Political Talk on Export-Import Bank Needs a Reality Check

CORNELL UNIVERSITY MEDIA RELATIONS OFFICEOct. 26, 2015

Political talk on Export-Import Bank needs a reality check

Newswise — House members from both the Republican and Democrat party are sponsoring a bill to re-open the Export-Import Bank, a federal lending institution that subsidizes American exports. While the trade bank’s mandate is to help American businesses face a global economy, critics say its practices mainly boost multi-national corporations.

Steven C. Kyle, an expert in macroeconomics and government policy, is an economics professor at Cornell’s Dyson School of Applied Economics and Management. He says that considering the bank’s practices a form of “corporate welfare” misses the point.

Kyle says:

“There are many politicians out there who would like to imagine that the world of international trade is one where the rules of free markets apply. However pleasant that thought might be, it is not the world we actually live in.

“Here in the real world there are competitors who would be happy to use local exports-imports banks to steal deals from the United States. This is particularly true in the case of aircraft manufacturers, where Boeing’s main competitor – Airbus - can offer export credits and financing. Thanks to the French government, Airbus can also seal a deal that we cannot because of lack of financing and guarantees. “The Export-Import Bank likes to tout its service to small businesses. While that is undoubtedly true to some extent, the basic problem that the bank helps solve is one faced by large and small companies alike. How do exporters finance sales abroad when commercial banks refuse to lend because of lack of domestic guarantee or collateral? Solving this problem may look like “corporate welfare” to some, but in reality it is the difference between the business going to our corporations or to foreign ones abroad. “Unfortunately, the failure to renew the Export-Import Bank has caused some damage that won’t be reversed no matter what happens now. Once factories leave they don’t come back. Congress has made it crystal clear that depending on the Export-Import Bank is a risky proposition and it will take many years to erase that perception. After all, the authorization could be up for debate in another year or two even if Congress reverses course and renews it tomorrow. “It is unfortunate when ideology trumps reality but that seems to be what has happened to the Export-Import Bank.”

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