(Corrects O'Brien's position in 10th paragraph)
By Krista Hughes
WASHINGTON, July 1 Private sector trade finance
has not fully recovered from its financial-crisis collapse, and
it is not clear it could fill the gap if the U.S. state-run
export lender closes.
Conservative U.S. lawmakers are clamoring to shutter the
Export-Import Bank, an 80-year old institution that provides
support to U.S. exports, partly because they see it as usurping
the role of the private sector in providing credit.
Ex-Im's lending jumped 70 percent between 2008 and 2010 as
the bank joined other public sector export credit agencies
around the globe in an effort to make up for commercial banks
pulling back their loan portfolios.
While many big companies could likely organize financing
elsewhere, albeit on less favorable terms, small firms with
fewer options worry they might not be so lucky.
Although global exports and overall trade finance have
bounced back to record highs, data from export insurance
association Berne Union suggests public agencies, like the Ex-Im
Bank, are still providing much of the support.
About one-tenth of world trade is protected by policies
provided by Berne Union members, both public and private. The
private sector share of Berne Union-insured exports and
investments shrank from about two-thirds in 2008 to just under
half in 2013.
Banks, which are estimated to finance about one-third of
global trade, are crimped by tighter financial regulation.
"In the wake of the crisis, banks are wary of longer-term
commitments," said Peterson Institute for International
Economics senior fellow Gary Hufbauer. "Those loans are hard to
get outside of the official export credit agencies, like Ex-Im."
A survey by the International Chamber of Commerce of 298
banks in 127 countries found 30 percent were lending less than
before the financial crisis and 45 percent saw a shortfall of
trade finance globally. Even so, 68 percent reported activity
had picked up in 2013.
"This 'trade finance gap', remains a major challenge," ICC
Banking Commission Market Intelligence Task Force Chairman
Vincent O'Brien wrote in the survey report, adding the problem
was most acute for small-to-medium enterprises.
Trade can be risky: claims paid by Berne Union members to
exporters to compensate them for default on export transactions
eased slightly to $4.4 billion in 2013, but were still close to
the peak of $5.4 billion recorded in 2009. Total insured exports
were worth $1.8 trillion in 2013.
Francis Creighton, head of government affairs for the
Financial Services Roundtable, which represents many of the
largest U.S. financial firms, said high lending risk meant many
banks shied away from countries with poor governance.
"The Export-Import Bank makes that loan because if it loses
money, it has (a) long term to get back money over time and fees
it charges are way more than any losses that it's ever taken,"
Bill Cummins, director of the Alabama Small Business
Development Center Network and a former JPMorgan Chase & Co
trade finance banker, said banks would not provide some kinds of
finance, like loans using foreign accounts receivable as
collateral, to small businesses unless they received loan
guarantees or credit insurance from Ex-Im.
Export insurance allows an exporter to extend credit to a
foreign purchaser without taking the entire risk that the buyer
will not pay for the goods when they arrive, often months later.
Ex-Im credit insurance is "probably the most valuable tool
they've provided over the decades - you can't get anything like
it in the private sector," Cummins said.
Dan Bates, the chief executive officer of green energy firm
WindStream Technologies, said he had trouble
convincing big U.S. banks to advance him credit, even with a $4
million export insurance policy from Ex-Im.
But having that policy helped the company, which sells
hybrid wind turbine and solar panels to Europe, Africa, Latin
America, Asia and the Caribbean, secure a $2 million credit line
from trade lender GBC International Bank.
Bates said it would be a "crime" to close Ex-Im, which is
often criticized for supporting the exports of big firms like
Boeing and General Electric.
"Maybe if you're a General Electric or Boeing, you don't
need it because they have access to lines of credit ... but for
a small company that needs support to offer credit terms to
international buyers, Ex-Im is important," he said.
(Additional reporting by Emily Stephenson in Washington and
Peter Rudegeair in New York; Editing by Paul Simao)