There’s good news this morning for misguided ideologues who want to make America the only industrialized country without an export credit agency by blocking reauthorization of the Export-Import Bank. They now have a real expert on their side, an authority on commercial aircraft who can explain precisely why helping Boeing to sell U.S.-made planes abroad is a bad thing. There’s only one problem — the expert works for Airbus, a European company that the World Trade Organization has found only exists because of an egregious 40-year record of market distortions in the form of illegal export subsidies.
The source of this new-found support for reining in Ex-Im is Barry Eccleston, president of Airbus Americas. Airbus competes against Boeing, the last surviving U.S. manufacturer of jetliners. Eccleston told reporters at the Reuters Aerospace & Defense Summit on September 11 that “it’s not a level playing field” for his company in the commercial transport market because Ex-Im provides such attractive financing terms to Boeing customers. That assertion is so patently false that it deserves a rebuttal — although I’m going to make it brief, because neither Airbus nor Ex-Im’s enemies have shown much interest in facts that don’t support their views.
With regard to Ex-Im, the agency has been around for 80 years and exists mainly to facilitate exports of U.S. goods and services to customers that have trouble securing financing in private lending markets. Bankers don’t like to lend to countries or companies with past problems, so that’s when Ex-Im steps in. But its loans are not subsidies: they must be paid back with interest, which covers the cost of bank operations. Ex-Im’s default rate on its loans is lower than that of many commercial banks, so it isn’t costing taxpayers a cent and does not create significant risk for the government. Quite the opposite: it generated a billion-dollar profit last year. It operates in much the same way that export credit agencies do in dozens of other countries.
With regard to Airbus, that company exists solely because a consortium of European governments decided in 1970 to force their way into the global jetliner market using market-distorting subsidies. The World Trade Organization ruled several years ago that these subsidies were illegal under trade treaties, representing a market distortion of such breathtaking scale that no plane built by Airbus ever would have reached the market without them. So when the head of Airbus Americas says that the playing field isn’t level, that is a bit of an understatement: by receiving prohibited subsidies for four straight decades, Airbus has driven every U.S. manufacturer out of the business except Boeing, and greatly reduced Boeing’s market share.
The perversity of today’s Ex-Im debate is that bank critics keep attacking imaginary problems at America’s export credit agency while ignoring huge market distortions perpetuated by other nations. After pocketing its sizable subsidies from European governments, Airbus then has four different export credit agencies to which its customers can turn for financing. And Ex-Im Chairman Fred Hochberg told the Reuters conclave this week that if Airbus sets up manufacturing operations in the U.S. as it plans to do, overseas customers for its American-made products might qualify for Ex-Im financing too.
So the real question here isn’t whether Airbus is being hurt by Ex-Im Bank programs. It’s whether Boeing, Caterpillar, Fluor and hundreds of other American exporters can stay competitive when Congress undermines one of the few agencies helping companies to sell overseas from a country that has the world’s highest corporate income taxes — not to mention ridiculous regulatory burdens.
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