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In an exclusive interview with GTR, CEO of the Washington-based Bankers’ Association of Finance and Trade (Baft), Tod Burwell, gives his take on the future of US Exim after the nine-month extension of its charter this week.

 

GTR: How important do you think US Exim bank will be to the future US economy and trade?

Burwell: US Exim is critical, not only to US exports but also to international trade generally. There is a misunderstanding that the private sector is fully capable of satisfying all trade financing needs, but those in the industry realise that’s just not the case. There’ve been various studies demonstrating a financing gap in trade, and the most severe consequences of that gap tend to fall on SME exporters. ECAs will remain critical, especially to SMEs that have very few alternatives.

GTR: Would a US Exim closure have any benefits for the industry?

Burwell: You could argue that there’d be an opportunity for foreign ECAs or the private market to fill certain voids created by a closure. But, from a commercial point of view, the reason ECAs are so important is because bank balance sheets are under pressure. Private sector lenders have constraints like capital requirements, country risk limits and counterparty limits. The value of ECAs is their ability to assess, take and manage the risks that some banks won’t be able to do.

GTR: Critics of US Exim claim the bank unfairly supports large US-based corporates. Boeing, for example, has alone received US$48.63bn over the last five years. Why can’t US Exim better serve SMEs?

Burwell: I understand there is a difference between the number of deals and the value of those deals. Financing a single Boeing 777, for example, could be a US$300mn deal for 10 or 12 years. It’s not a stretch to think that US Exim financing seemingly favours those types of bigger, chunkier transactions as opposed to the smaller deals, but the overwhelming majority of companies benefitting from US Exim financing are actually SME exporters.

Around 80% of the transactions US Exim authorises benefit SMEs. Even when looking at Boeing or GE deals, a lot of those projects have hundreds of SME suppliers that are fully dependent on the transaction for their wellbeing. It’s the entire ecosystem of supplier companies.

GTR: What role will US Exim be playing in five to 10 years?

Burwell: It’s a question of politics settling the debate. It’s hard to look into a crystal ball, but I think the elections in November will have a role to play in the future of US Exim. We are going to need a good look at the face of the new Congress before we get a sense of it.

It’s difficult to project forwards because this is now a politically-sensitive topic as opposed to a discussion on the merits of export credit financing. Those that are close to trade finance think there is absolutely a critical role for US Exim, and there’s an opportunity for it to do more.

If you compare the relative amount of US Exim financing with other countries’ ECAs, it’s disproportionately smaller. It ranks below China, Japan, South Korea and Germany in the amount of export credit it provides. In terms of export credit authorisation as a percentage of GDP, you could also add Mexico, France, the UK and others to that list.