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hurt by new legislation

Exporting-aid agencies
hurt by new legislation

As many of the readers of the Rochester Business Journal know, Congress is considering several pieces of legislation that this writer believes could have a detrimental impact on current levels of funding for foreign-assistance programs of the U.S. government. Both the Senate and House budget committees have passed or are considering passing cuts in these programs. While this writer feels these cuts will seriously curtail the efforts of area businesses who want to export, especially to areas of the world such as Russia and the New Independent States, the purpose of this column is to explain the activities and responsibilities of a few of the organizations being curtailed or drastically scaled down. These agencies are the Export-Import Bank, the Overseas Private Investment Corp. and the Trade and Development Agency.
The EX-IM Bank is an independent U.S. government agency that provides support for U.S. exports through export credit insurance, loan guarantees and loans. There are several requirements U.S. companies must meet in order to have projects considered.
The EX-IM Bank will assist exports of goods and services containing at least 50 percent U.S. content. Reasonable assurance of repayment for all transactions is required. And because the law establishing the EX-IM Bank must deny financing for projects that cause direct injury to U.S. production and employment, the bank must assess whether its loan or guarantee will have an adverse effect on U.S. industry.
To many local bankers, the EX-IM Bank’s Working Capital Guarantee program is the most critical, especially for first-time exporters. This program encourages commercial lenders to make loans to U.S. businesses that have exporting potential, and need funds to produce or market goods or services for export.
Whether through its export credit insurance or loan guarantees or direct loans, the EX-IM Bank is a valuable friend of firms that want to export to areas of the world where the risks are too great for a commercial lender to go it alone.
A second agency facing a dramatic change (in this case, elimination) is the Overseas Private Investment Corp. By offering risk insurance and financing to U.S. firms at an early point in their export development, OPIC helps companies obtain assistance not available in commercial and private investment groups.
OPIC is a self-sustaining independent agency that gives direct loans and loan guarantees; insures investments against a broad range of political risks; assists in project development; and provides a variety of investor services. The latter includes money to assist U.S. companies beginning to export to expand and modernize existing plants and equipment. An example of OPIC work is the existence of bilateral agreements with all of the New Independent States; this includes subrogation of rights and clearance of proposed OPIC transactions.
The last agency in jeopardy is the Trade and Development Agency. TDA provides non-reimbursable grants for feasibility studies that determine the technical, economic and financial appropriateness of major projects; TDA also provides detailed data for making a decision on whether to proceed with a project. This program is especially valuable when a joint venture is possible.
In conclusion, it seems obvious that the export of American goods and services–with the creation of high-paying, skilled jobs–continues to play a very important role in the economic life of our community. Nationally, exports in recent years have accounted for almost half of our economic growth: The literature indicates that every $1 billion in sales of U.S. products and services overseas supports more than 19,000 American jobs– jobs that pay 13 percent more than the average salary.
The agencies described above are important tools in supporting U.S. exports. Without them, many U.S. companies would not be able to enter markets that are of a high-risk nature (e.g., Russia). These are markets that are economically and strategically important to U.S. foreign policy, and they are markets where there is no commercial financing available.
Most exporters know that both Japanese and German governments actively support companies in their countries through generous loans and subsidies. We should do no less.
(Walter Boston Jr. is director of the International Institute at SUNY College at Brockport.)

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