Export-Import Bank Act of 1945

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Export-Import Bank Act of 1945

Lynda D. Vargha

The Export-Import Bank Act of 1945 (P.L. 79-173, 59 Stat. 526) made the Export-Import Bank of Washington an independent government agency operating under a renewable charter. President Franklin D. Roosevelt initially established the bank by an executive order in 1934 and funded it with $1 billion from the U.S. Treasury. President Roosevelt originally intended to fund U.S. trade with the Soviet Union, but within the decade, the mission of the bank expanded to include the provision of loans and grants to U.S. companies seeking to export their products. By executive order, jurisdiction over the bank was transferred between government agencies four times between 1939 and 1943 before Congress established it as an independent agency with the enactment of the Export-Import Bank Act of 1945.

The creation of the bank in 1934 was part of a larger economic policy promoting government spending as a means for economic growth. At the time, the U.S. economy of the Great Depression was characterized by high unemployment, low income, low demand for goods and services, and slowed industrial production. Meanwhile, the communist Soviet Union experienced high industrial production from state-owned firms and zero unemployment. Under these economic conditions the Soviet Union was seen as a market for U.S.-produced goods and the export of U.S. goods to the Soviet Union was a reasonable strategy for promoting U.S. economic growth and lowering U.S. unemployment.

Although the original mission of the Export-Import Bank of Washington was to subsidize U.S. industrial production for export to the Soviet Union, within a decade, its mission quickly expanded to include other foreign countries. By the end of World War II (1939–1945), the Export-Import Bank played a vital role in helping U.S. companies participate in the expansion of U.S. industry to Europe and Asia as part of the post-war reconstruction effort. Because of the expanding post-war role of the bank and its growing importance, Congress formally designated it an independent government agency when it adopted the Export-Import Bank Act of 1945.

A 1968 amendment to the Export-Import Bank Act of 1945 renamed the bank the Export-Import Bank of the United States, and this continues to be its name today. Before 1980, the main avenue of export promotion through the bank was by way of direct loans to producers seeking to sell goods abroad. This program provided fixed interest rate loans and were most often given to producers to fund high capital (plant and equipment) expenditures in industries such as aircraft manufacture and nuclear power. Perhaps the most well-known case of such government funding is that provided to aircraft manufacturer Boeing. The government has supported Boeing though the Export-Import Bank for decades as a response to the European Union's subsidy of Boeing's major European competitor, Airbus. In 1980, when Congress limited the amount of direct lending, the bank decreased its direct lending and increased its use of loan guarantees and insurance coverage as a means of facilitating the export of American goods.

Despite all of these changes, the underlying goal of the Export-Import Bank of the United States has not changed, it continues to promote the sale of U.S. goods abroad. The bank provides loans and insurance to privately-owned companies to reduce the risk of selling in countries experiencing political or economic instability. In addition, the bank attempts to level the playing field of global markets for U.S. companies by subsidizing U.S. industries in competition with foreign firms subsidized by their governments.

President George W. Bush signed the Export-Import Reauthorization Act of 2002 on July 14, 2002. This act renewed the bank's charter through September 30, 2006 and included new rules for the provision of loans and insurance. The law now requires the bank to make a human rights assessment of any project over $10 million and to focus on projects that will promote U.S. job growth. Most importantly, the law draws attention to compliance with U.S. responsibilities as a nation member of the World Trade Organization (WTO). The Export-Import Reauthorization Act of 2002 prohibits subsidization to any industry subject to a retaliatory countervailing duty through the WTO agreements.

The global environment in which the Export-Import Bank of the United States must operate today is very different from that of 1945 when the Export-Import Bank Act made it an independent government agency. At that time, the bank was a mechanism for economic growth, as well as a means to promote the involvement of U.S. companies in the post-war reconstruction of Europe and Asia. At the time Congress intended these government subsidies to promote U.S exports abroad, thus increasing industrial production and lowering unemployment in the U.S. Today, the role of government subsidization to achieve economic growth is a source of debate among politicians and economists—some continuing to support the mechanism, while others argue that it undermines growth and productivity. However, the Export-Import Bank of the United States still enables U.S. companies to compete with foreign competitors that are subsidized by their own governments.