(Nottingam University, Nottingham, 27 July 2016) This 35 page paper investigates the impact of the US Export-Import Bank on US exports particularly in the wake of international competition from foreign national export credit agencies (ECAs). We employ a gravity framework on a country-industry-year-level panel dataset that matches EXIM authorizations with US bilateral exports. Our results depict the general ineffectiveness of the Bank in promoting exports within and across industries. Some heterogeneities behind the general finding are also uncovered: industries other than aerospace parts and products are more likely to benefit from EXIM authorizations, and that EXIM authorizations to larger businesses seem to be more effective in encouraging exports. Furthermore, we find no evidence that explains the role of EXIM in encouraging US exports by offsetting foreign ECA competition. These results are neither affected by competing countries' membership to the OECD Arrangement nor by the size of American firms that received EXIM support. Our results cast doubt on the ubiquitously positive claims made by the Bank and its supporters, yet also provide policy lessons for countries that are either in the inception stages of establishing their own ECAs or are now placing greater importance on ECA financing in encouraging domestic exports. See also the Global Trade Review review article
Index for August 2016
Volume 15, Issue 8
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(Daily Mail, London, 17 August 2016) Iran said Wednesday that Norway had offered the Islamic republic a $1-billion credit line following a meeting between their foreign ministers in Tehran. Borge Brende and Mohammad Javad Zarif signed three "export credit" deals aimed at funding "development and infrastructure projects", Iran's foreign ministry said in a statement. Iran has struggled to tap international finance as many banks fear US penalties if they do business with the Islamic republic. A landmak deal between Tehran and world powers, which was signed in July last year and came into force in January, saw many international sanctions on Iran lifted in exchange for curbs to its nuclear programme. European countries have been keen to do business with one of the last frontier markets, but Washington has maintained sanctions related to Iran's human rights record and missile programme.
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Argentina’s sovereign debt may be outperforming most of its emerging-market peers this year, but the OECD says the country is as risky as North Korea, Venezuela and Iran. The ranking is a remnant from the days when Argentina was still a pariah in international markets -- and it could soon change. About half a dozen International Monetary Fund economists are set to touch down in Argentina in September to assess the reliability of the country’s economic statistics and the sustainability of its fiscal and monetary policies, as well as the banking industry. The so-called Article IV consultation -- normally an annual review but, in Argentina’s case, the first in a decade -- is a key step to reclaiming legitimacy among organizations like the OECD and unlocking cheaper financing from member nations.
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(Pulse News, Seoul, 2 August 2016) State-run Korea Trade Insurance Corp. (K-sure) will likely provide additional security for two drill ships Daewoo Shipbuilding & Marine Engineering Co. (DSME) made but whose delivery is being stalled because of financial troubles of Angola’s state-run oil company Sonangol, according to the financial authorities and creditors on Monday.
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(Frontera News, London, 25 August 2016) In December, Paris Club creditor nations hammered out a debt restructuring deal with the Cuban government, which forgives a large portion of monies owed from a default in 1987, while the Cuban government committed to paying off the rest over time. Observers cite these kinds of deals as evidence that the Cuban government is serious about integrating itself fully into the global economy, but some are wondering if the island’s current liquidity crisis will compel it to fall back on its debt service promise. “The Paris Club countries that struck the deal with Cuba have all been encouraging their ECAs (export credit agencies) to open up to doing more business with Cuba,” said Pavel Vidal, a former official at Cuba's Central Bank now teaching at the Javeriana University in Cali, Colombia. “In fact, the Paris Club deal allowed for individual countries to convert part of the restructured debt into projects and equity. I think the French, Dutch and the Brits have also opened some lines. Europeans are trying to get to the party before the Americans can come in."
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(The Nation, Lagos, 19 August 2016) The Nigerian Export Import Bank (NEXIM Bank) and Fidelity Bank Plc are taking measures meant to enhance non-oil exports and create wealth for Nigerians. Both lenders urged exporters to explore opportunities presented by the N500 billion (US$1.58 billion) non-oil Export Stimulation Facility (ESF) as well as the expansion of the export credit Rediscounting and Refinancing Facilities (RRF) to develop the economy, stimulate their operations, and create jobs for the people.
