staffing and obviously all the multitude of other
businesses that we work with. Because really the foreign
companies that are our competitors, they just don't have the
loyalty to our other U.S. businesses that we would. And I think
that is the most important thing for us.
Mr. Poe. Thank you, Ms. Seidewand. Thank you.
Ms. Seidewand. Thank you.
[The prepared statement of Ms. Seidewand follows:]
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Mr. Poe. The Chair recognizes itself for 5 minutes. I want
to thank all four of you for being here. I have a lot of
questions. I will submit some of them in writing for the
reasons I mentioned earlier. As I mentioned in my opening
statement, in Houston, Texas, half of our economy is based upon
the Port of Houston, and we are an export port. We send stuff
all over the world that goes through our port, so trade is
important. Unlike the West Coast, primarily import ports.
Ms. Jaime and Ms. Seidewand, I want to start with you all
and then move over to our gentlemen, ladies being first, of
course. You have heard all of the comments by all of the
witnesses. You both have been here since we started early this
morning. You probably read, when you had time and were not
doing your work in your business to read, the press about EXIM
Bank and the volatile controversy over it. So my questions will
be first to both of you specifically, because you are in the
business world and you use EXIM Bank.
Ms. Jaime, tell me a little bit more about how your
business got started in San Antonio.
Ms. Jaime. Yes, Mr. Chairman. My business got started
basically by going to Latin America and finding coffees that
were specialty graded which is one of the highest quality in
coffee; bringing that coffee into the United States, and
selling it here in the United States. Microroasters generally
they do and roast approximately 20 pounds per batch. As time
developed, we started distributing more to our market in San
Antonio and we dedicated ourselves to do commercial roasting
for chefs, restaurants, hospitals. We are not in the retail
because the retail is over saturated. If you go to the grocery
stores, you have more than a dozen different labels, of course,
of coffees. So it is not a good idea for my business to have my
coffee sitting on a shelf in a supermarket where it is not
going to be noticeable.
Mr. Poe. So if there was no EXIM Bank, how would that
affect your business?
Ms. Jaime. Tremendously.
Mr. Poe. How? How would it affect you?
Ms. Jaime. It would affect it because I am not going to be
able to grow as quickly and help as many coffee growers as we
can when we are exporting.
Mr. Poe. Would you be able to export if you did not have
the EXIM Bank?
Ms. Jaime. No.
Mr. Poe. How much of the business is export business?
Ms. Jaime. Forty percent of my business right now.
Mr. Poe. You mentioned in your testimony that EXIM helps
screen your distributors in foreign countries to make sure you
are not working with criminals. What does that mean?
Ms. Jaime. Well, it basically means that when we have a
submission from a distributor overseas, they give us their
information. We send that to the EXIM Bank. The EXIM Bank
checks to make sure that there is no problems with their
payments. That they have a good record of being an
international distributor; if they have a history of doing any
business with any manufacturer in the United States. And once
we get that information back to us, then we can negotiate
better with that distributor. If they have never had a history
of doing business in the United States, then we are not going
to be able to offer any kind of payment terms and they are
going to have to pay for that order up front.
Mr. Poe. You mentioned that your business helps stop
illegal immigration. How in the world does you business help
stop illegal immigration?
Ms. Jaime. In the majority of the countries that coffee is
grown, the coffee grower is very poor and is very limited in
the resources they have. It is countless and countless number
of times, every year that I go to the Latin American countries,
I find coffee growers that say please represent us well, ma'am.
Please sell our product well and pay us well, so that I don't
have to leave my country, my family, and have to go and work in
the United States illegally.
Mr. Poe. Ms. Seidewand, same line of questioning for you
and I will try to move as quick as I can. if you don't have
EXIM, how does that affect your Boston, Houston business?
Microphone.
Ms. Seidewand. It is interesting how it crosses between
both of you gentlemen. Really what it means for us is no
growth. Really in the United States when housing did crash,
there was also a lot of consolidation of U.S. customers. A lot
of manufacturers started to consolidate. They were bought by
global conglomerates. So the U.S. market in manufacturing
actually shrunk which is where we would sell into.
So the market isn't even still the same then--isn't the
same now as it was then and really it wouldn't eliminate
exports, but it would far reduce them and make them much less
attractive.
Mr. Poe. Why?
Ms. Seidewand. Because we just wouldn't have the financing
to offer terms. When I buy from U.S. producers, they give me 30
to 60 days terms. I need time to actually export, prepare and
sell those exports. And then I have to compete on terms. I need
potentially 60 to 120 days of working capital financing which
if your line is being held and it is not large enough because
you can't lend against enough of your inventory and
receivables, you just don't have enough capacity.
Mr. Poe. So why not go to Bank of America and get those
120-day time limits as opposed to 30 to 60?
Ms. Seidewand. So LCs are wonderful. If I could do every
single customer on a documentary letter of credit that came
directly to me and was all the terms that I wanted, then I
would do every one. But in certain areas, especially Latin
America, as I am sure she knows, LCs are not something that
they are able to do.
