General Electric Co.’s proposed sale of 150 locomotives to Pakistan received a $437 million boost when the U.S. Export-Import Bank offered cut-rate financing to help the company compete with China’s export lender.
“I don’t want to lose any sale because of financing,” Fred Hochberg, the chairman of the Export-Import Bank, told reporters in Washington today. The U.S. learned in February that China planned to back a rival for the equipment sale, and it’s the first time the U.S. has offered to meet the terms of China’s government lender.
Pakistan is close to deciding on the purchase, according to The Nation newspaper in Islamabad.
The Export-Import Bank is a government-backed lender providing credit for American exporters to help the companies win overseas sales. The bank’s financing is a key to President Barack Obama’s goal of doubling exports, and loans or guarantees it provided climbed to a record $24.5 billion in the past fiscal year.
China, the world’s biggest goods exporter, has become a competitor for U.S. sales, in part because the nation doesn’t abide by limits set by the Organization for Economic Cooperation and Development on lending terms and costs to borrow. Thirty-four developed countries are in the OECD, and the restrictions on export financing help limit the subsidy or trade distortion in those credits, according to the OECD’s website.
Without those credit restrictions, Chinese exporters get an advantage over companies in OECD nations, according to an Export-Import Bank study in July. China’s export financing in 2008 was more than five times that of the U.S., according to the report.
The issue is complicated because the Chinese terms aren’t usually publicly available, Hochberg said after a speech at the Center for Strategic and International Studies.
In Pakistan, the terms were disclosed and the U.S. government moved to match, offering GE a 12-year loan for $437 million of the $477 million contract. The terms matched what would be available to its competitor from China, according to data supplied by the Export-Import Bank.
Commerce Secretary Gary Locke has sent letters to President Asif Ali Zardari of Pakistan, urging a decision for GE, the world’s biggest maker of locomotives, the bank said.
“With the rise of China, there is a lot of opportunity, but also a lot of competition,” Richard Herold, the leader of international government relations for GE Transportation, said today. “Ex-Im boldly stepped up to the plate.”