The Future of the Ex-Im Bank: Securing a Global Market Presence in the 21st Century
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Wednesday, April 18, 2012
The contentious debate over the Export-Import Bank re-authorization has placed the future of trade finance assistance, and the job recovery at large, into a tenuous position. CNP President Scott Bates and the Honorable Carlos Gutierrez discussed the ways to ensure America's global economic competitiveness for years to come. Scott Bates introduced the discussion by highlighting the legislative debate's larger implications: "We focus on national security policy here at the Center, and want to emphasize that the Export-Import Bank is an important component of U.S. national security."
Prioritizing Global Trade
Carlos Gutierrez, former Secretary of Commerce, used the conversation of the Export-Import Bank as a starting point for a broader discussion on the global trading environment. Mr. Gutierrez prefaced his remarks by stating that the Ex-Im Bank deserves to be reauthorized and that it would be stunning if the Bank's charter was not renewed at a time when other countries (namely China and Russia) are expanding their own export-import banks. He emphasized that the Ex-Im Bank is a healthy institution with extremely low default rates and a proven model to support export-oriented businesses. Indeed, according to the U.S. Chamber of Commerce, the default rate is less than 2 percent while the Bank has returned over $3.4 billion to the treasury since 2005. Moreover, 87% of the loans have gone to small businesses mitigating the claim that it only supports the largest and most powerful corporate entities.
For Mr. Gutierrez, the larger, and more endemic problem, is that United States has not prioritized trade issues in an evolving economic paradigm. The slow and hesitating run up to FTAs with Colombia, Panama, and South Korea revealed the extent to which our trade matters have become backburner priorities. Mr. Gutierrez argued that we have the ability create our own semi-regional trading groups that stitch together a wide-variety of markets. As the largest trading area in the world, the European Union has advanced the regional unit as an ideal trading model. Drawing from this success, Mr. Gutierrez suggests that the next watershed moment for global trade could be an effective consecration of the ASEAN+3 (ASEAN plus China, Japan, and South Korea) trading area. The United States is at risk of being under-represented in Asia. Mr. Gutierrez recommends pursuing FTAs in growing markets with a true sense of urgency.
With respect to China, Mr. Gutierrez believes the critical way to compete is to increase efforts to strengthen our economic ties with South Korea and invest in market-oriented commercial infrastructure. Investing in American ports, none of which rank in the top 10 worldwide, is a national imperative if we desire to compete globally. However, international competition will not arise solely from China as the global trading environment includes many market economies with industrial policies and increasing evidence of "state capitalism" – semi-nationalized companies that not only seek to maximize profits but also attempt to further the interests of the state. In lieu of attempting to convince countries to adopt a different model, Mr. Gutierrez believes we must make our own system compatible with this new trading environment while urging incremental reforms. In sum, to abrogate these systemic disadvantages the United States must fully support institutions like the Export-Import Bank and pursue a wide-variety of FTAs with the Executive branch given the authority to rapidly push through these agreements.
