Category Archives: Trade

Rep. Carolyn Maloney supports reauthorizing the Export-Import Bank, whose charter lapsed on June 30. She recently took to the Huffington Post to give 10 reasons to support Ex-Im. Here’s reason 1:

Exports play an important role in the U.S. economy, supporting nearly 12 million jobs in 2014.

Ex-Im did about $27.5 billion worth of business last year, amounting to about 1.2 percent of America’s $2.35 trillion in total 2014 exports, and less than one-sixth of one percent of America’s $17.7 trillion 2014 GDP. From this, Rep. Maloney concludes that Ex-Im supports nearly a tenth of the entire U.S. workforce!

Also note the clever use of phrasing here. Rep. Maloney and other Ex-Im supporters always talk about jobs “supported,” and never jobs “created” or “saved.” This is on purpose. Such phrasing is vague enough to make Ex-Im look good without having to prove that it’s actually doing good. This is important, since every time Ex-Im helps Boeing sell a jet to a foreign airline, it hurts domestic airlines and eliminates jobs there. I am not aware of any official Ex-Im statistics on how many jobs the agency has un-supported.

Reason 5 is similar, and reads in part:

Since 2009, our Ex-Im Bank has supported an estimated 1.3 million jobs.

That averages out to 260,000 jobs supported per year (again, note the phrasing), or about one-sixth of one percent of the total year-end 2014 labor force, according to theBureau of Labor Statistics. Since Ex-Im’s annual support is equivalent to only $2,300 per job supported, most of those jobs would still exist without Ex-Im—in fact, since Ex-Im is largely redundant with private sector financing, its actual amount of net support created is far smaller than even its own meager statistics show. Factor in the jobs Ex-Im unsupports, and Ex-Im is almost certainly a net drag on the U.S. economy.

Rep. Maloney’s other reasons are of similar strength.

Reasons 2, 3, 4, and 7 are all variations of the “but other governments do it, too” fallacy and the unilateral disarmament fallacy.

Boeing’s own CEO debunked reason 6 in a recent shareholder call. Maloney argues the private sector will be unable to step into any void Ex-Im leaves. Boeing, which receives 40 percent of Ex-Im’s business, publicly disagrees.

The Congressional Budget Office also publicly disagrees with Rep. Maloney on reason 8, even though it answers in part to her. The facts require it to do so. Maloney argues that Ex-Im is costless to taxpayers. Using the same standard accounting rules most government agencies and nearly the entire private sector use, Ex-Im loses millions of dollars each year. It only appears profitable when using Ex-Im’s in-house accounting methods, which are, ahem, rather different.

Reason 9 correctly argues that many Republicans support Ex-Im. For Democrats like Rep. Maloney and independents like myself, if the GOP supports something, that alone is often reason enough to oppose it. And Maloney also fails to mention President Reagan’s vocal opposition to Ex-Im (video evidence here and here), as well as the fact that he cut the agency’s portfolio cap in real terms.

Finally, Maloney’s reason 10 is that a lot of pro-business groups support Ex-Im. Of course they do! Ex-Im is a welfare program for businesses. Consumers would be better served if the government would follow pro-market policies, not pro-business policies. There is a world of difference between the two.

Instead of seeking cogent arguments from Ex-Im supporters, it is better to simply recognize that they wish to continue benefiting from the extensive lobbying, cronyism, and favor-making that institutions like Ex-Im make possible. One should also recognize their creativity in creating cover stories for their cronyism. For a more convincing top ten list of reasons to oppose Ex-Im, see my paper, and keep an eye on this blog for more.

I meant to post this here earlier, but my CEI colleagues recently put together some excellent Ex-Im graphics explaining why the agency should close.

See them all here.

Today is a victory day of sorts. Ex-Im’s charter has expired, and Congress declined to reauthorize it. The agency will remain open and will service its existing loan guarantees, but cannot make new ones. As of this writing, its website also says “authority has lapsed” in big capital letters (see picture above).

This victory was a team effort all the way. Over at the Cato Institute blog, Dan Ikenson celebrates (cross-posted at the Foundation for Economic Education) and gives kudos to a lot of the team’s key players. I am honored that he lists me among them.

This fight is far from over, but today marks an important milestone. More to say on that soon.

The Export-Import Bank’s charter expires on June 30. This series of posts makes the case for closing Ex-Im, one argument at a time. See also parts 1, 2, and 3.

General Electric CEO Jeffrey Immelt is claiming that closing the Export-Import Bank would mean “economic catastrophe.” He must use the term differently than most people do. A bit of math shows why.

