Friends of the Export-Import Bank of the United States are pushing to get the institution a new charter that would extend its operations through fiscal 2014. It would seem to be an easy task, given the amount of economic good the bank has done.
The Ex-Im Bank set a record in 2011, supporting $32.7 billion in export transactions. It provided assistance to more than 3,200 exporters employing nearly 300,000 workers. It’s a critical element in President Obama’s drive to double exports in five years, and create 5 million jobs.
But the bank’s 2006 charter expired on Sept. 30, 2011. Supporters thought a new charter would breeze through Congress. It didn’t. The Ex-Im-Bank, for all its work, is caught in a contradictory tangle where congressional conservatives charge the bank is undermining U.S. businesses while applauding its basic mission to create jobs through promoting exports.
A new charter was supposed to be part of an omnibus appropriations package Congress approved before it adjourned for the holidays, but a federal lawsuit to block a $3.4 billion Ex-Im Bank deal with Air India caught the attention of the House Republican leadership. They pulled the bank’s charter from the bill, instead giving it an extension to May 31.
Members of Airlines for America, formerly the Air Transport Association, sued the Ex-Im Bank in November to block Air India’s purchase of Boeing airliners. Nine of the association’s 14 members, led by Delta Air Lines, complained the deal put U.S. carriers at a competitive disadvantage. A federal judge in Washington dismissed the case on Jan. 13, saying the airlines failed to show they would be irreparably harmed if the deal went through. Airlines for America members indicated they would appeal.
The airlines are trying to force the Ex-Im Bank to disclose information and conduct economic impact analyses on each transaction to see if U.S. companies would be harmed, said John Hardy Jr., president of the Coalition for Employment Through Exports.
“They are seeking additional information that would otherwise be considered confidential,” said Hardy, whose nonprofit organization promotes education on legislative and regulatory issues affecting export finance and assistance programs. “Our argument is that the bank is doing what its charter says.” By weakening the bank’s ability to underwrite an export by Boeing, “the only thing you’re doing is helping Airbus. How does that help Delta?”
Boeing is a member of the CEE, along with other major exporters such as Caterpillar, Deere, General Electric, Fluor, Lockheed Martin and Westinghouse.
The airlines’ focus is on the aircraft industry, but they ignore the effect on the bank’s other customers, Hardy said. “What about Caterpillar, GE and all those other companies that are not involved in the aircraft industry? Their ability to export is hurt, too,” he said.
The longer Congress takes to renew the bank’s charter, Hardy said, the greater the danger it won’t be able to serve all customers. The bank now has a lending cap of $100 billion and is requesting a $140 billion cap in its new charter. The CEE estimates the bank’s outstanding obligations are about $93 billion and growing at the rate of $3 billion a month. The Ex-Im Bank will have to start rationing its funds as it pushes closer to its cap.
The bank also is required to set aside 20 percent of its resources for small businesses. That means the biggest customers will feel the squeeze first. “They’re going to try to level it out, but they’ve got to keep room for the little guy,” Hardy said.
Exporters also don’t have the option of turning to another traditional source. “The European commercial banks are normally very comfortable and very aggressive in export finance, but because of the European debt crisis, they have all pulled back,” Hardy said. “So who do the big exporters turn to? They turn to Ex-Im. Now they’re saying, ‘What are we going to do?’ We have this cap problem, and we don’t know how fast this reauthorization is going to go forward.”
The CEE is leading a coalition of trade groups to push for the Ex-Im Bank’s renewal. The question is where the bank stands on the congressional leadership’s priority list. Will it get a quick trip into law, or wait while lawmakers wrestle over other issues such as extending payroll tax cuts.
“At the end of the day, this is going to get reauthorized. It’s about growing the economy, and it’s about jobs. These would seem to be the two easiest selling points that you could possibly make, which is why what happened in December remains very peculiar,” Hardy said. “We have found that when we sit down and go into detail about the competitive environment, and the consequences in terms of loss of exports and lost jobs, everybody gets it.”