When the Washington Council on International Trade was laying out its 2012 Policy Priorities back in October 2011, which I shared in a January Crosscut article, I didn’t include Congressional reauthorization of the Export-Import Bank of the United States as a major issue. This omission wasn’t because the Export-Import Bank of the United States is not a vital tool for Washington companies, large and small, to finance their international trade activities; it very much is.
The reason I did not highlight Ex-Im Bank reauthorization as a 2012 issue: I assumed it was non-controversial and would be taken care of in Congress’ 2011 year-end budget package. Instead, it was only extended until May 31, and there is growing resistance from certain members of Congress against a full reauthorization. You know what they say about 'u,' 'me,' and assuming.
Some quick background: The Ex-Im Bank is a self-sustaining federal agency that assists in financing the export of U.S. goods and services to international markets. In the five years since Congress last reauthorized the Bank’s operations, it has returned about $3.4 billion to the U.S. Treasury above and beyond the cost of its operations. For the fiscal year ending on September 30, 2011, Ex-Im Bank supported $40.6 billion worth of U.S. exports at more than 3,600 U.S. companies, helping to create or sustain an estimated 290,000 export-related U.S. jobs.
Ex-Im Bank is particularly critical for Washington state businesses, where — in 2011 alone — Ex-Im Bank lent more than $7 billion to 74 companies, including 56 small businesses. Ex-Im Bank’s support extended to exporters as diverse as the Boeing Company (aerospace), Chateau Ste. Michelle (wine), Halosource (global health), Outback Power (clean technology), and Valley Grain (agriculture), and it supported businesses in every single Congressional district in Washington state.
So why would a self-sustaining, federal deficit-reducing agency face any resistance, you ask? There are two reasons. First, at the end of last year the Export-Import Bank was sued by Airlines for America (A4A), formerly known as the Air Transport Association — the trade association for the largest U.S. airlines — over $3.4 billion in loan guarantees to support the sale of 30 Boeing aircraft to Air India. The suit claimed that the loan favored foreign competitors over domestic carriers, because the foreign companies have access to cheaper capital to finance their aircraft purchases.
Second is resistance from those who would prefer that the federal government not be engaged in any private sector activity. “The Export-Import Bank is a prime example of corporate welfare that should have been eliminated years ago,” said a recent press release from the conservative Club for Growth, in which they announced that Export-Import Bank reauthorization would be counted as a "Key Vote" in their 2012 Congressional Scorecard.
Let’s take these two objections one-by one. The idea that loans to foreign airlines constitute bad public policy ignores the tens of thousands of aerospace jobs in this country that are entirely dependent on foreign airline purchases. Approximately 75 percent of Boeing airplanes being assembled in Washington state are destined for international customers, which means that a majority of Boeing jobs — and the jobs at Boeing supplier companies — wouldn’t exist without loans to foreign companies like Air India.
In fact, Boeing and its customers are the largest users of the Ex-Im Bank. In fiscal year 2010, air transportation loans accounted for 47 percent of total outstanding loans. By the way, nothing against the good folks at the A4A, but it is revealing that United, Continental, American, FedEx, and UPS all opted out of their trade association’s lawsuit.
The “government shouldn’t compete with the private sector” argument is even easier to refute. In many cases, the trade finance that Ex-Im Bank supplies would not have been available from the private sector — either because of the lack of free-flowing capital in our current economic downturn, or because banks often shy away from export financing, finding it too complicated or risky. Second, the Ex-Im Bank actually partners with the private sector to provide these loans.
The idea that Congress would fail to reauthorize the Ex-Im Bank is devastating to all of us trying to promote exports as a path to job creation and prosperity. President Obama’s National Export Initiative goal of doubling exports by 2014 — and Governor Gregoire’s commensurate Washington Export Initiative — would be dead on the vine without the bank.
Meanwhile, U.S. companies would be stuck competing on an uneven international playing field; the United States already trails countries like Brazil, Canada, China, Germany, France, India, and Italy in official export credit volumes as a share of each country’s national economy. In fact, according to the Information Technology & Innovation Foundation, export credit banks in Brazil and China provided 10 times more financing to their exporters as a share of GDP in 2010 than the Ex-Im Bank did for American exporters. Even the export credit agency of Canada — which has an economy about one-eighth our size — does more lending volume.
For our part, the Washington Council on International Trade has been leading the charge on behalf of Washington businesses on the issue. Last year, we submitted a letter signed by businesses across the state in support of Ex-Im Bank reauthorization, and we’re continuing to work with our Congressional delegation to build support for its passage.
In this political environment, even legislation that has bipartisan appeal is uncertain, but hopefully Congress will make sure that we don’t cut off financing for the largest source of our economic recovery. At the very least, I’m no longer going to assume that they’ll take care of it.
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