Complaining that the US Export Import bank is government subsidy of private business…well it is in a way…but not that much different than the thousands of grants, loans and tax credits provided by government agencies around the nation to secure local business and jobs…Congress let the charter expire June 30, 2015 and then hot footed it out of town. Since then they have shown little interest in reauthorizing it.
But it looks like some of their bigger constituencies might be unhappy.
General Electric for instance announced that the lack of the Export Import Bank may cause them to move 500 jobs abroad in order to stay competitive:
General Electric Co. said Tuesday that it may move about 500 jobs overseas because Congress did not renew a government program that allows foreign companies to borrow money to buy U.S. products.
Authorization for the U.S. Export-Import Bank was not approved by Congress, forcing it to stop lending July 1. Foreign companies use the agency to buy expensive U.S. products when bank loans are not available.
As a result, GE says 100 jobs from a Houston plant that makes gas turbines will move to Hungary and China in 2016. The Fairfield, Connecticut, industrial conglomerate says those countries have lending options in place for customers.
“We do not make today’s announcements lightly and in fact, have done everything in our power to avoid making these moves at all, but Congress left us no choice when it failed to reauthorize the Ex-Im Bank this summer,” said John Rice, GE’s vice chairman.
Another 400 jobs could be created in France instead of factories in South Carolina, Maine and New York if the company wins projects it is bidding on. The projects require financing, and the export-credit agency in France has agreed to provide it.
Democrats in Congress, citing GE’s announcement, urged Republican leaders to introduce legislation to get the Ex-Im bank operating.
And then there’s Boeing:
In 2014, 14% of Boeing’s total orders were to customers backstopped by Ex-Im guarantees, totaling billions of dollars in business. For its part, in that same year Ex-Im issued $20.5 billion in guarantees, making $675 million in the process.
With Congress on summer recess and the Export-Import bank lapse dragging on, Boeing gambles on a more forceful approach to influencing lawmakers
In the months leading up to an expected vote to reauthorize the U.S. Export-Import bank, Boeing BA -2.15% did what large corporations with lots of cash and deft political maneuvering skills often do so well. It spoke softly and lobbied hard, scattering a few pro-Export-Import soundbites from high-ranking officials where members of the media would find them and while spending millions on those representing its interests on Capitol Hill.
But on June 30 Congress let Ex-IM (as the agency is often called) expire without renewal. Compounding Boeing’s misery and defying the predictions of many pundits, Congress then broke for August recess without taking up Ex-Im’s renewal again. Without a vote, Ex-Im—which guarantees loans for foreign customers to buy U.S. goods like Boeing aircraft—remains unauthorized.
Now, with Congress out of session and Ex-Im increasingly a political football, Boeing and pro-Ex-Im allies like GE are changing tack, lashing out vocally, pulling political donations from opponents of the credit agency, and threatening to move American jobs overseas if Ex-Im isn’t renewed.
A more assertive Boeing signals a change in tactics for the supporters of Ex-Im, which include the U.S. Chamber of Commerce and other major U.S. corporations like General Electric GE -0.68% and Caterpillar (GE CEO Jeff Immelt has also threatened to export jobs if Ex-Im is not reauthorized). And as members of Congress entrench themselves for the upcoming political cycle, the question is whether Boeing’s heavy-handed approach will pay off.
“I didn’t expect them to double down on it the way they have,” says Richard Aboulafia, vice president of Analysis at Teal Group. “Originally they did the usual end-of-the-world-as-we-know-it, cats-and-dogs-living-together-in-sin kind of talk to motivate renewal. But I thought when they didn’t get that they would say ‘it’s not that bad, our business is sound.’ Instead they’ve been doubling down on the apocalypse.”
The apocalypse scenario that Boeing is spinning has little to do with near-term financing for its customers, but instead focuses on the company’s long-term competitiveness without the financial backstop provided by Ex-Im. “This is not something that creates near-term financial risk for Boeing,” said Boeing president and chief executive Dennis Muilenburg on a July 22 earnings conference call. “There are multiple commercial credit sources available today that the market is sound there … In the current financing market, that doesn’t create risk for us. This is about long-term global competitiveness. And that’s why we’re so forceful on this topic that it’s important Ex-Im be reauthorized.”
