July 7th, 2014
04:51 PM ET

Why the Export-Import Bank matters

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By Global Public Square staff

You know countries don't always play by the rules of international trade, especially countries where the government and large companies are really all part of the same team.

Take, for example, China – the most notorious player who hasn't read the rule sheet. The government of China lavishes subsidies on its companies to make their products more competitive in the global marketplace.

And it's not just subsidies that help Chinese companies. Last year, China's government gave its domestic companies $111 billion in guarantees, loans and insurance to help them sell their various products overseas.

And China is just one example – Japan's companies got $33 billion worth of such treatment, South Korea $24 billion. And by contrast, the U.S. total was just $15 billion. Keep in mind that South Korea's economy is less than 1/10th the size of America's!

Now this creates a very uneven playing field, one in which it's tough for many U.S. companies to compete. And if American firms are struggling to compete, that’s bad news for the millions of unemployed in this country.

So, how can America stop these other countries from winning at its expense? The conservative magazine, National Review, usually a staunch supporter of free trade, recently ran a cover essay urging Washington to threaten trade sanctions against China. But a trade war is a nuclear response – slowing growth everywhere, damaging everyone's economy, taking jobs away from Americans and imposing higher costs on all consumers.

A much better idea is to level the playing field somewhat, by having a U.S. government agency provide low-interest loans to exporters and guarantees to foreign buyers of American goods.

Guess what? We already have one. It's called the Export-Import Bank, but Washington is about to shut it down – shut down an agency that has been supported by both parties for around 80 years. The Bank's charter expires on September 30th and Congress will probably not renew it – for the first time ever.

Why?

Well, because Ex-Im has become what the New York Times columnist Joe Nocera calls "The Latest Tea Party Piñata."

Eric Cantor's loss has emboldened staunch conservatives, some of whom claim that the Ex-Im bank is tantamount to "crony capitalism" or "corporate welfare." Kevin McCarthy, the newly elected Republican leader of the House, recently declared that he doesn't support the bank's reauthorization and that the private sector could perform its functions.

The thing is, the private sector already covers 98 percent of export financing. The bank is a lender of "last resort," accounting for just 2 percent of annual exports, but a crucial two percent – cases where there’s a bit more risk than the private sector is comfortable with.

The bank says that it has helped to sustain more than 200,000 jobs in 2013 here in the United States.

Much of the opposition circles around the fact that U.S. taxpayers would technically have to foot the bill if foreign buyers were to default. But, the chances of default are low – in 2013, Ex-Im actually generated $1 billion in income for the Treasury Department.

So, if it creates jobs and makes money for tax payers, why has the bank become such a rallying cry for the GOP? The Tea Party is keen on taking on big business. And the Ex-Im bank, they say, panders to lobbyists, picks winners and losers, and helps giant corporations instead of ordinary Americans.

Welcome to the real world of globalization, where every other major government supports its companies, gives them loans and lines of credit.

To cut the one institution that does this for American companies would be unilateral disarmament. It's not as if the Chinese will watch America and say, “oh right, we should become free market purists and end all our subsidies.” No, they will simply laugh – all the way to their state-funded, well-subsidized bank.

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Topics: China • Economy • United States • What in the World?

soundoff (24 Responses)
  1. Dan

    Wow, maybe the tea party should refined as WMD. Yikes and thought it was bad here in Canada.

    July 7, 2014 at 6:05 pm | Reply
  2. No 'import-export' in China needed

    No import from China. No import from S.Korea.

    July 8, 2014 at 3:26 am | Reply
    • Joey Isotta-Fraschini©

      No imports from China and South Korea?
      I know that you don't understand what is wrong with that idea.
      The thinking of USA citizens has been invaded by a lethal virus. A number of symptoms mark its presence.

      July 8, 2014 at 5:35 am | Reply
      • Joey Isotta-Fraschini©

        i do not think in either of my nation's polarized boxes of prefabricated and irrational cognitions.
        Sometimes I disagree strongly with my friends. When I do, I hope that they will avoid the dismissal of my views as "sarcasm."
        When I am sarcastic, it is obvious.

