Senate Shows Broad Support for Ex-Im BankJune 17, 2015
On June 10, the Senate—in a primarily symbolic procedural vote—demonstrated broad support for a long-term reauthorization of the Export-Import Bank of the U.S. (Ex-Im). The Senate voted 31-65 to reject a motion offered by Senator Richard Shelby (R-Ala.) to table a Senate amendment to the National Defense Authorization Act (NDAA) offered by Senator Mark Kirk (R-Ill.) to reauthorize Ex-Im Bank.
The amendment was identical to the Export-Import Bank Reform and Reauthorization Act (S. 819) introduced earlier this year by Senators Kirk, Heidi Heitkamp (D-N.D.), Lindsey Graham (R-S.C.), Joe Manchin (D-W.Va.), Roy Blunt (R-Mo.), Joe Donnelly (D-Ind.), Kelly Ayotte (R-N.H.) and Mark Warner (D-Va.) that would renew the Bank’s charter through Sept. 30, 2019, and enhance congressional oversight of the agency. The amendment was withdrawn after the largely symbolic vote showed robust support for the bank’s renewal. Essentially, the vote meant that 65 senators, including 22 Republicans, backed the amendment to extend the Bank, while 31 voted to let it expire.
Senate Democrats did not want to use the defense policy bill as a vehicle because they said debate would continue for too long. The Export-Import Bank’s charter is set to expire on June 30. With this kind of support, Senate supporters are hoping to find another bill to attach reauthorization to, one that will move quickly and head to the president’s desk for signature. Some options being considered by the chamber are the highway extension bill, or the African Growth and Opportunity Act, a measure which passed the House on Thursday and is awaiting Senate action. Yet, some argue that it is unlikely Ex-Im’s extension would be added to the Africa bill, however, since it would then have to be approved by the House for a second time. Some are optimistic that the Senate could pass a standalone bill, despite the fact that the House is not expected to vote on an Ex-Im bill in the near term.
Over the past several months, there has been a good deal of misinformation spread about Ex-Im Bank and whether it truly helps small businesses. NSBA and its international trade arm, the Small Business Exporters Association, maintains the bank of is critical to help small firms export, and actually voted Ex-Im Bank Reauthorization among NSBA’s top 10 priorities for the 114th Congress.
Below are a few of the chief claims the opposition is making, followed by why those claims ring false.
The bank says it’s a champion of the little guy, but some 80% of its subsidies benefit the likes of Boeing, Westinghouse, Caterpillar, and Bechtel.
Ex-I Bank is mandated to allocate 20 percent of its funding to small businesses, however when you talk about the number of transactions, small firms over the past five years have comprised at least 86 percent of Ex-Im’s total authorizations. Smaller firms, by their very nature will do smaller deals and therefore will represent a smaller total dollar amount. In 2014, nearly half of Ex-Im Bank’s small-business authorizations involved amounts under $500,000.
Ex-Im is crony capitalism at the cost of the U.S. taxpayers.
Since 2008, Ex-Im has been a self-sustaining agency, and is only appropriated roughly $5 million for its Office of Inspector General, just .0005 percent of the total federal budget. This tiny budget outlay is more than covered in the fees Ex-Im raises which have resulted in Ex-Im in each of the last two years transferring nearly $1 billion in revenues to the U.S. Treasury. Targeting this tiny agency is enabling so-called budget hawks to avoid the truly difficult discussions on reining-in spending that is seriously out-of-control for the sole purpose of a talking point.
Ex-Im Bank finances less than two percent of U.S. exports overall, and benefits just one-half of 1% of small businesses.
Less than one percent of small U.S. firms export, so of course Ex-Im Bank couldn’t possibly benefit 10, 20 or whatever percentage its opponents deem appropriate. For the 3,300 small firms aided by Ex-Im Bank in 2013 alone, their support is critical.
A government program that subsidizes a very select group of small businesses cannot be said to help small business, in general. In many cases, Ex-Im financing puts small businesses at a disadvantage by providing overseas competitors with billions of dollars in financing at artificially low rates.
Ex-Im Bank is operating no differently from the nearly 60 various Export Credit Agencies throughout the world. Ex-Im financing that directly benefits small businesses has increased by 36 percent or more in each of the past five years in comparison with FY 2008. Furthermore, Ex-Im is reaching out to new businesses and in 2014 worked with 545 first-time users of Ex-Im Bank products.
Is Ex-Im helping all small businesses? No. Do disaster loans help all small businesses? No, but it would be unthinkable to reason that because disaster loans don’t help all small businesses, it must not be a worthwhile program.
Record demand for U.S. exports indicates no shortage of private capital to finance the sale of American goods overseas.
NSBA data has shown over the last 5 years that between one-fourth and one-third of small firms cannot access adequate financing, and this is among all businesses, a number which would almost certainly be higher among just small exporters. Surely if Ex-Im’s opponents’ goal is to level the playing field and ensure large firms aren’t benefiting from “crony capitalism” they could see that the ease with which larger firms and larger deals get made only underscores the importance of the programs offered by Ex-Im which focus on small exporters.
Most small businesses aren’t clamoring for export subsidies; they are focused on growing their domestic market share. Those who do export have less trouble with financing than the bank says.
Small businesses aren’t clamoring for subsidies period. They want a level playing field, and Ex-Im’s financing and loan guarantees are products that their customers pay for, not really a “subsidy.” These products open new markets to small firms that they otherwise wouldn’t have access to.
As previously mentioned, 98 percent of Ex-Im deals include partnering with a private bank. So, receiving private financing does not necessarily suggest that the financing was exclusive of an Ex-Im role. That financing might not have been available without the Ex-Im guarantee.
The help that the Ex-Im Bank provides distorts export markets and puts U.S. firms that DON’T get its help at a disadvantage.
The market is already distorted when it comes to small firms, whether through the challenges they face in financing, attracting talent, paying for health benefits or an unfair tax code. Ex-Im Bank helps to level the playing field for many smaller exporting firms. The so-called “disadvantaged” firms are not at a disadvantage because of Ex-Im, but rather because of massively-supported competing foreign firms – Ex-Im’s purpose is to help ease that distortion for companies that export. Competing foreign companies will gladly fill the gap created in the absence of Ex-Im that would stymie U.S. firms’ ability to compete for contracts internationally.
Ex-Im Bank doesn’t pick winners and losers. Its help is available to any U.S. exporter of American goods who shows that private banks won’t provide financing on terms that allow it to compete with foreign manufacturers.