Time to Reauthorize the Ex-Im Bank

By Don C. Brunell

American companies are beginning to feel the pinch after Congress killed the Export-Import Bank last June. It is increasingly putting our manufacturers at a competitive disadvantage. Not only are we losing orders to foreign competitors, but some domestic manufacturers are shifting jobs and production to other countries where those banks exist.

GE announced it plans to move 350 jobs from its Waukesha, Wisconsin gas engine plant to a new factory in Canada, which has its own version of an export-import bank. The company, which supplies jet engines to Boeing, says that financing from an export credit agency such as Ex-Im is required for some $11 billion of projects in the pipeline, including power turbines, generation equipment and aircraft engines.

It has been a long and contentious battle; however, Congress can rectify the situation before it adjourns for the year by reauthorizing the bank. For Washington, there is too much at stake not to.

According to the Puget Sound Business Journal, Washington state is the largest single beneficiary of Export-Import financing, largely due to Boeing, which sold $64 billion in Ex-Im financed exports from 2007 to 2012.

But it’s not just Boeing, says Kris Johnson, president of the Association of Washington Business. “Of the 183 exporters in the state of Washington that use the Ex-Im bank, 133 are small- and medium-sized businesses.”

Since 1935, the Ex-Im Bank has provided financing to foreign companies seeking to purchase American goods. The purchasers buy needed products and American companies export billions of dollars’ worth of goods each year – $37 billion in 2013 alone.

A federal agency, the bank borrows money from the Treasury Department and pays interest on the funds to the Treasury. It then lends that money to foreign companies at higher interest rates.

The Ex-Im Bank is self-supporting through interest payments and fees. No tax money is used and, in fact, the bank generated a $1 billion surplus for the U.S. Treasury in 2013. Congress provides funding for the bank’s Office of Inspector General and sets the bank’s lending limit.

Companies like Ethiopian Airlines need the Export-Import Bank to secure its loans to buy Boeing aircraft. It hopes to buy more than two dozen planes in coming years, but will consider going to European rival Airbus if the U.S. Ex-Im Bank stays out of business, the Wall Street Journal reported.

The Ex-Im Bank has been clouded in controversy. Some in Congress question whether the federal government should be involved in providing loans and loan guarantees to foreign customers of U.S. companies. They believe companies like Boeing should finance aircraft sales themselves.

The U.S. airline industry, led by Delta Air Lines Inc., sued the Export-Import Bank over its long-standing support for Boeing’s sales to foreign airlines. Delta and other airlines say the loans allow foreign carriers to purchase planes at below market prices, giving them an unfair advantage against U.S. carriers on international routes.

But our strong dollar and weaker growth hampers U.S. exporters. America’s exports of goods and services were down 3 percent from a year earlier in the first seven months of 2015. Exports fell 3.2 percent in August, according to the Commerce Department.

Declining exports, combined with a lack of U.S. Ex-Im Bank funding, is “a double-whammy,” says David Ickert, finance chief of Air Tractor, Inc., which makes small aircraft for the agriculture industry.

The bottom line is many foreign companies say they can’t secure financing from commercial banks without some kind of government-backed financing or guarantee and most developed countries, our competitors, secure loans through their own Ex-Im banks.

As difficult as it maybe, it is in our collective best interest to resurrect the bank.

Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.