        July 8, 2014 at 5:44 am |
  3. Joey Isotta-Fraschini©

    The new mayor of NYC, where I live, is trying to destroy the admissions policies of our best public high schools, because high scores on tests are required. These elite schools were not intended for average pupils.
    I voted for this mayor, but I erred. I shall not vote for him again.
    Equal opportunity does not guarantee equal achievement.

    July 8, 2014 at 5:55 am | Reply
  4. Why no imports from China matters

    ... because we would export more Made in USA goods and products. It also means less wars.

    July 8, 2014 at 6:02 am | Reply
  5. Joey Isotta-Fraschini©

    It would mean neither.
    We cannot export things that others don't want to buy, especially if they cost more than they are worth in the global market.

    July 8, 2014 at 7:23 am | Reply
    • You don't know ...

      if they don't wanna buy, if you don't have things in various markets. Many would buy: Harley Davidson, US Flags, Chevrolet, DENVER Electronics, Motorola SmartPhones&Cellphones, Texas Instruments ... here we go – there are some interesting products.

      July 8, 2014 at 2:19 pm | Reply
      • Joey Isotta-Fraschini©

        A Chevrolet? Abroad?
        Why?
        I won't even buy one here in the USA.

        July 9, 2014 at 8:56 am |
      • CHEVROLET

        We in Germany love CHEVROLET, these are great cars with affordable price-quality-performance ratio. Much better than expensive unreliable german cars.

        July 9, 2014 at 11:36 am |
  6. chri§§y

    Lol no imports from China and South Korea huh? Are you prepared to give up your TVs and cellphones? Oh and most other electronic "toys"? Because those items are not made in the USA!

    July 8, 2014 at 10:59 am | Reply
  7. chri§§y

    I DO KNOW there isnt one manufacturer of televisions in the USA!

    July 8, 2014 at 2:27 pm | Reply
    • EU-NATO-USA - - not China

      You can import TVs from EU. We in Europe have Philips, Bang Olufsen, Loewe, ...! PHILIPS are best!

      July 9, 2014 at 7:41 am | Reply
      • Maersk

        What about the two Chinese made dudos you bought for the price of one, one for your kwok zucking mouth and one for your azz?

        July 9, 2014 at 4:51 pm |
  8. chri§§y

    And also Motorola plans on closing its ONLY US manufactusing plant in Texas, very soon.

    July 8, 2014 at 2:44 pm | Reply
  9. William Mitchell

    The bank is important and should be funded by closing loopholes allowing many large corporations to move profits overseas to avoid taxes but that is not likely to happen soon.

    July 8, 2014 at 6:39 pm | Reply
  10. chri§§y

    @ William Mitchell it wont happen EVER if the GOP led Congress has their way! And they are hellbent on destroying this country faster than the speed of sound!

    July 8, 2014 at 7:31 pm | Reply
  11. Joey Isotta-Fraschini©

    Protectionism of any kind is a delusion, because ultimately the USA's workers must compete globally or resign themselves to subsisting on government crumbs.
    We used to be a great country, but our aspiration to wealth and excellence was, way back then, not deemed selfish and politically incorrect.
    Some do not become rich. Some fail. Some children were left behind when America was great.
    Leave the children behind. Way behind.
    Let the country heal.

    July 9, 2014 at 9:11 am | Reply
    • Christine

      Leave the children behind? The children are our future. We should be very careful in how we educate them.

      July 10, 2014 at 11:40 am | Reply
  12. occasionem

    You are right. They are all laughing. Next week, in Brazil, the BRICS nations will be meeting to set up a bank to finance their projects. It is very naive to think that doing business in Latin America, Asia and Africa is as easy as doing business in Western Europe, Canada or Australia. The economic and legal instability in these countries are too high for the private sector to finance which will reflect in the interest rates.

    July 9, 2014 at 9:16 am | Reply
  13. chri§§y

    Leave the children behind? Way behind? Thats pretty harsh even for you!

    July 9, 2014 at 12:18 pm | Reply
  14. chri§§y

    Precisely!!!!!

    July 10, 2014 at 12:17 pm | Reply
  15. JC

    Perhaps Boeing is charging too much? The ExIm bank is a taxpayer funded subsidy. There's a good article in The Economist which pulls back the curtain on the supposed "lender of last resort" mantra.

    July 10, 2014 at 12:24 pm | Reply

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