President Obama’s FY2014 budget was released this morning, and it includes some mixed messages on trade. Perhaps most significantly, the budget proposal includes a plan to reorganize – and consolidate – the government’s trade functions. As outlined in the FY2014 budget proposal, the President would like to consolidate six primary business and trade agencies into a new Department. The new Department would include the Commerce Department’s core business and trade functions, the Small Business Administration (SBA), the Office of the U.S. Trade Representative (USTR), the U.S. Export-Import Bank (Ex-Im), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency. It would also incorporate related programs from a number of other departments, including the Agriculture Department’s business development programs, the Treasury Department’s Community Development Financial Institutions Fund program, the National Science Foundation’s (NSF) statistical agency and industry partnership programs, and the Bureau of Labor Statistics.

The President outlined a similar proposal in his 2012 State of the Union address, with a resoundingly negative reaction from the business community. In response to that plan, the NAM joined more than 80 other business groups in a letter arguing that subsuming USTR into a broader trade and business government department would severely harm its credibility and hamper USTR’s ability to play its unique coordinating role within the U.S. government. USTR is statutorily responsible for developing and coordinating U.S. international trade and direct investment policy as well as overseeing negotiations with other countries. The head of USTR is the U.S. Trade Representative, a Cabinet member who serves as the President’s principal trade advisor, negotiator, and spokesperson on trade issues. The NAM continues to be troubled by this reorganization proposal, given the importance of trade to manufacturers in the United States.

In looking at the budget proposals for specific departments, the budget proposal would provide additional resources for trade promotion initiatives and agencies. The Commerce Department budget overview includes an increase for the International Trade Administration (ITA), with a proposed a budget of $520 – or a 14 percent increase over the 2012 enacted level. ITA helps promote U.S. trade and investment and also ensures fair trade through rigorous enforcement of trade laws and agreements. The agency is home to the U.S. and Foreign Commercial Service, which promotes U.S. exports and provides commercial diplomacy support for U.S. business interests around the world.

The Commerce Department’s budget proposal also supports the President’s Export Control Reform Initiative, with $112 million for the Bureau of Industry & Security (BIS) to help sustain export licensing and enforcement activities while moving toward a more predictable, efficient and transparent export control system. The proposal would give BIS an $11 million increase from the 2012 enacted level.

The State Department’s budget proposal includes $307 million for the U.S. Trade and Development Agency, USTR, U.S. International Trade Commission and OPIC – a combined $46 million increase over the 2012 enacted level. The President’s budget proposal also includes $131 million for the Ex-Im Bank’s administrative expenses and Inspector General, a $37 million increase over the 2012 enacted level.

Earlier today, the NAM sent a letter to the Senate expressing NAM policy positions on the budget resolution (S. Con. Res. 8 ) and its associated amendments. In particular, manufacturers support amendments offered by Senators Orrin Hatch (R-UT), Rob Portman (R-OH) and Ron Wyden (D-OR) to renew trade promotion authority (TPA) and enable the United States to negotiate and implement trade agreements that eliminate barriers to greater market access overseas. TPA, which used to be called fast-track authority, would allow Congress to accept or reject – but not amend – trade deals the Administration negotiates with other countries. Acting U.S. Trade Representative Demetrios Marantis, in testimony before the Senate Finance Committee on March 19, said the Administration was looking forward to working with Congress on TPA. The United States is currently engaged in negotiation on a Trans-Pacific Partnership (TPP) agreement and will be launching Transatlantic Trade and Investment Partnership negotiations with the European Union later this year.

The NAM also supports amendments offered by Senator Hatch to maintain a strong U.S. Trade Representative office and to strengthen U.S. government efforts promoting innovation and protecting intellectual property rights worldwide.

The NAM opposes S.Amdt.374 offered by Senator Mike Lee (R-UT) to defund the Export-Import Bank. Ex-Im Bank authorized more than $35 billion in financing in FY 2012, supporting more than 255,000 American jobs. The Bank worked with more than 3,400 U.S. companies, 85 percent of which were small businesses. Ex-Im is a vital tool in leveling the global playing field, helping manufacturers to offset the financing support our foreign competitors receive from their governments, and in securing new customers in emerging markets. As the “lender of last resort,” Ex-Im has experienced unprecedented demand in the past few years while banks have been hesitant or unable to extend competitive terms on some transactions. The Ex-Im Bank also generates enough fees to offset its costs, contributing the remaining surplus to the U.S. Treasury to help to offset the budget deficit. The 2012 Annual Report outlines the Bank’s accomplishments last year.

