OCT. 2, 2015 — Black Swan barbecue sauce and GE gas engines for heavy industry — two Midwestern products together in one sentence for the first time. Why? Because both are feeling the hurt from the shutdown of the Export-Import Bank.
If you like American competitiveness, manufacturing jobs or delicious ribs, read on: The Export-Import Bank of the United States, a government financial institution that supports American exporters, is under siege in Congress and may disappear if it isn’t reauthorized soon. That would be a frustrating, unnecessary loss for the American economy.
The bank’s been on ice since July, when conservative Republicans blocked its ability to conduct new business. The Ex-Im may be gone for good unless House Speaker John Boehner can figure out how to save the bank before he steps down Oct. 31. If the next speaker is House Majority Leader Kevin McCarthy of California, the bank’s chances for survival grow dimmer. He supports closing it.
The debate is about philosophy, not performance. The Ex-Im’s loans have a tiny default rate. It is profitable, meaning it returns money to the Treasury each year. The bank makes loans, guarantees private loans and provides credit insurance to exporters. Many of the loans go to foreign customers that want to buy American. These companies, in the market for big-ticket items like compression engines or airplanes, comparison shop between, say, an American manufacturer backed by the Export-Import Bank and a Chinese manufacturer backed by China’s export bank. May the best product win.
What happens if the Export-Import Bank goes out of business? Here’s a clue: GE said this week it plans to shift a gas engine plant, and 350 jobs, from Waukesha, Wis., to Canada, so global customers will be able to get financing from Canada’s export bank. A few weeks ago, GE said it was shifting 500 turbine and generator assembly jobs from the U.S. to Europe and China because of the bank shutdown. Boeing said several hundred California jobs are imperiled because a customer needing Ex-Im financing canceled an order.
“In a competitive world, we are left with no choice but to invest in non-U.S. manufacturing and move production to countries that support high-tech exports,” said John Rice, a GE vice chairman.
GE and Boeing are, by far, the two biggest customers of the Ex-Im and two of the biggest targets of Ex-Im critics, who say big companies should arrange their own financing. They see the bank as an example of crony capitalism, an intrusion in private markets and a risk for taxpayers. GE and Boeing are fighting back, and maybe they’d change their minds about the announced job losses if the bank is preserved.
Here’s why the Ex-Im matters: It fills a crucial niche for both big companies and small businesses. Commercial banks often avoid the export market, or charge extra, because of the unique risk factors and paperwork demands. Many international transactions are privately financed, but for 10- or 15-year loans on construction projects or big capital equipment purchases in dicier parts of the world, government loans or guarantees are often needed. If the Export-Import Bank isn’t around, would-be customers will go elsewhere. (“Hello, Beijing? I’d like to apply for a loan.”)
Small guys rely on it too. Max Good, who runs Black Swan BBQ from a home office in suburban Dundee, exports his sauce to Brazil and Costa Rica. He’s worried because a foreign customer who wants to pay on delivery represents a cash-flow risk he covers through insurance. The Ex-Im Bank handles that business at such a bargain rate Good couldn’t even remember the premium cost. With the bank sidelined, he got a quote for commercial insurance: $10,000 a year.
“I get frustrated with this situation,” he told us. “It seems to me the very people who are causing this, the anti-government people who want smaller government, they tend to also be the ones who say, ‘We want to support local business.’” The Ex-Im Bank, he said, “is how we create jobs.”
So come on, Congress. Support American jobs, and American barbecue sauce. Support the Export-Import Bank.