In the spring of 2015, back when conservatives in Congress opposed corporate welfare, the Export-Import Bank of the United States was facing defeat. Congressional conservatives, including the party leaders in both chambers, were poised to let Ex-Im’s charter expire on June 30.
While under the microscope, and while the agency and its friends on Wall Street and K Street argued desperately to save it, Ex-Im’s board approved an interesting subsidy.
Ex-Im guaranteed a $23 million loan to the Export-Import Bank of China, which is supposedly the competitor of our Ex-Im. China’s Ex-Im was borrowing the money to finance an equipment purchase by the China National Technical Import & Export Corporation, another state-owned company whose job it is to advance China’s industrial capabilities.
Beijing was aiding the purchase in order to juice manufacturing in Western China. The U.S. export was factory equipment — specifically, carpet-tufting machines.
In short, China was building a carpet factory, and U.S. taxpayers were subsidizing it, and along the way subsidizing two Chinese state-owned companies. The U.S. currently imposes tariffs on Chinese carpeting, by the way. So thanks to the Export-Import Bank, up for renewal this month, we are fighting the trade war against ourselves. Yet under the China-related “reforms” in the current legislation to reauthorize Ex-Im, that carpet factory subsidy would simply sail through.
So, what happened?
What happened to the conservatives who used to rail against corporate welfare? What happened to the swamp-draining president who said Ex-Im should die? What happened to the administration that wanted to take on China’s industrial policy? They all caved. Some caved to corporate lobbyists. Most Republicans caved to President Trump. And Trump caved to his corporatist Commerce Secretary Wilbur Ross.
Out the window goes free enterprise and smaller government. Out the window goes draining the swamp. Out the window goes taking on China. Big business’ demands and loyalty to Trump win the day.
The tale of Ex-Im’s imminent reauthorization is a perfectly depressing tale of Donald Trump’s swampy Washington.
About half of the Republican Party, including all the party leaders, opposed the Export-Import Bank as recently as 2015, while Democrats have consistently loved the corporate-welfare agency. Now the GOP is happily going along with Democrats in reauthorizing the agency, as part of a massive spending bill, with next to no reforms.
The Ex-Im provisions in the current spending bill would reauthorize the agency for seven years, meaning Ex-Im gets to skate through the next three Congresses without facing any threat of reform or real oversight. And Ex-Im needs reform and oversight.
While its advocates claim Ex-Im helps the U.S. fight the trade war, reality is quite different. The number one destination where Ex-Im sends U.S. tax dollars is China. An overwhelming majority of that financing goes to state-owned enterprises such as Air China and the Industrial and Commercial Bank of China. Ex-Im isn’t a very good tool to counter China’s industrial policy since its top activity is funneling cash to China’s tools of industrial policy.
Some China hawks wanted to bar Ex-Im from subsidizing China’s government, but U.S. exporters objected. Boeing and other manufacturers were afraid of losing sales to China if China wasn’t getting the skids greased by the U.S. taxpayers. So the current bill will simply require Ex-Im to check in with the State Department before finalizing loan deals of at least $25 million to Beijing state-owned companies.
Big business lobbyists approved of this supposed reform, a clear sign that it’s toothless. And toothless it is: Even that $23 million loan guarantee to help China’s government build up China’s manufacturing sector would not require so much as a State Department sign off under the proposed reform.
The main problem with Ex-Im isn’t its subsidization of the Chinese government. The main problem is that whenever government picks winners and losers, it doesn’t help the economy. It instead helps the well connected, including politicians, banks, lobbyists, and the biggest manufacturers. In the typical year, twice as much Ex-Im financing subsidizes Boeing exports as goes to finance exports by small businesses.
Conservatives used to understand this. Trump used to know this. Power has corrupted them. The swamp wins, and so does Beijing.
