The U.S. Export-Import Bank has been called a purveyor of “corporate welfare” and a “boondoggle,” but the federal government-backed institution has long proven a useful and secure financial tool for numerous small and midsized American companies who seek overseas buyers for their products.
Is it perfect? No, nothing is. A lot more negative things could be said about our dysfunctional Congress, which permitted a small band of lawmakers to shutter the Ex-Im Bank—at least temporarily—by allowing its charter to run out at midnight on June 30.
What is to be gained from this act? Not much, except for some short-term smirking and told-you-so remarks from the bank’s opponents, who claim the bank only benefits the well-heeled American companies such as Boeing and General Electric.
“It is time for Washington to stop trying to pick winners and losers, and allowing Ex-Im to expire is a good place to start,” said Marc Short, president of Freedom Partners, one of the most outspoken critics of the bank. (Ironically, billionaire brothers David and Charles Koch, who are lead benefactors of Freedom Partners, have had companies in their portfolio which benefited from the bank’s financing.)
The majority of Capitol Hill lawmakers have vowed to quickly restore the bank’s charter before summer’s end, with large trade organizations such as the National Association of Manufacturers and U.S. Chamber of Commerce offering their full support.
However, the damage is already done. U.S. exporters and overseas buyers of their goods may think twice about the financial stability of the Ex-Im Bank in future deal-making.
Fred P. Hochberg, chairman and president of the Ex-Im Bank and a former private sector executive himself, warned just prior to the bank’s charter expiration that its counterparts abroad are ready to step in to fill the void.
“Of course, there’s also China — you can bet they’ll be continuing to put their foot on the gas. In fact, one of China’s export finance agencies noted that they doubled their activity in 2014 — and they expect to double it again in the next year or two,” he said.
On June 12, Ex-Im Bank released its annual Competitiveness Report to Congress, outlining trade difficulties facing U.S. industry. The report noted there are 85 agencies with a similar charge as the Ex-Im Bank and that China’s export lending grew more than 40 percent last year.
Hochberg noted that in Ex-Im Bank’s 81-year-old history, it has financed just under $600 billion for U.S. exports, while China has done a minimum of $670 billion in the last two years alone.
“American workers have never needed a handout — you just need a level playing field. We don’t have to make the cheapest products in order to compete. After all, when you shop for groceries, a car — whatever it is — you’re not looking for the cheapest thing. You’re looking for value,” Hochberg said in a mid-June speech to a group of machinist and aerospace workers.
“China makes cheaper locomotives…ours last longer. China makes cheaper auto parts…ours are more dependable. China makes cheaper bridges, cheaper industrial machinery — pretty soon, they’ll be making cheaper airplanes. And you can bet that they will be financing those airplanes to the hilt,” he added.
Until the World Trade Organization calls for an end to government-backed financial institutions for promoting exports, the United States would be fool-hearted to deliberately rob its corporations—large and small—of a tool that helps them export abroad.
This editorial was published in the August 2015 issue of American Shipper.