Summary: Testimony was provided on a forthcoming report on Export-Import Bank (Eximbank) financing of U.S. exports, the international competition Eximbank faces, and the ability of Eximbank to meet that competition. Financing is an increasingly important factor in exporting, particularly in sales to developing countries not able to finance expensive capital projects internally. U.S. exporters face strong foreign competition, particularly as increasing numbers of other countries develop advanced technology and manufacture competitive products; under such market conditions, financing terms often secure a sale. Eximbank supplements commercial financing of foreign borrowers who require fixed interest rates and lengthy repayment periods through direct credit, insurance, and guarantee programs. To avoid an international export credit "war," the United States has agreed with 21 other nations on voluntary guidelines for government-supported export financing. In early 1980, the United Kingdom, Germany, France, and Japan all offered a base interest rate of 7.5 percent, the minimum rate allowed by the agreement. The average rate on direct loan financing supported by Eximbank was about 10.5 percent, although Eximbank often competes by modifying its normal lending practices on a case-by-case basis. The number of exports and the portion of each export that Eximbank can finance each year is limited by the annual direct loan authorization approved by the Congress and by Eximbank's efforts to remain a self-sustaining institution. Some of Eximbank's competitors have access to foreign assistance funds and can offer mixed credit financing; lacking this advantage, Eximbank must use its income and reserves to absorb the costs involved in offering the equivalent of mixed credits. Other factors which limit Eximbank in competition with its counterparts are limitations placed by U.S. foreign policy, a reluctance to use Eximbank's direct loan authority to finance the local costs of prospective buyers, and a reluctance to finance foreign goods which may be included in major pruchases of U.S. goods. The Congress may want to consider several alternatives to Eximbank's competitive disadvantage, such as increasing Eximbank's annual direct loan ceiling, lowering Eximbank lending rates, and reconsidering the restrictions on financing local costs and foreign content.
