It is widely known that the U.S. nuclear energy industry is deeply involved in the broad effort to renew the Export-Import Bank of the United States (Ex-Im Bank). Hundreds of U.S. nuclear exporters, supported by the Nuclear Energy Institute, have sounded alarm at the prospect of losing the Ex-Im Bank because they know it is vital to U.S. competitiveness in the global nuclear industry.
I was therefore surprised to read an argument from a noted supporter of nuclear energy, my friend Jack Spencer of the Heritage Foundation, that our industry’s belief in the vital importance of the Ex-Im is mistaken. Heritage Foundation’s advocacy arm, Heritage Action, is one of the groups leading the opposition to the Ex-Im Bank. But I take Jack seriously on nuclear energy matters, so I’ll examine his responses to the nuclear energy industry’s arguments in favor of reauthorizing the Ex-Im Bank.
Ex-Im enables U.S. nuclear suppliers to reduce Russian energy dominance. Notably, Jack acknowledges the challenges posed by Russian competition in global nuclear energy markets. He accepts that U.S. nuclear exporters are contending with aggressive Russian expansion and that favorable financing terms is one of Russia’s key competitive advantages. And he acknowledges that Russia’s expansion into in nuclear energy increases the overreliance of U.S. partners on Russian energy, implicating broader U.S. national security interests.
As an alternative response to Russia’s nuclear energy export strategy, Jack suggests streamlining U.S. export regulations for U.S. nuclear cooperation partners. Modernizing U.S. nuclear export controls is a necessary but insufficient step toward a level playing field with Russian and other foreign nuclear energy suppliers. Crucially, it would do nothing to address the competitive imbalance in financing, which is often the decisive factor in nuclear energy tenders. In short, if the Ex-Im Bank goes away, the U.S. nuclear energy industry will lose a critical tool for competing against Russian nuclear energy supply. Export control reform is not a substitute.
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Ex-Im is a requirement to compete. Jack repeats the claim that private financing can fill the void left by the Ex-Im Bank. But the commercial banks have repeatedly debunked this myth about Ex-Im and private financing – as recently as last week. In no business sector is the indispensability of the Ex-Im Bank clearer than in the export of nuclear power.
There does not exist a commercial bank that will finance a nuclear power plant for 18 years plus the term of construction – the agreed limit among members of the Organization for Economic Cooperation and Development (OECD). According to the commercial banking executives that I’ve consulted, their unwillingness to finance nuclear power plants without the Ex-Im Bank holding a stake has nothing to do with project risk. Foreign utilities are typically very low credit risks. Rather, they explain that Basel III capital reserve requirements prevent them from allocating billions of dollars in tier one capital for as many years as necessary to finance a nuclear power plant.
Jack claims that foreign customers “can demand support from export credit agencies for the simple reason that such support is available.” If Ex-Im Bank goes away, export credit agency support will still be demanded by suppliers, and it will still be available – but from non-U.S. suppliers only. Again, U.S. nuclear suppliers will not even be able to compete.
Jack correctly points out that the U.S. industry has some advantages, including “reliable and efficient products, operational excellence, and safety culture.” But if these advantages are often insufficient today, how can they be adequate when U.S. nuclear suppliers lose the ability to offer a competitive financing package?
Jack rightly points out that the global elimination of export credit agencies is the most desirable solution. But as former Reagan-era assistant secretary of defense Frank Gaffney has pointed out, unilateral disarmament is a terrible strategy to achieve that outcome. Through leverage provided by the Ex-Im Bank, the United States has successfully imposed discipline on other export credit agencies in multiple business sectors, including nuclear energy. Under the Nuclear Sector Understanding of the OECD, export credit financing terms and trade-related aid in the nuclear energy sector must conform to agreed limits. If the United States shuts down the Bank, it would lose its greatest source of leverage for disciplining the 59 export credit agencies operating worldwide.
Uncertainty about Ex-Im is already hurting U.S. suppliers. Although Jack writes that the Ex-Im Bank is “inherently political,” it enjoyed strong bipartisan support from its establishment almost eight decades ago until 2011, when Heritage Action and other groups made it a target. I speak regularly to nuclear energy executives, who compete every day in international markets. Every one of them has a story about international customers asking whether their company will be able to close deals, given the uncertainty about Ex-Im Bank. Some of the executives have confirmed that their international competitors were the sources of the customers’ worries about Ex-Im Bank. This is the burden that U.S. nuclear exporters have carried since 2011. If Ex-Im goes away, that burden will in many cases become insuperable.
Jack reiterates other, broader arguments against Ex-Im Bank. It allows Washington to choose who wins and who fails, he writes, and it fosters an unhealthy dependence on “subsidized financing.” When nuclear energy executives who actually compete for international business hear these arguments, they are baffled and angry. They know that with Ex-Im Bank backing, any U.S. nuclear exporter is enabled to win -- and that the only losers are their competitors from Russia and elsewhere. Some of them dislike subsidies just as much as Jack does, but they all understand that export credit agencies play a vital role in international business that will not change if Ex-Im goes away. From their experience in competing head-to-head against foreign rivals that enjoy many forms of government support, they know better than anyone in Washington that without the level playing field provided by the Ex-Im Bank, they will no longer be able to compete. They cannot even conceive of a policy to support U.S. nuclear exports that does not include the Ex-Im Bank.