The head of the Export-Import Bank, using unusually tough language against the trading practices of a U.S. ally, said yesterday his agency will beat France at its own game by offering highly subsidized credit terms to win sales for U.S. companies.
Ex-Im President William H. Draper III said the bank has offered cut-rate financing to help American companies win six major contracts in five countries away from the French. The targeted countries are Algeria, Tunisia, Brazil, India and Malaysia.
One of those deals would give India the ability to produce state-of-the-art computers using technology the United States has until now refused to sell to that country. Financial and other terms are expected to be discussed this week by the government of Prime Minister Rajiv Gandhi. The $27 million contract pits Control Data Corp. against a French firm for the sale of technology and equipment.
Draper said the Ex-Im Bank is likely to improve its credit terms if France counters with better financing in any of the six contracts listed as the first targets for subsidized credit.
The Ex-Im Bank is a government agency that helps U.S. exporters with direct loans and guarantees to finance overseas sales. Destined for oblivion twice during the Reagan administration, the bank emerged in September as a key element in the White House's aggressive trade stance as the manager of a $300 million "war chest" to beat other countries' export subsidies.
This new position for the bank marks an abrupt turnabout for the Reagan administration, which until September had opposed matching other countries' cut-rate financing for foreign sales. Its switch was part of its answer to congressional pressure for Reagan to act against soaring trade deficits, expected to reach $150 billion this year.
Draper said the administration wants France to reopen negotiations to end the "predatory practice" of "mixed credits," which combine humanitarian aid, amounting to one-fourth or more of a contract, with regular financing terms to effectively offer a cut-rate deal.
With 25 percent of the financing coming from aid funds, the buyer in effect gets back one quarter of every dollar he spends.
"We want to see what damage we can do to the French and to others using mixed credits in order to attack" the practice, Draper told a press conference.
"It's a skirmish, not an all-out war with France," he added. "We want to bring about a successful peace in this war of mixed credits."
Even though other countries -- including West Germany, Britain, Italy, Belgium and Japan -- offer mixed credits, Draper said the Reagan administration targeted France because it is obstructing negotiations to end the practice among industrialized nations in the Organization for Economic Cooperation and Development (OECD). He added that the United States wants the aid portion of mixed credits to total at least half the contract so it becomes too expensive a practice.
French officials expressed surprise that Draper had targeted France, America's oldest ally, and said this could harm overall relations between Washington and Paris. Officials added that French policies follow current OECD regulations and praised mixed credits for increasing the amount of aid.
Draper announced three weeks ago that the Ex-Im Bank has offered mixed-credit financing amounting to $69 million to win $280 million in U.S. sales. But at a press conference yesterday he detailed for the first time who the new aggressive policy is aimed at and which U.S. companies would benefit from it.
The money will be offered as a direct grant if Congress approves the Reagan "war chest" in time. Otherwise, Draper said, the bank will offer highly favorable loan terms that would save buyers the same amount of money.
In the Algerian case, which Draper described as "the most controversial," the Ex-Im Bank is offering what amounts to aid worth one-fourth of a $145 million contract for trains and equipment for the Algiers metro, even though the French don't use mixed credits there.
"The French look at Algeria a former colony as a country that is very French-oriented in its purchasing program. They feel they don't have to bid mixed credits to get the business. We felt this was a good place to attack," said Draper.
In Tunisia, the bank is offering a grant worth 35 percent of a $12 million airport equipment contract that pits Calmaquip Engineering Corp., a small Miami firm, against competitors from France and Italy.
The same Miami firm is competing against a French company for a $52 million contract to supply navigation and communications equipment for 12 airports in Brazil. The bank is offering a financing deal that includes a grant worth one-fourth of the contract.
"The French have come into what we consider our market -- Brazil -- with mixed credits in the past, and we will fight them when we do it. We are attacking on these two cases [Tunisia and Brazil]," said Draper.
The bank also is offering grant money that would cover 35 percent of a $20 million deal to help General Motors Corp. sell 26 locomotives to Malaysia. France, Japan and Britain all are offering mixed-credit deals, Draper said, but the bank is trying to help GM crack a new market.
A second deal with India offers 32 1/2 percent aid for a $30 million contract for gas turbines in which General Electric Co. is pitted against French and British companies offering mixed credits. "It's as if we gave away $32.50 for every $100 bid," said Draper.