BILL ANALYSIS Ó
AJR 14
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Date of Hearing: May 22, 2015
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Eduardo Garcia, Chair
AJR 14
(Chu) - As Introduced May 7, 2015
SUBJECT: Export-Import Bank of the United States: reauthorization.
SUMMARY: Memorializes the Legislature's desire for the U.S. Congress
to support legislation reauthorizing the Export-Import Bank of the
United States (Ex-Im Bank). Specifically, this resolution:
1)Makes findings and declarations that, among other things, state:
a) The Ex-Im Bank is the official export credit agency of the U.S.
and exists for the purposes of financing and insuring foreign
purchases of U.S. goods for customers unable or unwilling to
accept the credit risk;
b) The Ex-Im Bank has supported more than $400 billion in U.S.
exports in the past 70 years and helps to cover critical trade
finance gaps by providing loan guarantees, export credit
insurance, and direct loans for U.S. exports in developing markets
where commercial bank financing is unavailable or insufficient.
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For fiscal year 2014, the Ex-Im Bank provided $20.5 billion in
loan guarantees which leveraged $27.5 billion in exports while
supporting 164,000 United States jobs;
c) The Ex-Im Bank is a self-sustaining agency, which operates at
no cost to the taxpayer and over the last three fiscal years has
generated more than $3 billion in fees from its foreign customers
which were deposited in the U.S. Treasury to reduce the U.S.
deficit and indebtedness; and
d) Over the past five years, the Ex-Im Bank has assisted more than
967 California companies to export their products. Nearly 200 of
those companies are owned by women or minorities and over 700 are
small businesses. These companies export their products and
services around the globe totaling more than $21 billion in sales.
Fifty-two of the 53 congressional districts in California had
companies benefit from the Ex-Im Bank loans;
e) Legislation is pending before the 114th U.S. Congress that
would continue the Ex-Im Bank's capacity for creating jobs while
also making its practices more accountable and transparent, as
well as making the bank more solvent and self-sufficient.
2)Resolves that the California Legislature desires the U.S. Congress to
support the reauthorizing of the Ex-Im Bank.
3)Directs the Chief Clerk to transmit copies of this resolution to the
President and Vice President of the U.S., to the Speaker of the House
of Representatives, to the Majority Leader of the Senate, and to each
Senator and Representative from California in the Congress of the
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United States.
FISCAL EFFECT: None
POLICY ISSUE FRAME:
The Ex-Im Bank is operating on a short-term extension of its charter,
which expires on June 30, 2015. The Ex-Im Bank's mission is to assist
U.S. companies in exporting goods and services to international
markets. California benefits through jobs, tax dollars, and related
development associated with being a strategic business location within
the global economy.
Ex-Im Bank has shown over its 80 years of operations to be an important
tool for U.S. companies interested in doing business in other
countries. The Ex-Im Bank does not compete with private sector lenders
but provides export financing products that fill gaps in trade
financing. It assumes credit and country risks that the private sector
is unable or unwilling to accept. It also helps to level the playing
field for U.S. exporters by matching the financing that other
governments provide to their exporting businesses.
Although the Ex-Im Bank's charter has been extended numerous times, in
the last several years its actions have come under criticism by
conservative groups relative to the appropriateness of its role in
aiding private businesses in their export activities. Many business
groups, including the U.S. Chamber of Commerce, strongly support the
Ex-Im Bank for its ability to meet unmet business transaction needs,
which serves to level the playing field for U.S. firms exporting into
markets where their foreign competitors receive similar government
supported assistance. This resolution seeks state legislative support
for federal advocacy to support the reauthorization of the Ex-Im Bank.
With California businesses being one of the largest users of Ex-Im
Bank programs, California's opinion on reauthorization has particular
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merit in the national debate.
In deliberating the appropriateness of this resolution, Members may
wish to consider the importance of trade within the California economy,
the continuing need for programs to assist businesses in accessing
capital and new markets, and the demonstrated ability of the federal
government to operate the Ex-Im Bank without ongoing costs to the
public.
COMMENTS:
1)Background on the Bank: The Ex-Im Bank is a wholly owned U.S.
government corporation, which was established by the U.S. Congress to
provide market-oriented public services and to produce revenues to
meet its expenditures. The Ex-Im Bank provides a variety of
financial and insurance products that are designed to fill gaps in
private export financing. Its charter was last extended through a
federal FY 2015 continuing resolution which expires June 30, 2015.
The Ex-Im Bank operates at no cost to American taxpayers and over the
past two decades the Bank has generated nearly $7 billion more than
the cost of its operations.
In the federal fiscal year (FFY) 2014, the Ex-Im Bank approved $20.5
billion in financial authorizations, which supported an estimated
$27.5 billion in export sales and approximately 164,000 U.S. jobs.
Since 2009, the Ex-Im Bank has supported nearly 1.3 million private
sector jobs.
Of the total transactions in 2014, approximately 89% (3,347) of the
financial transactions were with small business for a total of $5.9
billion. Of that $5.9 billion in small business transactions, more
than $5 billion were for direct support of small businesses and $700
million were attributed to small business inputs within the supply
chains of larger U.S. exporting companies. One in five Bank
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authorizations made in FFY 2014 were for a woman- or minority-owned
business.
Between 2012 and 2015, $7 billion in financial authorizations went to
704 California exporters, which supported $14 billion in exports. Of
those exporters, 533 were small businesses, 90 were minority-owned
businesses, 63 were women-owned businesses, 10 were businesses in
renewable energy, and 34 were environmentally beneficial. The three
top export destinations for California products were Mexico, Germany,
and Singapore. More businesses in California used the Ex-Im Bank than
in any other state except Texas, 704 vs. 955. However, of those
businesses, California has a higher number of small businesses, 533
vs. 516. California Ex-Im Bank users represented the highest number
of women-owned firms, renewable energy-related firms, and
environmentally beneficial-related firms in the nation.
Other accomplishments in the past several years include an enhanced
risk management approach which materially reduced defaults since the
financial crisis. The default rate as of September 30, 2014, was
0.175%. Fred Hochberg, the Chair and President of the Ex-Im Bank
attributes the low default rate to the Bank's continued prudent
oversight and due diligence standards. Key changes identified in
Congressional testimony include modernizing the Bank's credit
monitoring techniques, creating a special assets unit to address
emerging credit issues, improving underwriting, and enhancing credit
loss modeling with qualitative factors. In preparation for
reauthorization, the Ex-Im Bank has met all its reporting
requirements including the preparation of a current business plan,
publication of a small business report, and submittal of quarterly
reports on its default rate.
*Information for this comment came from a variety of sources
including, but not limited to, written testimony before the U.S.
Senate Committee on Banking, Housing, and Urban Affairs (January 28,
2014), and the Ex-Im Bank website.
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2)Reauthorization Challenges: According to a November 2014 report by
the Congressional Research Service (CRS), the central debate over the
Ex-Im Bank reauthorization comes down to the question, what is the
appropriate role for government relative to the promotion of an
individual business' export activities? In summarizing this debate,
the CRS report states, "Congressional and stakeholder views on Ex-Im
Bank vary. Proponents contend that the Bank supports U.S. exports and
jobs by addressing shortfalls in private sector financing and helping
U.S. exporters compete against foreign companies backed by their
governments' export credit agencies. Critics assert that it crowds
out private sector activity, picks winners and losers through its
support, operates as a form of "corporate welfare," and poses a risk
to taxpayers."
The CRS report also notes that while the Ex-Im Bank debate has been
long-standing, the U.S. Congress has renewed Ex-Im Bank's authority
many times, generally on a bipartisan basis and under both Republican
and Democratic administrations. Helping to fuel the debate in recent
years are differing views on which businesses benefit the most from
Ex-Im Bank activities. Supporters of the program point to the
significant percentage of small businesses being served - nearly 90%
of the bank's 2014 deal-flow, representing more than $5 billion of
the $20 million of Ex-Im Bank's financing and insurance during that
term. Program opponents argue that those same numbers show that it
is really the larger size businesses that benefit. Proponents of the
program counter, that that $5 million represents export activities
that would not otherwise happen and that the Ex-Im Bank assistance
for all size businesses merely offsets government-backed services and
financial products offered to their foreign competitors.
Further complicating this year's reauthorization discussions,
according to a Wall Street Journal article (5/20/2015), are the U.S.
Congress' deliberations over providing the U.S. President with
fast-track trade authority. While fast-track and Ex-Im Bank
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reauthorization are separate issues with differing coalitions, the
article notes that the timing of the reauthorization makes it
vulnerable to becoming a potential policy hostage within the other
highly controversial trade-related debate.
3)California's Trade-Based Economy: International trade and foreign
investment serve as critical components of California's $2.2 trillion
economy. If California were a country, it would be the 31st largest
exporter and the 15th largest importer in the world. Merchandise
exports from California ($174.1 billion) accounted for over 10.7% of
total U.S. exports in goods, shipping to over 220 foreign
destinations in 2014.
California's land, sea, and air ports of entry served as key
international commercial gateways for the $577 billion in products
entering and exiting the U.S. in 2014. Statewide, 4.4 million
California jobs are dependent on foreign trade. Over 602,800
California workers benefit from jobs with foreign-owned firms, which
accounts for 4.8% of all private sector jobs in the state.
The importance of trade to the California economy is increasing as a
percentage of California jobs tied to trade more than doubled from
1992 to 2013, 10.6% v. 21.8%. Most recently, the value of
trade-related work, as a component of the broader economy was the
subject of a study by the Brookings Institute and JP Morgan Chase,
Export Nation 2013. The report found that between 2003 to 2012
exports drove post-recession growth in the 100 largest metro areas
including Los Angeles, San Diego, and the Inland Empire. The study
is unique in that it collects data by origin of production rather
than origin of export movement, as is the case with the U.S.
Department of Commerce export data.
