This week the Heritage Foundation issued the latest in a series of inaccurate, misleading attacks on the Export-Import Bank. Like some of my conservative friends, I’m puzzled why a respected think tank would embrace such a wrongheaded, anti-American position. The issue divides Republicans at a time when they have the opportunity to advance causes of far greater importance. Furthermore, the “reasoning” set forth in Heritage critiques is so transparently fallacious that anybody with a basic understanding of economics can demolish it. Allow me to illustrate.
1. The Heritage brief begins by saying, “The Export-Import Bank (Ex-Im) funnels billions of taxpayer dollars each year to overseas businesses for the purchase of American products,” describing Ex-Im loans and loan guarantees as a “subsidy.” Wrong. Ex-Im programs don’t cost taxpayers a cent, because any loans have to be paid back with interest. In fact, Ex-Im gave the Treasury a billion dollars in excess fees last year that it had collected and didn’t need to sustain ongoing operations. Trade subsidies, meaning government giveaways to support exports, are a real problem — France subsidizes Airbus, China subsidizes Huawei. But Ex-Im doesn’t subsidize anybody.
2. The Heritage brief says Ex-Im programs distort market forces and thus cause surplus production. Wrong. If Ex-Im programs were actual subsidies or other countries did not have their own export credit agencies, this argument might be true. But every other major trading nation has an export credit agency that does as much or more than Ex-Im to promote home-country exports. On items like jetliners, there is an agreement in place limiting the kinds of financing arrangements signatories can provide. Thus, Ex-Im programs have the opposite effect from what Heritage alleges: they level the playing field so that market forces actually function. If Ex-Im were shut down then the market really would be distorted, because other countries would continue their own export credit programs, creating an imbalance.
3. The Heritage brief says Ex-Im loans and loan guarantees for exports of U.S. equipment used in foreign mines are hurting workers at domestic mines producing the same commodities. Wrong. If foreign miners couldn’t purchase U.S. equipment at globally-competitive prices, they would simply import their equipment from other countries. There are plenty of other countries in the business of producing heavy mining equipment, and some of them (like China) offer far more liberal terms than Ex-Im can on financing. Note to Heritage: those Komatsu earthmovers you saw along the turnpike last summer while stuck in traffic are made by a Japanese company. Foreign miners aren’t going to abandon their projects just because U.S. equipment purchases are harder to finance.
4. The Heritage brief says Ex-Im assistance in financing plane purchases by Air India and other foreign carriers has wiped out 7,500 jobs at U.S. airlines that lack access to such financing. Wrong. Interest and fees on Ex-Im financing are similar to what any U.S. airline can obtain at a commercial bank. If Air India didn’t like the terms available for its Boeing purchases, the airline would just have turned to Airbus — which makes competing planes in every segment of the market and has four different European export credit agencies on which its customers can draw. Had the Indian carrier actually done that, the impact on U.S. airlines would have been the same, but a lot less machinists would have been employed at Boeing.
The latter case illustrates how Ex-Im critics are used by U.S. companies trying to advance their own special interests. Delta Air Lines has spun up its industry association to oppose Ex-Im financing of widebody jetliner exports because it competes internationally with foreign carriers like Air India and Emirates that want to buy U.S. planes. Meanwhile, Delta regularly taps the export credit agencies of other countries to acquire its own planes — like last year, when Export Development Canada gave Delta $1.5 billion to acquire up to 70 Bombardier regional jets. None of Ex-Im’s critics ever have anything to say about this “distortion of market forces,” or the 40-year travesty of illegal launch aid to Airbus by European governments. Is that cronyism at work, or just sheer ignorance? You decide.
Find Archived Articles: