There is a perpetual debate in Congress over how to grow the economy. While everyone agrees that we need to grow the private sector, a small but increasingly powerful group in Congress is saying that the government has no role in promoting economic development.
The majority of Democrats and Republicans however agree that Congress should level the playing field to help small businesses reach new markets. And, with 95 percent of all customers of American-made products living outside the U.S., boosting exports is critical to growing the economy across-the-board. Companies that sell to China as well as Reno or Las Vegas are going to thrive and create jobs, bring foreign dollars home and create real, sustainable growth.
A key tool in promoting these exports – the U.S. Export-Import (Ex-Im) Bank – is in flux by lawmakers looking to disengage the government from promoting economic development. Unfortunately, if Congress fails to renew the Bank, American businesses could lose approximately $27 billion in annual exports – sales that would be lost to foreign trade cheats instead.
The Ex-Im Bank is a rare exception. It is a government agency that promotes real, sustainable job growth without interfering with free markets. Rather than use taxpayer money to hire more government workers or subsidize companies, the Ex-Im Bank provides secure loans to help American companies that would be otherwise unable to find commercial financing to sell their goods to foreign customers.
And, there is a host of reasons as to why that commercial financing is unavailable. For example, the buyer might be located in a country with frequent political unrest where banks don’t want to lend. Or it might not have the collateral required by a commercial lender to make a major purchase – like an American jetliner or a piece of farm machinery.
Over the course of my career, I have owned and operated several manufacturing operations. Now, I put my knowledge and experience to work, helping small and medium-sized manufacturing business succeed. I have seen first hand how critical the Ex-Im Bank is for so many companies trying to break into the export market.
Over the last several years, the Bank has financed nearly $300 billion in American exports. It helped over 9,000 companies sell their goods to the world and 90 percent of those companies were American small and medium-sized businesses. It helps U.S. companies, including many here in Nevada, support over 1.2 million American jobs. Without the Ex-Im Bank, many of these jobs wouldn’t have existed.
The Ex-Im charter requires strict lending guidelines that ensure a return on the taxpayer’s dollar. The Bank’s default rate is less than one quarter of one percent – lower than most commercial lenders. In the rare case of default, the Bank is able to recoup an impressive 50 cents on the dollar. In fact, the Ex-Im Bank has been operating in the black for years, returning more than $1.7 billion to the U.S. Treasury over the last two years as a result of the fees and interest it charges foreign buyers.
Some critics claim that because the Ex-Im Bank is profitable, it is taking business from commercial lenders. In fact, it is forbidden by law from competing with commercial lenders. Furthermore, commercial lenders would be the first to tell you they can’t and won’t step in should Ex-Im disappear.
Other critics say that the Ex-Im Bank picks winners and losers and distorts the free market, but the reverse is true. Foreign manufacturers already benefit from government subsidies and protections that vastly exceed the modest financing option Ex-Im provides. Measured as a percentage of GDP, Germany and France provide more than twice the U.S.’s export credit limit; China and India provide nearly three times as much, while Korea dwarfs us by a factor of 10.
Abolishing Ex-Im would mean unilateral trade disarmament. Foreign countries would continue to subsidize their own exports, stealing tens of billions of dollars in sales from American companies. Foreign customers would simply buy Mahindra tractors instead of Caterpillar, Airbus jets instead of Boeing.
The Ex-Im Bank levels the playing field, giving every American company a fair shot to compete for business on a global scale. This is the kind of pro-growth policy that everyone should support and which our country desperately needs. Critics of the Bank may mean well, but they are putting our economic recovery at risk.
Congress should provide the appropriate oversight, reapprove the Ex-Im Bank’s charter and ensure that American businesses are able to continue to drive our economic recovery.
Terry Culp is deputy director of Nevada Industry Excellence.