On Friday the Export-Import Bank of the United States (Ex-Im) announced new appointments to the Bank’s Advisory Committee for 2013 and NAM Board Chair and Vermeer Corporation CEO Mary Andringa has been appointed to the Committee.

According to the Ex-Im Bank the Committee advises the Bank on its policies and programs and in particular how those programs help U.S. exporters compete. 

“I am pleased to announce our 2013 Advisory committee members,” said Ex-Im Bank Chairman and President Fred P. Hochberg.“Our members represent various regions of our nation and all are committed to helping Ex-Im Bank achieve its mission of creating and sustaining U.S. jobs through exports. Our Committee is responsible for offering fresh ideas, perspectives and insights, and I look forward to working with each of our new members.”

As a manufacturer heavily engaged in exporting all over the globe, Mary is well suited to lend her advice and ideas on how to improve the Bank so it can help exporters remain competitive and increase exporters to create jobs. We greatly appreciate Ex-Im Bank Chairman and President Fred Hochberg appointing a great manufacturing leader to the Committee.

The Ex-Im Bank plays a critical role in helping manufacturers in the U.S. export goods to new markets throughout the world. Companies of all sizes benefit from the programs offered by the Bank to help them grow exports, particularly small and medium-sized businesses. The Bank supports approximately 255, 000 American jobs and $50 billion in U.S. export sales.

Joining Mary on the Committee is fellow manufacturer Nancy Mercolino, president and owner of Ceilings Plus and the 2012 Ex-Im Bank Small Business Exporter of the Year Award. Since Ex-Im is such an important tool for manufacturers it is welcome news that the manufacturing voice will be heard on the Advisory Committee in 2013.

Recently a federal judge ruled against an airline industry trade association in a case that questioned federal loan guarantees that help foreign companies purchase U.S.-made airplanes.

The Air Transport Association of America (ATA) sued the U.S. Export-Import Bank last year over loan guarantees to Air India, contending that the loan guarantees were harmful to domestic carriers in the competition for airline routes. Earlier this year, U.S. District Judge James Boasberg declined to issue an injunction against the Bank.

In July, the District Court determined that the Bank “acted neither arbitrarily and capriciously nor contrary to its governing statute when it approved the 2011 Commitments to Air India.”

ATA argued that export financing for U.S.-manufactured airplanes harms domestic carriers. The suit also alleged the Bank failed to fully assess the potential adverse effect of the loans. The judge found, though, that “there remain significant external checks on such hypothetical transactions: Congress not only has a recurring opportunity to decline to reauthorize the Bank, but it also gets the chance to review new commitments of more than $100 million before they take effect.”

In May, President Obama signed Export-Import Bank reauthorization legislation into law. The legislation reauthorized Ex-Im Bank through FY2014 and increased its lending cap to $140 billion. As NAM President Jay Timmons wrote in an Op-Ed earlier this year, the Ex-Im Bank in FY2011 “helped nearly 4,000 businesses in the U.S. export more than $41 billion worth of goods. Those exports support 290,000 jobs in this country, many of them at small and medium-sized businesses.”

Lauren Airey is director of trade facilitation policy, National Association of Manufacturers.

From The Milwaukee Journal-Sentinel and reporter Rick Barrett, who have done an excellent job with this story, “Snail’s pace of Bucyrus loan worries officials“:

The U.S. Export-Import Bank on Wednesday took the first step toward reversing an earlier decision that had put up to 1,000 U.S. jobs and $600 million in Bucyrus International Inc. sales at risk. But the process is taking so long, Bucyrus’ chief executive is worried the contract still could disintegrate, sending the orders – and jobs – to China. 

The bank, which earlier had refused to finance the sale of Bucyrus coal-mining equipment for a power plant in India, on Wednesday voted 3-0 to put the sale back on track. Two more votes remain – one on the project’s financial aspects, and the other for final approval. There’s also a 35-day period during which the deal will be sent to Congress for comments. 

