Ex-Im Bank Critics Don’t Seem To Know Much About U.S. History — Or Global Trade

Politico reports today that the main trade association of the aerospace industry has begun running ads in Capitol Hill newspapers featuring words of praise from Ronald Reagan for the Export-Import Bank.  Right-wing critics are trying to block the bank’s reauthorization later this year, citing a series of fanciful complaints about its role in financing exports of U.S.-made goods and services.  As Aerospace Industries Association spokesperson Chip Sheller says in the story, the ads are aimed at reminding both parties that “the bank is something their predecessors in the House and Senate have supported for decades.”

Eight decades to be exact — Ex-Im was established in 1934, and until the latest band of zealots swept in from the countryside, the bank’s periodic reauthorizations were bi-partisan lovefests.  Even the most recent reauthorization in 2012, which was uncharacteristically contentious, saw most Republicans (and virtually all Democrats) supporting the bank’s work.  Which raises the obvious question of why some Republicans did not, even though Ex-Im routinely assists companies in the Republican heartland to sell goods abroad and thereby create jobs.  The usual explanation offered is conservative ideology, but who was more committed to conservative principles than Ronald Reagan?  And yet Reagan had no problem endorsing Ex-Im.  So something else must be going on.

Perhaps part of the explanation is simple ignorance of the nation’s history, and of how international trade works.  Some ideologues have such a shallow grasp of the nation’s past that they don’t realize businessmen (and women) have always turned to politicians for help.   That’s how the Erie Canal and Transcontinental Railroad got built.  It’s the reason Republican presidents like Lincoln and McKinley favored high tariffs on manufactured goods.  And it’s a large part of the explanation for why America became the world’s leading producer of computers, jetliners, lasers and networking technology during the Cold War.  So what Ex-Im critics call “corporate cronyism” is part and parcel of the processes that made America the greatest economy in the world.

Here is something else about the past that the critics don’t seem to know: their unilateral-disarmament approach of abolishing a vital federal function without first securing reciprocal action from other countries has been tried before.  Shortly after taking office, President Ronald Reagan accepted the advice of free-market ideologues in his administration that the government should stop providing construction subsidies to the commercial shipbuilding industry, because such payments distorted the market.  What they failed to consider was that U.S. subsidies existed mainly to counter similar support given to the shipbuilders of other nations.  So when the “construction differential subsidy” was abolished in 1983, the U.S. commercial shipbuilding sector collapsed.  An industry that had been producing one oceangoing commercial vessel every two weeks during the 1950s, 1960s and 1970s simply ceased to exist.  Other countries ended up dominating the global market.

Something similar could happen to Boeing, the nation’s leading exporter, if its customers lose access to Ex-Im credit programs.  Critics delight in referring to Ex-Im as “Boeing’s bank,” even though most of the bank’s financing benefited other companies (including thousands of small businesses) last year, and it all has to be repaid with interest.  The reason Boeing stands out is because illegal subsidies to foreign aircraft producers forced all the other U.S. jetliner companies out of the business.  No kidding: the World Trade Organization says Airbus probably wouldn’t exist at all without decades of prohibited subsidies from four European governments, and yet now it holds half of the global market — even though Boeing planes are safer, cheaper to operate, and more technologically advanced.  I haven’t heard a peep out of Ex-Im critics about this particular distortion of market forces, which has wiped out tens of thousands of jobs in the U.S.

There is no threat at all to U.S. taxpayers from helping to finance Boeing’s exports of jetliners.  Ex-Im actually makes a profit on the transactions, and if somebody doesn’t pay back the loans on time, Ex-Im can just repossess the aircraft.  Not that anybody defaults on Ex-Im financing of jetliner exports anyway.  But if Congress was to end Ex-Im’s programs while Airbus continued to tap not one but four European export-credit agencies, the U.S. company would gradually lose market share and economies of scale — to a point where it might no longer be able to compete.  Critics scoff at such scenarios, but their fathers probably couldn’t imagine companies like RCA and Zenith disappearing either.  Like I said, these people have no sense of history, so they have little grasp of the potential damage they are doing.

Perhaps Ex-Im’s critics should consider the comment another conservative icon, Winston Churchill, made many years ago.  He said “the duty of governments is to be first of all practical,” and then went on to state emphatically, “I would not sacrifice my own generation to a principle.”