In a year with a busy legislative agenda and a collection of “must pass” bills, the U.S. Export-Import Bank (Ex-Im) can’t be overlooked. Its charter will lapse at the end of September. Congress must begin work soon to reauthorize the bank, and the Senate must confirm a quorum for its board so that it can function properly as an engine of exports and job creation.
Ex-Im was a contentious issue in 2015, when it was last up for reauthorization. However, after a long debate, its charter was reauthorized with two-thirds majorities in both chambers of Congress voting in favor.
At the time, common sense seemed to have won. After all, Ex-Im provides financing and guarantees for U.S. exports that directly support American jobs at no cost to the taxpayer. It’s one of the smallest and leanest of government agencies.
But the bank has been unable to extend loans or guarantees in excess of $10 million due to the absence of a quorum of Senate-confirmed members of its board of directors. Larger firms — including the tens of thousands of smaller firms in their supply chains — are operating at a clear disadvantage in global markets.
Ex-Im isn’t just working with one hand tied behind its back. It’s more like it has one hand and two feet tied together, and the only thing it can do is hop around and try to help American exporters.
According to Ex-Im’s 2017 annual report,
Due to the lack of a board quorum for the whole of 2016, EXIM was able to approve only about $200 million in medium-term financing and no long-term support… By comparison, though, in FY 2014—the Bank’s last fully operational year—EXIM authorized more than $20 billion in financing that supported nearly 165,000 American jobs.
The bank explains the implications of this sharp curtailment in operations:
By contrast, China provided $34 billion (in U.S. dollars) in medium-and long-term (MLT) financing for China’s exports. The BRICS countries (Brazil, Russia, India, China, and South Africa) provided a combined total of more than $51 billion in MLT export credit in 2016, nearly half of the total official export credit provided worldwide. Much of this credit was provided on terms outside of the OECD Arrangement with which EXIM complies.
As a result, the U.S. is at a disadvantage. The bank’s latest congressionally mandated Competitiveness Report notes: “As of June 6, 2018, there are nearly $43 billion in transactions in Ex-Im’s pipeline that require a vote by Ex-Im’s Board of Directors that could support an estimated 250,000 U.S. jobs.”
The losers include thousands of small business suppliers that are helped when Ex-Im finances major purchases from larger companies like airplanes and construction equipment.
While Ex-Im has been on the sidelines, other countries continue to be extremely active with fully empowered and well-funded export credit agencies (ECAs). The Bank reports:
Worldwide, official ECAs are proliferating; there are some 96 ECAs and counting. Governments from the United Kingdom to France to Germany to Finland to Canada and China are bolstering the export credit their ECAs provide.
Most U.S. exports are financed by commercial banks or the companies involved, but Ex-Im is indispensable in some circumstances. Ex-Im is necessary because ECA support is often required even to bid on a wide variety of foreign business opportunities. This includes requests for tender from both public and private sources, including opportunities as diverse as infrastructure projects, nuclear reactors, and contracts to provide medical equipment to hospitals.
In addition, Ex-Im is necessary because it is par for the course for expensive capital goods such as aircraft, turbines, and locomotives to be sold worldwide with unashamed ECA backing. ECA support can make or break a deal.
Far from being a burden on the taxpayer or a subsidy for corporations, Ex-Im charges fees for its services that have generated $7 billion in revenue for the U.S. Treasury over the past 25 years above and beyond funds it received in appropriations. Ex-Im enables U.S. companies large and small to turn export opportunities into real sales that support U.S. jobs as well as contribute to a stronger national economy.
President Trump has explained the value of Ex-Im:
It turns out that, first of all, lots of small companies will really be helped, the vendor companies. But also maybe more important, other countries give [assistance]. When other countries give it we lose a tremendous amount of business.
That’s exactly right. It’s time to get the Ex-Im Bank up and running again. That means the Senate needs to get to work and confirm the nominees for board members, and the Congress needs to reauthorize the bank before its charter expires on September 30.
The alternative? In the president’s words: Americans will “lose a tremendous amount of business.” With jobs and competitiveness at stake, it’s time to act.