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Without congressional action, the U.S. Export-Import Bank (Ex-Im) will close its doors on June 30. Against that backdrop, those campaigning against renewing the Bank’s charter have leveled a slew of misleading accusations.
At times, the debate over Ex-Im sounds like a fact-free zone. Let’s dig into some of the charges.
Myth: Ex-Im only helps big business.
Fact: In reality, shutting down Ex-Im would mean thousands of small and mid-sized firms couldn’t even export because commercial banks generally won’t accept foreign receivables as collateral for small businesses loans. Ex-Im’s critics have no answer to this business reality. And this is no minor concern: Small and medium-sized companies account for nearly 90% of all Ex-Im transactions.
This is why scores of small and medium-sized businesses from across the country are urging Congress to renew Ex-Im.
Myth: Ex-Im is a luxury for big exporters.
Fact: Closing Ex-Im would shut major American exporters out of huge business opportunities overseas because support from an official export credit agency such as Ex-Im is required for a company even to bid on overseas infrastructure projects.
Closing Ex-Im would put U.S. companies selling expensive capital goods such as aircraft, locomotives and turbines at a unique competitive disadvantage because their foreign competitors all enjoy ample financing from their home-country export credit agencies – enough to easily knock U.S. companies out of the competition.
This is especially true of the nuclear power sector, where deals always require support from an official export credit agency such as Ex-Im. Since the U.S. nuclear industry is dependent on exports – almost no new nuclear plants are being built in the United States while other countries are building dozens – closing Ex-Im could put nuclear suppliers out of business or force them offshore.
Myth: Ex-Im displaces private finance.
Fact: That’s not what people with actual financial expertise say. The Bankers Association for Finance and Trade (BAFT) and the Financial Services Roundtable (FSR) recently issued a joint letter to congressional leaders expressing strong support for Ex-Im.
They explained that Ex-Im “cannot be replaced solely by the private sector.” “Balance sheet constraints (arising from prudential capital and liquidity requirements, among other factors) along with institutional credit, country and counterparty limitations” are among the factors that limit the ability of commercial banks to provide export finance.
The associations added: “An Ex-Im Guarantee does not make a bad deal ‘bankable’ … commercial banks share the risk on transactions with Ex-Im and so would not enter into arrangements where the risk trumps the viability of the deal.”
Myth: Ex-Im costs the taxpayer billions.
Fact: Ex-Im has sent to the Treasury $7 billion more than it has received in appropriations since 1990. This figure comes from Ex-Im’s annual report, which uses the accounting method required by law. Contrary to rumor, the Congressional Budget Office (CBO) has never denied that Ex-Im generates a “negative subsidy,” i.e., it doesn’t cost the taxpayer a dime.
Using an alternative “fair-value” accounting method, CBO did produce an estimate that Ex-Im might impose costs on the Treasury over the next decade. However, this alternative accounting drew on highly questionable assumptions. For instance, this scenario assumed Ex-Im would extend loans at a level nearly 40% higher than it did last year, even though the Bank’s lending has been declining steadily as the financial crisis of 2008-2009 recedes.
Myth: Ex-Im subsidizes foreign state-owned firms.
Fact: According to the Merriam-Webster Dictionary, a subsidy is “money that is paid usually by a government to keep the price of a product or service low.” As we’ve just explained, Ex-Im doesn’t dole out taxpayer dollars; in fact, it charges fees for its services that allow the Bank to return more money to the Treasury than it receives in appropriations. Again, that’s a “negative subsidy,” i.e., it doesn’t cost the taxpayer a dime.
The aim of Ex-Im’s opponents is to tie it to unsavory customers overseas. This is really an attempt to divert attention from the true beneficiaries of Ex-Im – the tens of thousands of American workers whose jobs depend on the Bank. Tough competitors abroad would be delighted to make those sales instead, and they all have backing from their home country export credit agencies. Every major trading nation has one.
Maybe Ex-Im’s opponents, especially in Congress, should spend a little less time generating misinformation and misdirection … and a little more time looking these hard working American job creators in the eye.