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Study Debunks Ex-Im Bank as Favoring Big Business

A new study counters criticism of the Export-Import bank, the official credit export agency of the U.S., as favoring large business with data showing the bank overwhelmingly supports small and mid-size businesses.

The report comes at a crucial time for the bank; its fate now lays in the hands of Congress, as it decides whether or not to renew its charter set to expire in September.

The study found that, by sheer number of authorizations, Ex-Im Bank supports small businesses at a disproportionately higher rate. In 2013, Ex-Im bank authorized 3,412 small businesses—a total of 89 percent of all of Ex-Im’s authorizations.

The debate surrounding the bank is highly fractured and does not align evenly along party lines.The bank’s critics argue that it represents a type of capitalist favoritism—one that serves the needs of certain large corporations at the expense of other American businesses.

But the new study by the American Action Forum says “the data do not support the notion that Ex-IM’s pattern of activity is more politically-driven than market oriented.”

In fact, the results countered much of this criticism by establishing that Ex-Im’s influence is disproportionately supportive of small and mid-sized businesses, and that the bank’s operations are reflective of U.S. trade in general—with much of the support centering around smaller businesses.

The study challenges critics’ rudimentary distinctions between small and large businesses, noting that “networks of small businesses comprise supply chains of larger firms, which not only produce the vast majority of U.S. exports but also seek Ex-Im financing when facing fierce competition from foreign ECAs.”

Supporters of the Ex-Im bank point to its record in generating and maintaining jobs during the financial crisis, as well as positioning the U.S. to be a powerful competitor in global trade. Loans from Ex-Im have directly supported more than 200,000 U.S. jobs, and since 2009, the bank has indirectly contributed to the growth of more than 1.2 million domestic jobs.

Fred Hochberg, chairman and president of the U.S. Export-Import (Ex-Im) Bank, speaks during a House Financial Services Committee hearing on the
Ex-Im Bank reauthorization in Washington, D.C. Photo: Andrew Harrer/Bloomberg via Getty Images

“Since the financial crisis, the Ex-Im Bank has helped over 1,000 Texas companies finance $19 billion in exports. More than half of these exporters were small businesses,” according to an article in The Houston Chronicle. “Nationwide, the Ex-Im Bank supported $37.4 billion in U.S. exports and 205,000 jobs in 2013.”

But in a strongly worded Op-Ed, the editors of the Wall St. Journal pushed back on those claims, saying “Congress requires Ex-Im to finance small business and purports to create jobs. Congress has layered mandates on the bank to support women- and minority-owned businesses, green companies, and firms in sub-Saharan Africa. But the bulk of its business is with very large corporations.” Further, the piece claims that how the bank counts jobs is “opaque,” citing a GAO study that called for the institution to increase its reporting transparency.

“Failure to reauthorize Ex-Im would amount to unilateral disarmament in the face of other nations’ aggressive efforts to help their exporters,” Republican congressmen Charles Boustany and Chris Collins wrote in a letter, according to POLITICO. “Given our nation’s fragile economic recovery, we must continue to promote U.S. exports and create American jobs and not disadvantage U.S. manufacturers in a competitive global marketplace. This is a program that generates not only exports and jobs, but also much needed revenue for the federal government.”

Even though some factions of the Republican party claim the Ex-Im Bank is nothing more than an exercise in federal overreach, studies and experts have concluded that restoring the bank’s charter will not add any additional burden to the taxpayer.

But that’s not the view of the proclaimed taxpayer grassroots group Americans for Prosperity, which is staunchly against reauthorizing the bank. “Hardworking taxpayers are already struggling to maintain their household budgets, so it’s no surprise that they don’t want their hard-earned tax dollars funding this corporate welfare scheme that only benefits the politically connected,” said AFP President Tim Phillips in a statement.

“The Ex-Im Bank doesn’t cost taxpayers a dime—it is self-sustaining and returns money to the U.S. Treasury—more than one billion dollars in 2012 alone,” according to an article in BreitBart. “Because highly valued manufactured goods are part of the collateral for the loans, the risk is very low even in the event of a default.”

And in order for the U.S. to remain competitive, the bank’s supporters also raise attention to the much higher levels of support generated by other nations. For example, both South Korea and China, two of the emerging market’s most formidable players, provide two to three times more support to their exporters than the Ex-Im Bank. In Europe, much the same is happening, with countries like Germany, Italy, and France providing more financial support in terms of GDP and total export percentage.

While the new study presents data and analysis that supports the renewal of the Ex-Im Bank, it does so with the caveat that reforms will be necessary.

“Reauthorizing the bank with reforms provides a chance for policymakers to streamline the bank’s functions, limit distortions, continue to add safeguards to protect taxpayers, and add transparency to bank operations,” according to the study.

Study Debunks Ex-Im Bank as Favoring Big Business was originally published on Ideas Lab

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