See also: Export-Import Bank 101: The ‘it makes a profit’ argument
The argument that convinces most people to support the Export-Import Bank is the everybody else is doing it argument. This argument is based on faulty reasoning, misrepresentation of the facts, bad economics, and an odd (though slightly veiled) appeal to fairness.
Other countries’ subsidies do not justify U.S. export subsidies.
Other countries hurt themselves with export subsidies
China subsidizes its exports far more than the U.S. does. This probably helps the subsidized Chinese exporters, but it hurts China’s economy as a whole. Research by Fabrice Defever and Alejandro Riaño, presented at the Royal Economic Society’s 2013 annual conference claims that if China removed its export subsidies China’s national income would rise by 3 percent.
Economist Frédéric Bastiat once wrote: “it makes no more sense to be protectionist because other countries have tariffs than it would to block up our harbors because other countries have rocky coasts.” Similarly, it does not make sense to subsidize exports just because other countries do.
The Congressional Research Service writes, “most economists doubt … that a nation can improve its welfare over the long run by subsidizing exports.”
As CRS explained:
If China hurts its economy through export subsidies, why does it have so many? The answer is simple: These destructive export subsidies help the politically connected exporters, even while hurting the rest of the economy.
Ex-Im actually partners with (and subsidizes) foreign export subsidizers
Ex-Im is not a rival of foreign export-subsidy agencies. It is a partner with them.
In 2013 and 2014 alone, U.S. Ex-Im extended three loan guarantees worth a combined $73 million to the Export-Import Bank of China.
Korea Ex-Im (KEXIM) and the U.S. Ex-Im signed a joint agreement in 2004 — not to cut subsidies, but to jointly subsidize aircraft sales to South Korea. “This agreement will further develop our working relationship with KEXIM, and bring new sources of financing to the aircraft industry,” Ex-Im’s President Philip Merrill said at the time.
An official from Japan’s export-finance agency, called NEXI, told me, “NEXI is more a collaborator with U.S. Ex-Im rather than competitor. … The U.S. Ex-Im is more the partner of NEXI.”
Ex-Im also has agreements with Brazil’s national development bank, which operates an Ex-Im.
U.S. Ex-Im primarily subsidizes China’s government
The country that received the most U.S. Ex-Im financing last fiscal year was, by a large margin, China. A vast majority of that financing went to state-owned corporations in China. So Ex-Im primarily subsidizes the Chinese government.
Besides the Export-Import Bank of China, other state-owned recipients of U.S. Ex-Im funding include the largest bank in the world, the Industrial and Commercial Bank of China, as well as Air China.
In one Ex-Im deal, the subsidized exporter was Sinopec, a state-owned Chinese company that, by some measures, is the largest in the world. The foreign buyer was CNOOC, another state-owned Chinese company. The whole deal was financed by a Chinese bank, but the U.S. Export-Import Bank provided a loan guarantee, putting U.S. taxpayers on the hook in case the Chinese government didn’t pay back a Chinese bank that financed a purchase from the Chinese government.
Our Ex-Im inspires other countries to subsidize their exports
Defending U.S. export subsidies because other countries subsidize their exports ignores the fact that other countries defend their export subsidies on the grounds that the U.S. has Ex-Im. In fact, U.S. Ex-Im has spawned the creation of other Ex-Ims.
Roberts Orya, CEO of the Nigerian Export-Import Bank, wrote in defense of U.S. Ex-Im reauthorization, “U.S. Ex-Im Bank has discharged its mandate creditably. The institution has inspired establishment of similar export credit agencies around the world.”
A British think tank, Civitas, advocates British export subsidies in these terms: “U.K. should learn from Germany and America’s proactive export policies: The German and American governments have been far more active in boosting exports than the U.K., which follows a more laissez-faire approach. … In the U.S. however, the Export-Import Bank … is on track to meet its target of doubling its annual lending to small businesses to $9 billion by 2011′.”
The U.K.’s export-finance agency justifies its existence this way: “In the global marketplace, U.K. exporters need parity with overseas competitors when supported by their national ECA.”
Ex-Im’s recipients also lobby foreign governments to expand their export subsidies
General Electric is a leading force lobbying for reauthorization of the Export-Import Bank. GE also lobbies Australia to expand its export-subsidy operation, as evidenced in this letter. GE explains, “As a global company, GE works with a range of export credit agencies (ECAs) on behalf of customers and partners.”
Siemens, a top recipient of financing from U.S. Ex-Im is a vocal advocate for Ex-Im reauthorization. It is also in the top 15 of recipients of export credit from French ECA Coface.
Foreign Ex-Ims (and their customers) are hoping Congress reauthorizes Ex-Im
Ex-Im defenders most often point to European jetmaker Airbus as the reason Ex-Im (which primarily subsidizes Boeing) needs to exist. Although NPR cited Ex-Im officials saying Airbus “would love to see the Ex-Im bank shut down,” this isn’t, in fact, true.
Airbus says it is neutral on Ex-Im reauthorization. Airbus lobbyist Haley Barbour told me he checked with Airbus before taking the job as the lead Republican lobbyist for Ex-Im reauthorization, and that Airbus gave him the okay — because they don’t oppose reauthorization.
Again, an official at Japan’s Ex-Im flatly told me he doesn’t want U.S. Ex-Im to end, and the CEO of the Nigerian Ex-Im wrote an op-ed decrying the threat to U.S. Ex-Im.
