Tea Party Divided by Export-Import Bank

William Schubert, president of a small infrastructure export firm outside Houston, identifies himself as a Tea Party Republican. Credit Michael Stravato for The New York Times

Their mission: to rid the firebrand Republican senator of his ardent desire to kill the federal Export-Import Bank, which they said would greatly harm the export-driven small businesses that Mr. Cruz of Texas often extols.

The result: failure.

“At the end of the meeting, there were a lot of angry Texans there,” said Mr. Schubert, who identifies himself as a Tea Party Republican. “We didn’t come there to talk the talking points. We were there to talk the complexities of international trade.”

Senator Ted Cruz of Texas. CreditAlex Wong/Getty Images

In the last two weeks, the battle over whether to save it or let it die has begun in earnest.

For conservatives, frustrated by their failure to overturn the Affordable Care Act or stop President Obama’s immigration policies, killing the Export-Import Bank has taken on enormous importance. They do not have to overcome a presidential veto or beat a Democraticfilibuster. They simply have to refuse to bring it to a vote. Republicans have no excuse, warned Michael A. Needham, chief executive of Heritage Action for America, one of the groups demanding the bank’s demise. “All Congress has to do is nothing, which they have proven themselves to be pretty good at,” he said.

The business leaders who seek a reprieve, many of them Republicans, are in disbelief and are promising retribution.

“Crony capitalism, crony capitalism, that’s all they ever say, over and over again,” said Randy Barsalou, a Republican and an owner of BCH Trading Company, a small lumber exporter in Hot Springs, Ark. Mr. Barsalou is pressing his state’s congressional delegation to support the bank. “If my guys don’t get behind this, I can tell you I won’t be voting for them,” he said.

For Republican lawmakers, the calculation is that killing the bank is not likely to hurt them politically. Powerful business groups like the U.S. Chamber of Commerce and the National Association of Manufacturers might say they ardently support the Export-Import Bank, but other Republican positions on low taxation and light regulation will keep them from exacting a price on Republican lawmakers for the bank’s death. That is one reason Republican presidential hopefuls like Jeb Bush, the former governor of Florida, who once supported the bank, and Gov. Scott Walker of Wisconsin have recently joined Senators Cruz, Rand Paul of Kentucky and Marco Rubio of Florida in embracing its demise.

Still, the chamber, the National Association of Manufacturers, the Aerospace Industries Association and 46 other business associations assembled the Exporters for Ex-Im Coalition. The coalition flew in more than 650 small-business leaders, suppliers and local chambers of commerce members for 400 meetings with representatives, senators, staff members and committee aides on Capitol Hill on Feb. 25.

On Jan. 28, Representative Stephen Fincher of Tennessee introduced legislation to reauthorize the bank for five years, gathering 57 Republican co-sponsors. Heritage Action responded last month with automated telephone calls in the districts of 31 of those Republicans, blasting them for supporting “a slush fund for corporate welfare.”

Business groups and the bank’s biggest beneficiaries, like Boeing, General Electric and Caterpillar, have hired lobbyists and consultants. Conservative groups like the Koch brothers’ Americans for Prosperity are rallying the Tea Party grass roots.

Starting this month, Americans for Prosperity has committed to spending “well into the six-figure range” to kill the bank, said Levi Russell, a spokesman for the group. That will go for television and digital advertising, phone banks, direct mail and activist visits to lawmakers’ Capitol Hill and district offices. The targets are 93 House Republicans who they see as willing to block action on the bank’s reauthorization, enough to commit a majority of the Republican majority to the bank’s demise.

“Before, there were two kinds of people: people who didn’t know it exists and people who love it because they use it,” Mr. Russell said of the bank. “This year, the education component is done. We’re now in position to ramp up the grass roots side.”

Randy Barsalou, an owner of a lumber exporting company, is pressing for support of the bank.Credi tJacob Slaton for The New York Times

So will Club for Growth, a well-financed conservative political action committee, which vowed on Wednesday to back any members of Congress who opposed the Ex-Im Bank if they were attacked by any establishment groups.

On the day of the pro-bank “fly-in,” Representative Jeb Hensarling of Texas, chairman of the House Financial Services Committee, which has jurisdiction over the bank, wrote a letter to all Republican members proclaiming his opposition to its reauthorization and, in effect, telling them not to listen to the business leaders at their doors. Less than 1 percent of 1 percent of small businesses benefit from Export-Import Bank, he wrote, while American taxpayers’ money goes “to help foreign corporations, including businesses that are owned by the governments of China, Russia, Saudi Arabia and the United Arab Emirates.”

“The best way to level the playing field for American exporters and manufacturers is not with taxpayer subsidies, guarantees and politically driven lending, but instead with more opportunity,” he wrote. “A pro-growth agenda — including fundamental tax reform, American energy independence, cutting burdensome red tape and reducing abusive lawsuits — will do more to help our exporters, manufacturers and small businesses than the Export-Import Bank ever could.”

The business leaders who use the bank say they are baffled at such vehemence. The bank operates on fees it charges its users and, so far, has made money for the government. More important, it has created jobs — many of them. The bank contends that through its export financing, it has helped maintain 1.2 million private sector jobs since 2009.

Acrow Corporation of America makes the modular, prefabricated bridges that helped win World War II and now proliferate in developing nations. But customers in countries like Cameroon and Zambia cannot readily get private bank loans for large infrastructure projects without backup. European and Chinese competitors have their own government-backed export credit agencies. Acrow, which is based in Parsippany, N.J., has the Export-Import Bank, said Paul Sullivan, the company’s director of international business development.

“We are already hearing from customers that our competitors are in their offices saying, ‘You cannot rely on an Acrow bridge deal because their financing mechanism is not likely to stay alive,’ ” Mr. Sullivan said. He suggested that the death of the bank would cost 200 jobs, many at Acrow’s manufacturing plant in Pennsylvania. “For us to pull another arrow out of our quiver, it’s irrational, it’s terrifying and it’s inappropriate when one considers the reality of the global marketplace today.”

Mr. Barsalou of BCH Trading uses the Export-Import Bank differently. To finance lumber exports, his company needs upfront cash that customers in Greece and Egypt will not provide, nor will his Wells Fargo Bank, without the Export-Import Bank’s guarantee.

“They say banks should do that,” he said, referring to opponents of the Export-Import Bank. “Well, banks don’t do that, and that’s the reality.”

To the bank’s opponents, such opinions are almost beside the point. Supporters might trot out small-business owners like Mr. Barsalou, but the bank’s big efforts are on behalf of big companies. It is, after all, derisively called the Bank of Boeing.

“I have no doubt Boeing, G.E. and Caterpillar will continue to thrive as great American companies if Ex-Im goes away,” Mr. Needham, of Heritage Action for America, said.

Mr. Hensarling, the chairman of the House Financial Services Committee, has taken to posting the “Egregious Ex-Im Bank Deal of the Day,” like one aiding mining projects in the Democratic Republic of Congo, which he said one human rights group had labeled the “rape capital of the world.”

Mr. Russell, of Americans for Prosperity, said, “Sometimes when you’re the beneficiary of something that’s helping your business, you personally, it’s hard to look at something objectively.”

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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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