When it comes to selling American goods and services overseas, there isn’t much that the U.S. political system does right. Its corporate income taxes are the highest in the world. Its regulatory system imposes a patchwork of poorly coordinated burdens on industry. Its parties pander to factions with narrow-gauge economic agendas, regardless of the long-term consequences. Not surprisingly, America has surrendered leadership in many of the industries that once made it the world’s biggest economy. Steel. Chemicals. Glass. Rubber. Railroads. Automobiles. Shipbuilding. Electronics.
One of the few bright spots in a federal landscape populated by distracted and indifferent policymakers is the Export-Import Bank, which lends money to overseas customers interested in buying U.S. products. The money has to be paid back with interest, but for buyers who face uncertainty at home, Ex-Im may be the only available source of financing. Imagine you are the government of Egypt trying to get a long-term loan to buy U.S. locomotives or earth-movers or jetliners. How many private banks would be interested in providing that loan? Not many.
This is not a new idea. Ex-Im was established in the depths of the Great Depression 80 years ago, when private banks had pretty much ceased lending to anyone who lacked a Triple-A credit rating. As the global economy expanded in the postwar era, five dozen other countries established their own export credit agencies to facilitate trade. These agencies typically don’t compete with private lenders. In fact, Ex-Im is prohibited by law from doing so. They exist mainly to finance exports when commercial credit is unavailable, for example because lenders fear instability in Argentina or Indonesia.
Making such loans does not expose U.S. taxpayers to losses, because Ex-Im carefully assesses risks before lending. As a result, it has a lower default rate than places like Well Fargo and Bank of America. It covers the cost of its operations from fees charged to companies and countries using its services, so it requires no annual appropriation of funds. But without its programs, hundreds of thousands of U.S. jobs in high-tech industries would disappear. For instance, the nation’s sole surviving maker of jetliners — Boeing — would be hard-pressed to remain competitive against heavily subsidized foreign plane companies without Ex-Im financing.
Over the last four years, a radical minority of Republicans in the House of Representatives has tried to rewrite the Ex-Im success story by forcing it through ideological filters that have little to do with the way global trade actually works. What comes out the far end of their “analysis” is a narrative of corruption and waste that is, frankly, pure fiction. And now, in a bid to quell their restive right wing, some House GOP leaders are giving in to this nonsense — even though it will hurt their constituents and America’s economic strength.
These critics need to be confronted with the limitations of their shallow ideas. If the U.S. ceases to support its exporters while countries like Brazil, China, India and South Korea increase their own financing activities, then America will keep hemorrhaging high-paying jobs and industries to those places. Perhaps the next industry to go will be jetliners, or mining equipment, or refining technology (nobody builds refineries in America anymore). With the rest of the world working hard to compete in trade, failure to keep Ex-Im Bank in business would badly damage the economic recovery, not to mention the livelihoods of hundreds of thousands of voters.
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