Mr. Poe. Banks won't do those?
Ms. Seidewand. They won't do them.
Mr. Poe. American banks won't do those?
Ms. Seidewand. No, the local banks there. The customers
won't actually open an LC for them. And if they do, it could
cost as much as 30 or 40 percent. They just don't make sense in
a commodity market.
Mr. Poe. Okay, thank you. My time has expired. I will yield
from the gentleman from Boston, Massachusetts.
Mr. Keating. Thank you, Mr. Chair. I want to just to follow
a couple of threads one with you, Ms. Seidewand. You mentioned
about what other international areas of a company--other
countries, actually, are offering in terms of some of the
financial terms that you need. So you are competing against
them. Can you tell us, you mentioned Asia, generally. Can you
tell us what countries and what they are doing that makes it so
hard for you to compete?
Ms. Seidewand. So the loudest one I would say would
probably be from the trading companies in Japan where their
lending rates are so low that they are able to offer terms that
far outweigh what I can compete with. I may have the same price
because we have competitive products in the United States. For
a service, or maybe even offering the same types of products
from the United States, that they and oftentimes are also them
and four other countries' worth of products. But they can do so
maybe doubling my terms. They consistently extend, extend,
extend, and so if I can't compete with that, I am not able to
offer that to those customers on a long-term basis.
Mr. Keating. So it just gives you a level playing field?
Ms. Seidewand. Absolutely. Absolutely.
Mr. Keating. The other thread I wanted to just follow up on
and thank you for service, General Jones, and having you here
has prompted this question that I wasn't prepared to ask, but
your background and I think you are uniquely positioned to
answer this. Looking at our trade issues, shared values with
Europe and looking at the incidents of what is going on Ukraine
and some of the other countries around there, can you draw a
parallel to the advantages of our trade particularly with
countries who have shared values and our security in this part
given your NATO background?
General Jones. Thank you for that question. I think that we
are living in a very different century and whereas the 20th
century was characterized by a lot of violence, global wars,
and who had the strongest and the best armies who wanted to
fight, the 21st century to me is much more of an economic
competition. And this is the path that the country--this is a
national security issue as well. And I believe that if you look
at Mr. Putin's aggression in the Crimea and Ukraine and the
response to it, it is primarily economic. And there are
projects afloat in Europe that the U.S. is also participating
in to draw up long-term consequences for Mr. Putin's behavior.
We can do something about reducing Europe's dependence on
Russian energy, but it is an economic response. We can help
Ukraine divest itself of being too dependent on Russian energy.
And so I think the times that we live in, we need to have
the tools to do that. The Transatlantic Trade and Investment
Partnership is already our largest alliance of over $1 trillion
in trade, $4 trillion in investment, and 13 million jobs. And
this is a way that we can connect with Europe in the 21st
century, much the same way we did in the 20th century, but with
a much more balanced approach vis-a-vis military and economic
development.
So many of our nation's responses to international threats
that are facing us are going to be economic. The day that ISIS
is defeated in Iraq is a day that we need to have an
international plan, hopefully, with U.S. leadership to have
economic recovery for that region because if we don't, as we
did in the Iraq invasion, Iraq will just continue to spiral out
of control.
In my view, it is a simple formula. Security plus economic
development, plus governance and rule of law, are the three
components that have to be factored into international
engagements in the 21st century.
Mr. Keating. I would mention, too, that some of these
countries wouldn't be able to participate in the sanctions.
General Jones. Exactly.
Mr. Keating. If they are not strong and join with us which
have really thwarted Putin's aggression more than anything
else. And the second thing, even with NATO, part of their 2
percent contribution is limited because of their economic well
being.
General Jones. Sure.
Mr. Keating. And that is important, too, because hopefully
after Wales and the economy that is advancing although too
slowly to be able to meet that challenge. Do you think that is
important as well?
General Jones. The only reason Iran is at the table is
because of economic sanctions. The only reason Mr. Putin is
going to find a way out of his problems in Ukraine is because
the economic conditions will ultimately force him to do that. I
believe that to be true.
Mr. Keating. Thank you for your comments.
General Jones. Thank you, sir.
Mr. Keating. I yield back.
Mr. Poe. I thank the gentleman. I have a couple of
questions left for Mr. Ikenson and General Jones and then I
will yield to the ranking member if he has further questions.
Mr. Ikenson, two questions. I will give you both questions
and then answer both of them. If EXIM Bank is reauthorized,
what reforms do you think must be in the reauthorization? And
second, you said that manufacturers are victims of the Export-
Import Bank. National Association of Manufacturers representing
large and small manufacturers support the reauthorization. So
could you explain that discrepancy and also answer the first
question?
Mr. Ikenson. Sure.
Mr. Poe. Briefly.
Mr. Ikenson. Thank you for the question. Well, I hope that
EXIM is not reauthorized. I believe in free market capitalism
and I think we should try it. But if it is to be reformed, to
me, the big problem is not necessarily the burden on taxpayers.
