Enviros Surprised, Happy at Bush Proposed Bank Cutback

by Danielle Knight

The White House is considering reducing the U.S. Export-Import Bank's current budget of $927 million by 24 percent. Known as Ex-Im, the Bank provides financial assistance in the form of export credit subsidies to U.S. exporters.

The administration's budget proposal is based on Bush's plan to cut individual income tax rates which gives the wealthiest the largest tax cuts in dollar terms.

An alliance of powerful corporate associations is opposing the cut to Ex-Im's budget, arguing that the availability of export credit is a critical factor in winning international competition for export sales, particularly in developing countries, where the potential for export growth is the largest.

Thomas Donohue, president and CEO of the U.S. Chamber of Commerce says the United States is falling behind Japan and European countries in providing assistance to its corporations.

"It has been more than a decade since funding for the Bank has been increased and we have fallen behind our competitors," says Donohue.

Ex-Im officials declined to comment on the proposal, but business insiders say that the Bank is appealing the move.

"Cutting the Ex-Im Bank's funding would be a giant step in the wrong direction," Donohue says.

Normally under fire by the environmental community for its pro-industry cabinet appointments and controversial plan to open up an arctic wildlife reserve to oil drilling, the new administration is now oddly on the same side as environmentalists.

Environmental organizations are praising the Bush administration for reducing the budget of an institution they argue is wasting taxpayer dollars by funding projects that cause global warming and pollute ecosystems in developing nations.

"We commend President Bush if he follows through on this budget cut," says Cena Swisher, program director at Taxpayers for Common Sense, an advocacy group here in Washington.

Brent Blackwelder, president of Friends of the Earth-U.S., says that between 1992 and 1996, Ex-Im and a related U.S. agency, the Overseas Private Investment Corporation, underwrote $23.2 billion in financing for oil, gas, and coal projects worldwide.

During the life of these projects, some 25.5 billion tons of carbon dioxide, an amount equivalent to total global greenhouse gas emissions for 1996, will be released into the atmosphere, according to a 1999 report by Friends of the Earth and the Institute for Policy Studies.

"Ex-Im Bank has authorized billions of dollars since 1992 in fossil fuel and mining projects that will destroy the environment and cause global warming," says Blackwelder.

The World Bank, in comparison, underwrote $13.6 billion in financing for such projects between 1992 and 1998.

The billions of dollars in support for fossil fuels contradict the U.S. foreign policy goals which call on developing countries to "meaningfully participate" in the Kyoto Protocol, an international treaty that requires industrialized nations to reduce their greenhouse gas emissions.

Ex-Im has been particularly devoted to fossil fuels in China, say environmentalists. Between 1992 and 1998, it committed a combined $1.66 billion toward the development of seven power plants in the Asian nation. Six of these plants were coal fired while only one was fuelled by gas.

The Bank's investments in the fossil fuel sector often prove to be among the agency's riskiest, says Blackwelder.

Ex-Im, for example, recently considered supporting a coal-fired power plant in Bo Nok, Thailand that was opposed by local communities. Police injured dozens of peaceful protesters who were concerned about the project, and local communities are now threatening to burn the plant down if it is built. Local residents have stated they would prefer clean, renewable energy,

"Supporting dirty, financially questionable coal-fired power plants around the globe is not where U.S. taxpayer money should go," says Swisher.

Ex-Im Bank has long been a target of environmental organizations, which successfully campaigned to get the agency to adopt some minimal environmental standards during the administration of former President Bill Clinton.

Such guidelines prohibit loans from going to projects that harm tropical or primary forests. They also require environmental standards for nuclear power plants and oil and gas development projects.

Because of these guidelines, Ex-Im did not join its European counterparts when they provided financial support toward construction of China's controversial Three Gorges Dam, which will inundate several cities and relocate more than one million people.

Despite these standards, the Bank has still come under fire for its backing of projects that activists say are destructive to the environment. In fiscal year 2000, Ex-Im approved financing, for example, for an oil pipeline in the West African countries of Chad and Cameroon after the World Bank approved a similar package.

The southern portion of the pipeline cuts across Cameroon's tropical rainforest. The extinction of wildlife -- including gorillas, chimpanzees and elephants -- already disappearing from Cameroon's forests as a result of commercial logging and poaching would be made easier by newly constructed access roads along the pipeline, say environmental groups.

Human rights and environmental organizations have also criticised Ex-Im and the World Bank for backing a project located in Chad, a country widely denounced for its corruption.

In December 2000, the Washington Post revealed that Chad's president spent $4.5 million of the World Bank's loan on weapons instead of addressing poverty alleviation as promised.