In The Arena Expand the Ex-Im Bank, Don’t Eliminate It

Kent Hughes is a public policy scholar at the Woodrow Wilson International Center for Scholars. The opinions expressed in this article are solely those of the author.

In one of the most bizarre congressional fights in recent memory, conservatives, joined by some liberals, are pushing to eliminate the Export-Import Bank, an obscure federal agency established in 1934 amid the economic wreckage of the Great Depression.

Critics have portrayed the bank, which extends credit to exporters at no cost to U.S. taxpayers, as “crony capitalism” that favors Big Business at the expense of ordinary Americans. They point to the 2008 financial crisis as an example of how taxpayers can pay for losses while companies keep any gains. In addition, they argue that the government is taking on a role best left to the private sector and are urging Congress not to renew the bank’s charter in September.


These arguments miss the mark and pose a danger to the American economy. The proposal to eliminate the Export-Import Bank is a form of unilateral disarmament that completely ignores the competitive realities of today’s global economy. We should be expanding the resources of the Ex-Im Bank, not threatening to eliminate it.

Why do we need the Ex-Im Bank? Global competition — which drives the bank to offer to match the funding policies of America’s industrial competitors, all of which have aggressive export-promotion efforts. If U.S. firms cannot match the price and terms offered by other advanced economies, overseas purchasers will often turn to our international competitors.

And the competition is about to become even more intense. The United States and other advanced industrial powers agreed in 1978 to limit the amount of subsidy their respective export funding banks would offer. Newly emerging competitors in Asia and elsewhere, however, are not bound by that agreement. To meet this challenge, we should have a multiyear plan to double the bank’s lending limit, starting with a 20 percent increase to coincide with the charter renewal.

Last year, the Ex-Im Bank supported more than $37 billion in exports. By dollar value, the majority of the bank’s funds support large exporters, while 90 percent of the transactions go to small- and medium-size firms. Last fiscal year, Ex-Im supported more than 200,000 jobs — concentrated in manufacturing; over a five-year period, Ex-Im supported 1.2 million jobs during a period of severe unemployment.

The Ex-Im Bank is all the more important because the United States continues to run large trade and current account deficits, deficits made up largely of imported oil and imported manufactured goods. The shale gas and oil revolution will help diminish our dependence on oil imports, but the manufacturing deficit also demands attention. Over the past decade alone, the United States has lost more than 60,000 manufacturing facilities and millions of manufacturing jobs. Even in advanced technology goods, long a source of American economic strength, the United States now runs a trade deficit of some $80 billion a year.

Adding trade deficit to trade deficit has turned the United States into the largest debtor the world has ever known. Gradually losing exports of aircraft, large turbines, earth-moving equipment, farm implements and other capital goods will simply make a serious problem worse.

Opponents of the Ex-Im Bank also ignore the critical importance of America’s capital goods industry as part of a diversified industrial base. That diversified base is a key part of America’s trump card: innovation. Without the industrial base, good ideas that bubble out of America’s universities and laboratories may simply drive growth, jobs and future innovation in other countries.

The private sector currently provides about two-thirds of all spending on research and development in the United States. Much of that research spending comes from the large industrial firms that, in turn, are major exporters. Putting them at a disadvantage relative to foreign competition could be yet another blow to the research base.

Critics lash out at the bank for providing the bulk of its funds to large, exporting firms such as Boeing and General Electric. This argument ignores the extensive supplier chain that supports major exporters. Tens of thousands of small businesses provide parts and services that are incorporated in every capital goods export, from a Boeing 777 to a GE engine or turbine to a large piece of Caterpillar construction equipment.

Delta Airlines, one of the leaders of the push to eliminate the bank, has complained that competing airlines in emerging markets receive an Ex-Im Bank subsidy to buy American planes that is not available to U.S. carriers. But, if Ex-Im fails to meet the terms offered by its competitors, the emerging-market country could receive the same subsidy from a European export bank supporting Airbus. Delta would be not better off, and America would be the loser.

We should always be concerned about putting taxpayers at a financial risk. The 2008 financial crisis and the ensuing Great Recession are a stark reminder of how financing can go wrong. But the Ex-Im Bank’s track record inspires confidence. Year after year, it provides a healthy return to the Treasury based on interest and insurance fees — more than $1 billion last fiscal year alone.

Even the best institutions can be made better and stronger. As Ex-Im grows, it needs to make sure that the size and quality of its staff keep pace. The bank is working hard to increase its support for small business, and its relatively new focus on support for supply chains recognizes the thousands of suppliers that reach international markets through the major exporters. And it is not the cesspool of corruption its critics imagine: Recent reports of Ex-Im employees receiving bribes did not lead to favorable treatment, and the employees were dismissed.

So yes, the Export-Import Bank can do better. But shutting it down on the grounds that it promotes “crony capitalism” is utter economic fallacy — call it crazy capitalism.