It is the absence of concern toward other companies when an
export sale is subsidized, that customer, that foreign customer
benefits at the expense of the U.S. customers of that U.S.
exporter. And I know that Mr. Hochberg mentioned that they do a
cost benefit analysis of all of their pending transactions. I
rather doubt that they do that with respect to--they never go
into full mode with respect to the impact on downstream
industries.
A study that I did took a look at the costs, the costs that
are actually imposed on these companies by seeing how important
the export product is to the downstream industry as a
manufacturing input. And based on that and based on the largess
that is doled out to the exporting industry and to the
downstream industry, I was able to calculate a cost. The
problem is this is a situation of what is seen and that which
is not seen. We see the export subsidies and we all seem to
like exports and we celebrate that, but we don't often see the
impact on the downstream industries. Delta is a big company and
it was able to discern it and bring it to the attention of the
public. But there are lots of companies, smaller companies,
that rely on inputs that don't even really realize that they
are being affected in a relative way, vis-a-vis their foreign
competitors, so some mechanism that brings that to the fore so
that there is a channel through which companies can evaluate
the impact on them and maybe seek damages.
That sort of parlays into the second question, the
manufacturing sector has many, many victims in a variety of
states. It costs about $2.8 billion per year.
Mr. Poe. Then why does the National Association of
Manufacturers support EXIM Bank?
Mr. Ikenson. It does because those who benefit, the
companies that benefit from it are the ones that are speaking
out. They want EXIM. We have heard some stories here about how
crucial EXIM is to their businesses. The companies that suffer
and then incur costs are often unaware of what is going on.
Mr. Poe. So they don't know they are victims?
Mr. Ikenson. Many times they don't know that they are
victims. They are not as big as Delta.
Mr. Poe. I need to reclaim my time because we are about out
of time.
General Jones, be more specific. You make the statement
that EXIM Bank is important for national security. Why is EXIM
Bank important for national security and what would be the
consequences if we didn't have it?
General Jones. Mr. Chairman, if I could just quote from my
formal statement and I quote, ``If EXIM Bank is shut down, and
the United States leaves the field on export financing, such a
vacuum would not only undermine U.S. business abroad and lose
jobs at home, but undermine American influence and economic
leadership at a time when it is needed more than ever.''
I believe it is an instrument that is valuable. I think the
numbers are impressive. And I don't believe it is in our
national interest, if I could use a military term, ``to
unilaterally disarm.'' If we do this, you can be sure that the
Russians, the Chinese, our friends in Europe, they are not
doing this. They are competing. And they are competing every
single day with their missions, not only trade missions but
heads of state missions, and I believe that the future is the
public and private sector finding more ways to work together,
not ways in which we drift apart. And I think that is a very
fundamental difference between us and the rest of the
competitive world that we deal with.
Mr. Poe. Thank you, General Jones. The Chair will yield to
the gentleman from Massachusetts, Mr. Keating, the ranking
member.
Mr. Keating. Well, briefly. In response to Mr. Ikenson's
concern, I can only ask the two people that are actually in
business, Ms. Jaime and Ms. Seidewand. If you are worried about
downstream affecting it, well in a void like that that
downstream I am afraid is going to be taken by another country,
acting in ways that we don't, directly getting involved as a
country funding. So in a void in that downstream, it is going
to be filled somewhere by someone. We want it filled by the
U.S. Could either of you comment on that? Am I right in that
thinking?
Ms. Jaime. Yes, Mr. Congressman. Basically, just in my
field, coffee bean is the second most profitable commodity,
traded commodity. If we don't act as importers and also
exporters and be able to fill right now the emerging markets,
international markets for specialty coffees, you are right.
Somebody else is going to get it.
One of the main problems that I have when I go to those
countries to buy those coffees that are specialty and they are
high quality is that the Chinese buyers are coming in and being
very aggressive to be able to get those coffees. And since the
coffee grower really does not know how to negotiate for those
contracts, they are still on the losing side. So it is
important for us not only to go, be competitive in purchasing
these coffees, but immediately put them in the international
market that we have a great opportunity to do that right now.
Mr. Keating. Thank you, Mr. Chair. I yield back and I thank
all of you for taking the time to be part of this hearing.
Mr. Poe. The gentleman yields back. I also want to thank
you four for being here most of the morning, here at the
testimony and your testimony. And as I mentioned to the first
panel, there may be questions submitted by members on both
sides on these issues and they will be submitted to you because
of the necessity of hearing your answers from other Members of
Congress that may not have been able to ask questions. In any
event, I thank you for being here and the subcommittee is
adjourned.
[Whereupon, at 12:17 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Record
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Material submitted for the record by General James L. Jones, USMC,
Retired, founder, Jones Group International (former National Security
Advisor to the President of the United States)
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Note: The article entitled ``The Task Ahead,'' submitted by General
James L. Jones, is not reprinted here but the link may be found on the
following Internet page: http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103486]
[all]