Reasons to Oppose the Ex-Im Bank, Part 2: Its Favors for Some Businesses Hurt Other Businesses
The Export-Import Bank’s charter expires on June 30. Unless Congress votes to reauthorize that charter, Ex-Im will soon cease to exist. This would be a major victory in the fight against corporate welfare. Ex-Im’s beneficiaries often tar their opponents as anti-American, anti-business, and anti-jobs. This series of posts will instead stick to the merits of the issue, which overwhelmingly favor closing Ex-Im, one argument at a time. For more arguments, see my recent paper. For the first installment of this series, see here.
The Export-Import Bank has given financing to more than 20 foreign airlines, many of them state-owned or state-supported. Ryanair, Air India, Korean Air, and fourteen other airlines have each received more than $1 billion in financing during the period 2000-13. Emirates Airlines saves as much as $20 million per plane purchased with Ex-Im financing, according to Congressional testimony by Delta Airlines CEO Richard Anderson. Air India, with Ex-Im’s help, was able to drive Delta out the Indian market entirely, costing Delta and related businesses up to 1,000 jobs.
Ex-Im does not engage in a great deal of direct lending. Instead, most of its activity consists of guaranteeing loans companies secure from third-party banks. If a foreign airline is unable or unwilling to pay back the third-party loan, Ex-Im will step in and repay it with U.S. taxpayer dollars. Ex-Im’s loan guarantees allow those airlines to secure extremely favorable interest rates, saving them a great deal of money. The quid pro quo, naturally, is that the airlines buy planes from Boeing instead of Airbus or Embraer.
Delta Airlines, understandably, is upset at the Export-Import Bank for giving direct assistance to its foreign competitors. They sued Ex-Im in 2011 and again in 2013, with Hawaiian Airlines and the Air Line Pilots Association joining as plaintiffs. Other domestic airlines probably have similar sentiments, but have been less vocal about it for various reasons.
No doubt some politicians will use this example to argue that Delta and other aggrieved companies should receive their own subsidies to balance out the favors Ex-Im does for its foreign competitors. A better policy would be for government to neither help nor hinder. Good companies that satisfy their customers will win out in the end.
Ex-Im’s activities don’t just harm domestic companies. They also harm domestic workers. In 2005, General Electric used a $3 million Ex-Im grant to move one of its factories from Bloomington, Indiana to Celaya, Mexico. “My taxes are paying to ship my job to Mexico,” quipped one of the 470 laid-off workers.
Ex-Im’s benefits to some companies are obvious enough. But those benefits come at a cost to other companies. This fact should be included in Congress’ calculus as it decides whether or not to continue the bank.