Ex-Im Bank Turns Down Financing for Chinese Dam

The U.S. Export-Import Bank on Thursday rejected financing for Caterpillar Inc. and other American companies that wanted to sell equipment for construction of China’s controversial Three Gorges Dam.

Ex-Im Bank Chairman Martin Kamarck said his four-member board voted unanimously to turn down financing chiefly because the dam project failed to meet the bank’s environmental guidelines.

While the decision adds to U.S.-China strains over trade and other issues, it doesn’t stop the dam project from going forward, and it doesn’t bar U.S. companies from bidding on it.

The vote, originally set for December, had been eagerly awaited by Caterpillar, Voith Hydro Inc. and other U.S. companies that saw as much as $1 billion in possible exports to the massive dam project on the Yangtze River.

“America’s export competitiveness has suffered as a result of today’s decision,” said Caterpillar Group President James Owens, echoing other corporate critics of the administration’s China policy.

The Ex-Im decision could undermine support for the bank in Congress, where some Republicans have campaigned for years to eliminate the bank and its so-called corporate welfare.

While Kamarck held out the possibility the Ex-Im Bank could reconsider its opposition if China met its concerns, U.S. environmental and human rights groups hailed the decision as final.

“The Ex-Im Bank has helped America take some moral leadership on this issue,” said Friends of the Earth President Brent Blackwelder. “It has also helped those in China struggling for democracy, human rights and environmental stewardship.”

Financing for Three Gorges has been the most contentious issue faced by the Ex-Im Bank during the Clinton administration.

In September, the White House National Security Council urged the bank, an independent federal agency, to turn down applications for loans or risk guarantees for the dam project because of environmental and human rights questions.

After the board meeting, Kamarck outlined these reservations. He said Chinese officials had not provided sufficient information on measures to maintain adequate water quality in the project’s reservoir, protect ecological resources and preserve endangered species, deal with the proposed resettlement of 1.3 million people who would be displaced by the reservoir and protect cultural resources.

After the White House decision to oppose Ex-Im financing, Peoria, Ill.-based Caterpillar; Voith Hydro, the U.S. subsidiary of Germany’s Voith; and other companies with an interest in the project mounted a lobbying campaign with support from lawmakers in Congress.

The companies argued that with China planning to continue work on the dam regardless of U.S. policy, the only real question for the administration was whether American firms have government backing to help them win the export orders against foreign competition.