President Ronald Reagan, January 30, 1984: “Exports create and sustain jobs for millions of American workers and contribute to the growth and strength of the United States economy.The Export-Import Bank contributes in a significant way to our nation’s export sales.”
President Bill Clinton, May 6, 1993: “Export expansion obviously encourages our most advanced industries. I am committed to promoting these exports, and that’s where the EX-Im Bank plays an important role.”
President George W. Bush, June 14, 2002: “I have today signed into law S. 1372, the Export-Import Bank Reauthorization Act of 2002.This legislation will ensure the continued effective operation of the Export-Import Bank, which helps advance U.S. trade policy, facilitate the sale of U.S. goods and services abroad, and create jobs here at home.”
In 1934, the Export-Import Bank (Ex-Im Bank) was established by President Franklin D. Roosevelt to bolsterU.S. export opportunities in order to maintain and create U.S. jobs.
In a nutshell, the Ex-Im Bank provides loans and loan guarantees to businesses and governments from countries with limited or no access to capital in order to support U.S. exports, essentially acting as the U.S.government export credit agency.
It provides financing mechanisms such as export credit insurance, direct loans (buyer financing) and working capital guarantees (pre-export financing) to help foreign buyers purchase U.S. goods and services.
Since its first $3.8 million loan to Cuba for U.S. silver ingots, the Ex-Im Bank has grown to an agency that in 2012 had more than 3,700 transactions that supported nearly $50 billion worth of exports.
In the mid-1940’s the Ex-Im Bank was made an independent executive branch agency by an act of Congress and has been reauthorized 16 times since its creation. However, unless renewed by the current Congress, the Ex-Im bank’s charter and government funding will expire in a few short weeks on September 30th.
Those supporting an extension of the Ex-Im bank say that if were to go away, the U.S. would be at a disadvantage with competing countries and foreign firms would gain a competitive advantage especially in emerging markets.
Supporters say the Ex-Im Bank helps to create and maintain U.S. jobs by filling gaps in private export financing having supported 1.2 million private-sector, American jobs since 2009.
They also point out that American companies such as Boeing, Caterpillar, General Electric, and Gulfstream all rely on the Ex-Im Bank for financing to make sales in export markets where commercial lending is unavailable or limited.
Besides, they say, the Ex-Im Bank is one of the few government agencies that actually makes money for U.S.taxpayers, pointing out that in the past fiscal year alone, the EX-Im Bank earned more than $1 billion above the cost of operation for U.S. taxpayers.
However the Ex-Im Bank has just as many detractors as supporters, detractors who say that it is nothing more than the government picking winners and losers, creating corporate welfare and crony capitalism.
They point to the Ex-Im Bank’s claim that 85-90% of the transactions conducted benefit small businesses, saying that the definition of a small business is questionable and that what most Americans would consider a small business and their workers are harmed by the Ex-Im Bank helping foreign competitors.
But the major opposition to the reauthorization of the Ex-Im Bank comes from the U.S. airline industry, including Georgia based Delta Air Lines, which says that it increases their competition abroad.
According to the airlines, between 2008 and 2013, 26% of widebody aircraft made in the U.S. and sold overseas was financed by the Ex-Im Bank. The loan terms offered with theses sales were more favorable than they could have received in the private market, creating an unfair advantage for the foreign airlines.
A major U.S. airline CEO cited one example of loans given by the Ex-Im Bank to an airline based in Dubaithat amounted to the equivalent of $20 million per plane, essentially equaling one free plane for the foreign airline for every eight new planes the U.S. airline buys.
Supporters and detractors of the Ex-Im Bank all make valid points in their arguments for and against its reauthorization.
September 30th is fast approaching and with Congress coming back from a five week break a decision must be made soon.