Amid the national debate on trade policy, there’s a little-known executive branch agency that plays a significant role in U.S. companies’ ability to market their goods overseas but has sparked controversy in recent years.
What is it?
The Export-Import Bank (or Ex-Im Bank) was established in 1944 by President Franklin D. Roosevelt to serve as the official export credit agency of the U.S. and help American businesses export their goods and services. Here’s how the Ex-Im Bank describes its role:
“When private sector lenders are unable or unwilling to provide financing, EXIM fills in the gap for American businesses by equipping them with the financing tools necessary to compete for global sales.”
In other words, it guarantees loans needed for transactions between foreign buyers and American companies to occur that otherwise wouldn’t happen because of credit or country risks.
The Ex-Im Bank is self-funded through user fees it collects, but ultimately it’s backed by the full faith and credit of the U.S. government ― which means that taxpayers are liable for losses it incurs. As a result, it can only authorize transactions with a “reasonable assurance of repayment”.
Why is it controversial?
Critics of the Ex-Im Bank argue that it’s a form of “corporate welfare” because the companies benefiting the most from its activities are among the largest U.S. corporations. For example, in 2014 about 40 percent of the Bank’s authorizations benefited Boeing alone, as opposed to 25 percent for small businesses as a group.
Detractors also say the Bank is picking economic winners-and-losers with taxpayer dollars ― and sometimes those bets don’t pay off. According to data from USAFacts, a non-partisan civic data initiative, the Ex-Im Bank last operated at a net loss in 2010 when it was $262 million in the red. And it’s had worse stretches in recent decades, such as the three years during the 1980s in which it incurred an annual deficit of more than $1 billion.
Supporters of the Ex-Im Bank argue that it helps U.S. companies and workers compete in the global economy ― supporting more than 1.7 million American jobs over the last decade while operating at a default rate of less than 1%. It also has consistently turned a profit in the course of its business, sending an average annual profit of $293 million back to the U.S. Treasury between 2000 and 2015 per USAFacts.
What’s happening with it now?
The Export-Import Bank’s last reauthorization kept the agency open through September 2019 but marked a continuation of a heated debate over its future in Congress. Since 2016, the Bank’s board has been without a quorum because the Senate hasn’t confirmed enough board members, which prevents transactions valued at more than $10 million from being authorized.
While it’s not clear if the 115th Congress will try to reauthorize the Bank before it adjourns at the end of 2018, a bill introduced by Rep. Justin Amash (R-MI) would abolish the Export-Import Bank after winding down its operations over a three year period:
Should the Export-Import Bank be reauthorized or abolished? Hit Take Action to tell your reps and share your thoughts below!
— Eric Revell
(Photo Credit: iStock / thitivong)
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