For the last one year, the Export-Import Bank has been unable to approve a single transaction exceeding $10 million in value. Consequently, 30 deals of a cumulative amount of more than $20 billion are stuck, awaiting the appointment of the third member of the bank’s five-person board.
Currently, the bank can only approve transactions less than $10 million each. Although these make up 98% of applications to the bank, they account for only a third of the dollar value. A number of large American companies including Boeing, G.E., Caterpillar, Westinghouse, and John Deere are unable to get export orders as the Ex-Im Bank can no longer help finance foreigners’ purchases.
Why is the government-owned Ex-Im Bank unable to fulfil its mandate to support the country’s exporters? A report in the New York Times explains that Senator Richard Shelby, Republican of Alabama and chairman of the Senate Banking Committee, stonewalled the appointment of the third member of the Ex-Im’s board. Till this appointment is made, the bank does not have the authority to approve transactions in excess of $10 million.
A statement issued by Richard Shelby’s office explains that the senator “believes that his actions are in the best interest of the American taxpayer.” The statement continues, “Nearly 99% of all American exports are financed without the Ex-Im Bank … which demonstrates that the bank is more about corporate welfare than advancing our economy.”
Last year, in June, the Ex-Im Bank actually downed its shutters temporarily when a section of conservative Republicans did not allow its charter to be renewed. At that time, the bank’s chairman, Fred Hochberg, had pointed out that other countries were promoting industry and employment within their borders by backing their own equivalent of the Ex-Im Bank.
China’s agencies have done business of $670 billion in the last two years alone. This figure dwarfs the estimated $27.5 billion done by the U.S. Ex-Im Bank in 2014. The Ex-Im Bank has an 81-year history and was the first major institution promoted by a government to act as a lender for the buyers of a country’s export products. But today there are 85 agencies like the U.S. Ex-Im Bank around the world. Each is trying to promote manufacturing activity within its own country.
America’s top companies have found a way out of this impasse. They are shifting manufacturing and jobs out of the country to locations where the government is more helpful. Recently G.E. has decided to move its gas turbine manufacturing facility to France from Greenville, S.C., as the French government is willing to provide financing for sales to Saudi Arabia, Brazil, and Mexico.
G.E. has also moved 500 power-project jobs from Texas, South Carolina, Maine, and New York to France, Hungary, and China. Manufacturing activity has also been shifted to Britain and Canada.
John G. Rice, G.E.’s vice chairman says the company is largely unaffected as it has the option to continue shifting its factories out of the country. But moving manufacturing plants out of America means fewer job opportunities for the country’s workers. In addition to this, downstream suppliers are adversely affected as they cannot follow G.E. to other countries.
Referring to Senator Shelby, Mr. Rice says, “It’s very troubling to me, and I think a lot of others, that one person can hijack a process and keep the export credit agency from functioning in the United States when two-thirds of Congress support it.”
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