The delays are a concern, said Bucyrus CEO Tim Sullivan, who says the Indian power plant operator, Reliance Power Ltd., could grow frustrated and turn to China or another country for mining equipment since it needs the shovels, draglines, trucks and other gear in early 2011. South Milwaukee-based Bucyrus also needs to start making the equipment soon to meet Reliance’s timeline. 

The story quotes the NAM’s Pat Mears, recounting how the Ex-Im Bank is less aggressive than its foreign counterparts in promoting exports.

Here’s the Export Import Bank’s news release, “Ex-Im Bank Approves Preliminary Review of Export Financing Application for India’s Sasan Power Plant.” Unfortunately, the official statement shows the Bank to be still paying obeisance to the self-imposed environmental dictates that sidelined the project in the first place.

“We are pleased that Reliance is making this commitment to renewable energy, which allows us to sustain U.S. jobs and promote both conventional and renewable energy exports,” said Ex-Im Bank Chairman and President Fred P. Hochberg.

Chairman Hochberg also noted that, “this transaction was also made possible because of Anil Ambani’s leadership and vision in diversifying Reliance Power’s production portfolio of energy projects in India. Reliance Power’s efforts will benefit the people of India and Ex-Im’s efforts will benefit U.S. energy exporters.”

So Reliance Power in India is also doing just enough in the way of alternative energy projects to give the board cover for voting for this specific financing. But the loyalty to environmentalism remains, institutionally limiting the Export-Import Bank’s ability to carry outs basic mission — supporting U.S. exports.

How in the world could the Ex-Im Bank vote down financing for a solid project in the first place, costing a potential $600 million in sales and 1,000 job? Especially now, as the Milwaukee Business-Journal reports, “Milwaukee loses one-third of manufacturing jobs in 10 years: “The Milwaukee metropolitan area has lost 54,800 manufacturing jobs over the last 10 years, the 15th-biggest drop among the largest 100 metros in the country, according to a new Business First of Buffalo analysis.”

While most recent attention toward the Export-Import Bank has been on its wrong-headed decision to reject loan guarantees for an Indian power project — threatening $600 million in U.S. equipment sales — another mishandled project demonstrates institutional problems the Ex-Im Bank must address. From NAM President John Engler’s column in The Hill, “Rejection of U.S. deals and jobs undermines goal of doubling exports“:

The other troubling case involves a potential $2 billion sale of commercial satellite equipment and services by Lockheed-Martin to the Iridium Corporation. Held back by excessive rules and restrictions, Ex-Im could not make its decision in time — even though expedited financing was the competitive factor in determining who would win the bid, Lockheed or Thales, a French company.

Given the same time limitations, the French export credit agency, COFACE, committed to finance the deal and Thales was awarded the contract. The French decided that they wanted their company to get the sale; the same cannot be said about the United States.

This represents a major missed opportunity for the United States. The deal would have supported an estimated 2,000 highly paid, skilled U.S.-based engineering, design and manufacturing jobs. It would have increased U.S. exports by $2 billion, much of that from U.S. small and mid-sized companies in Lockheed’s supply chain. A successful U.S. bid would have also supported our domestic satellite advanced technology base — once first in the world but now trailing the European Union’s.

The National Association of Manufacturers has been vocal in calling for the Export-Import Bank to reconsider its 2-1 vote denying loan guarantees for a power generation project in India, a denial that could cost Bucyrus, the Wisconsin-based equipment manufacturer, and its suppliers some $600 million in sales and 1,000 jobs. (See earlier posts.)

This one, misguided decision aside, there are bigger issues affecting the Export-Import Bank that need to be addressed. NAM President John Engler addressed some of them in a new op-ed published at The Hill, “Rejecting U.S. deals and jobs undermine goal of doubling exports“:

Governments of other nations operate similar export-financing programs, but with more substantial government backing and without attaching as many anti-competitive restrictions to projects.

Ex-Im Bank’s financial support for exports reached a record $21 billion last year. But its counterpart north of the border, Export Development Canada, provided $80 billion to support Canadian exports, an even more impressive number when you consider the relative size of the U.S. and Canadian economies.

Japan’s equivalent agency did nearly $140 billion in support last year!

The Export-Import Bank is also is saddled with restraints that its competitors are not — environmental impact studies, economic impact tests, requirements that U.S.-flagged vessels carry the financed cargo, etc. These non-trade objectives are well-meaning but surrender advantages so other countries get their power plants and other equipment but from non-U.S. suppliers using non-U.S. financing.

