There has been no shortage of well-intentioned laments about the expiration of the authorization of US EXIM Bank on June 30, 2015—since then, the Bank's authority to issue new loans ceased and its operations are limited to managing loans already in its portfolio.
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 the failure to date of the US Congress to reauthorize the Bank amounts 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.
Today, the consequences of Congress' failure yet to re-authorize US EXIM Bank, notwithstanding the clear and powerful arguments in favor of doing so, are particularly poignant in relation to the Bank's role in Africa. It would be a bitter irony if US EXIM Bank is forced to disengage at the time when Africa's rise and integration in the world economy is becoming more visible.
Among the many compelling arguments for reauthorization is 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.
On October 27, by a vote of 313-118, with 127 Republicans voting "aye," despite the strident opposition of Financial Services Committee Chairman Jeb Hensarling (R-TX) and many in the Republican Leadership, the US House of Representatives passed a US EXIM reauthorization bill. This bill now is before the US Senate which is unlikely to take up the House-passed measure. Despite the level of support in the Senate, it appears that the Senate would not pass this US EXIM reauthorization bill because Majority Leader Mitch McConnell (R-KY), who opposes an EXIM reauthorization, refuses to give the House bill the necessary floor time to pass it. Despite his personal opposition, Senator McConnell has said that he is open, of all things, to the possibility of including a US EXIM reauthorization as part of a long-term highway bill.
Thus, it appears that the future of the Bank is dependent on appending a US EXIM reauthorization to a "must-pass" piece of legislation, such as a long-term highway bill or a bill funding the US federal government's operations after December 11, 2015 when the current continuing resolution funding the US federal government expires. Of course, the characteristics of these "must-pass" pieces of legislation have little to do with the merits of the case for US EXIM Bank or with the arguments in favor of its engagement with Africa.
But Africa is too big to be contained by these constraints in vision. The current stalemate over the future of the US EXIM Bank illustrates 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.
At this stage, the reauthorization of US EXIM Bank is more important as a signal of both US credibility in the region and the United States' willingness to compete for global trade opportunities than it is to the future of Africa. Whether or not US EXIM Bank is reauthorized, Africa has alternatives.