The U.S. should take the lead in writing global rules for export financing to blunt an increase in unregulated support from nations including China, India and Brazil, Export-Import Bank Chairman Fred Hochberg said.
“Export finance is increasingly like the Wild West, where rules are loosely followed, if at all,” Hochberg said in a speech today in Washington. “America needs to lead the world in developing a new framework.”
Governments are increasing exports with at least $160 billion in unregulated support, including direct state investment, according to the Washington-based Ex-Im Bank. The rules-based system set up in 1978 by the Organization for Economic Cooperation and Development -- primarily the U.S. and European nations -- is out of date, Hochberg said.
“The international export-finance landscape is changing dramatically, and not in ways that necessarily benefit the United States,” he said. Other countries will “continue to try and create their own national champions” to compete with U.S. companies.
The 78-year-old bank is playing a role as President Barack Obama seeks to double the value of U.S. exports from 2009 through the end of 2014. The bank provides loans, guarantees and insurance to help overseas companies buy U.S. products. Last year it approved a record $32.7 billion in financing, with about $11 billion for sales of Boeing Co. (BA) aircraft.
The U.S. and China since February are among governments negotiating a new export finance system and may have an plan in place by the end of 2014, Hochberg said. Participants are still defining issues, including infrastructure financing, he said.
Congress last month reauthorized the bank’s charter through 2014, with a $140 billion lending limit, after a debate about its role and effectiveness. Critics such as the Club for Growth, a Washington-based organization that advocates for limited government, have said the bank meddles in markets. U.S. carriers led by Delta Air Lines Inc. (DAL) of Atlanta said the lender doesn’t adequately consider the effect of its financing on domestic industries, which Hochberg disputed.
The U.S. should overhaul its “alphabet soup” of trade- related agencies, including the bank and the U.S. Trade Representative’s office, Hochberg said.
There should be a “healthy debate about what configuration will ultimately work,” according to Hochberg.
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