Non-authorization of EX-IM Bank Impacts U.S. Economy
President Franklin D. Roosevelt created the U.S. Export-Import (EX-IM) Bank in 1934 as part of his New Deal to finance and insure foreign purchases of U.S. products. But despite filling export financing gaps through its loan guarantee and insurance programs for 81 years, the federally-backed bank’s future is uncertain.
Congress allowed EX-IM’s lending authority to expire on June 30 as Tea Party Republicans seeking to limit government intervention in the free market assert the bank chose winners and losers by deciding which companies are approved for loans and insurance.
Due to the lapse in its authority, EX-IM is no longer processing new applications or engaging in new business, and is now focusing on its $107 billion portfolio until it is reauthorized.
According to EX-IM, it backed $27.5 million in exports in 2014, which is about two percent of the U.S. total. The institution also added that small business exports represented more than $10 billion of that total. And in the past six years, the Bank has financed the sale of more than $200 billion in U.S. exports, supporting over 1.3 million private-sector American jobs.
President Obama is among the bank’s supporters, noting that EX-IM supported about 164,000 jobs in 2014, and that it places the U.S. on an equal footing with foreign nations that insure and export their products.
EX-IM’s seaborne shipping policy is that most products insured by the bank should be transported on U.S.-flagged vessels. This includes direct loans of any amount, guarantees above $20 million and products with repayment periods of more than seven years.
Many of the bank’s political supporters have argued that cargo preference laws for U.S. vessels is a cost-effective way to support the nation’s commercial fleet. Cargo preference is one of the ways that U.S. deepwater fleet and U.S. merchant seaman are maintained. The U.S. deepwater fleet supports military operations around the world.
Earlier this week, General Electric (G.E.) stated that it would move 500 jobs overseas in response to EX-IM non-authorization. G.E. intends to move about 400 of those jobs to France, whose export credit agency has already offered financing services. The remaining 100 jobs will be relocated to Hungary and China. The jobs are shifting away from Texas, New York, Maine and South Carolina.
While most developed nations have an export credit agency, China appears to be the country most likely to gain if EX-IM is not reauthorized. According to a White House release, the majority of global official export credit agency activity remained flat in 2014, China’s grew by over 40 percent.