President and Chairman, Board of Directors, Export-Import Bank of the United States; CFR Member
Managing Director and Chair, Global Research, Corporate and Investment Bank, JPMorgan Chase & Co.; CFR Member
Chairman Kimberly Reed discusses how the Export-Import Bank is working to modernize U.S. business competitiveness in the face of contentious trade and business practices by China.
CHANG: Thank you so much, and welcome to today's Council on Foreign Relations meeting with Kimberly Reed, president and chairman of the board of directors of the Export-Import Bank. I'm Joyce Chang, chair of global research for J.P. Morgan, and I have the true pleasure and honor of presiding over today's discussion. We have more than 250 participants registered for this virtual meeting. And we will do our best to get to as many questions as possible during the Q&A period. So again, this is on the record, and in addition to the Council on Foreign Relations members, invited members of the press are also present.
So first, I want to provide you with some background on Chairman Reed and her incredible journey at the EXIM Bank to frame the discussion. EXIM is an independent federal agency that has supported nearly 1.5 million jobs in all fifty states over the past decade by facilitating the export of U.S. goods and services. It is noteworthy that Chairman Reed is the first woman in the EXIM Bank's eighty-six-year history to lead the bank. And she assumed this position in May 2019, after holding leadership roles for twenty-five years prior on job creation, trade, economic development, food and agriculture, and reform measures. She served under Hank Paulson and Jon Snow. She was the president of the International Food Information Council. And she also served as counsel to three separate committees in the House of Representatives. But what some of you may not know about the history of the EXIM Bank is the bank had been shut for four years when congressional authorization for the bank had lapsed in 2015. And so, when Chairman Reed took over, she was confronted with this challenge. So that's really the first question I have and a true welcome to you, Chairman Reed. Can you discuss EXIM's mission and how it executes its mission to support U.S. jobs? And tell us a bit about how you went about reopening an agency that had been closed for four years and about just what steps are being taken to ensure the sustainability and the mandate for the EXIM Bank?
REED: Well, thank you very much, Joyce, and hello to everyone. And I believe that my predecessor, Fred Hochberg, also is joining us today. I send greetings from the EXIM Bank headquarters, which is on the northeast corner of Lafayette Park overlooking the White House right now. And I want to say for all the reporters listening today; we just made big news. So we just came out of a board meeting and so happy to discuss what we just did, which is a change in our content policy.
Joyce, before we go into the discussion on that, let me just read to you what we just did. We're working on the press release as we speak. I'm very pleased to announce here at the Council on Foreign Relations that for the first time in a generation and a half, the EXIM board established a targeted domestic content policy for ten export sectors key to U.S. prosperity and security. EXIM board this morning took a tailored approach and voted unanimously to establish that projects or procurements involving ten congressionally mandated, transformational export sectors will qualify for EXIM financing if the proposed transaction meets 51 percent of the U.S. content threshold and if certain other requirements are met. In addition, if certain requirements are met, which I can go into in a moment, EXIM will be able to approve a transaction even if it does not meet the 51 percent threshold. A wide range of stakeholders in the private and public sectors express support for this change, with many representing U.S. exporters that face strong competition from the People's Republic of China. And I will also say that joining me in the board meeting today were my fellow Board Members Spencer Bachus and Judith Pryor as well as our ex officio member U.S. Secretary of Commerce Wilbur Ross, Undersecretary of State Keith Krach. And I provided comments from Under Secretary of the Treasury Brent McIntosh. And also, to set the stage for today, Kevin Cramer, senator of North Dakota, and I published an op-ed in The Hill that appeared online. So we can talk more about this when you're ready, but hot off the press, it's been a long, great journey since May 2019.
CHANG: Well, thank you so much, Chairman Reed, because that is really breaking news for all the CFR members to be the first to hear, and it seems like that really brings us much more in line with some of the other countries, like China and Germany. But about your journey and the mission of the EXIM Bank, if you can lay out exactly how you do execute this mission.
REED: Well, my journey has been amazing. As Joyce laid out my background, when President Trump was elected, I was on the Treasury transition team, or the landing team, going into the Treasury Department. And I had very productive discussions with the Obama political appointees and the career staff since I spent more than three years at the agency and love the agency. And when presidential personnel asked me what they thought I should be doing in government service, they suggested EXIM. And I'd really not thought about EXIM before, and I considered it because when you're asked to serve, you do. And I first said, "Isn't that a bank of crony capitalism?" and "Isn't that place shut down?" and other comments like that. And they're like, "No, the president changed his mind. He wants to reopen the bank," even though during the campaign he supported not reopening it. He changed his mind after talking to businesses and hearing firsthand that the United States was missing out. And so I didn't even appreciate that that had happened, and so I looked at my background—time at Treasury, I worked briefly at Lehman Brothers, and also in the world of food and agriculture, helping U.S. companies to export around the world—and I said, you know what, I guess this makes sense. And so I went on a journey that took two and a half years of my life. And again, it's an issue that Democrats support. I had a 100 percent Democrat "yes" vote on my confirmation. And it's free-market conservatives who are not fans of the bank, and so, as a Republican, I really wanted to help bridge that divide and listen to their points. And coming out of that, I committed to some key reforms with Senator Pat Toomey of Pennsylvania, such as increasing transparency, holding bad actors accountable, and as I tell every financial institution that I meet with, we won't compete with you—we want to supplement and do all we can through our mission. I was finally confirmed on May 8, 2019—79 to 17—which was a very good vote, and again, 100 percent Democrat "yes" vote on me, but working really hard to transform our agency.