The Export-Import bank is the United States’ export credit agency, one of many around the world that guarantees loans taken out by foreign companies to purchase goods exported from that country.
For example, in April, Iraq requested financing for 10 Boeing 737 airliners. Commercial banks would generally be cautious about lending hundreds of millions of dollars for airliners to a country where the future remains uncertain. Normally in this situation Ex-Im would review the financing request and, if approved, would agree to backstop the loan, assuring creditors that if Iraq fails to make payments, the U.S. government will make good on the money lent. Boeing would get the sale and the U.S. jobs that go along with it, and Iraq would gets the needed airliners.
Historically Ex-Im has done very well for the U.S., earning a net profit as income from issuing loan guarantees has exceeded payment for loan defaults. Typically its renewal sails through Congress without much debate. But lately a contingent of Tea Party identifiers and other conservative Republicans have turned away from Ex-Im, labeling it “corporate welfare” and calling for Ex-Im’s role to be absorbed into the private sector.
That’s a problem for Boeing, which is by far the largest beneficiary of Ex-Im’s loan guarantees. In 2014, 14% of Boeing’s total orders were to customers backstopped by Ex-Im guarantees, totaling billions of dollars in business. For its part, in that same year Ex-Im issued $20.5 billion in guarantees, making $675 million in the process.
According to data compiled by Maplight, a nonpartisan research group that tracks money’s influence on politics, Boeing spent roughly $16 million per year in each of the last four years lobbying Congress. This year, the company spent $13 million in just the first six months, spending more than $9 million in the second quarter alone as Ex-Im’s expiration approached.
Since Ex-Im’s expiration—and especially since Congress broke for summer recess without putting Ex-Im’s reauthorization to a vote—Boeing and GE have ceased contributing to more than a dozen top Republicans that oppose Ex-Im, all of which received contributions from the companies in 2014.
Long-term, Boeing argues, that trend could continue. Pulling Ex-Im’s authorization creates an uneven playing field, the bank’s supporters say, because other countries have their own export credit agencies (ECAs) that will step into the void left by Ex-Im, pulling lucrative contracts—and eventually jobs—away from the U.S.
And then today on the local front, upper managers from Caterpillar and Toolcraft stepped into the fray:
Caterpillar and Toolcraft Co., Inc. are proud to be part of the greater Milwaukee business community. The Electric Rope Shovel and Dragline products produced in Milwaukee are shipped all over the world to support international mining customers. These exports are critical to the 950 Caterpillar jobs in greater Milwaukee and the 40 jobs at Toolcraft Co., Inc. In fact, more than 90% of our machines made here with precision-machined parts are sold overseas.
With 95% of the world’s consumers located outside the United States, it is critical that we have access to those export markets in order to sustain and grow our business. We need policy-makers in Washington to have our back as we try to do so — and that means committing to a pro-growth agenda that opens foreign markets and provides every tool available to U.S. exporters. One such tool is the U.S. Export- Import Bank, which saw its charter lapse in June because some in Congress want to close the bank.
For 80 years, the Ex-Im Bank has supported U.S. jobs by financing the export of American products. With Congress still debating whether to renew the charter, the bank cannot consider new financing requests from our export customers, putting future sales opportunities in jeopardy.
U.S. exporters compete with companies in more than 60 countries that have export credit agencies, like the Ex-Im Bank, financing their companies’ exports. Without this bank, U.S. companies will face a deep disadvantage in global markets.
We know that eliminating Ex-Im would mean fewer exports. Fewer exports mean less business for American suppliers and subcontractors. It would hurt businesses such as Toolcraft Co., Inc. and cost jobs up and down the entire supply chain in Wisconsin.
The partnership between Caterpillar and Toolcraft Co., Inc., as with all of our customers, is local but the impact is global. Congress must promote trade policies that help Wisconsin businesses stay competitive in the global market place in order to keep and grow jobs here at home.
President & Owner
Toolcraft Co., Inc.
How long with the GOP continue to bite the hand that feeds them…and the wallets that employ many of the rest of us?