According to page 6 of Ex-Im’s 2014 annual report, the bank did $27.5 billion of business in 2014. The Bureau of Economic Analysis estimates GDP in the fourth quarter of 2014 to be $17.7037 trillion (see Table 3, page 8). This means Ex-Im’s business last year was equivalent to about one sixth of one percent of GDP. This is par for the course.

Confining the comparison just to America’s $2.35 trillion of exports, everything Ex-Im did all of last year is equivalent to less than 1.2 percent of exports. Seeing as many Ex-Im-financed projects would still happen without the bank’s involvement including GE, by Immelt’s own admission—its true net impact is almost certainly much smaller than that.

If anything, by redirecting billions of dollars of capital towards the politically connected and away from deserving entrepreneurs, Ex-Im is preventing the economy from reaching its true potential.

The Export-Import Bank’s charter expires on June 30. This series of posts makes the case for closing Ex-Im, one argument at a time. See also parts 1 and 2.

Ex-Im officials claim the vast majority of its lending activities go to smaller businesses. This is true by number of loans—in 2013, 2,160 out of 2,775 businesses receiving Ex-Im financing were small businesses, or just more than 78 percent. But Ex-Im’s claim is false by the more important metric of dollar value of loans. In most years, more than 80 percent of Ex-Im financing, measured in dollars, goes to big firms. Also worth noting: Ex-Im’s in-house definition of “small business” covers firms with up to 1,500 employees.

Ex-Im’s charter states “the Bank shall make available, from the aggregate loan, guarantee, and insurance authority available to it, an amount to finance exports directly by small business concerns … which shall be not less than 20 percent of such authority for each fiscal year.”

Small business’ actual share of Ex-Im financing has failed to meet that 20 percent threshold in 2011 (18.45 percent), 2012 (17.11 percent), and 2013 (18.96 percent). 2014 was the first year Ex-Im met that threshold since at least 2010.

Small business advocates who favor keeping or expanding Ex-Im should note that Ex-Im gives financing to approximately one in 10,000 small businesses. Considering approximately 20 other agencies give subsidies to small business, Ex-Im’s closure would have very little effect on the amount of subsidies small businesses receive. Most of its closure’s impact would be felt by its top ten beneficiaries, all of which are large companies by anyone’s definition of the term.

The Export-Import Bank’s charter expires on June 30. Unless Congress votes to reauthorize that charter, Ex-Im will soon cease to exist. This would be a major victory in the fight against corporate welfare. Ex-Im’s beneficiaries often tar their opponents as anti-American, anti-business, and anti-jobs. This series of posts will instead stick to the merits of the issue, which overwhelmingly favor closing Ex-Im, one argument at a time. For more arguments, see my recent paper. For the first installment of this series, see here.

The Export-Import Bank has given financing to more than 20 foreign airlines, many of them state-owned or state-supported. Ryanair, Air India, Korean Air, and fourteen other airlines have each received more than $1 billion in financing during the period 2000-13. Emirates Airlines saves as much as $20 million per plane purchased with Ex-Im financing, according to Congressional testimony by Delta Airlines CEO Richard Anderson. Air India, with Ex-Im’s help, was able to drive Delta out the Indian market entirely, costing Delta and related businesses up to 1,000 jobs.

Ex-Im does not engage in a great deal of direct lending. Instead, most of its activity consists of guaranteeing loans companies secure from third-party banks. If a foreign airline is unable or unwilling to pay back the third-party loan, Ex-Im will step in and repay it with U.S. taxpayer dollars. Ex-Im’s loan guarantees allow those airlines to secure extremely favorable interest rates, saving them a great deal of money. The quid pro quo, naturally, is that the airlines buy planes from Boeing instead of Airbus or Embraer.

Delta Airlines, understandably, is upset at the Export-Import Bank for giving direct assistance to its foreign competitors. They sued Ex-Im in 2011 and again in 2013, with Hawaiian Airlines and the Air Line Pilots Association joining as plaintiffs. Other domestic airlines probably have similar sentiments, but have been less vocal about it for various reasons.

No doubt some politicians will use this example to argue that Delta and other aggrieved companies should receive their own subsidies to balance out the favors Ex-Im does for its foreign competitors. A better policy would be for government to neither help nor hinder. Good companies that satisfy their customers will win out in the end.

Ex-Im’s activities don’t just harm domestic companies. They also harm domestic workers. In 2005, General Electric used a $3 million Ex-Im grant to move one of its factories from Bloomington, Indiana to Celaya, Mexico. “My taxes are paying to ship my job to Mexico,” quipped one of the 470 laid-off workers.

Ex-Im’s benefits to some companies are obvious enough. But those benefits come at a cost to other companies. This fact should be included in Congress’ calculus as it decides whether or not to continue the bank.