The Export Trading Company Act (1982) was enacted to protect joint activities by American export trading companies by allowing these companies to apply for a limited anti-trust exemption. This is intended to encourage the formation of American export trading companies in order to stimulate U.S. exports of products and services.
Background
Anti-trust laws were perceived as handicapping U.S. export trading companies in the global marketplace and making it difficult for these companies to undertake export joint ventures. During the Reagan administration, the proposed answer was limited deregulation of exports.
Thus, the proposed new Act would restrict federal and state jurisdiction over anti-trust violations which did not go beyond exports, and thereby remove the competitive disadvantage to U.S. exporters over foreign companies. Early estimates of $11 billion in increased sales and 300,000 new jobs over the 5 years following the Act’s passing turned out to be overly optimistic.
How it works
Under the Export Trading Act, banks are allowed to make equity investments in export trading companies. In particular, the Export-Import Bank of the United States may make working capital guarantees to any qualified American exporter.
Export trading companies can also apply for an Export Trade Certificate of Review from the Office of Export Trading Company Affairs (OETCA), a branch of the International Trade Administration. With this certification, these companies receive a limited anti-trust exemption which exempts them from criminal and civil lawsuits at both the federal and state levels.
In this way, American export firms are encouraged to cooperate with each other in order to compete more effectively in the global marketplace. Some government-suggested directions for cooperation include collaboration to reduce shipping costs, fill large export orders, and boost negotiating power.
Issues and outcomes
The Export Trading Company Act applies only to American businesses operating on American soil. Foreign competitors may still be able to challenge these cooperative practises under their own domestic antitrust provisions.
The effectiveness of this kind of exemption is uncertain. For example, the exports of U.S. wood products have doubled since the Export Trading Company Act was enacted, but very little of that increase can be linked causally to the Act.
In general, the removal of domestic competition among export trading companies may have harmed export incentives more than it helped. In addition, the option to circumvent anti-trust laws in the export arena undermined the ability to enforce anti-trust laws elsewhere.