FOREIGN TRADE: Political Loans

If Washington’s Export-Import Bank had a cashier’s cage, foreign nationalswould have been queued up there last week. With Lend-Lease ended (see NATIONAL AFFAIRS), the borrowers were figuratively standing in front of the Export-Import Bank’s 64 desks, hat in hand:

¶ France has asked for $240 million for river barges and railroad equipment (including 27,000 cars and locomotives).

¶ Denmark is negotiating for $20 to $25 million for reconstruction.

¶ The Netherlands would like $115 million for domestic reconstruction; the Netherlands East Indies is negotiating a loan to rebuild its rubber plantations and oil refineries.

¶ China needs $500 million to tide it over the fiscal year ending June 1946.

¶ Russia, which had received $10 billion under Lend-Lease, may want at least $1 billion to finance purchases of machinery and tools.

¶ Britain, hardest hit by Lend-Lease termination, may need $3 billion just for food and necessities.

Slow Start. This sudden interest in the Export-Import Bank, and the volume of prospective loans, was something new to the Bank. In the eleven years since its creation, it has loaned only $612 million (at a profit of $43 million).

The bank was started by Franklin Roosevelt on Feb. 2, 1934. Diplomatic relations with Russia had just been resumed, and the Administration foresaw the possible need of $1 billion in credits for Russian purchases in the U.S. But Russia never got the loan. In its first two years, E.I.B. made just two important loans—$13 million to Cuba, and $673,000 to finance tobacco exports to Spain. Jesse Jones, the RFC chairman, cracked that he could carry its business in his vest pocket. E.I.B. was a dull place.

Fast Finish. As power politics flared in Europe and Asia, the bank’s business boomed. The character and purpose of its loans underwent a change. Instead of an implement to foster U.S. world trade, the bank became an instrument of foreign policy. Its loans were made more for political reasons than economic:

¶ In 1940 it authorized a $45 million loan to finance Brazilian Dictator Getulio Vargas’ dream of the Volta Redonda Steel Works.

¶ Also in 1940, the Chinese-owned Universal Trading Corp. borrowed $17 million from E.I.B. for trucks and gasoline which everybody knew were for use against the Japanese invaders.

¶ To Chile went $22 million for public improvements, largely as a countermeasure against Nazi propaganda.

Potent Power. Export-Import is now headed by big, blond Wayne Chatfield Taylor, longtime New Dealer (AAA, Treasury, Commerce) and the man who gave Sewell Avery the heave-ho. In financing world reconstruction, his E.I.B. will assume a major role among Government agencies, for there is at present no other Government source which foreign nations can tap for the credits they must have. Until Bretton Woods’ International Bank becomes a fact, E.I.B. loans will be a potent power in world politics and trade.