So I was told that once a Senate votes on you, it takes about two weeks for the paperwork to go through the process before you can go in and take your oath of office and start your job. And so the day after my confirmation, I'm at my kitchen table on the morning of May 9, in my nightgown, drinking my coffee, and emailing lots of people that I was so thrilled to be taking on this new charge. And I get a call from the White House, and they said, "Kim, we've never seen this before, the president of the United States immediately signed your paperwork. You have an hour to get to work and take your oath." And so, I called my dad, who lives in West Virginia, who'd been looking forward to this event for his whole life, and for me to do this really the biggest thing in my career, and said, "You're going to miss it, dad." And got in my car, wrote my speech, and showed up an hour later in front of 400 wonderful career staff and 115 contractors— we're a 515-person independent agency, eighty-six years old now—and took my oath. And on day one, I said at that swearing-in ceremony, just off the cuff, what's my mission going to be. And that is to reopen this agency, fully reopen it, because without a board quorum, we can't do deals above $10 million. And so because the board did not have a quorum for four years, only the small business transactions under $10 million were taking place. And we had the capability of supporting at any one time $135 billion in exports. So I said, I'm going to reopen the bank, and then we're going to reform the bank because we need to get reauthorized because that was May. In December of last year, our agency was set to expire. And that means not only could you not do the big deals, but you also couldn't do anything—pencils down. And the dynamics had to change for that not to happen, and I know my predecessor Fred Hochberg had to deal with the closure of the bank and that issue. It's a hard issue. So, I took to Capitol Hill, had to testify, of course, and built what we do, internally changing the culture and making sure we're doing those reforms, and worked really hard.
Normally, Congress extends EXIM for three, four, or five years at a time, and when I showed up, financial institutions, foreign governments, foreign purchasers, and U.S. exporters told me they need certainty. We've been away for four years, and the world's changed a lot in those four years. And we now today have 115 export credit agencies around the world. I just discovered 116 a couple of weeks ago or last week when I was in Bahrain at the Manama Dialogue. So Bahrain has an export credit agency now. But the world has changed, and so, Chairman Reed, you need to give us certainty by getting EXIM reauthorized. So what happened? The president of the United States came out and said, "I want a ten-year reauthorization." And Congress came back and said, "Okay, seven." So we got the longest reauthorization in our agency's history. And I was really nervous because, you know, how things come together with Congress. And so it was almost a year ago, and if he didn't sign some bill on December 20, it was lights off. And I was invited to Andrews Air Force Base, where the president signed into law creating the United States Space Force. And I'm like, he needs to sign our bill. We were in a minibus, as they call them, H.R. 1865. And he got up on Air Force One after creating the Space Force and signed that piece of legislation there. And so what that did was give us a reauthorization. But what that bill also did was give us a new mandate. And I would say the most significant, indeed, in our history.
And if you read the legislation, and I know that we'll talk about it, Congress told us a year ago that we need to establish a program on China and transformational exports. And they recognize things like the Belt and Road Initiative, China 2025, debt-trap diplomacy, what's happening all around the world, and China has two official export credit agencies and other unofficial means. And they said, EXIM, you need to get up your game. And this comes, I believe, from a lot of the free-market conservatives, who probably were not big fans of the bank. They understand the China issue, and so they gave us this new mandate. It's daunting because the law calls for us to focus at least 20 percent of our portfolio (or $27 billion out of $135 billion) to match the rate terms and other conditions that China may be offering a foreign purchaser so that the foreign purchaser picks "Made in the U.S.A" and our great goods and services. And we know that the United States makes the best in the world.
And so Congress wants us to advance America's comparative leadership in the world with respect to the People's Republic of China, neutralize China, and get going ten transformational export sectors. And so those sectors include, and this is where we recreated the content policy just a few moments ago, artificial intelligence; biotechnology, and coming from the world of food and ag I see that also as ag-biotech; biomedical sciences, which is very important as we talk about COVID-19; wireless communication equipment, including 5G; quantum computing; renewable energy, energy efficiency and energy storage; semiconductors and semiconductor machinery manufacturing; emerging fintech, including technologies that deal with data security, privacy, money laundering, and financing terrorism; water treatment and sanitation, including technologies and infrastructure to reduce contaminants and improve water quality; high performance computing; and all associated services necessary for use of any of those ten exports. So Congress said, get out there, find deals and help us do things like 5G. We'll talk more about it, but it's been a tremendous effort, and that's just like one of the things we've been focused on, but the main one.
