The consequences of Congress’ foolish failure to reauthorize the Export-Import Bank are becoming apparent.
The other day, General Electric announced plans to move 500 jobs overseas, and Boeing reported it had lost two foreign satellite contracts. Both attributed the developments to the loss of the Export-Import Bank.
The 81-year-old bank serves as a lender of last resort to foreign buyers of American-made products. It also provides working-capital guarantees to ensure U.S. exporters can obtain loans from private banks, and it offers insurance so the companies are protected if the foreign buyers don’t pay their bills.
Critics call it corporate welfare, which is nonsense, as Tampa’s Francisco Sanchez, former undersecretary of Commerce for International Trade, points out.
“Companies that avail themselves of the service pay a fee. This is not free” Sanchez tell us. “This is one of the few federal agencies that doesn’t cost taxpayers any money.”
Income derived from dues and interest allowed the bank to return nearly $700 million to the Treasury last year. And supporters point out that over the past 20 years the bank has contributed $6.9 billion to deficit reduction.
Nor is the bank taking business from the private sector as some claim.
Most banks are reluctant to take on the difficulty of foreign transactions, so the Export-Import Bank fills the void.
Indeed, it actually helps the private sector, providing guarantees to private banks for loans to exporters, and 98 percent of its deals include partnering with a private bank, according to the National Small Business Association.
As Sanchez, who recently spoke at the Latin America Trade Gala in Tampa, stresses, without the Export-Import Bank providing guarantees or loans, these business loans would not be made and American companies would lose out on trade opportunities. The default rate is exceptionally low — 0.175 percent, according to federal officials.
That is the reason the bank has long enjoyed strong bipartisan support, including the enthusiastic backing of President Ronald Reagan, who understood the importance and difficulty of competing in a global market. Pro-business Republicans still stand behind the bank.
But anti-government GOP factions managed to block its reauthorization in June, so now it can no longer help American business compete for new business, though it can still administer existing deals.
The situation is preposterous, and House Speaker John Boehner and others Republicans who care more about the economy than rhetoric are seeking a remedy.
Critics such as Sen. Ted Cruz and The Heritage Foundation claim the bank is unnecessary. If that is so, why do all of our competitors utilize credit agencies like the Export-Import Bank to boost their countries’ trade?
The program simply levels the playing field for American businesses, and most of those that take advantage of the program — about two-thirds — are small businesses.
Critics dismiss this, pointing out that large companies still account for the bulk of the bank’s funds, as if less costly transactions were not critically important to the small enterprises trying to tap the global market.
Moreover, consider how major companies such as GE and Boeing utilize thousands of suppliers, small businesses that indirectly benefit from the Export-Import Bank’s activities.
As Sanchez points out, the bank is particularly helpful to U.S. companies seeking increased sales and services to foreign nations with a growing middle class, a highly competitive market.
According to federal officials, over the past six years the bank has financed the sale of more than $200 billion in U.S. exports, supporting more than 1.3 million private sector U.S. jobs. In 2014, the bank financed the sale of $275 billion in exports with 3,700 transactions.
In Florida over the past six years, the bank has helped 719 businesses, 569 of which were small operations. The transactions supported nearly $7 billion in exports.
All this is important to reviving American manufacturing. Yet critics would unilaterally destroy this trade resource and aid our foreign competitors.
The Export-Import Bank’s results demand support, but Congress has again shown a propensity for sound bites instead of sound policy. This lunacy should be reversed, and the bank reauthorized for business.