Another look at purpose of Ex-Im Bank

The News Tribune (Tacoma, Washington)
March 25, 2012 Sunday
BYLINE: BILL VIRGIN; contributing writer

In the annals of children’s appeals to their parents, none has been
used more and proven less effective than “everyone else gets to.”

In matters of public policy, however, it seems to work just fine.

That point is worth keeping in mind in evaluating multiple debates
over government-backed incentive and economic development programs,
starting with one of considerable interest in this corner of the world
– the Export-Import Bank.

Reauthorization of the Export-Import Bank is before Congress, but it
has run into opposition from the domestic airline industry, most
notably Delta, which argues that subsidized financing for foreign
carriers to buy American products lowers their cost of competing with
U.S. operators.

The American products those foreign airlines are buying are, of
course, Boeing planes. Not for nothing is Ex-Im called “Boeing’s
bank.” From 2007 to 2012, according to the bank’s own website, Ex-Im
backed more than $27 billion in loans in support of more than $62
billion in Boeing sales from Renton, Everett and Seattle. Dozens of
other Washington companies participated in Ex-Im financing programs
over that period, but none of them represented even $100 million in
activity over that period.

Not surprisingly, then, Ex-Im’s backers include senators from both
parties in states with sizable Boeing presence including Washington
and South Carolina.

The arguments in favor of not just keeping the bank but raising the
cap on its lending and guarantee capacity seems to boil down to these:
Jobs, “everyone else does it,” and “what’s the harm?”

The jobs argument is obvious enough, although critics question whether
export jobs would really disappear if the bank did.

“Everyone else does it” is true enough in that other countries
subsidize and support the export programs of their domestic countries.
Thus the challenge from bank proponents: Do you want to be the one
that unilaterally disarms in global competition?

As to the matter of “what’s the harm?” bank supporters note that Ex-Im
supports itself. Detractors might take note of how well getting
involved in housing finance has worked for the government or the
taxpayers now on the hook for losses. But there’s a larger issue of
harm, having to do with Ex-Im representing one more strand in a web of
cross-subsidies so complex and tangled that we have no idea who in our
economy is accruing what net benefits, never mind the big-picture
question of what anything truly costs, once the subsidies and support
are stripped out.

Whether it’s aircraft sales or housing finance or health care or
seaports, government involvement not just distorts the market but
twists it beyond recognition.

And for many voters, politicians and business leaders, that’s just
fine, so long as the participants reap the jobs, votes and tax breaks
they’re seeking or are promised. Even the suggestion of tweaking the
system is greeted with anguish and outrage. Large-scale reform, to
test the notion whether jobs, votes or financial competitiveness would
truly vanish in the absence of such programs? Unthinkable.

Ex-Im isn’t going anywhere. Too many people have too much of a stake
in seeing it maintained to do away with it. It may emerge from this
scrum with expanded lending and loan guarantee programs. If
Washington’s minor film-industry tax break, which expired last year,
managed a revival in this year’s legislative session, the continued
existence of a much larger, more visible and more politically
connected program such as Ex-Im seems assured. Especially when
everyone else is doing exactly the same thing. It’s as though parents,
taking their cues from Olympia and Washington, respond to the plea
that “everyone else gets to” skateboard off the roof or play with
firecrackers with the admonishment, “Well in that case, have fun!”

Bill Virgin is editor and publisher of Washington Manufacturing Alert
and Pacific Northwest Rail News.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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