Congress is back from its annual August recess. One of the top items on its agenda is reauthorizing the Export-Import Bank, which has an expiring charter on September 30. Called Ex-Im for short, the agency provides loans guarantees and other financing for U.S. exporters and their customers abroad. Though a relatively small agency, it has come under fire in recent years for dozens of corruption allegations and too-cozy relationships with large businesses such as Boeing and General Electric. The agency should be shut down, but will likely be reauthorized in a bill from Sens. Kevin Cramer (R-N.D.) and Kyrsten Sinema (D-AZ).
Ex-Im’s goal is to increase U.S. exports. But Ex-Im turns out to be ineffective and likely counterproductive to many of its advocates’ goals. Conservative opposition to Ex-Im’s last reauthorization in 2014 led to the agency virtually shutting down for nearly a year. It then operated at about a sixth of its usual capacity until May of this year. As Mercatus Center economist Veronique de Rugy points out, nobody noticed.
Exports increased by $128 billion during Ex-Im’s hiatus. Boeing, which alone accounted for about half of Ex-Im’s business in most years, reported record profits. Its CEO told shareholders the company had no trouble securing alternative financing for projects Ex-Im traditionally would have covered, debunking one of Ex-Im supporters’ strongest arguments—that Ex-Im will go where the private sector won’t.
The Ex-Im fight has been one of the greatest pro-market victories in recent years. Total Ex-Im activity from 2014-2018 was about $47.9 billion less than previous levels, shielding taxpayers from nearly $12 billion of risk exposure per year. Ex-Im’s $110 billion portfolio shrank by $52 billion, reducing taxpayer exposure by $13 billion per year. Those savings will disappear when Congress likely reauthorizes Ex-Im later this month.
It is not too late to add reforms to the bill. Currently, any Ex-Im transaction larger than $10 million must be approved by at least three of its board members. These account for roughly five-sixths of Ex-Im’s business. The major source of Ex-Im savings over the last four years has been the Senate’s refusal to confirm new members to replace expiring board terms. This is the legislative branch saying to the executive branch that its behavior is unacceptable and using its power of the purse to address the problem.
The Ex-Im reauthorization bill would do away with this quorum requirement and, with it, an important democratic check on executive power. This short-sighted move to benefit a few favored big businesses is another step in a long-term process of executive power arrogation. At the very least, reformers need to strip this provision out of the bill.
Rather than the ten-year proposed reauthorization period, Congress should also revisit this flawed agency in three years. Ex-Im uses its own boutique accounting standards to show a profit, whereas the Congressional Budget Office found that Ex-Im likely makes a loss under rules the rest of the federal government and most of the private sector use.
Ex-Im’s portfolio limit should be capped at its current size of about $60 billion rather than increased to $175 billion, since Ex-Im has no visible benefits to export levels. A ten percent cap on how much of Ex-Im activity can benefit a single business would help prevent Boeing or another company from capturing Ex-Im to the extent seen in the past. Ex-Im also has a quota for sponsoring green energy projects, which are especially prone to corruption, as Ex-Im’s involvement in the Solyndra scandal showed.
Finally, an underappreciated point is how Ex-Im can make some U.S. businesses less competitive. When Ex-Im offers favorable financing for a foreign airline to buy a Boeing plane, that airline often directly competes with U.S. airlines such as American, United, or Southwest. Often, Ex-Im can only help one U.S. business by hurting others. Besides being zero-sum, this opens up a fierce lobbying game with predictable ethical consequences. The Trump administration supports Ex-Im as part of its larger trade agenda. In practice, Ex-Im turns out to undermine it.
While Ex-Im’s reauthorization this month is all but inevitable, principled members of Congress should at least add in reforms to a reauthorization bill that gives a corrupt agency and the politically-connected businesses it supports everything it wants, and more.
Originally published at CNS News.