Tim Sullivan, President and CEO of the Wisconsin-based manufacturer Bucyrus, was on CNBC’s Squawkbox this morning to discuss the Export-Import Bank’s handling of the loan guarantees to support Bucyrus’ sale of mining equipment to build a mine and power plant in India. The Ex-Im Bank rejected the financing because the Indian project involved coal, in the process surrendering potentially $600 million in sales to foreign competitors and costing 1,000 U.S. jobs. As we reported last week, the decision provoked intense reaction from industry and elected officials, and the Ex-Im Bank is reconsidering its decision.

Sullivan:

I think this will get done. There has to be a memorandum of understanding with our customer that hopefully will be completed this week, and then next Thursday it will go back for a revote. I am confident, I think, because of the situation today that this deal will get down.

We’ve got four more pending, though, and those deals will not get done with the current environmental policies at U.S. Eximbank.

And later in the interview:

I have a standing invitation from [Ex-Im Bank] Chairman Hochberg to come to Washington. We’ve got to talk about the follow-on. We have to get these policies aligned with U.S. technology, not Chinese technology. Otherwise, we’re out.

And you know, if you look at what’s in the marketplace today, there’s 250 gigawatts of coal-fired power plants being constructed. That’s a billion tons of coal. We have a trillion tons of reserves of coal in 77 countries around the world. We’re going to burn coal. This puts us on the sidelines. It basically puts us out of business, and it tells manufacturers like myself, don’t expand in the United States. If you’re going to expand, go to some of the countries that have that capability to back your products.

• Milwaukee Journal-Sentinel, “Bucyrus chief dug deep for support “
• Milwaukee Journal-Sentinel, “Bank’s reversal lifts shadow over Bucyrus“

President Obama speaks in Racine, Wisc., today on the economy. We trust this Wall Street Journal editorial was on the top of his pile of pre-trip briefing materials this morning. From “The Bucyrus Travesty“:

The manager of a Milwaukee custard stand on Friday asked Joe Biden for lower taxes in return for dessert, and the Vice President told him not to be “a smartass.” Perhaps on his own visit to Wisconsin today, President Obama will have a better answer for the latest blue-collar casualties of his Administration’s anticarbon obsessions.

Last Thursday, the U.S. Export-Import Bank denied loan guarantees to Reliance Power Ltd., an Indian utility building a coal-fired power plant near Sasan, India. Bucyrus International Inc., a South Milwaukee-based manufacturer, was ready to export some $310 million in mining equipment—and about $600 million over three years—but Reliance’s order was contingent on the favorable financing rates provided by the Ex-Im guarantee. Reliance cancelled the order Monday morning and will reboot with Bucyrus’s competitors in China or Belarus if the bank doesn’t reverse in the coming days.

The Reliance-Bucyrus deal met all of the Export-Import Bank’s qualifying criteria, including the tougher environmental and CO2 standards that the White House has imposed over the last several months. But the bank nonetheless rejected the project in a 2-to-1 vote under pressure from the Treasury and State Departments. “We were absolutely flabbergasted and shocked,” Bucyrus CEO Tim Sullivan told us in an interview.

The Business Journal of Milwaukee: “Feingold, NAM also urge Export-Import Bank to rethink Bucyrus decision“:

U.S. Sen. Russ Feingold and the National Association of Manufacturers have joined in urging the U.S. Export-Import Bank to reconsider its decision to deny financing of mining equipment for a coal-fired power plant in India, which has effectively canceled a $600 million equipment order for Bucyrus International Inc.

 Milwauke Journal-Sentinel, “Calls mount mount for Export-Import Bank to reverse Bucyrus decision“:

Former Michigan Gov. John Engler has urged the U.S. Export-Import Bank to reverse its recent decision that denied loan guarantees for mining equipment that would be made by Bucyrus International to supplying coal for a power plant in India. 

Engler, now president of the National Association of Manufacturers, said he spoke with Bank Chairman Fred Hochberg. 

AP reports that Bucyrus chief executive Tim Sullivan has spoken with officials at the U.S. Export-Import Bank, who have told him they are having detailed discussions with the White House about it. It’s hard to see how President Obama can travel to Racine, Wisc., Wednesday to talk about the economy and not have this issue resolved.