An Ex-Im report to Congress from several industry associations, including the U.S. Chamber of Commerce, all laud Bank activities and claim that trade financing supported $34.4 billion in exports and 227,000 U.S. jobs at over 3,300 companies last year. Poppycock is a nice word to summarize this claim. What follows here is a discussion of why that is so, together with what should be done to set the record (and U.S. policy) straight.
Ex-Im was created by Executive Order #6581 in February 1934 by President Franklin D. Roosevelt to “assist financing U.S. trade with the Soviet Union,” which was then entering the world scene as successor to czarist Russia. The U.S. Constitution did not then and does not now authorize use of taxpayer funds to aid politically favored groups. However, the Ex-Im mission is still driven today by political rather than economic logic.
Obama Administration goals under a National Export Initiative (NEI) specifically seek to double U.S. exports while increasing Ex-Im administrative expense allowances by 25%. Ex-Im assists only 1.9% of exports today, but it imposes artificial constraints in financing conditions. For example:
- It sets a goal of not less than 10% credit and insurance costs for “renewable energy” end uses (only 2.2% last year were “environmentally beneficial” and just 0.23% have met the renewable energy target over the past eight years).
- It requires any transaction over $10 million to deliver goods on a U.S. flagged ship (with the limited number of U.S. flag carriers, transportation costs are high enough to nullify any potential benefits of Ex-Im financing).
- It requires that financed export contain not less than 25% U.S. content in products as a means to ensure U.S. employment (a burden for industry to ensure while remaining cost competitive with a global supply chain).
- It supersedes private bank financing and makes taxpayers liable for defaults. (Ex-Im claims to finance only transactions too risky for private banking and lends only to credit-worthy borrowers. Being too risky and a safe bet cannot be simultaneous.)
It is obvious that management of the Ex-Im Bank does not accept views drawn by many observers and critics that the Bank puts resources to less efficient use than private-sector analogs and creates distortions in the national economy. Bank management does not, moreover, accept the conclusion made by many organizations that have studied its activities (Pew Charitable Trusts, Government Accountability Office and Congressional Research Service) that it has a net negative impact on national benefits and purpose.
It is long past time to restrict and disband this institution that was and remains a creature of the Progressive wing of the political spectrum that encourages pervasive and invasive government. It must also be recognized that Washington-located associations and lobbying groups do not speak for affected American business. It is time for our industrial leaders to speak to their elected officials in the House of Representatives and Senate and urge them to disband Ex-Im Bank, revoke its charter and return export financial services provided by private banks and insurance companies to its proper role. IH