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(Business Standard, Mumbai, 1 August 2016) Indian ECA ECGC is likely to introduce credit insurance cover for the overseas-based subsidiaries of Indian companies, a top company official said here today. Under the proposed scheme, which is likely to be launched within a month's time, ECGC will provide cover to 85 per cent of the project cost to the overseas-based subsidiaries of the Indian companies.
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(Compressor Tech News, Waukesha, WI, 26 August 2016) GE has started constructing its multimodal manufacturing facility in Welland, Ontario, Canada. The facility, a US$165 million investment in its first phase, will manufacture GE Power’s reciprocating gas engines, as well as components for compression, mechanical drive and power generation applications. It will also craft components for GE transportation diesel engines. The facility, expected to open in early 2018, will employ 220 people and has the ability to expand for other GE global businesses, such as Power, Oil & Gas and Transportation. Since 2010, GE’s Waukesha brand formerly held its manufacturing operations in Waukesha, Wisconsin. In September 2015, however, GE Power decided to move its manufacturing jobs to Canada, citing a lapse of charter for the US export credit agency – the Export-Import Bank (Ex-Im) as a reason. With the facility in Canada, GE will be able to access support from the country’s export credit agency, Export Development Canada (EDC). GE has a long-standing relationship with EDC, the company said.
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(Xinhua, Beijing, 16 August 2016) China's State Council (the Cabinet) urged local authorities to intensify efforts to stabilize exports and imports, which both declined in the first seven months of the year. Trade facilitation measures adopted by the country's free trade zones should be duplicated, standards at different customs areas must be unified, and examination procedures should be simplified, according to a statement released after a State Council executive meeting presided over by Premier Li Keqiang Tuesday. Financial institutions should enhance credit support to companies that have received export orders, help them control exchange rate risks, and expand the coverage of export credit insurance, the statement said.
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(Wall Street Journal, Beijing, 9 August 2016) The U.S. Export-Import Bank is vetting major export-financing deals in advance so it can resume lending as soon as a U.S. Senate logjam is resolved, its chairman said Tuesday in Beijing. Fred Hochberg, Ex-Im Banks’ chairman and president, said he hopes the Senate can clear an impasse during the next few months affecting a backlog of loan applications totaling some $20 billion at the Washington-based institution, which finances U.S. exports. The bank has run into stiff opposition from critics who characterize as “corporate welfare” its support for U.S. exporters such as Boeing Co. Last year, the bank’s operations were suspended after House Republicans stopped Congress from voting on a reauthorization measure before its charter expired last July. In December, large majorities in both chambers voted to renew its lapsed charter. But Sen. Richard Shelby (R., Ala.), the chairman of the Senate Banking Committee, has blocked the confirmation of a board member, depriving the bank of the quorum needed to approve deals exceeding $10 million.
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(Global Trade Review, London, 3 August 2016) France’s Airbus group supplied a near tenfold increase in customer financing following a freeze in export credits from the UK, France and Germany earlier this year, in light of potential corruption and transparency issues. In its half-yearly statement the company said it supplied €587mn of financing to customers compared to €63mn for the first half of 2015. “This is temporary finance we are doing as we’re under suspension of export credit financing,” company CEO Tom Enders told analysts. However, this is only 1% of total ECA financing received in 2015, reflecting that the market is liquid and competitive, he added. Meanwhile, the UK Serious Fraud Office has opened a criminal probe related to use of third-party consultants.
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(Brave New Coin, Southbank AU, 15 August 2016) Bank of America Merrill Lynch (BofAML), HSBC, and the Infocomm Development Authority of Singapore (iDA) recently announced that they have jointly developed “a prototype solution built on Blockchain technology that could change the way businesses around the world trade with each other.” Trade finance involves a range of activities; lending, issuing letters of credit (LCs), factoring, export credit issuance, and insurance. The processes are typically time and labor intensive, involving many parties while multiple documents must be checked to reduce risk and provide assurance to sellers, buyers, and their banks. An LC or Documentary Credit represents a guarantee by a bank that a seller will receive payment from a buyer once certain conditions are met. Using blockchains, all parties involved in an LC transaction can view all actions in real-time, such as when the seller has shipped the buyer's goods. “Each action in the workflow is captured in a permissioned distributed ledger, giving transparency to authorised participants whilst encrypting confidential data,” states the project press release.