Worldwide: Should Africa Worry About The Potential Demise Of US EXIM Bank?

There has been no shortage of well-intentioned laments about the expiration of the authorization of US EXIM Bank on June 30, 2015, at which time the Bank's authority to issue new loans ceased and its operations were limited to managing loans already in its portfolio. The path to the US EXIM Bank's eventual reauthorization on December 4, 2015 was dogged by ideological disputes including a number of issues far removed from the merits of the Bank's mission or from the interests of the beneficiaries served by the Bank. An unlikely coalition of most US business groups, virtually every Congressional Democrat, and many Congressional Republicans who ultimately were willing to buck their party's leadership proved necessary to get US EXIM reauthorized, five months after the US Congressional leadership had allowed the Bank's authorization to expire.

Many fervent opponents of the Bank's reauthorization held key positions in US Congressional leadership and in the committees of jurisdiction. As a result, even though US EXIM reauthorization clearly had the support of majorities in both chambers of the US Congress (the House of Representatives and the Senate), highly unusual procedural tactics were required to get such a reauthorization through the Congress and to the President for his approval. Post-reauthorization developments suggest that US EXIM's opponents will continue to look for vehicles to impair the Bank's operations.

The Bank has enjoyed a long history. It was established in 1934 by executive orders with the specific objectives of making loans to the Soviet Union and Cuba. It was later made an independent agency by the US Congress in 1945, which is notably the same year as the establishment of the International Monetary Fund and the World Bank. At that time, these agencies were conceived to facilitate financing for international trade and to support reconstruction and development of countries ravaged by World War II—with the rehabilitation of Europe high on the agenda. The focus of US EXIM Bank continued to evolve, with changes in the world economy.

There are now some 60 export credit agencies—sponsored by individual countries, such as China, Canada, France or by multilateral institutions—and they play an important role in trade financing across the globe. Such agencies take on credit and country risks that the private sector is unable or unwilling to accept. In the global competition for trade, export credit agencies are particularly critical counterparts for Africa where the domestic banking systems have been relatively weak in their capacity to finance the purchase of goods from overseas.

Given the proliferation of export credit agencies around the world, proponents of US EXIM Bank reauthorization contend that any failure by the US Congress to reauthorize the Bank would amount to unilateral disarmament by the US in the competition for trade opportunities. In contrast, the "limited government conservatives" in the US Congress, who are the strongest opponents of US EXIM reauthorization, decry the Bank's activities as "corporate welfare" and an allegedly rigged process that puts the Bank, rather than the private sector competitive process, in the position of picking winners and losers.

Impact on Africa

The consequences of Congress' delay in reauthorizing US EXIM Bank, notwithstanding the clear and powerful arguments in favor of doing so, and the Senate's continuing failure to approve a nominee to the Bank's Board that would give the Bank a quorum and thereby enable it to resume making loans larger than US$10 million are particularly challenging in relation to the Bank's role in Africa. It would be a bitter irony if US EXIM Bank is forced to disengage or limit its operations to making relatively small loans at a time when Africa's rise and integration in the world economy is becoming more visible.

Among the many compelling arguments for reauthorization was that US EXIM Bank is highly effective in supporting US-Africa trade. The establishment of sub-Saharan Africa as a priority region for the Bank, recognizes the prospects of long-term economic growth and infrastructure development that would support US exporters' efforts to increase their sales to the region. In 2014, the Bank approved deals worth US$2.05 billion to support exports of US manufactured goods to sub-Saharan Africa (out of the Bank's total support of US$27.5 billion in exports through more than 3,700 transactions in 2014). Contrary to popular myth, the Bank does not cost US taxpayers any money, but rather has earned the US over US$2 billion in its last five years of operation. The Bank has also been instrumental to developing and implementing important sub-Saharan Africa initiatives such as the Obama Administration's Power Africa Initiative, which seeks to contribute to adding 30,000 megawatts of new electricity generation capacity and increasing electricity access by at least 60 million new connections. Clearly, continuing and expanding US EXIM's support for such initiatives in Africa requires that US EXIM have a quorum on its Board that will allow the Bank to resume doing larger deals.

