Exporting Round-up

August 17, 2011

Traditionall a very bright spot in an otherwise dim economy, the last few months have seen some less-than-stellar news on exporting. According to the  U.S. Department of Commerce, U.S. exports slowed in June, the most recent month for which data is available. On the other hand, the Export-Import Bank of the U.S. (Ex-Im Bank) recnetly reported a new all-time high for export finance authorizations. Meanwhile, congressional action awaits two key exporting bills: the Ex-Im reauthorization and stalled Free Trade Agreements.

Decline of U.S. Exports

The Department of Commerce’s Census Bureau and the Bureau of Economic Analysis (BEA) announced August 11 that total exports for the month of June dropped $4.1 billion to $170.9 billion, down from $175 billion in May. This drop resulted in a trade deficit of $53.1 billion, up from $50.8 billion in May, revised.

Both goods and services suffered in June with the goods deficit increasing to by $2.1 billion from May to $67.6 billion, and the services surplus decreasing a very slight $0.1 billion to $14.5 billion. Although both goods exports and imports were down, there was a much more significant drop in exports of goods to the tune of $4.1 billion versus the drop in goods imports of just $1.9 billion.

Compared with June 2010, this most recent data shows the overall trade deficit up $6.2 billion. Despite this growing gap, U.S. exports increased 12.9 percent over the last year. Causing the gap was the fact that imports also were up, but slightly higher at 13 percent.

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Ex-Im Bank Authorizations Hit All-Time Record

Ex-Im Bank has set a new all-time record for export finance authorizations. On Aug. 4, for the first time, loan authorizations exceeded $ 24.5 billion and with two months still remaining in the fiscal year the total Ex-Im authorizations will continue to grow. Ex-Im Bank financing supports over $31.5 billion of export sales and 213,000 American jobs in communities across the country. Included are 2,548 small business export finance transactions.

This fiscal year’s authorizations to date represent a 70 percent increase over the Bank’s Fiscal Year 2008 total of $14.4 billion.

The Bank’s previous export finance authorizations record was set during the last fiscal year, which ended September 30, 2010. The Bank’s export portfolio is now $82.4 billion as of the end of June.

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Ex-Im Bank Reauthorization Status

With a little over one month left on its current authorization, Ex-Im Bank reauthorization awaits Congressional action after the August recess.

As background, Ex-Im Bank is a self-sustaining federal agency and serves as the official export credit agency (ECA) of the U.S. It helps finance American exports of manufactured goods and services, with the objective of contributing to the employment of U.S. workforce, primarily in circumstances when alternative financing is not available. Ex-Im Bank’s main programs are direct loans, loan guarantees, working capital guarantees and export credit insurance.

Ex-Im Bank’s most recent reauthorization was in 2006, when Congress extended the Bank’s authority through FY2011 which means unless it is reauthorized the Bank’s charter will expire on Sept. 30, 2011.

On June 1, 2011, H.R. 2072, the Securing American Jobs Through Exports Act of 2011, was introduced and referred to the House Financial Services Committee. H.R. 2072, which would extend Ex-Im Bank’s authority through Sept. 30, 2015 was approved by a voice vote on June 22 and ordered to be reported favorably to the full House floor for final passage—which will likely occur when Congress returns from August recess.

NSBA Board Member David Ickert testified before the Senate Banking Subcommittee on Security and International Trade and Finance on the reauthorization Ex-Im Bank, and highlighted several key provisions of the Ex-Im Charter that are very important and necessary to small-business exporters, including a Small Business Division within the Bank that is responsible for conducting research, tailoring products to small business needs and increasing loans to small business concerns.

Through the Small Business Exporters Association–NSBA’s international trade arm–NSBA is working to ensure that reauthorization of the Bank is done in a timely manner and will continue highlighting the Bank’s critical role in supporting small- and mid-sized U.S. exporters.

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Plan to Move FTAs

Just before the August recess, Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) announced that they had agreed on a path forward for consideration of three long-stalled free trade agreements (FTAs) with Korea, Colombia, and Panama and the trade adjustment assistance (TAA) program to help workers adversely impacted by trade when Congress returns from the August recess.

The agreed-upon plan is for the Senate to first pass the TAA measure by holding a separate vote and then vote on the FTAs. The agreement would extend the TAA health care tax credit through the end of 2013, but reduce the subsidy rate to 72.5 percent of health insurance premiums. TAA and the subsidy expired Feb. 12 after Congress opted not to extend the program.

Reid has been vocal in not supporting movement on the FTAs, which he has never supported, until TAA has passed. On the other side, McConnell does not support TAA, but understands there is bipartisan support for this program and the only way of moving forward on the FTAs. McConnell, House Speaker John Boehner (R-Ohio), and other Republicans have insisted on a separate TAA bill not included in the FTA implementing legislation.

Since May the administration has said that it will not formally submit the FTAs under the fast-track Trade Promotion Authority procedures until the provisions of the Labor Department’s TAA program have been renewed. A bipartisan June agreement on the TAA terms did not include a deal on the legislative process, resulting in an impasse.

The FTAs negotiated by the Bush administration with Colombia, Korea, and Panama have been stalled for years. The Colombia pact has been the most controversial of the three given the historically high level of violence against trade unionists and the impunity accompanying that violence.

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