Using the Export Nation methodology, total California exports for
goods and services in 2012 was $252 billion, as compared to the U.S.
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Census Bureau's 2012 number of $162 billion for goods only, as
measured by origin of movement. In 2012, exports represented 8.8% of
California GDP, based on the Export Nation methodology. The top five
metro areas in California include: (1) Los Angeles (37.1%); (2) San
Francisco (15%); (3) San Jose (13.7%); (4) San Diego (11.5%), and (5)
the Inland Empire (9.2%). Chart 1 includes more specific data on
selected California exports of goods and services, as expressed in
2012 dollars (adjusted for inflation) and based on the Export Nation
methodology.
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| Chart 1 - Southern California Largest Metro Areas |
| |
| |
| Exports (2007-2012)(in millions, adjusted for inflation) |
| |
| |
------------------------------------------------------------------
|---------------------+------+------+-----+-------+------+---------|
| Metropolitan | 2003 | 2012 |Expor|Export |Export|Annualize|
| Statistical Area |Export|Export| t | in | in | d |
| | s | s |Share| Goods |Servic|2009-2012|
| |(milli|(milli| of | 2012 | es | Growth |
| | ons) | ons) | GDP | | 2012 | in |
| | | | | | |Manufactu|
| | | | | | | ring |
| | | | | | | |
| | | | | | | |
| | | | | | |(Post-Rec|
| | | | | | |ession) |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|El Centro, CA |432.79|586.87|9.3% |456.594|130.27| 8.9% |
|Metropolitan | 54 | 08 | | 6 | 62 | |
|Statistical Area | | | | | | |
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| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|Los Angeles-Long |62850.|93871.|12.0%|56462.3|37409.| 4.0% |
|Beach-Santa Ana, CA | 51 | 65 | | 9 | 26 | |
|Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|Oxnard-Thousand |3997.9|6462.6|15.2%|4822.01|1640.6| 3.8% |
|Oaks-Ventura, CA | 9 | 74 | | 6 | 58 | |
|Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|Riverside-San |7999.8|13128.|9.2% |8407.37|4720.6| 5.9% |
|Bernardino-Ontario, | 25 | 07 | | 3 | 97 | |
|CA Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|San |11996.|21613.|11.5%|13702.5|7910.9| 7.2% |
|Diego-Carlsbad-San | 96 | 47 | | 2 | 54 | |
|Marcos, CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
|San |15417.|38046.|12.5%|23306.1|14740.| -0.7% |
|Francisco-Oakland-Fre| 44 | 75 | | 2 | 64 | |
|mont, CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
|---------------------+------+------+-----+-------+------+---------|
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|San |21384.|34641.|23.8%|26418.3|8222.8| 10.9% |
|Jose-Sunnyvale-Santa | 90 | 22 | | 9 | 31 | |
|Clara, CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical Area | | | | | | |
| | | | | | | |
| | | | | | | |
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| Source: Export Nation 2013, Global Cities Initiative, a joint |
|project of Brookings Institute and JP Morgan Chase |
| |
| |
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Trade and foreign investment support new job creation, bring new
technologies and skills to California workers, generate local and
state revenues, and generally strengthen the state's economic base.
In the future, California's economy will become increasingly reliant
on accessing foreign markets where a majority of global economic
growth is expected to occur.
4)Related Legislation: Below is a list of legislation from the current
and prior legislative sessions.
a) AB 311 (V. Manuel Pérez) Bi-National Infrastructure and
Economic Development Bank: This bill would have expanded the role
of the I-Bank to include facilitating infrastructure and economic
development financing activities within the California and Mexico
border region. Status: Held in the Assembly Committee on
Appropriations, 2013.
b) AB 886 (Allen) Export and Import Credit: This bill would have
established a capped and allocated tax credit for importers and
exporters that increase cargo through California air and sea
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ports, hire additional staff, or incur capital costs at a
California cargo facility. Status: Held in the Assembly
Committee on Appropriations, 2013.
c) AB 1247 (Medina and Bocanegra) Small Business Finance Center:
This bill establishes the Small Business Finance Center within the
California Infrastructure and Economic Development Bank for the
purpose of establishing a one-stop-shop for small businesses
interested in utilizing state loan and credit program including
export finance guarantees. Status: Signed by the Governor,
Chapter 537, Statutes of 2013.
d) AJR 37 (Muratsuchi) Reauthorization of the Export-Import Bank:
This bill memorializes the Legislature's desire for the U.S.
Congress to support legislation reauthorizing the Export-Import
Bank of the United States. Status: Resolution Chapter 72,
Statutes of 2014.
REGISTERED SUPPORT / OPPOSITION:
Support
Antelope Valley Board of Trade
California Chamber of Commerce
California Manufacturers and Technology Association
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Huntington Beach Chamber of Commerce
LAX Coastal Chamber of Commerce
Long Beach Area Chamber of Commerce
Orange County Business Council
San Diego Regional Chamber of Commerce
Southwest California Legislative Council
The Boeing Company
Opposition
None Received
Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090
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