Despite being the world’s leading exporter, the U.S. spends over 3 billion tax dollars annually on export promotion activities. The most egregious member of federal government’s confederacy of dunces is easily the Export-Import Bank of the United States, the Eximbank.
With a nearly $900 million budget, the Eximbank provides several means of export finance:
- subsidized loans to foreign purchasers of U.S. products;
- loan guarantees to support loans made by private sector banks to foreign purchasers of U.S. products;
- loans and guarantees of working capital for U.S. producers seeking to enter export markets;
- subsidized project finance, loans or guarantees by banks to finance foreign infrastructure projects in developing countries.
Despite these programs, the vast majority of U.S. exporters owe none of their success to Eximbank finance. Small businesses typically shun Eximbank programs due to the delays in processing the indeterminable red tape.
Some industries do benefit from the Eximbank’s programs, most notably the aviation industry. In fact, the Eximbank’s critics often refer to it as “Boeing’s Bank.” The Eximbank is corporate welfare with a fancy name. If foreign government purchasers of U.S.-made aircraft are creditworthy, private sector banks ought to finance the transactions. A country with two-thirds of the world’s market share cannot be suffering from market failure.
The Eximbank is a component of the Clinton administration’s National Export Strategy (NES), an aggressive foray into industrial policy and central planning. It empowers the federal government to target and develop:
- Big Emerging Markets — Mexico, Argentina, Poland, Brazil, China, Indonesia, India, South Africa, South Korea and Turkey;
- Big Emerging Sectors — aerospace, telecommunications, information technologies, environmental technology, medical equipment and infrastructure industries.
Under a new “green” agenda, special consideration must be given to ecologically-friendly exports — demonstrating that the Eximbank is driven by political pressures and not sound lending practices.
In the final analysis, Eximbank financing does not determine success in the global marketplace. Created in 1934 to facilitate trade with the Soviet Union, the Eximbank is a government agency masquerading as a market-based financial institution. Sixty years later, the Eximbank should follow the lead of its first customers, and go out of business.