If you think liberals are having a hard time adapting to the Trump presidency, you should hear what some conservatives are saying. Neocons and free-trade purists are in utter agony, because the new president insists on dealing with the world as it is, rather than as they would like it to be.
A case in point is the dwindling band of Export-Import Bank critics who think America should be the only major trading nation without an export credit agency. "Ex-Im," as it is often called, is a government agency that helps overseas customers for U.S. goods to arrange financing. When a prospective customer can't find a private-sector lender to extend credit, Ex-Im steps in to guarantee the money will be paid back, so the deal can occur.
This is not a hard concept to understand. Many commercial banks are wary of lending to countries with a history of recent economic or political turmoil. The main role of Ex-Im, which almost always works through private banks and lenders, is to reduce the risk they must assume to tolerable levels. Over 80 export credit agencies in other countries provide similar services, and some of them (like China's) are quite aggressive in promoting the products of their country.
But that isn't good enough for the free-trade zealots. They claim the Export-Import Bank distorts market forces by passing out subsidies to a handful of favored companies like Boeing and General Electric. Here's an example of their argument, penned by Timothy P. Carney of the Washington Examiner on February 28:
If any of this were true, it might make sense for the Trump administration to review Ex-Im activities. However, there are no subsidies. All the credit, loans and other benefits Ex-Im provides must be paid back with interest, and that interest covers the costs of Ex-Im operations. So the bank doesn't cost taxpayers a cent, and actually generates a profit for the government. In fact, it has reduced the federal deficit by nearly $4 billion over the last eight years.
The reason Boeing customers are big users of Ex-Im credit is that Boeing is the last surviving U.S. producer of jetliners, and its planes generally sell for $100 million or more. There used to be several U.S. builders of jetliners, but all of Boeing's domestic rivals were forced out of the business by the appearance of Airbus, which the World Trade Organization now says has received illegal trade subsidies for every plane it offers. No kidding, without those illegal subsidies from European governments, Airbus might not exist at all.
What's really perverse about the case Ex-Im Bank critics propound is that they focus on subsidies Boeing doesn't actually receive, while ignoring the subsidies its overseas rival does. How myopic is that? Boeing contributes to my think tank, so I've been listening to its executives complain for years about all the business they are losing to unfair competition from subsidized foreign plane makers.
But here's another way in which the critics seem totally detached from reality. Although Boeing sells 70-80% of its jetliners overseas, every one of them is built at company plants in the U.S. And guess who provides most of the content in those planes? Thousands of small and medium-size suppliers who are also located mainly in the U.S. Every time Boeing sells a 737 or 777 overseas, thousands of workers at small and medium-size businesses in the U.S. benefit.
The same is true of other big exporters of capital equipment, like General Electric and Caterpillar. The supply chain for their locomotives and trucks and medical equipment is located near their plants, which means mainly in the U.S. And that's before we even get to the many small and medium-size exporters that Ex-Im Bank helps directly. There are over a thousand of those in Texas alone.
So it is easy to see why President Trump has decided he supports Ex-Im Bank, just like every chief executive from Roosevelt to Eisenhower to Reagan to Bush has since its founding over 80 years ago. Americans can't compete in global trade if every other trading nation is helping its exporters to secure financing, and Washington is not. This isn't a theory, it's just common sense. Which means the efforts of Ex-Im critics to hobble the bank are undermining President Trump's campaign to rebuild American competitiveness.