♠ Posted by Emmanuel in Americana
at 2/21/2012 10:37:00 AM
Today's post concerns the United States' Export-Import Bank. Alike the World Bank's International Finance Corporation, it too promotes investment abroad, albeit by American corporations including SMEs. The website blurb briefly describes its functions well:
The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank's mission is to assist in financing the export of U.S. goods and services to international markets.Ex-Im Bank enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy.
Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill gaps in trade financing. We assume credit and country risks that the private sector is unable or unwilling to accept. We also help to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters.
Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). No transaction is too large or too small. On average, 85% of our transactions directly benefit U.S. small businesses.Now, an innate American fixation is needlessly blowing stuff up. Consider Afghanistan and Iraq. Combine this inbred violence with gross negligence of international institutions and you often have interesting results. Witness American lawmakers' serial reluctance to pay their share of UN dues despite it being headquartered in New York. Ditto for the IMF and World Bank in Washington DC. Especially now that the US is in dire financial straits, one thing that may bind the left and the right is cutting off support for bodies that have secured America's place in the world (for better or worse).
With more than 77 years of experience, Ex-Im Bank has supported more than $456 billion of U.S. exports, primarily to developing markets worldwide.
And so it is with the Ex-Im Bank: despite not featuring much in the headlines Stateside for reasons given above, nearly everyone else familiar with foreign investment trends worldwide should know of it. Yet despite many American manufacturers lauding the role the Ex-Im Bank plays in facilitating foreign investment, we return to the problem of inward-looking lawmakers not really appreciating the same. Thus it is currently engaged in an appropriation fight that pits the remaining American lawmakers with an internationalist outlook against rational choice theory acolytes who do not really understand the difficulties faced--especially by SMEs--in conducting business abroad:
General Electric Chief Executive Jeffrey Immelt on Monday defended the U.S. Export-Import Bank against charges the export-facilitating lender is "corporate welfare" and should be shut down. "It's not really corporate welfare to put us on the same playing field that our global competitors are on," Immelt said during a panel discussion on the future of American manufacturing with Boeing Chairman Jim McNerney and Dow Chemical Chairman Andrew Liveris.The usual suspects are behind this "starve the foreign beast" lobbying. Also note its increased role in a world where export finance from private sources has thinned:
The Export-Import Bank is facing a tough reauthorization fight in Congress. Immelt, who also heads an outside economic advisory council for President Barack Obama, said the United States needed the nearly 80-year-old bank to compete against the European Union and China in global markets for aircraft and other products. "If you're trying to sell a Boeing 737 MAX with GE engines in Africa, you've got (to compete against) a fully subsidized European superstructure and Chinese bank financing...I think things like Exim are ways that we can level the playing field," Immelt said.
The conservative Republican group, Club for Growth, which is influential with members of the Tea Party movement, has called on Congress to kill Eximbank, which provides direct loans, credit guarantees and other financial instruments to support U.S. exports. "The Export-Import Bank is a prime example of corporate welfare that should have been eliminated years ago," Club for Growth President Chris Chocola said on January 31. "By picking winners and losers, politicians and bureaucrats are distorting trade flows. It's time to end the Eximbank for good."So I find myself in the odd position of agreeing with NAM which, characteristically, is one of the most vehement opponents of other countries investing in the US. Nor am I keen on the "everyone else is subsidizing the bejesus out of their manufactures, so why can't we?" argument, but still. These are strange times, indeed.
The bank has played an increasing role in supporting U.S. exports since Obama took office. That's largely due to the lingering effects of the global financial crisis, which dried up other sources of export financing. But Obama's goal of doubling exports in five years has also increased the bank's activity. After two back-to-back record years, Eximbank's total credit exposure is now more than $90 billion, close to the $100 billion limit set by Congress. Some lawmakers want to increase the exposure cap to around $135 billion as part of the bank's proposed reauthorization.
In a letter last week to congressional leaders, the National Association of Manufacturers said it was vital that Eximbank be reauthorized for four more years before its current short-term extension expires on May 31. "The Eximbank is the only tool American manufacturers have to counter the huge sums of export financing - many hundreds of billions of dollars - that other governments provide their exporters," NAM Vice President Frank Vargo said. "If American manufacturers lose access to the Eximbank, our ability to compete globally will be severely curtailed."
