Economist: Export-Import Bank Under Short-Sighted Political Attack

Since the 1930s the Export-Import Bank (Ex-Im) has been one of the most important tools in the US arsenal for stimulating trade. For decades, both the Democrats and Republicans have seen the companies in their states and districts do well as a result of Ex-Im activity. It was long considered one of the most efficient of trade promotion tools, but now it is facing serious opposition from the ranks of the Tea Party wing of the GOP as well as from some of the more liberal members of the Democrats.

Opponents attempt to paint such activity as a kind of corporate welfare and an inappropriate way to spend money. The fact is that Ex-Im is not actually spending government money as much as it is using government loans to seed global trade projects. The other salient fact is that the Export-Import Bank is self-funding and actually returned $1 billion to the US Treasury last year.

The Ex-Im Bank works pretty simply. If a foreign buyer of American goods lacks the money needed to purchase from the US, the Ex-Im Bank will loan the money needed to make that purchase. The foreign buyer is on the hook to repay that loan or they face collection procedures and exclusion from the system. It is rare that an Ex-Im loan is not repaid. The US manufacturer uses this loan to help compete with the manufacturers in other parts of the world that may be getting a wide variety of government assistance. The US taxpayer is basically not at notable risk with this program.

Aside from politicians to the far right and left, opposition also comes from some of the bigger corporate players and in convoluted fashion. Delta, for example, doesn’t like the Ex-Im Bank because foreign carriers can get loans to buy planes from Boeing and, thus, they can compete with Delta. It seems to escape the notice of Delta that foreign carriers will simply elect to buy Airbus jets instead and compete just fine. All that changes in such a situation is American jobs being lost to Airbus, not a domestic.

The US has a reputation for quality that attracts buyers, and they are willing to pay that higher price. That is good for the US company and the people who work for it. The loans are just that—loans. It is not a grant or a subsidy. It is a means by which buyers gain access to the US option and that buyer returns the loan value to the US.

The opposition to this program is exceedingly short-sighted and suggests a woeful ignorance as to how global trade is conducted. In the most direct of terms, the lack of this system will mean a loss of some of the highest paid jobs in manufacturing, the very jobs that most of these same politicians wail over

- Chris Kuehl, PhD, Armada Corporate Intelligence

Ex-Im Bank Director Sean Mulvaney made a case for continued bipartisan support of Ex-Im at FCIB’s 24th Annual Global Conference. Excerpts from his prepared remarks were printing in the November/December issue of Business Credit. NACM members can login to view the digital version of that issue by clicking the following link:

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