CHANG: Thank you so much, Chairman Reed. I do want to emphasize just the bipartisan support that Chairman Reed received, but also that for today's announcements, as I understand, it was also bipartisan support for the measures that were approved today. But you had mentioned that you were in Bahrain, and they've just opened an export credit agency, and I understand that you have been on the road a tremendous amount—Bahrain, Vietnam, Poland, and Greece. And so could you talk to us a little bit about what you're seeing overseas and how you would characterize the strategic and competitive advantages of U.S. companies as you look at what's happening around the globe?
REED: Absolutely. So, we reopen the bank. I did a little bit of traveling after being confirmed. In fact, I told you the story where I took the oath, and immediately after taking this oath and making these commitments to reopen, reform, and reauthorize EXIM, I went into a staff meeting where a luminary in the world of export credit financing, who was on our staff, fifty-year employee, Jim Cruse, looked at me and said, "You need to go to China." And I'm like, "Yes." He's like, "No, right now." I'm like, "Yes." He's like, "No, like, we're going to go get a visa right now, and you're getting on a plane to go to China." And so, it was just fortuitous timing; my export credit agency peers from the G12 countries were having their annual meeting. And it happens once a year, and China was hosting. I immediately got on a plane and flew to China. Our charter asks us, by law, to work to reduce export credit financing around the world. But I have said we will not do this unilaterally. So I read the law to the Chinese and to my G12 colleagues, introduced myself, and said that we look forward to working together because we really want to increase transparency. So that was there. And from that, I secured the agreement to allow the United States to host the G12 in 2020, which we ended up doing virtually on September 9 and 10.
I got a call when I was in China that the president wanted me to head his presidential delegation to the swearing-in of the president of South Africa, President Ramaphosa. And so that was an immense honor to fly to Pretoria, be on stage with heads of state, and kings, and important people from the continent, to talk about Africa with them. We have a special mandate in our charter to focus on sub-Saharan Africa. It's a passion of mine. And so, it was an honor to be there and represent our country in the highest way. And then, coming back, we stopped in Cape Verde. That was great to visit. But I've been to eighteen countries. COVID happened. So imagine you're trying to reopen, and COVID happens, and so that took a little bit out of my efforts around the world. But since September, I've been testing all the time, wearing masks, traveling again because I decided during my tenure here—I only get to have a year and a half of a four-year term because EXIM's charter terms the president's role with the president of the United States, so my term expires on January 20—I felt like I had to do all I could do to help with business development. I know that's important to all the CFR members as well, so I'm engaged all around the world—eighteen countries—and as you mentioned, I just came back from Bahrain. I also stopped on the way back in Poland and Romania to get U.S. great nuclear energy experts on their radar, but have engaged with heads of state and government. My favorite was with President Bolsonaro in Brazil, where I signed an MOU in front of him. But I was recently with the prime minister of Vietnam and the new interim prime minister of Romania—they just had an election last week, and so I was the first official meeting with the interim prime minister there, but such an honor. Aung San Suu Kyi—met her in Burma.
And so what am I hearing from all of them? Wow, EXIM is back, and we love American products. You are the best. And I think a lot of these countries that signed up for China's debt-trap diplomacy are learning as well now that they need to be rethinking some things. And so we're working hard to reopen their interests, and it's also the job of U.S. companies. So U.S. companies listening, you need to get out there. And we are, you know, the lender of last resort. Yesterday we approved a $300 million transaction to help Copa Airlines in Panama buy the 737 Maxes that just have come back online. And that was important, but we want to help every industry in our country to be successful. So we're getting back on the map. I also would say that I've just come out of the G7 meeting with my G7 peers that took place over the past two days, and we did co-financings together as well. And countries like Canada, UK, Germany, France have lower content requirements. And they have a lot of other attractive things that help U.S. companies go over there. And we don't want to see that happen. We want multinationals to bring jobs back to the United States. And so we're working hard. And that's the main thing I'm hearing right now from my visits all around the world.
CHANG: Thank you so much, Chairman Reed. I want to focus more on China. And CFR has been doing so much work on this topic, a whole Task Force on Belt and Road Initiative, which I've been fortunate to be part of. So just a very intense discussion. But you came at a time of such change, you know, U.S.–China tensions, also COVID-19. And what we had seen in our own research is an acceleration of the shift towards wanting a more diversified regional supply chain and diversification, so there was less dependency on China. I was wondering if you could just talk a bit more specifically about how you are working with U.S. companies who are looking to diversify their supply chains and how have you had to innovate in the COVID-19 environment? It seems like it's accelerated everything when the change was already in motion.
