Franklin Roosevelt created the Export-Import Bank largely as a foreign-policy tool. Today, the agency’s defenders downplay that aspect, and instead justify their taxpayer-backed financing as a jobs program here in the U.S. That’s probably prudent, because if Ex-Im were a foreign policy tool, it’s a pretty poorly run one.
“A look at Ex-Im’s beneficiary list suggests that the bank sometimes works against American interests abroad,” writes former deputy national security advisor Mark Pfeifle in the Wall Street Journal. One example: hundreds of millions of dollars to a Russian bank named VEB, which Pfeifle writes: “maintains an operating agreement with Russian arms exporter Rosoboronexport … a chief weapons supplier to Bashar Assad’s regime in Syria and has supplied advanced missile systems to Iran.”
Pfeifle also points to Ex-Im subsidies corruption-tainted state-owned companies, such as Mexico’s Pemex, Ex-Im’s largest beneficiary.
I could add to Pfeifle’s list: In the 1990s, Ex-Im approved financing to the China National Nuclear Corporation, which had recently been caught selling nuclear weapons technology to Pakistan in violation of the nuclear non-proliferation treaty.
Also, as Pfeifle points to, the U.S. subsidizes state-owned enterprises in China. Is supporting China’s state-run corporatism in America’s national interest?
But there’s a more pervasive foreign policy question involved in the whole matter of Ex-Im. One reason exporters and the banks that finance their exports love Ex-Im is not simply backing their repayment with the full faith and credit of the United States, but backing their repayment with the full force and might of the United States. In other words, a foreign buyer in financial trouble is going to prioritize paying back the American Ex-Im-backed exporter, because he understands Uncle Sam can be a tough collection agent. Is this a healthy contribution to U.S. foreign policy — being a global collection agency for Boeing and Wells Fargo?
Foreign policy scholar and my American Enterprise Institute colleague Tom Donnelly argues that Ex-Im should be expanded and refocussed, to function as a foreign policy (specifically a national security) tool. Donnelly’s probably correct that subsidizing U.S. exports could serve foreign policy in a way that would make Ex-Im’s economic costs worth paying, but that’s not on the table now. Also, I don’t think Ex-Im people want it on the table, because becoming a foreign policy tool would necessarily increase the riskiness of Ex-Im’s financing.
Even if Ex-Im had a net economic benefit for the U.S. (it doesn’t), it ought to be worrisome that it often undermines U.S. foreign policy in order to profit a handful of U.S. exporters and their lenders.
