Export-Import Bank:

Improvements Needed in Assessment of Economic Impact

GAO-07-1071: Published: Sep 12, 2007. Publicly Released: Oct 15, 2007.

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Congress established the Export-Import Bank of the United States (Ex-Im) to encourage U.S. exports. Congress has directed Ex-Im to consider the economic impact of its work and not to fund activities that will adversely affect U.S. industry. In this context, GAO reviewed (1) Ex-Im's policies and procedures for determining economic impact, (2) the extent to which Ex-Im appropriately identifies and analyzes projects that could cause adverse economic impact, and (3) the extent to which Ex-Im's process is transparent. To conduct this work, GAO reviewed Ex-Im's procedures, data on projects applicable for the economic impact process, and detailed economic impact analyses. GAO also interviewed Ex-Im and reviewing agency officials and industry representatives.

Congress requires Ex-Im to assess whether a project requesting its financial support will negatively impact U.S. industry. Ex-Im uses a screening process to identify projects with the most potential to have an adverse economic impact, and then subjects the identified projects to detailed analysis. A negative finding could result in a denial of Ex-Im support. The screens--either explicitly required by Ex-Im's charter or introduced under the bank's statutory authority--include whether (1) the financed project will increase foreign production, (2) there are trade measures against the resulting product, (3) the resulting product is "undersupplied," (4) the requested financing is over $10 million, and (5) the financed project will increase foreign production by 1 percent or more of U.S. production. Between fiscal years 2003 and 2005, this screening process identified 20 projects (out of 771 applicable) that required a detailed economic impact analysis. In the detailed analysis, Ex-Im assesses whether the resulting product would be in surplus on world markets or in competition with U.S. production. Between fiscal years 2003 and 2005, Ex-Im approved most projects applicable for economic impact analysis, totaling approximately $6.1 billion in approved financing. GAO found challenges and areas for improvement in the screening and detailed analysis of projects for economic impact. The effectiveness of the $10 million screen, introduced under Ex-Im's statutory authority, is uncertain. Ex-Im has not determined whether it removes from review those projects that could meet the statutory definition of substantial injury (producing 1 percent or more of U.S. production in an industry). For example, a $9.9 million financing request that would allow a foreign company to produce an estimated 3.5 percent of U.S. production was screened out of the analysis. GAO also found that Ex-Im could improve some methods it uses in its detailed analyses, such as how it estimates displaced production. In addition, GAO found that Ex-Im could clarify how it characterizes the effect of its financing on the U.S. trade balance. Finally, GAO found that Ex-Im could strengthen the internal controls it uses to ensure that the screening process and detailed analysis are conducted consistently and accurately. GAO also found limitations in the transparency of Ex-Im's economic impact process. While Ex-Im publicly posts its procedures, they contain areas of ambiguity. For example, the procedures do not define the term "oversupply." Also, Ex-Im has not provided all public comments to the board of directors. GAO identified two practices--referencing in the procedures the list of sectors likely to require extra scrutiny and publicizing final economic impact conclusions--that would increase the predictability of the process.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve the public transparency of the economic impact process for interested and affected parties, the Chairman of the Export-Import Bank of the United States should inform interested parties about the sensitive sector list by including a reference to the list in the economic impact procedures.

    Agency Affected: Export-Import Bank of the United States

    Status: Open

    Comments: Ex-Im Bank officials briefed GAO in July 2011 about their efforts to implement the recommendations from this report. We are monitoring their efforts and will update the status as we obtain additional information from the Bank.

    Recommendation: To improve the public transparency of the economic impact process for interested and affected parties, the Chairman of the Export-Import Bank of the United States should clarify publicly available procedures by including more information regarding Ex-Im's methodology for analyzing applications, such as defining how it incorporates "oversupply" determinations in its analysis and what measures it uses and specifying under what conditions "proportionality" would be used.

    Agency Affected: Export-Import Bank of the United States

    Status: Closed - Implemented

    Comments: Ex-Im Bank generally concurred with the GAO recommendations and stated that it would continue to explore feasible ways to improve the economic impact procedures and make the process more consistent and use-friendly. Ex-Im Bank stated that it would clarify the basis for an assessment of "oversupply" and create criteria for using "proportionality." The Export-Import Bank Reauthorization Act of 2012 requested that Ex-Im Bank provide a report on the implementation or rejection of the recommendations contained in GAO-07-1071. Ex-Im's report, dated November 26, 2012, notes that on November 19, 2012, the Bank Board approved the "Economic Impact Procedures and Methodological Guidelines" (effective April 1, 2013) and published them on the Bank's web site. The report also notes that Ex-Im has codified several terms, such as "structural oversupply" and "proportionality" in its new procedures. These procedures and guidelines provide additional information on what measures Ex-Im uses to determine "oversupply," as well as specifying the conditions under which "proportionality" would be used, thereby implementing GAO's recommendation.

    Recommendation: To improve Ex-Im's identification and analysis of applications for economic impact, the Chairman of the Export-Import Bank of the United States should review and strengthen internal controls concerning the economic impact analysis to ensure, for example, that staff members conducting the analyses have sufficient training and guidance in Ex-Im's economic impact methodology, that relevant Ex-Im staff verify and approve the analyses, and that sufficient documentation is maintained to record key information.

    Agency Affected: Export-Import Bank of the United States

    Status: Open

    Comments: Ex-Im Bank officials briefed GAO in July 2011 about their efforts to implement the recommendations from this report. We are monitoring their efforts and will update the status as we obtain additional information from the Bank.

    Recommendation: To improve Ex-Im's identification and analysis of applications for economic impact, the Chairman of the Export-Import Bank of the United States should create specific methodological guidelines for staff analyzing applications for economic impact, bearing in mind relevant Office of Management and Budget guidance where appropriate.

    Agency Affected: Export-Import Bank of the United States

    Status: Open

    Comments: Ex-Im Bank officials briefed GAO in July 2011 about their efforts to implement the recommendations from this report. We are monitoring their efforts and will update the status as we obtain additional information from the Bank.

    Recommendation: To improve Ex-Im's identification and analysis of applications for economic impact, the Chairman of the Export-Import Bank of the United States should review the $10 million threshold to determine whether additional steps are needed to mitigate the risk of exempting from more detailed review applications that could meet the definition of substantial injury. The additional steps could include, for example, selectively reviewing transactions that would affect relatively small U.S. industries or sensitive sectors.

    Agency Affected: Export-Import Bank of the United States

    Status: Closed - Implemented

    Comments: According to information provided by Ex-Im Bank concerning their review of applications above and below the $10 million threshold, we are closing this recommendation as implemented.

    Recommendation: To improve the public transparency of the economic impact process for interested and affected parties, the Chairman of the Export-Import Bank of the United States should publish either individually, or in the publicly available board minutes, the final determinations regarding whether a project would have a positive or negative impact.

    Agency Affected: Export-Import Bank of the United States

    Status: Open

    Comments: Ex-Im Bank officials briefed GAO in July 2011 about their efforts to implement the recommendations from this report. We are monitoring their efforts and will update the status as we obtain additional information from the Bank.

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