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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.
Wow, maybe the tea party should refined as WMD. Yikes and thought it was bad here in Canada.
No import from China. No import from S.Korea.
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.
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.
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.
... because we would export more Made in USA goods and products. It also means less wars.
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.
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.
A Chevrolet? Abroad?
I won't even buy one here in the USA.
We in Germany love CHEVROLET, these are great cars with affordable price-quality-performance ratio. Much better than expensive unreliable german cars.
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!
I DO KNOW there isnt one manufacturer of televisions in the USA!
You can import TVs from EU. We in Europe have Philips, Bang Olufsen, Loewe, ...! PHILIPS are best!
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?
And also Motorola plans on closing its ONLY US manufactusing plant in Texas, very soon.
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.
@ 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!
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.
Leave the children behind? The children are our future. We should be very careful in how we educate them.
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.
Leave the children behind? Way behind? Thats pretty harsh even for you!
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.
The arguments favoring the Ex-Im ignore two important issues: the immoral practice of ignoring trade violations and the overwhelming international dominance of American purchases. The immorality leads to cynicism and erosion of morale. American businesses become cynical because their own government won't do the right thing and protect them from illegal trade. And the Bank becomes a conduit for patrician payouts. Denying trade to foreign illicit companies isn't a trade war, it is prosecution of a just and important law.
Our dominant economy means that American industry can fairly easily replace any foreign importers and enjoy the benefits of replacing them. Most of the technology driving foreign importers was invented and developed – wait for it – in America! Doesn't it just warm your heart, Americans, when the Chinese demand manufacturing secrets used to build planes here as a condition of buying those planes. Gee, I wonder what they'll do with those secrets.
We rightly refuse to pay ransom to terrorists, and suffer the intense pain of watching our citizens die an excruciating death, knowing it means fewer Americans will have to experience this. How much more should we do the same thing financially?
The Global Public Square is where you can make sense of the world every day with insights and explanations from CNN's Fareed Zakaria, leading journalists at CNN, and other international thinkers. Join GPS editor Jason Miks and get informed about global issues, exposed to unique stories, and engaged with diverse and original perspectives.
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Obama as a foreign policy president?
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China's trapped transition
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