REED: I think every company is seeing now how important it is to have U.S.-based supply chains. EXIM's mission is very specific; it is supporting U.S. jobs through exports. And so we are helping to tell the story, I think, how important supply chains are, even for a company like Boeing. I had the pleasure of going out to Washington State and meeting with a company called Pacific Tool that makes tools to help put together and fix these beautiful airplanes. And I heard firsthand about how they had to basically reduce their workforce and layoff people because of COVID and other challenges that the aviation industry and Boeing, in particular, are facing. And just last night, I got a very wonderful bit of news from the CEO of that small business and that they are rehiring again. And he thanked me for what EXIM did yesterday with our Copa Airlines transaction. But I would say that we're about helping any company, small to large, where there's a need. The companies will look at, you know, they have the bottom line and how they need to compete, but this administration, I think, is really focused on bringing back those jobs. And even with our new content policy that we just did, a very narrow and targeted new policy, there's an incentive there for companies to bring back their supply chain.
And you asked me about COVID-19. So, I was just, you know, not even a year into my job when this hit. And when I was at Treasury under the leadership of Jon Snow and Hank Paulson, we had a global risk working group. And as part of that, we identified all the different possible scenarios. A global pandemic was actually one of those. And I also experienced being in the front office at Treasury when Hurricane Katrina hit and what we had to do to respond and be proactive on that front. And we did some really great things, including having IRS transform their IT systems—because it was not filing season—to be able to help with FEMA calls. A very innovative thing. So I've been through that before. And so in January, as soon as we started reading about and hearing about this, I convened an internal task force on COVID co-chaired by our chief of staff and our chief management officer and our team to prepare for this. And then on, I believe it was maybe March 12 or March 13, we voted on temporary measures to help our U.S. exporters in every way. And then, on March 16, I converted our agency into a fully teleworking agency, and it went off without a hitch.
I'll say I don't know about you, but I'm working harder than ever at home. And I was loving CFR, I'm a new CFR member. So I just joined. I got to do one meeting in person with Florie Liser, a wonderful EXIM Sub-Saharan Africa advisory member who heads the Corporate Council on Africa. She and I went to a CFR meeting in Washington on March 10, and I think that was probably the last in-person meeting that CFR did. I haven't had my orientation yet, by the way. But we immediately, you know, begin teleworking, and we're doing deals, we're efficient. And we have more to do because we don't have enough on our book yet. I think we need about $80 billion more in applications to come in before we hit that $135 billion threshold. So, it takes a while to do these applications, as we know, and we do due diligence here, a lot of underwriting, but we are going strong.
CHANG: And it is, you know, the one thing that all of this Zoom and virtual meetings have done is we've all been able to continue through all this. There's no cancellation for snow days. Back in the old days, CFR would have had to say in New York, we have to postpone this meeting. But it's just great to be with you today. I want to stay on China and talk more about the transformational export program. And just, you know, we've done a lot of work on China at J.P. Morgan, but when you look at the key sectors that you talked about—AI, biotech—all of these are becoming even just more important because of the COVID-19. What is the best way for the U.S. to compete with China's development model? Because it has significantly protected its domestic market. It also benefits from having the financial power of state-owned banks. What do you think is the best way to compete with this model from the U.S. side?
REED: Before we focus on that, I want to say I recruited an amazing person, Mr. David Trulio from the Pentagon—and he was a term member at CFR—to head our China program here. Congress gave us an unfunded mandate to stand this big initiative up because we came after the appropriations process. Hopefully, they'll fix that. But I know that David has been working on a special Task Force with CFR on the Belt and Road Initiative. And I don't know when you're going to come out with your report on that, but I'm sure that report will have very important recommendations.
When it comes to what we do here at EXIM, Secretary Pompeo wrote a very strongly worded letter to me, and I don't have it in my hand, but I'm going to put it on our website with our press release on this announcing what we just did this morning. But Secretary Pompeo basically said, EXIM, you need to change your policies to help us compete with China. And that especially includes 5G. And so I think that we are a targeted tool, we're not the end-all solution. And Congress said, do this program, neutralize China, advance America's competitive leadership within your means. And that means, as we work with companies like Ericsson, Nokia, and others in the content of U.S. parts that go into those components of 5G networks, now we're able to finance that with this act that took place today. And so I think that we're going to raise awareness on our new tool now. I've asked staff, and staff may be listening, we're going to convene a public meeting where those ten transformational export stakeholders, as well as Labor, as well as interested citizens, and, of course, journalists can listen in on how we're going to get this going again. But what we voted on today says, submit your application—we're taking them today on this. So we want to help with that. And then, of course, we do what we always do. And we want the world buying "Made in the U.S.A." And so be that equipment, be that agriculture exports, as we've seen, and it's been a priority for me, that I did with Iraq recently. We want to help in every way. And our goods, the quality and strength of them, is what will allow countries to be sure they pick us over China. We're going to be smart and do what we do best and that we will not do a race to the bottom, but we want to be able to compete as Congress has charged us with doing.
