Federal News Service May 6, 2004 Thursday
HEADLINE: HEARING OF THE DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND TECHNOLOGY SUBCOMMITTEE OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES SUBJECT: OVERSIGHT OF THE EXPORT-IMPORT BANK OF THE UNITED STATES
CHAIRED BY: REPRESENTATIVE PETER T. KING (R-NY) WITNESS: PHILIP MERRILL, PRESIDENT AND CHAIRMAN, THE EXPORT-IMPORT BANK OF THE UNITED STATES
LOCATION: 2128 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.
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REP. KING: Now that Mr. Watt has laid the foundation and the platform, Dr. Paul.
REP. RON PAUL (R-TX): Thank you, Mr. Chairman.
And welcome, Mr. Merrill.
MR. MERRILL: Thank you.
REP. PAUL: You said the gentleman from North Carolina speaks clearly and logically, and --
REP. WATT: Thanks.
REP. PAUL: -- that's good and I won't contest that. But I want to see if I can get the same compliment, so I'm going to try. And in follow up, I notice in our memorandum from our staff here in the committee states, "Tensions exist between the bank's mission and the United States' commitment to free markets." And I would say, yes, there certainly are tensions. There is a contradiction, there is a real conflict. And I think you indicated maybe that we shouldn't use the word "subsidies" too generously, and yet the bank wouldn't come to the Congress for appropriations and authority if somebody didn't get some specific benefit.
So I think there's always a special benefit which is a subsidy, whether it's in cash or not-maybe it's an edge-and there's always a cost. And there is involved here an allocation of credit, and the victim is never found, never seen. And especially in an area where there's tighter credit, there are victims that are suffered. And although there may be a small businessman who gets the benefit, there is some other small businessman who is getting a disadvantage from it.
And my question is, how can you rationalize support for this organization because we on our side, we're supposed to be the champion? They're not supposed to be the champions of the marketplace, we are. We're supposed to be the champions of the marketplace.
We're not championing subsidies. We declare freedom and free markets and less government, and yet we're pushing this all this and we give all this support. So don't you think for your support of this organization, don't you have to do a lot of rationalization and reject some of the very principles that we stand for?
MR. MERRILL: Well, there are two answers to that question, Congressman. Yes, that's a perfectly logical and clear set of principles which it's hard to argue, I would not argue. I think that answer number one is practical. When a small businessman-I'm sorry that Don-that Congressman Manzullo left, but the-when a small businessman in Moline, a specific case, exported $20 million worth of trucks to Uzbekistan, no bank is going to finance that without the government guarantee.
Do we want to make the sale or do we want to have a French or a German or an Italian company make the sale? Theoretically, you're absolutely right. I agree with you. Practically, I want the guy in Moline to make the sale.
REP. PAUL: So your argument is that freedom is impractical, which I disagree with ?
MR. MERRILL: Ah, I didn't say that.
REP. PAUL: Well, indirectly. But let me follow up with another one, and maybe I'll get a little bit further on this next question. I'm interested in the Trade Bank of Iraq, and that's been set up-we waste no time, you know, trying to get some benefits in there maybe to our corporations. It's been set up at $500 million. Has that been used yet? And if it has been, has any corporation been participating in Iraq?
MR. MERRILL: There's only been one use so far, but I-the Trade Bank of Iraq, which basically we initiated-Peter Saba, our chief operating officer, did the basic legwork I would say. We raised-we put $500 million into it or against it. We raised another $2 billion -- $500 million from Japan, $250 million from Italy, 17 other countries, total $2.5 billion. So far there's only been one-a consortium of 13 banks administered by J.P. Morgan which won the contract, not with us but in an international kind of-with the Coalition Provisional Authority.
There's only been one contract so far to the U.S. That was $14 million. I think you-I hope you have a sense of humor for this, for a fogging machine. It's insect-for a fogging machine out of the United States-or a set of fogging machines, 200 of them. The problem is very simple in Iraq. Appreciating either the taxpayers are going to put up the money, or there's going to be foreign investment which is going to pump oil or invest there.
The three questions-the three issues are sovereignty, security, which is obvious, and precedence over existing debt. So under current circumstance, Iraq has $130 billion in existing debt and a couple of hundred billion in reparations, so companies are understandably unwilling at the moment to-or reluctant to invest over the long term there. Nevertheless, we want to be prepared for when the government-the handoff takes place and the debt is supposed to be written off by the Paris Club at the end of the year. Whenever a government comes into Iraq, we want to be prepared to make available lending.
One other thing I've got to get there, and that is the Trade Bank applies not only for U.S. exporters but for exporters from other countries as well. Any country. It's multilateral, it's not U.S. only.
REP. KING: The time of the gentleman has expired, but in the interests of fairness if you want to keep up with your partner, Mr. Watt, I'll let you take one more question.
REP. PAUL: No, I don't-I'm not --
REP. KING: Okay, thank you.
MR. MERRILL: I thank you both.
REP. KING: (Off mike.) -- Mr. Paul, wide access on the committee.
Seriously, Mr. Merrill, I want to thank you for your testimony this morning. It's really been helpful to us. I would note that some members may have additional questions for you and they can submit them in writing and the record will remain open for 30 days.
With that, I thank you for your testimony and the subcommittee stands adjourned.
MR. MERRILL: I thank you for your warmth and kindness, I appreciate that one and all, the entire committee.