Rocky path to reauthorization

As noted, the opposition of key members of the US Congressional leadership and the Chairs of the committees of jurisdiction (House Financial Services and Senate Banking) required that a US EXIM Bank reauthorization take a very unusual procedural path. The Bank's four-year reauthorization ultimately ended up "hitching a ride" on a separate "must-pass" piece of legislation as it was included in a long-term highway and transit reauthorization conference report passed by the House and Senate on December 3 that the President signed on December 4, 2015.

Given this opposition to an EXIM reauthorization, in the months leading up to the June 30, 2015 expiration of the Bank's authorization, it became clear that the House Republican leadership and Financial Services Committee Chairman Jeb Hensarling would not voluntarily bring an EXIM Bank reauthorization bill for consideration by the House of Representatives. As a result, to break this impasse, with the support of at least 40 House Republicans who were willing to ignore the wishes of their leadership, Republican Congressman Stephen Fincher of Tennessee filed a discharge petition and, on October 9, the necessary signatures were achieved to bring to the House floor a petition to discharge the committee of jurisdiction from considering a bill reauthorizing the Bank. Virtually every House Democrat signed on to this discharge petition. Subsequently, on October 26, the House of Representatives passed a Motion to Discharge the Rules Committee from further consideration of the US EXIM Bank reauthorization bill. This was the first time since 2002 that a discharge petition had been successful. Once a reauthorization bill reached the House floor, the floodgates opened and on October 27 the House of Representatives overwhelmingly passed the EXIM Bank reauthorization bill.

Notwithstanding this procedural achievement, it became clear that if an EXIM reauthorization were to be approved by the Senate and thereby to become law, it would need to be included in a "must pass" piece of legislation as the Senate would not consider an EXIM reauthorization bill separately. For this purpose, the long-term highway bill—which has no bearing on the subject matter or operations of US EXIM Bank—was used as the vehicle to carry an US EXIM reauthorization over the finish line.

After additional procedural wranglings, on December 3, by a vote of 359-65, the House of Representatives passed the highway bill conference report that included the four-year reauthorization of US EXIM Bank and later that same day, the Senate likewise did so. Finally, on December 4, 2015 the US President approved the conference report and the US EXIM Bank reauthorization became law.

The struggle continues—but Africa's future is strong

Now that the US EXIM Bank has been reauthorized, an ongoing concern is that the Bank's opponents will continue the fight by resisting Senate approval of the President Obama's nominees for the Bank's Board, irrespective of the merits of the nominees. With only two of five seats on the Board filled, the Board lacks a requisite quorum to approve loans greater than US$10 million, which make up a significant majority of the Bank's balance sheet. That said, given the strong level of Congressional support for US EXIM Bank's reauthorization, it seems more likely than not that an additional nominee to the Board will eventually be approved, thereby allowing the Bank to resume making larger loans.

No matter the outcome, Africa is too big to be contained by these constraints in political vision that have hampered US EXIM Bank's operations. The protracted questions over the future of the US EXIM Bank illustrate more broadly that if the US can't get it together to engage productively with Africa, others will no doubt fill the void, including through supporting the export of alternative goods from their countries to Africa. Should that prove to be the case, US companies and the workers they employ may turn out to be hurt the most by this outcome.

The reauthorization of US EXIM Bank and the restoration of its capacity to lend above US$10 million are important signals of US credibility in Africa and the United States' willingness to compete for global trade opportunities. That said, the future of Africa is not dependent on the future of US EXIM Bank. Fortunately, Africa has alternatives.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
26 Sep 2018, Conference, New York, United States

Dentons is delighted to support a global IT services and consulting firm Miratech as an event host partner at their annual conference called M-Force18 New York on September 27th. The event will be held at Dentons New York office in the heart of Midtown Manhattan, opposite Rockefeller Center.

2 Oct 2018, Seminar, Dallas, United States

We are pleased to offer a program of five sessions designed specifically for in-house counsel. Topics will include:

  • In-house corporate ethical issues
  • What recent Supreme Court decisions mean for business
  • Keeping lawyers out of your benefit plans
  • Litigation tactics for in-house counsel
  • Employment issues in the age of #MeToo
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions