The U.S. Export-Import Bank Charter expires on May 31, and it could reach its lending limit of $100 billion by May 1, forcing it to temporarily stop making new loans. The Obama administration is seeking a four-year renewal of the bank's charter, and wants to raise its lending authority to $140 billion. The Bank currently finances the U.S. exports of goods and services that support jobs here in the United States and it should be strengthened. Conservatives and one domestic airline want to kill the bank, or curtail its lending authority. Both stances are misguided, as we pointed out last week. Conservative opponents of the Ex-Im Bank, such as the Club for Growth, claim that its financing distorts markets and picks winners and losers. Foes overlook the fact that the agency provides vital support for U.S. manufacturing and service exports and jobs, and it makes money for the U.S. government by charging firms for the services it provides. Ending Ex-Im bank financing would make losers of domestic manufacturers, workers and communities all across America.
The Ex-Im Bank helps U.S. firms compete with exports from other developed countries that have their own credit agencies. If we unilaterally disarm by failing to renew the bank's charter, or by refusing to expand its lending authority, U.S. exporters will be at a serious disadvantage when competing with foreign firms for manufacturing export sales. It would make much more sense to expand the Ex-Im Bank's mandate and have it provide financing for domestic sales by firms that are competing with imports financed with foreign export credit. Aircraft and aerospace products provide a perfect example of why the bank's charter should be expanded, not narrowed.
The Ex-Im Bank finances exports of aircraft, construction equipment, and other big- and small-ticket items. Aircraft and avionics are the top recipients of its support. The Ex-Im Bank authorized $12.6 billion in financing for aircraft and avionics, 55 percent of total authorizations in key industries in 2011. In total, U.S. firms exported $86.8 billion in aircraft, aircraft engines and parts and avionics in 2011, so the Ex-Im Bank financed nearly 15 percent of those exports. The U.S. also imported $40.8 billion of aircraft, parts and avionics. There are only two manufacturers of large, commercial passenger jets in the world: Boeing and Airbus. The export of $1 billion worth of Boeing aircraft supports approximately 6,800 domestic jobs (including workers employed directly in aerospace and parts, and those in other industries providing parts and services to the aerospace sector). On the other hand, the import of $1 billion worth of Airbus aircraft displaces an equal number of domestic jobs. The negative impact of aircraft imports offsets the positive impact of aircraft exports. The U.S. happens to have a large trade surplus in aircraft and parts, but that is beside the point. Exports and imports both impact domestic employment levels, in equal but opposite ways: Exports support domestic jobs while imports displace them. Expanding our aerospace trade surplus by helping domestic firms better compete with publicly financed imports is win-win-win for domestic manufacturers, workers and their communities.
So why doesn't the Ex-Im Bank finance sales of domestic firms that are competing with imports that benefit from low-cost, foreign export financing? It is, after all, the Export-Import Bank of the United States. The Ex-Im Bank Charter (Sec. 2(a)(1).) states that:
The objects and purposes of the Bank shall be to aid in financing and to facilitate exports of goods and services, imports, and the exchange of commodities and services between the United States or any of its territories or insular possessions and any foreign country or the agencies or nationals of any such country, and in so doing to contribute to the employment of United States workers. The Bank's objective in authorizing loans, guarantees, insurance, and credits shall be to contribute to maintaining or increasing employment of United States workers. [Emphasis added].
But the bank's annual report only talks about financing provided in support of U.S. exports. It ignores the negative impacts of imports on U.S. employment, and the need to help U.S. firms compete with imports that benefit from foreign export finance.
Promoting exports while ignoring the negative impacts of imports has become an executive mantra in Washington. It is nearly impossible to find any reference to the negative impacts of import growth in executive branch publications. In fact, in the twisted logic of White House trade-speak, imports are now job creating, as in the following remarks from U.S. Trade Representative Ron Kirk, marking the passage of the U.S. Korea Free Trade Agreement and two other FTAs:
And let's also remember, too, the many American companies that support jobs right here at home by taking what they import from these trading partners and using it to produce new, made-in-the-USA goods.
Such statements ignore the basic economic logic of national income accounting: Increases in exports increase GDP, and (in an economy like ours with excess unemployment) support job creation, while increases in imports reduce GDP and costs jobs. Period. No amount of smoke and mirrors or twisted legal reasoning can change these fundamental economic facts.
It's time to end the single-minded focus on export promotion at the White House and the Ex-Im Bank. Our policies and our trade financing should be used to support domestic job creation both through increasing exports and by helping U.S. firms compete on a level playing field with imports publicly financed by foreign governments.
--The author thanks Ross Eisenbrey for comments