The Export—Import Bank

The Export—Import Bank: An Economic Analysis provides a critical analysis of the export financing issue and the Eximbank's performance in fulfilling its congressional mandate. The analysis is based on extensive interviews with Eximbank officials and on numerous internal documents in addition to published materials.

This book is composed of 11 chapters that reflect the three perspectives on Eximbank’s performance. First, an analysis of the need for such financing is presented in conjunction with an assessment of the competitiveness of U.S. programs compared with those provided by other nations. Second, Eximbank performance is evaluated in terms of the cost of its programs, their potential welfare impacts, and the likely impact on U.S. exports. Third, an evaluation is provided of the Eximbank's decision making and its methodology for evaluating the impact of its direct credit program. Recommendations are made concerning U.S. export financing objectives, strategies for achieving those objectives, and Eximbank administrative procedures. This work also provides an economic analysis of Eximbank financing and includes a case study of Eximbank decision making in the granting of a $200 million aircraft credit to Ansett Airlines of Australia.

This book will prove useful to those who are interested in international trade and finance, as well as those concerned more broadly with government intervention in markets.

Preface

1. Eximbank: The Controversy, Its Mandate, and Its Programs

I. The Controversy

II. The Origin and Functions of the Eximbank

III. The Principal Features of the Export-Import Bank Act of 1945

IV. Eximbank Programs

V. Related Organizations

VI. International Agreements Pertaining to Export Credits

VII. Policy Issues Associated with the Eximbank

References

2. A Review of the Bank's Activities: 1970-1981

I. Introduction

II. Eximbank Performance

III. PEFCO

IV. Conclusions

References

3. The Economic Justification for the Programs of the Eximbank

I. Introduction

II. Capital Market Imperfections

III. Capital Market Deficiencies

IV. Promotion of Exports, the Balance of Payments, and Employment

V. Maintaining U.S. Product Dominance

VI. Concessionary Export Financing as Aid

VII. Meeting Foreign-Subsidized Export Financing

VIII. Conclusions

References

4. The Supply and Demand for Government-Supported Export Financing

I. Introduction

II. The Demand for and Supply of Government Financing of International Trade

III. The Response to Challenges to the Eximbank

IV. Conclusions

References

5. The Competitiveness of Eximbank Programs

I. Introduction

II. Official Export Financing Programs of Six Major Trading Countries

III. The Level of Official Export Financing

IV. Analysis of the Disposition of Preliminary Commitments

V. Surveys of Exporters

VI. Conclusions

Appendix 5.A. The Export Financing Programs of Six Other Countries

References

6. The Subsidy Provided by Eximbank Financing

I. Introduction

II. Estimates of the Subsidy

III. The Subsidy Provided by an Eximbank Credit

IV. Estimation of the Subsidy

V. Analysis of the Direct Credit Data

VI. Conclusions

Appendix 6.A. Derivation of the Subsidy Provided by an Eximbank Credit and the Blended Interest Rate on a Credit

Appendix 6.B. Eximbank Country Risk Groups

References

7. The Welfare Consequences of Concessionary Export Financing

I. Introduction

II. The Nature of the Welfare Effects of Concessionary Export Financing

III. Estimates of the Net Cost of Eximbank Concessionary Financing

IV. Conclusions

Appendix 7.A. The Discount Elasticity of the Export Price

References

8. Additionality and Its Measurement

I. Introduction

II. The Treasury Study of FY1978 Eximbank-Supported Exports

III. The Eximbank Studies

IV. A Critique of the Additionality Studies

V. The Information Problem

VI. An Alternative Approach to the Measurement of Additionality

References

9. A Test of Additionality

I. Introduction

II. Additionality and Aircraft Financing

III. The Bank's Aircraft Financing Policy

IV. The FY1979-1981 Aircraft Credits

V. The Model and Hypotheses Tested

VI. Results

VII. Conclusions

VIII. An Extension of the Methodology to All FY1980-1981 Credits

Appendix 9.A. Aircraft Export Financing, FY1979

Appendix 9.B. Aircraft Export Financing, FY1980

Appendix 9.C. Aircraft Export Financing, FY1981

References

10. The Ansett Case

I. Introduction

II. The Aircraft Offers

III. The Airbus Financing Offer

IV. The Eximbank Board Meetings

V. Analysis of the Subsidy Provided by the Eximbank Financing

VI. Analysis of the Bank's Decision Making in the Ansett Case

VII. Implications for the Bank's Decision-Making Process

Appendix 10.A. Calculation of the U.S. Dollar Interest Rate Equivalent to the Airbus Financing Offer

Appendix 10.B. Calculation of the Subsidy on the 727 and 737 Financing

References

11. The Future Role of the Eximbank

I. Introduction

II. U.S. Objectives and the Eximbank

III. Achieving Export Financing Objectives

IV. The Operation of the Bank in Its Present Form

V. Conclusions

References

Index