Gear up for yet another battle. Congressional reauthorization of the United States Export-Import (Ex-Im) Bank – the government agency that provides export finance for US companies – promises to be another heated debate. Those that claim that Ex-Im is the lender of last resort to small exporting businesses will go up against those that argue it promotes crony capitalism using taxpayer money.
So who’s right?
The Ex-Im Bank, throughout its 81-year history, has promoted U.S. exports by providing direct lines of credit to foreign buyers, insurance to American exporters, and loan guarantees to banks that lend to foreign buyers and American exporters. Central to the raging reauthorization debate – and going beyond partisan political grandstanding – is the impact of the bank on American jobs.
Hillary Clinton, the Democratic Party’s front-runner in the 2016 presidential election, has come out in support of the bank. When asked about it, she said:
“I’m a very strong supporter of the Ex-Im Bank, because it is a tool for us to be competitive in order to support our businesses exporting”.
The debate pivots on how one examines the activities of the Ex-Im Bank. In terms of dollars financed, small businesses accounted for 25 per cent of the total in 2014. This gives credence to the notion that the bank is subsidizing big corporations.
But other metrics tell a different story.
A New York Times commentator noted:
“in 2013, 2160 of the 2775 exporting companies that used the bank, or almost 80 percent, were small businesses…. Small companies accounted for more than 90 percent of the bank’s insurance authorizations in 2013, and just over half the insurance dollars.”
In 2013, 95 per cent of all working capital guarantees from the Bank went to small businesses. Such guarantees, by definition, include support for salaries of employees.
The U.S. Small Business Administration defines a small business as a firm employing less than 500 people and, by this standard, Ex-Im Bank could be supporting more than a million American jobs in small businesses alone.
Ex-Im Bank has largely self-financed its activities and has been budget-neutral. In 2013, the Bank’s overhead was 90 million dollars, making up for a negligible percentage of the 3.5 trillion dollars federal expenditure.
This, of course, doesn’t mean that the Ex-Im Bank is perfect. It needs reforms. Foreign buyers of large American manufacturers should receive a smaller share of export capital while more working capital guarantees should be allocated to small businesses. There also needs to be a larger effort to make small businesses aware of what Ex-Im Bank can do for them. If it is American jobs that the Ex-Im Bank seeks to support, such reforms must be a priority. But to kill the Bank altogether is a bit like throwing the baby out with the bath water.