CHANG: I think that these are very important developments, and in J.P. Morgan's own research, we conclude that in a world of global value chains, U.S. content isn't the best proxy for supporting U.S. jobs. So having this flexibility and targeting certain sectors, you know, is a very important step and an important development.
REED: Joyce, can I just ask you to dive in on that a little bit since you've done research on this? I don't mean to put you on the spot, but I think it's important with the board action we just took what you mentioned about content and jobs if you can go, like, because you are the head of global research for J.P. Morgan.
CHANG: Well, so in a world of global value chains, you know, basically saying that a 100 or an 85 percent content rule, I mean, that's really not a good proxy for how you support U.S. jobs. So giving U.S. companies the flexibility, you know, having the power to actually take a look at more strategic sectors, I think, is a very important development on how to improve U.S. competitiveness in the global environment that's changed so much, just in the short time that you've been in this role. Look at what you've had to contend with, you know, between the U.S.–China relations, what COVID-19 has done, and looking at strategic sectors of the economy. So I think that the rigidity of the U.S. content requirements is something that has long been discussed, you know, in the academic, in the business world, as something that was really outdated compared to where we should probably be bringing to the dialog right now. So, you know, breaking news is a very important development. And that actually another question that I often do get is this proposal on EXIM Bank's 2 percent default rate cap, whether this actually is intended to protect American taxpayers, but it actually ends up promoting more risk-averse behavior at the EXIM Bank. I know there's a congressional proposal about this, but some of these things which were drafted decades ago, you know, they're now coming up for review and the agency having been shut for four years. I mean, you have been so good at sort of getting on top of how many of these things need to be updated and that you also need to work with multilateral partners as well. So you've been on the road meeting with different countries. But I don't know if you want to perhaps even talk a bit about just that congressional proposal to raise the 2 percent default rate cap?
REED: Absolutely. So obviously, first and foremost, we're about protecting the taxpayer. And for the critics of the bank, I want to be sure they know that when we do underwriting, we have very strict standards and that speaks to our very low default rate as it is. And so right now, it is 0.8 percent, it's up ticked a little bit because of COVID-19. But for the majority of my time here, it has been under 0.5 percent, which I'm told, when I ask every bank, is pretty good. (Laughs.) I make all the bankers laugh.
CHANG: Definitely compared to U.S. companies, that's a very good default rate.
REED: And, of course, Congress has imposed this default rate cap of 2 percent. So what does that mean? When you hit it, pencils down, and you stop doing what you do until you bring that down. And I appreciate that because we're all about the taxpayer. And the foreign purchasers who default—shame on them. So we do a pretty good job of it. And we can repossess things like planes if we ever need to. But we're really good about that. We also charge interest in fees on each of our loans, and we give that money, millions and millions of dollars when we're fully operational, to the Treasury. Our job is not to make money for the government, but when we're fully operational, we are a self-sustaining agency. But as you look at something like COVID-19 and hearing loud and clear, this is when we are needed most, just as we were needed right after the 2008 financial crisis. And so, as you hit that 2 percent cap, that maybe defeats the purpose of when EXIM is needed most. And so if we would ever get near that, I'm going to be up on the Hill immediately with Congress to let them know about that. I think they understand that. And Congressman Andy Barr, a wonderful member of the House Financial Services Committee, who also is on something called the House China Task Force, he's introduced legislation to allow EXIM with our China program to raise that default cap to 5 percent. And that is because, think about the losses, match the rate terms and conditions of China, and to be able to give deals in the United States. So, maybe we will have a riskier appetite. And for the Chinese, who are probably watching today, we love the Chinese people; it's the People's Republic of China, the Chinese Communist Party that I'm talking about here, you know, but I was asked flat out, how are you going to approach risk now with this new mandate. And so, we're still going to be about protecting the taxpayer. Doing our due diligence is always the standard of reasonable assurance of repayment, but we will be more aggressive. So, we'll see where that legislation goes. Of course, it's the end of Congress, so bills have to be reintroduced. And hopefully, we're laying the good groundwork here for future work by the Congress. And I want to just say how much I appreciate my authorizers, Chairwoman Maxine Waters, Ranking Member Patrick McHenry, Chairman Mike Crapo, and Ranking Member Senator Sherrod Brown. I feel that we've worked really hard to put this bank in a good place for the future.
