The US government narrowly avoided shutting down the Export-Import Bank late last year. Now, a temporary extension to its funding negotiated then is due to run out this month and prominent Republican lawmakers, including Paul Ryan (the former Vice-Presidential candidate who chairs the powerful House Ways and Means Committee) and Jeb Hensarling (who is chairman of the House Financial Services Committee) seem determined to see the institution die. The arguments for letting this happen are mostly false and allowing Exim to run out of money would leave the United States as the only major economy without an export credit agency.
Eximbank is not, as some maintain, “crony capitalism” benefitting only big companies such as Boeing, General Electric and Caterpillar. While the bulk of its support does go to major US exporters, it has also backed up hundreds of small and medium-sized enterprises in the US that supply these firms and in many cases are dependent on the Export-Import Bank helping to arrange financing and guarantees they could not obtain from private sources.
Nor is Eximbank “corporate welfare,” busy doing things that ought to be left to the private sector. Big companies many times need a government guarantee just to compete for a major contract. Their creditors abroad all too frequently enjoy robust help from similar agencies, quite often from more than one, as in China, where enterprises can get export credit finance through the Export-Import Bank of China as well as the China Export & Credit Insurance Corp. Airbus, Boeing’s main international competitor, receives export-credit support from not one but three agencies, in the United Kingdom, France and Germany.
All the US Export-Import Bank does in these cases is level the playing field, and that only to some extent. Still, there are those who say it does not create any net new jobs, because – whenever you subsidize one US company – you are ignoring the fact that other US firms could have made the same sale without the subsidy. In real life, alas, things do not work in this fashion. Reuters has just reported that General Electric risks losing a USD 350-million deal to build locomotives for Angola without Eximbank’s support. If so, the company that gets the contract will not be an American one, it will be a Chinese entity with export-credit financing from a state agency.
There are even adversaries in the United States who go so far as to claim that Eximbank is helping competitors abroad at their expense. Delta Airlines holds that by providing loan guarantees to, say, Air India or Emirates, or Etihad Airways, the US institution has allowed them to lower their borrowing costs so that they could then use the savings to cut ticket prices on international routes that compete with Delta, or purchase more jets. But Federal District Court Judge Rudolph Contreras, in a 72-page ruling, has already called Delta’s argument “unpersuasive and contrary to the record in this case.” For its part, Delta has conceded that it “knew all along” that this “was going to be won or lost in Congress” (with political arguments, we’d say), not in the courts (with non-ideological ones).
To underscore the lengths to which this battle has been going, there is radio advertising in which the narrator solemnly tells anyone who cares to listen that “each year, America’s Export-Import Bank sends billions of your taxpayer dollars to foreign corporations that compete unfairly with American jobs. That’s billions to countries like China, Russia, Saudi Arabia…” What the speaker fails to mention is that those foreign corporations are buying United States goods and that Eximbank is one of the few agencies in Washington that runs at virtually no cost to the taxpayers, operating on money borrowed from the US Treasury Department, on which it pays interest.
To allow the normally obscure Export-Import Bank to die a quiet death on July 1 simply by not renewing its authorization would certainly be one of the dumber things our solons on Capitol Hill could do. While it is not always easy to prove that the agency is actually helping to create jobs in the United States, there is no doubt that jobs would be lost if US companies unable to access the support of a US Export-Import Bank would shift the production of things that are currently being built in the United States to other countries because there they have an institution helping them arranging export financing and guarantees.