"Wild West" export financing needs taming: Hochberg

WASHINGTON (Reuters) - The United States could lose exports in sectors ranging from aircraft to power equipment unless a new international pact is reached to rein in "unregulated" government export financing, the head of the U.S. Export-Import Bank said on Monday.

"The international export finance landscape is changing dramatically, and not in ways that necessarily benefit the United States," Ex-Im Bank President Fred Hochberg said in a speech. "Export finance is increasingly like the Wild West, where rules are loosely followed, if at all."

Hochberg said the bank recently examined government export credit practices around the world and "found a stunning increase in the amount of ECA (export credit agency) financing that is happening underground and in the dark."

That's true even among members of the developed country club known as the Organization for Economic Cooperation and Development (OECD), which established guidelines in 1978 for government export credit agencies, Hochberg said.

The OECD "framework was effective for decades, but our report clearly shows that it is showing its age," he said.

"Our study estimated that there was roughly $100 billion in unregulated OECD export financing and an additional $60 billion from the BIC (Brazil, India, China) countries," Hochberg said.

Ex-Im's study found that OECD-regulated financing has dropped from two-thirds to one-third of global export finance over the past decade and "is continuing to fall," Hochberg said.

The United States and China recently launched export credit talks with the goal of reaching a deal by the end of 2014.

Those have been expanded to include countries in Europe and other members of the OECD, although negotiations are still at an early technical stage, Hochberg said.

Unlike many competitors, the Ex-Im Bank only provides financing to support particular export deals, he said.

But other government credit agencies offer financing to promote any number of long-term national interests, such as increased access to natural resources, future inbound investment, and creating a better overall environment for certain national champions, Hochberg said.

"It's a wink and a nod. Finance now for future benefits," Hochberg said.

Examples include a $100 million loan by Canada's export credit agency to Colombian petroleum company Ecopetrol, "with the understanding that Canadian companies will get a first look in future investment and procurement decisions," Hochberg said.

"Or when Japan's ECA delivered $200 million to India to finance clean energy projects, with the expectation that more Japanese technologies will eventually be used by India."

The U.S. Congress recently renewed the Ex-Im Bank's charter over the objections of some conservative Republicans, who called it a form of corporate welfare and argued the government should have no role in helping finance exports.

The reauthorization bill gradually raises Ex-Im Bank's credit exposure cap to $140 billion, from $100 billion previously, and Hochberg argued in his speech the United States would need all that fire power.

"Believe me, China and other countries will not be shy about using any tool, as much as they can and for as long as they can, to put their people to work," Hochberg said.

The Ex-Im study also found many international buyers believe China and other developing countries are only 3-5 years from matching U.S. quality in some high-value goods.

"They're already getting closer with their advanced industrial equipment. And airplanes and avionics, our number one export and a huge source of American jobs, could well be next," Hochberg said.

(Editing by Andrea Ricci and Tim Dobbyn)

WhatsAppFacebookTwitterLinkedinBeloudBluesky