CHANG: So, thank you so much, Chairman Reed. Now at this time, I would like to invite the membership to join the audience from the conversation with their questions. And a reminder that this meeting is on the record.
STAFF: We'll take the first question through Ron Shelp.
Q: I'm Ron Shelp. Because of the pandemic, I've resorted to being an author and a struggling documentary filmmaker. I realized it's really very new in your regime, you might say, but are you working on or have you done any deals that actually involve financial help for China? And secondly, could you name a couple of the really significant ones you've either done or working on within your mandate?
REED: So, obviously, as we look at supply chains and what goes into that, China is an issue. And Congress, in their reauthorization of EXIM, has put in standards for us to notify Congress if we ever deal with a transaction where China might be part of that. That has not happened to date under my tenure here, but I would say that we've worked hard to make sure that we are using our China program. It's been hard until we did the change that we just did this morning, but I will say that we approved the largest deal in EXIM's history, a deal that's going to be transformational. For the country of Mozambique, we approved a $4.7 billion transaction. And this is $4.7 billion of U.S. goods and services by a company called Air Products to be sent to Mozambique to help them develop their LNG capability. And that supports nearly seventeen thousand jobs in Pennsylvania, Florida, and across the country.
And why is that significant? Because before we got confirmed, before the quorum to reopen our bank, Mozambique was going to pick Russia and China for that deal. And as soon as we were confirmed, they picked us. So, that was a great win. We also have a couple of other deals that we have done to help displace China, and we really work to help increase transparency on this point. And so you'll see as we communicate about it in press releases. And we have some that are probably going to come before the board. We sent them to Congress, but it's in the world of water and for the country of Ghana, so dam rehabilitation efforts and a water treatment center. And so we sent deals in November to Congress on that, you know, about $240 million worth of exports, and working through the process before we bring these deals back to the board, but I know that they also are deals that will displace China. But I hope today's action will help us even more. On our open public meeting today, Secretary Wilbur Ross announced that they were at a meeting at the White House yesterday on national security matters and actually really emphasized the importance of EXIM being a part of the solution. And so, as you've seen Ambassador Robert O'Brien, Secretary Pompeo, and others giving big China speeches. I gave one to the Center of Strategic and International Studies (CSIS) back in the summer, but I think now that we have this new capability to do 5G, we really want to see trusted allies, partners, and vendors being the choice for the world over companies like Huawei and ZTE. And I think you will see that hopefully happening in the near term now.
CHANG: Well, thank you so much, Chairman Reed, and also for all the work on Africa, spending time on the emerging markets, countries which have been some of the hardest hit under COVID-19. There are two more questions in the queue. So, perhaps I can go to Laura to just queue up the next question. I have a few myself, you know, kind of coming back to China, but let's go to the membership first, please.
STAFF: We'll take the next question from Fred Hochberg.
Q: How are you, Chairman Reed? Good to see you. This was a great presentation. I enjoyed it enormously. What kind of pushback did you get on the content change? Because that has been a challenging issue for EXIM for a long, long time. So, could you just give a little insight into that because I imagine it was not universal support?
REED: I'm sure that you'll be able to read lots of statements in support and some opposed. We asked for public comments, so I believe all those comments are listed in the Federal Register. Of course, we care about American workers. My first job on Capitol Hill was working for something that looked at the future of the American workplace. And I worked with Labor. So, Labor is concerned, but again, we're not changing our content policy. We are creating a program of transformational exports, and this is a narrow, targeted content policy for that program. And this program on China expires in 2026. And right now, you know, I asked my lawyers, we can't do 5G, because it doesn't meet this 85 percent content threshold. And so this was the option to help me fulfill my mandate, I think, under the law to do these transformational exports. But you know, we have two Labor members on our EXIM Advisory Committee by law, and we have advisory committee meetings regularly. We always have an open door for them.
We did this conversation over the summer with 1,100 individuals, called Strengthening America's Competitiveness initiative, where we looked at each of the sectors and invited anyone that wanted to participate to come and talk. And, of course, on all these calls, content was the issue. They said, we can't do this unless you take this change. So, we were very thoughtful and deliberative. And I do want to take into consideration everyone's concerns. And I'm sure you had your own experience with that. I'd be interested in knowing if you would have changed the full content policy when you were here if the dynamics were different. But I hope that this is a thoughtful approach in that we have reporting requirements in the statute to Congress. Congress will look at this again in 2026. Maybe they'll want to renew it, adjust it, whatnot. But by the overwhelming majority, I know our administration is thrilled. I hope that Congress will be happy that we're taking the step to actually do what they told us to do.
