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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.
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.