Associate Editor
Loyola University Chicago School of Law, JD 2024
In 2021, the Biden administration conducted a 100-day supply chain assessment in the midst of a global supply shock. The assessment specifically looked at four critical products that were being severely impacted by reverberating supply chain issues – semiconductors, large capacity batteries, critical minerals, and pharmaceutical ingredients.
Under a plan established by the White House, the Export-Import Bank of the United States (“EXIM”) was tasked with developing a “Domestic Financing Program” to help facilitate the expansion of domestic manufacturing and increasing access to international markets. EXIM approved its first domestic loan in August of 2023, quietly shepherding a political and financial experiment that is aimed at revitalizing "strategic sectors" of the U.S. economy and incentivizing investments in distressed areas of the country.
What is EXIM?
EXIM is the official export credit agency of the U.S. government. Export credit agencies are financial institutions that act as mediators between exporters and national governments. EXIM offers export financing such as loans, guarantees, and credit insurance to American exporters and their customers as added protection against the risks that exist in international trade. The agency stands as a key player in facilitating international trade financing and supporting U.S. economic interests. It is also one of the only U.S. government agencies to continuously turn a profit.
Established in 1934 through an executive order by President Franklin D. Roosevelt, the agency’s primary mission was to provide financial assistance to promote U.S. exports globally. EXIM became the official export credit agency of the United States after the passage of the Export-Import Bank Act of 1945. Over the years, EXIM has evolved to meet the changing needs of the global economy, playing a crucial role in post-war reconstruction, trade expansion, and economic development.
One of the pivotal moments in EXIM's history was its involvement in the Marshall Plan. Launched in 1948, the Marshall Plan, officially known as the European Recovery Program, aimed to underpin the economic recovery of war-torn Western European countries after World War II. EXIM played a vital role in the plan's implementation by offering financial support and banking functions to U.S. companies exporting goods and services to Europe. During this period, EXIM's financial assistance was instrumental in stimulating the recovery of major European economies.
By providing favorable lending terms for U.S. exports, the agency not only helped rebuild war-ravaged nations but also fostered stronger economic ties between the United States and its European allies. The success of the Marshall Plan highlighted the agency's capacity to contribute to global economic stability and peace through trade. Post the Marshall Plan era, EXIM continues to adapt to the evolving international trade landscape. It supports various sectors, including manufacturing, infrastructure, and technology, contributing to the growth of U.S. businesses on the global stage.
Despite facing challenges and debates about reauthorization, EXIM remains a vital tool for U.S. exporters, supporting job creation and overall economic growth. In recent years, there has been a renewed emphasis on EXIM as part of broader economic and trade policies.
Make More in America
In response to President Biden’s assessment, EXIM developed and approved a domestic finance program known as the “Make More in America Initiative.” The plan aims to provide American manufacturers, especially small and medium-sized businesses, with new access to capital to address supply chain gaps.
To assist companies in enhancing domestic manufacturing, particularly in sectors vital to national security, EXIM made its existing medium and long-term loans, loan guarantees, and insurance accessible for export-oriented domestic manufacturing projects. EXIM’s board announced that priority would be given to companies focused on developing and manufacturing biomedical products, renewable energy, and those focused on environmental sustainability.
The difference between the Domestic Financing Program and EXIM’s traditional structure as an export credit agency are stark. Because this new program operates as a manufacturing loan to American businesses, EXIM would not have to comply with international agreements that set specific parameters for export credit agencies. These longstanding agreements ensure fair competition between countries, with the idea that export financing should not be a race to the bottom whereby strong economic powers offer interest rates so low that other countries’ credit agencies cannot compete.
Here, rather, EXIM would be subject to the World Trade Organization’s trade financing rules. Under those rules, EXIM would look to market pricing rather than benchmarking loan terms against other individual economies.
EXIM’s First Domestic Manufacturing Loans
In August 2023, EXIM’s board approved a direct loan of $4.7 million to Aquatech, a minority-owned small business in Canonsburg, Pennsylvania. This marked the first time EXIM financed a domestic development project.
Aquatech engineers and commissions water treatment systems ranging from desalinization plants to wastewater treatment reactors. The stated purpose of the loan is to aid Aquatech in acquiring services and laboratory equipment to modernize and expand its labs in multiple states. The funding is expected to generate new positions at Aquatech as well as fund construction, and will allow the company to compete for substantial contracts in foreign and domestic lithium extraction projects.
In October of 2023, EXIM issued an $11.5 million loan to IperionX, a North Carolina-based metals technology company. The loan is intended to help finance the company’s build out of a titanium production facility in Virginia. The United States imports over 91% of the titanium it consumes from Eastern Europe and parts of Asia, and does not currently maintain a strategic stockpile of the metal. The loan, which was supplanted by a loan from EXIM’s “China and Transformational Exports Program,” seeks to reduce the country’s reliance on other global powers for titanium and other critical metals and minerals.
Owen Herrnstadt, an EXIM board member, emphatically stated that “rebuilding our manufacturing base by bringing more of our supply chains home is vital to our national and economic security.” Like Herrnstadt, the Biden administration has made it its mission to highlight the importance of reshoring manufacturing as a way to mitigate inflation caused by supply chain shocks, like we saw as a result of COVID-19, as well as to reduce reliance on foreign powers who may pose challenges to America’s economic interests. Here, the Biden administration is giving an old horse new life. EXIM is tasked with revitalizing an economy once again.