So we are also asking for further detail that you'll see in the press releases with the information on a policy that we're going to require the U.S. exporter to provide an actionable written plan acceptable to EXIM, describing the pathway to expand U.S.-based jobs meaningfully in the supported transformational export sector in the subsequent three to five years, including plausible plans to relocate related supply chains to the U.S. from the offshore market. So we're going to be judicious and nearly apply this flexibility. And, I also want to say, as you know, it's a plan for when we need to go below 51 percent. So you'll see in the policy these exceptions that allow us to do that.
And Chairman Hochberg, you know just as well as I know that Canada, France, Germany, and all of our peers around the world have less content requirements than we do. This effort we took also aligns with our Commerce Department's Advocacy Center standard. So we're very thoughtful about that. And just as a little thing, I'm going to show you a document here, I don't know if you can see it, but it is our annual Competitiveness Report. We are required by law to tell Congress how EXIM is competing against other export credit agencies around the world and what's happening in that landscape. And obviously, we were shut for four years. So it wasn't a pretty sight. We weren't doing anything. And so asked our peers around the world every year, what are you doing? China doesn't normally respond to it much, but we know that China, with its export credit agencies, is doing just about what the G7 countries are doing combined. And so it's important that we have this tool in our nation's toolbox, and I want to thank the president of the United States for asking me to take on this mission.
CHANG: Thank you so much, Chairman Hochberg and Chairman Reed, for those answers. Laura, let's go to the next question. Just to try to get through as many as possible in the queue.
STAFF: We'll take the next question from Ryan Kaminski.
Q: Thank you, CFR and Chairwoman Reed. My name is Ryan Kaminski, and I'm with the World Benchmarking Alliance, which seeks to advance corporate accountability, transparency, and leadership on sustainability, including the SDGs, which every country on Earth, including the U.S., has committed to implement. I agree very much with you when you said the world has changed. And I wanted to ask for your thoughts on specifically two things—rising standards and expectations pertaining to sustainable business practices as well as recent findings that investments that are more green-oriented have actually performed better than more traditional portfolios, even during COVID. In this regard, it's really encouraging to hear the focus on renewable energy. So, can I ask to what extent there is currently, or just movement toward, a cross-cutting approach at EXIM on sustainability, ESG, or sustainable finance? Thank you so much.
REED: You're welcome. And in my prior life at the International Food Information Council Foundation, I became very familiar with SDGs, particularly when it comes to food and other related agriculture SDGs. I believe that companies have to see where the world is going, and it's up to each of them to decide how they handle their sustainability standards. I think you see changes happening underway in our country with our own U.S. companies in that aspect. We have at EXIM great talented staff, we have engineers, and we do environmental and different types of analyses for transactions that come into EXIM. But again, we have to judge every application by law that comes in based on the merits of that application. We can't pick winners and losers. But I've been working really hard to raise awareness on EXIM in the clean energy sector. I was just in Poland and was with Ambassador Georgette Mosbacher, who loves U.S. nuclear energy, and met with officials there, as well as in Romania, where I went out to a nuclear power plant called Cernavoda. And I actually was given a document from 1981 that Ronald Reagan signed. Back then—and the law continues to say that EXIM can't support Marxist-Leninist countries—and back then, Romania was on that list, and President Reagan actually signed a waiver allowing EXIM to support the financing of Cernavoda. And so I went out and visited again, and we signed an MOU with the minister of economy there for a $7 billion, proving our willingness to work with the Romanians; the largest MOU we've done in the history of EXIM, as they look at nuclear there. And so we'll see if Cernavoda and U.S. exports that would go into that, you know, actually apply for the need for EXIM financing. But they're building out and wanting to refurbish their efforts. Same for Poland, and this also can involve cross-cutting efforts in our government, such as DFC now has this new authority to be able to support such things as well. And I know that you had Adam Boehler on this program a couple of weeks ago. Also, Congress set a standard for us on how they want to see an aspirational goal of 5 percent of what we do to support renewables. And so we have a lot of work to do because we're not at $135 billion yet. And so we welcome every application, and it's about supporting our great U.S. companies and U.S. jobs.
CHANG: Thank you so much. Chairman Reed, I think we have a final question in the queue. And then I have a question as well. So it's back to you, Laura.
STAFF: We'll take the next question from Joel Motley.
REED: Hello, Joel.
Q: Hi, Kimberly, how are you?
REED: What a nice surprise.
Q: Yes, I figured you would be surprised. Thank you so much for such an inspiring talk and for all that you've accomplished in a very short period of time. My question is about the future of export-import banks and that area you referred to earlier as sort of tension between free-market consciousness and government support consciousness. And you're right at the center of that tension, and as you look into the future, how do you see export government-led support like EXIM Bank in our country and others as a kind of playing field, if you will, how do you see that evolving?
REED: Well, hopefully, I have transformed our agency in a good way to put it on a strong path on many fronts. I think it's important that the Biden administration come and take this China program to its fullest potential. It's going to be a lot of work. 20 percent of the portfolio should be at least this, and I know there's legislation floating around there that that should increase to 33 percent. So when they come in, they need to be very serious, and I expressed that to the transition team on Monday of this week. And I hope Congress gives the funding to help them actually build that out in a robust way.
