Last week, Standard & Poor’s issued a short report about Boeing. “Boeing Co. Faces Long-Term Credit Risks If The U.S. Export-Import Bank Isn’t Reauthorized,” read the alarming heading.
In dollar volume, Boeing is America’s single largest exporter. It is one of our country’s strongest manufacturers. It employs more than 150,000 people, and last year it sent checks worth $48 billion to some 15,600 subcontractors. In competing with the likes of Europe’s Airbus and Canada’s Bombardier, it takes advantage of loan guarantees and financings offered by the Export-Import Bank — just as those competitors rely on their own export credit agencies for loan guarantees and financings. Without the help it gets from the Ex-Im Bank, Boeing would undoubtedly lose business to those competitors.
And, as S&P was suggesting, it could also see its credit rating lowered if it had to finance and guarantee loans to its airline customers “in order to remain competitive.” Clearly, S&P did not view this a positive development. Nonetheless, on Monday, The Wall Street Journal’s editorial page — which is among the conservative voices leading the charge against the reauthorization of the Ex-Im Bank — hailed that same S&P report because it also said that, in the short term, Boeing would be able to find financing. Thus has the Ex-Im Bank become the current Rorschach test of American politics.
I continue to find it mind-boggling that anyone in Washington would want to pursue a path that is so clearly destructive to the economy. But that is exactly what is happening. Conservative organizations like Heritage Action for America and Americans for Prosperity have made killing the Ex-Im Bank their cause. And it has been taken up by tea party Republicans in the House, as well as Jeb Hensarling, the powerful chairman of the House Financial Services Committee. Although it is likely that the Senate will pass a reauthorization bill this month, if the House doesn’t follow suit by the end of September, the Ex-Im Bank will not be reauthorized. Companies that rely on the Ex-Im Bank’s array of financing products to complete deals will, unquestionably, be hurt. Many of them will be small and medium-size companies that are able to export only because of the assistance they get from the Ex-Im Bank.
But some will be big guns like Boeing, Caterpillar and General Electric. It’s worth dwelling on these large companies for two reasons. First, customers of these big companies get the bulk of the Ex-Im Bank’s assistance. Though this seems completely logical — the biggest companies do the biggest deals, after all — this has made them a target of the right, which views the relationship between the bank and American multinationals as “crony capitalism.”
Second, most of the arguments made against the Ex-Im Bank revolve around its help to the big companies, not the small ones. For instance, it is argued that big companies have their own means of helping customers finance deals. That’s true, but it’s the customers, not the companies, that are pushing for export credit guarantees. A Boeing source told me that it is hearing from customers and potential customers about the fate of the Ex-Im Bank. “It’s a big deal,” my source said, especially in places like Africa, where conventional financing for aircraft is hard to come by.
“Nobody is saying these companies are going to die if they can’t use the Ex-Im Bank,” said Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics and a member of the Ex-Im Bank’s advisory board. “The issue is their ability to meet their competition.”
Siemens of Germany is a huge company that competes with GE; Komatsu of Japan competes with Caterpillar; and Airbus competes with Boeing. Each of them gets assistance from its own export credit agency, none of which will go away if the United States decides not to reauthorize the Ex-Im Bank.
House Republicans have sought a commitment from the Treasury Department to lobby for the elimination of export credit agencies around the world. But this is an ideological pipe dream. Other countries have no interest in walking away from export assistance.
In its editorial on Monday, The Journal mocked the phrase “unilateral disarmament” in regard to the Export-Import Bank. But that is what it would be. There are times when we have to accept the world as it is, rather than how we wish it would be. And like other countries, we ought to be helping our companies get business, and thus increase employment and economic growth — not forcing them to compete with one hand tied behind their backs.
Email Mr. Nocera at firstname.lastname@example.org.