The U.S. Export-Import Bank: A Government Agency Worth Fighting For
BY REBECCA UFKES
Executive Vice President, UEC Electronics
America plays a vital role in global transportation, both as a service provider and supplier of the capital equipment needed to support an ever-growing global transport system. That is a well-known fact. What is less known is the role that small businesses play in that story.
At UEC Electronics, we design, prototype and manufacture components for the aerospace industry. We thus play an integral role in the production of America’s number one manufactured export – commercial airplanes.
Less known, too, is the important role that the U.S. Export-Import Bank plays in foreign airline purchases of American-made airplanes. I am writing about Ex-Im because Congress needs to reauthorize the bank this year and some legislators are trying to stop that from happening. We cannot let them succeed because the bank is essential to the continued success of the U.S. aerospace industry in global markets – and thus to the continued success of the thousands of small companies like UEC that supply big exporters like Boeing.
Ex-Im was established in 1934 and over the past 80 years has helped thousands of large, small and medium -sized American companies sell their products and services to customers in other countries. Ex-Im does so by helping foreign customers finance their purchases of American goods, typically by offering loan guarantees that enable them to obtain commercial loans that otherwise would be unavailable to them.
The economic benefits of Ex-Im are significant and widespread. In 2013, Ex-Im helped facilitate $37.4 billion of U.S. exports that in turn supported 205,000 American jobs. In my own state of South Carolina, Ex-Im over the past five years has helped 43 companies, including 25 small businesses, sell $761 million worth of goods and services to foreign customers.
These U.S. sales to foreign customers would be in jeopardy if Ex-Im did not exist. That is because all of the world’s major exporting countries have government export credit programs of their own. In fact, many of them like China, France and Germany, provide significantly more export credit support than the United States. If Ex-Im were to go away, foreign customers in need of government export credit would take their business to our competitors in Asia, Europe and other parts of the world. Ex-Im is an essential competitive tool for American exporters, including small businesses.
So why are some members of Congress trying to kill the bank? The reasons most often heard are that Ex-Im exists for the benefit of giant corporations that do not need such assistance, that Ex-Im loan guarantees distort commercial credit markets, and that the bank’s portfolio of loans represents a risk that taxpayers should not have to bear.
Let us take those one at a time. While Ex-Im does help foreign customers purchase goods and services from large U.S. companies, most Ex-Im transactions involve small businesses (in 2013 the figure was almost 90 percent). What is more, the thousands of small U.S. businesses like UEC that supply parts and services to large exporters are “invisible exporters” that benefit from Ex-Im just as much as the big players. And those big exporters, by the way, absolutely need Ex-Im to be competitive in global markets.
As for the allegations of market distortion, the bank’s charter specifically mandates that it not compete with commercial lenders, but complement private sector lending. Ex-Im steps in when commercial loans are unavailable. That is why Ex-Im loan activity rises when commercial credit is tight, as we saw following the banking crisis in 2007, and falls when credit is more readily available to most borrowers, as we are seeing now.
And to those who say that the bank is putting taxpayers at risk, we say take look at the bank’s track record. The bank’s default rate is less than 2 percent over its 80-year history, and last year its default rate was a miniscule 0.0025 (one-quarter of one percent). Ex-Im does an excellent job analyzing risk – arguably better than many commercial lenders.
It also is worth noting that Ex-Im charges foreign customers buying U.S. products for its loan guarantees and other financial services, and because its default rate is as low as it is, Ex-Im not only covers all of its own operating expenses, but routinely earns a profit for U.S. taxpayers. In each of the last two years, for example, the bank returned $1 billion to the U.S. Treasury. This highly successful government agency helps level the playing field for American companies competing in global markets, and it costs U.S. taxpayers nothing.
Ex-Im is a government agency that is worth fighting for. In fact, it is essential that we fight for it because unilateral disarmament in an intensely competitive global market will cost American businesses billions of dollars in lost exports and American workers thousands of jobs. The business community should let their elected representatives in Washington know that it wants Ex-Im reauthorized. Employers should feel free to cite any figures in this article, which are all thoroughly researched and accurate; they can also note that the U.S. Chamber of Commerce and the National Association of Manufacturers are strong champions of Ex-Im. In fact, NAM is soon activating a webpage that will make it easier for Ex-Im proponents to generate a letter to their elected officials and will be found on www.NAM.org.
We are proud to be a part of America’s biggest manufactured export, and the vital transportation links that American-made jets enable around the globe. Those links are key to local economic development and to global economic growth. Trade and transportation are key enablers of higher living standards and a better world, and Ex-Im is a key enabler of American exports and global trade and transportation.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Eno Center for Transportation.