So what do I see until we get our arms around what China's doing? And maybe that falls into the bailiwick of the U.S. trade representative, the Treasury Department, and other agencies that have a role in this, until we get our arms around that. As I mentioned, I just came from a G7 meeting with my peers, and we all are very concerned about this. So we're going to all demand that we have a level playing field, and so it'll be up to Congress, and I think it'll also be up to U.S. companies to explain what's happening and to tell that story. I can't predict beyond 2026 when EXIM needs to be reauthorized again, but I really challenge everyone who would have a role in this to develop empirical data and to share the story to help educate our country and the world. So I want to say that.
And Joel, if I could just take a second here, I'm really touched that you're here. A mentor of mine, actually she's my surrogate mother, was a member of the Council on Foreign Relations, Carole Brookins. She was an executive director of the World Bank. And I was at Treasury with Carole but didn't really know her until I moved up to New York in 2007 when I joined Lehman Brothers, and she was up there and really took me under her wing. And she was a force, and I saw her on Valentine's Day in Florida. And she flew off to Paris where she caught COVID, and she came home and died in late March. First death in Palm Beach. And I know how much she loved the Council. I know she wrote a letter of support for me to become a member. And I'm trying to do all I can to carry on her legacy as well. And Joel was a business partner of Carole's, and there's a beautiful piece that CBS News did, a snippet of memorial to her because we have so many families and friends and loved ones who are going through the lack of being able to congregate together to remember someone, so I'm going to dedicate this session to Carole Brookins, if that's okay.
Q: Thank you so much. That's lovely.
CHANG: Thank you so much. Perhaps, I could just start with the last question, but I also want to congratulate and thank Chairman Reed for just coming in during a tumultuous time really reinvigorating the mandate, setting a framework, going ahead before the dialogue with U.S.–China on such important issues. But I wanted to just come back to U.S.–China. You mentioned that CFR has a task force on the Belt and Road Initiative (BRI) that you and David on your team have done so much work on. But how do you think the U.S. should fashion a targeted and strategic response to BRI? And how do you envision working with other countries on this? You've traveled all over the world. Do you feel that this is a common agenda with other countries?
REED: I think that it's becoming a common agenda, at least in the world of export credit finance. I'll tell you when I went to the Manama Dialogue, you know, I was the lead delegation member. Secretary Pompeo participated virtually, and I was there in person. And I'll tell you, I had bilats with so many important people, including the foreign minister of Jordan, and he's like, you need to come to see me now. And so, it's raising awareness, I think. We're reading a lot of articles. I saw a big piece in FT recently on what's actually happening with China's approach because of COVID-19 and the economic downturn, our dynamics that are affecting that. But I think that education is happening now. And the job of EXIM is to let the world know that we want to help them buy "Made in the U.S.A" transformational exports as part of this. And I want to say that, as Secretary Pompeo instructed me, and I will be posting this letter on our website, but he says, "We cannot face this challenge alone. As such, I ask you to work with your export credit agency counterparts in allied countries and like-minded nations around the world to meet this challenge—China—with great courage, as our response will have historic implications on the freedoms we hold dear."
CHANG: I see all the partnerships, and even as the Biden administration is coming in, all the talk about multilateralism and reaching out, and being a part of this dialogue and making it a more global dialogue. Well, Chairman Reed, I really just wanted to take a moment to thank you for joining this meeting, for all the work that you have done taking over at a time where an agency had been shut for four years, hitting a pandemic, and also setting a framework as we've seen the whole U.S.–China relationship evolve. That really does set the agenda for many, many years going forward. And I thank you for setting a real benchmark for female leadership and all the work that you've done with the career staff as well on such important issues. And, you know, as is in the tradition at the Council on Foreign Relations, we always close this promptly on the hour. So I want to thank everybody in the membership for joining today's virtual meeting. Most of all, thank Chairman Reed for sharing her insights, her experiences, and everything that she's doing to really support U.S. jobs and the dialogue on such important issues. And please note that the audio and the transcript of today's meeting will be posted on CFR's website. Thank you, everybody. Stay safe and healthy, and happy holidays to everyone.
REED: Thank you. Thank you so much, Joyce. Thank you to all the members. And I want to say it's very important that the U.S. through EXIM provides an alternative in the marketplace. Customers around the world welcome U.S. solutions. And our EXIM new vision is keeping America strong. And for all the women in the world—go, go, go. I was told that I shouldn't even do this, and I should give up, and I want to say, go get them, ladies. We're a 53 percent workplace in women here at EXIM.
CHANG: Well, thank you, Chairman Reed. It's been an honor and a pleasure to be with you.