The Right’s Unilateral Disarmers

For several years now, some on the political right have portrayed the U.S. Export-Import Bank (Exim) as an exemplar of inappropriate federal government involvement in activities that should be left to the private sector. Worse, Exim is portrayed as engaging in “crony capitalism” – loosely defined as picking winners and losers on the basis of political connections, and favoring the former with taxpayer largesse.

Despite the evidence to the contrary – including the fact that taxpayers have not had to pay a cent on the billions in loans and credit guarantees Exim has extended to support American businesses providing goods and services to foreign customers – this mantra has become something of an idée fixe in certain circles. Increasingly, it poses a danger to the Export-Import Bank, its ability to provide such a service in the future, and to the competitiveness of U.S. exporters with foreign rivals that enjoy similar, if not vastly greater, support from their governments’ Exim counterparts. 

That prospect appears to have grown significantly after Rep. Kevin McCarthy announced shortly after his election as House Majority Leader that he would oppose the Export-Import Bank’s reauthorization. Were he actually to use his office to prevent consideration of the legislation necessary to allow the bank to do more than administer its existing loan and credit portfolio, Leader McCarthy would be engaged in something Republicans have generally eschewed – and properly castigated Democrats for doing with some regularity: unilateral disarmament.

That’s right. As long as no corresponding action is taken by China, Japan, the Europeans, or others with whom our exporters go head-to-head to make their sales, the United States will have denied itself unilaterally an often-decisive factor in such transactions: certain access to credit on favorable terms. And, while the Exim’s critics claim that an agreement can be forged whereby other governments’ export lending facilities will be shuttered, no such accord is in prospect.

Alternatively, we are told the private sector can pick up the slack. Unfortunately, publicly traded banks and other underwriters are simply unable or unwilling to offer terms that are competitive with those offered by foreign governments’ export facilitation operations. Export credit bridges real gaps in commercial finance, from developing emerging markets to financial market disruptions.

Even companies like Boeing that have relatively deep pockets depend on Exim to support foreign airline purchases of its high-quality planes when competing against heavily subsidized Airbus and emerging aircraft manufacturing concerns in China and Brazil. Most of the thousands of other American exporters that benefit from Exim’s services also lack such means. They would likely see their opportunities for overseas sales vanish as foreign competitors use government loan guarantees and credits to close deals, despite offering what are often inferior products.

Consequently, the upshot of the sort of Republican-led unilateral disarmament now in prospect with respect to Exim Bank is that the United States will lose export opportunities and jobs. In some cases, American companies that have a successful business model, provided they are able to compete internationally on a level-playing field, will become unviable.

Of particular concern is the likelihood that among the casualties will be the already-beleaguered U.S. defense industrial base. For example, what is left of the skilled workforce, engineers, design teams, machine tools, etc., needed to produce state-of-the-art fighter aircraft, transports, and satellites now resides substantially in our commercial aerospace sector. And if the industry’s commercial operations cease to be able to sell their products to overseas customers, as a practical matter, we are going to find ourselves even less capable of reconstituting our military production lines when, not if, they are needed.

That would amount to unilateral disarmament, not just in the figurative sense, but in the literal one.

As long as transactions supported by the U.S. Export-Import Bank are made on the merits and with the same record of fiduciary responsibility that has protected the taxpayer’s equities to date, and so long as other nations provide comparable support to their exporters, our country needs Exim. And Republicans should eschew the sort of unilateral disarmament that would eliminate it.