Adrien Matray often looks to the headquarters of Enterprise Singapore to illustrate a growing paradox in American economic strategy. There, officials at the city-state’s trade promotion agency track American industrial policy with a mixture of curiosity and disbelief.
“The United States has one of the most effective export credit systems in the world,” one senior official remarked recently. “And they keep trying to shut it down. We don’t understand it.”
To Matray, a Research Economist at the Federal Reserve Bank of Atlanta who has studied export credit agencies globally, the American approach is baffling.
“It’s like showing up to a race with one shoe untied,” says Adrien Matray.”Other countries take this seriously. We treat it as an afterthought.”
THE GLOBAL PLAYING FIELD
Export credit agencies exist in over 100 countries representing 92% of global trade. These government-backed institutions provide financing, guarantees, and insurance that help domestic firms compete for foreign sales. Major trading nations treat them as essential infrastructure for economic competition.
China’s export credit system has become a central instrument of the Belt and Road Initiative, financing ports, railways, and power plants across Asia, Africa, and Latin America. These projects don’t just generate immediate returns—they create long-term commercial relationships and dependencies that serve Chinese strategic interests for decades.
Germany’s Euler Hermes actively supports manufacturers competing for contracts in emerging markets. Korea’s export credit agencies are one reason the country’s shipbuilders, electronics firms, and construction companies have captured global market share. Even smaller economies like Sweden and Denmark punch above their weight in international trade partly because they back their exporters effectively.
The United States has comparable capabilities—EXIM’s expertise and track record match any competitor—but hobbles itself through political neglect. The bank’s lending authority is capped by Congress at levels far below what other advanced economies provide. Periodic reauthorization battles threaten its existence. From 2015 to 2019, political gridlock left it effectively unable to approve major transactions.
THE COST OF NEGLECT
New research quantifies what this neglect costs. When EXIM shut down in 2015, firms that had relied on its support saw revenues fall 12%, investment drop 14%, and employment decline 10%. Every dollar of EXIM financing had been generating roughly $4.50 in American exports.
“These are big effects,” says Matray, who co-authored the study with economists from Singapore and Berkeley. “And they didn’t hit just any firms—they hit the most productive American exporters hardest.”
The shutdown wasn’t the result of any policy judgment about export credit’s merits. It stemmed from an unrelated political battle—Tea Party Republicans blocking Obama administration priorities. EXIM became collateral damage.
When normal operations resumed in 2019, the bank had accumulated a backlog of $40 billion in pending applications. American exporters had spent four years losing contracts to foreign competitors whose governments provided continuous support.
“The trade war with China gets all the attention,” Matray observes. “But in those same years, we were losing export opportunities simply because our own export credit system wasn’t functioning. That’s a self-inflicted wound.”
WHY PRIVATE MARKETS FALL SHORT
Understanding why EXIM matters requires understanding why private banks don’t fill the gap.
International trade involves complications that domestic commerce doesn’t. A manufacturer selling to a buyer overseas faces unfamiliar legal systems, difficulty evaluating creditworthiness, extended payment timelines, and country risks ranging from currency controls to political upheaval. Banks that finance such transactions face the same uncertainties, often magnified by distance.
“Private banks are rationally cautious about risks they can’t assess,” Matray explains. “They’d rather decline a transaction than lose money on something they don’t understand.”
This caution creates financing gaps. Worthy export opportunities go unfunded—not because they’re unprofitable, but because private institutions lack the expertise or risk appetite to support them.
EXIM specializes in exactly these situations. As a government agency, it can draw on diplomatic relationships and intelligence resources unavailable to commercial banks. It has decades of experience evaluating foreign risks. It can provide insurance against “force majeure” events—political upheavals, wars, currency crises—that private insurers explicitly exclude from coverage.
“There’s a reason every major trading nation has an export credit agency,” says Matray. “Private markets genuinely fall short in this space. The question is whether you address that failure or leave your exporters to compete with one hand tied behind their back.”
THE PRODUCTIVITY ANGLE
The research revealed something unexpected about which firms benefit most from EXIM support. Critics had long alleged that the bank primarily served giant corporations—Boeing, General Electric, Caterpillar—that could easily find private financing elsewhere.
The shutdown provided a natural test of this critique. If EXIM were merely padding profits for well-connected firms, its absence wouldn’t have mattered much.
Instead, the damage concentrated among firms that genuinely needed help: financially constrained companies, exporters serving risky destinations, businesses without established banking relationships. Most strikingly, the most productive firms—those generating the highest returns on investment—suffered disproportionately.
“This tells you something important about private markets,” Matray argues. “They’re not just missing some transactions—they’re systematically missing the most valuable ones. The firms with the best opportunities face the tightest financing constraints.”
EXIM corrects this distortion. When it shut down, capital flowed away from productive export-oriented firms toward less productive companies with easier access to private credit. Economic efficiency declined.
STRATEGIC IMPLICATIONS
The case for robust export credit extends beyond economics. In an era of great power competition, export relationships are instruments of influence.
When American firms supply critical equipment, infrastructure, and technology abroad, they create commercial dependencies that serve U.S. interests. American standards become global standards. American companies become preferred suppliers. American workers benefit from the production.
When those contracts go to Chinese or European competitors—backed by their governments’ export credit systems—the dependencies point elsewhere. Strategic industries develop relationships with other countries’ suppliers. American influence in key markets diminishes.
“Export credit is soft power that pays for itself,” says Matray. “You’re simultaneously supporting domestic jobs, promoting national champions, and building international relationships. It’s hard to find policy tools that accomplish all three.”
THE CONTRAST WITH TARIFFS
The strategic and economic case for export credit stands in stark contrast to tariff policy, which has dominated recent trade debates.
Tariffs restrict imports but invite retaliation. They raise costs for American consumers and manufacturers that rely on foreign inputs. They protect domestic markets but do nothing to expand American presence abroad. Whatever short-term political appeal they offer, they produce long-term economic costs and diplomatic friction.
Export credit operates differently. It promotes American sales rather than restricting foreign ones. It expands economic activity rather than contracting it. It supports jobs through growth rather than protection. And it operates without taxpayer subsidies—EXIM has historically returned money to the Treasury rather than requiring appropriations.
“If you’re worried about trade deficits, there are two sides to the equation,” Matray points out. “You can try to reduce imports, which is costly and provocative. Or you can try to increase exports, which is beneficial and self-financing. We seem fixated on the first approach while ignoring the second.”
A CHOICE, NOT A CONSTRAINT
America’s underinvestment in export credit isn’t inevitable. It’s a choice—one that policymakers could reverse relatively easily.
EXIM already has the institutional capacity, expertise, and track record. What it lacks is adequate political support and funding. Raising its lending limits, ensuring stable authorization, and prioritizing its role in trade strategy would cost taxpayers nothing while generating substantial returns.
“Every other major trading nation figured this out decades ago,” says Matray. “They compete aggressively for export contracts because they understand what’s at stake. We have the capability to compete at least as effectively—we’re just choosing not to use it.”
As American policymakers contemplate how to address trade imbalances and strategic competition, they might start by looking at the tool already in their hands.
“EXIM works,” Matray concludes. “The evidence is overwhelming. The only question is whether we want to win the export race or keep running it with our shoes untied.”
About the Author
Adrien Matray is a Research Economist and Associate Policy Advisor at the Federal Reserve Bank of Atlanta. His research focuses on empirical corporate finance, entrepreneurship, and innovation, with a particular interest in how financing constraints and technological change affect firms and workers. He is also a Research Affiliate at the Center for Economic and Policy Research (CEPR). For Adrien’s publications, visit https://adrienmatray.net/published-papers/
