International Law & Trade The Export-Import Bank Of The United States: Staying The Course Over 70 Years

Sunday, May 1, 2005 - 01:00

The Editor interviews Peter B. Saba, Chief Operating Officer and General Counsel, Export-Import Bank of the United States.

Editor: Mr. Saba, will you give our readers some idea of your professional experience?

Saba: I started practicing law, concentrating in corporate finance and securities law, here in Washington. I then served in President George H.W. Bush's administration in the Department of Energy as Counselor to the Deputy Secretary and then as the Principal Deputy Assistant Secretary for Domestic and International Energy Policy. From government I went to the energy and project finance practice at Skadden Arps in Washington.

Editor: How did you come to Ex-Im Bank?

Saba: I am here as a consequence of my experience working in the field of international project finance, which included transactions involving the Ex-Im Bank. My experience with the first Bush administration was also a contributing factor, as was my volunteer work for the current President.

Editor: Can you tell us about the origin of the Bank and something of its history and mission?

Saba: The Bank was initially established by executive order of President Franklin D. Roosevelt in 1934 - as part of an effort to revive the economy during the Great Depression - and then reincorporated as a U.S. government corporation in 1945. During the years following World War II, the Bank played an important role in post-war reconstruction. Over the 70 years of its existence, the Bank has assisted in financing more than $400 billionin U.S. exports.Its mission is to facilitate the financing of U.S. exports of goods and services thereby helping to create and maintain U.S. jobs. We provide financing in situations where private financing is unavailable or to level the playing field for U.S. exporters facing foreign competition backed by officially supported financing on the part of their own governments. I hasten to add, the Bank is not a foreign aid or development agency. We are a banking institution, and each of our transactions is required to have a reasonable assurance of repayment.

Editor: And the connection between the Bank and U.S. trade policy?

Saba: We are not a trade policy agency, although we play a critical role in supporting U.S. trade and in helping to reduce the trade deficit. Essentially, we are part of the U.S. trade promotion effort, and we are subject to international trade rules.

Editor: What types of organization are eligible to apply for Ex-Im Bank loans? What are the criteria? Are there particular products or services that are given favorable treatment?

Saba: Any organization - domestic, foreign or multinational - is eligible for Ex-Im Bank support so long as the financing is used for U.S.-produced goods or services. We do have some special programs - an environmental exports initiative, a transportation security program and one involving the export of medical equipment - that entail special enhancements.

Editor: What about destinations? I note, for example, the recent agreement whereby the Bank will facilitate the financing of U.S. exports to Ukraine.

Saba: Given our mission, we are most active in emerging markets and transition economies. We have a total portfolio of over $60 billion in loans, guarantees and insurance, and at the end of the latest fiscal year, this portfolio was concentrated 29 percent in Asia, 26 percent in Latin America, and 15 percent in Africa and the Middle East.

Editor: What are some of the critical issues that the Bank faces at present?

Saba: One critical issue involves our support of small business. Over 80 percent of our transactions directly support small businesses, but the relative size of these deals is small, and we have a need to streamline them.Improved technology is an important part of the answer to this challenge. If we can improve our cycle time and handle this work more efficiently, we will be able to enhance the services we offer our clients immeasurably. By next year we hope to have in place an online application and processing system for our most heavily utilized small business products. Another challenge for the bank concerns the shift of the U.S. economy and its exports toward knowledge-based and technology services. We need to adapt our existing products and to develop new products to reflect this shift.

Editor: The Board of Directors of the Ex-Im Bank recently approved a preliminary commitment request from Westinghouse Electric for support in connection with the construction of four nuclear power plants in the Peoples' Republic of China. Can you tell us about this undertaking?

Saba: The preliminary commitment was approved to support a bid by Westinghouse in response to an RFP issued by the Chinese government. Westinghouse is proposing to use its ground-breaking new technology called the AP-1000, which incorporates key passive safety and other features. In connection with this RFP, we expect aggressive competition from companies from other countries which are supported by their respective governments. Had the Bank not approved this preliminary commitment, Westinghouse would have been forced to submit a bid that was less competitive than what actually ensued. There are a number of steps that must take place before the Bank issues a final commitment, including the bid process in China, which will take several months. Westinghouse is, however, in a very strong position as a result of the Bank's support.

Editor: What are the implications of a transaction this large to the American economy?

Saba: This particular project is very meaningful in a number of ways. Westinghouse tells us that if they win this bid, this undertaking would support over 5,000 jobs. In addition, $5 billion of exports would make a significant contribution to decreasing our trade deficit with China. Moreover, China is planning a significant expansion of its nuclear power program. Winning this bid would constitute a significant advantage in competing for these additional projects. Finally, planning, building and then operating the facilities which are to use this improved technology could be helpful in the deployment of the technology elsewhere, both in the U.S. and abroad. Overall, this project is very significant.

Editor: Would you give us your thoughts about globalization? Is the process irreversible at this point?

Saba: I think that globalization is irreversible. The whole history of mankind, in my view, has been one of globalization. In this ongoing evolution, we are at a particularly accelerated stage.

Editor: What are the implications for the U.S. of more and more players joining the global economy? I am thinking of countries such as China, India and, Brazil.

Saba: As more and more countries join the world economy, U.S. exporters are going to be faced with both greater opportunities and greater challenges. The opportunities lie in the fact that joining the global economy is a two-way street. That is, for these countries to join the global economy, they must open their domestic markets to the outside world. The emerging middle classes in these countries will have increasing purchasing power that is going to provide lots of opportunities for increased global trade. That is the good news for U.S. exporters. At the same time, businesses in China, India and Brazil are injecting new competition into the global marketplace, and that represents a challenge for U.S. businesses.

Editor: Where do you think the Ex-Im Bank is going to be in, say, five years?

Saba: I think that it will continue to pursue the same core mission that has driven it over the last 70 years. That is to facilitate the financing of U.S. goods and services and thereby help to maintain and create U.S. jobs. We may be pursuing this mission in different ways, with different programs and in different markets, but the core mission will be the same.