Why on Earth should the federal government help Boeing sell airplanes?
That question was posed by the Wall Street Journal editorial page this week, while the Association of Washington Business (AWB) pounded on office doors back in Washington, D.C. Two indications that the battle over the federal Export-Import Bank is heating up in the other Washington – an issue of vital interest to this state’s business community.
The obscure 80 year-old institution, normally the least controversial of federal agencies, is in the fight of its life as a reauthorization deadline approaches Oct. 1. Opposition to the bank seems a mishmash of election-year positioning and lofty conservative rhetoric, promoted by think tanks and opinion leaders on the right.
Yet this position does not reflect a universally held conservative belief, and the argument is oddly disconnected from the realities of business. Washington state’s business community seems to have a bit firmer grounding in the real world.
The Seattle Times has editorialized in favor of the bank’s survival, and says it’s high time for Washington’s congressional delegation, Republicans in particular, to make a strong public statement in the bank’s favor.
The Export-Import Bank of the United States, like similar institutions in every developed country of the world, provides loans and credit services for purchasers of American goods. It doesn’t cost taxpayers anything — it has returned more than $1 billion to the treasury since 2007. And it has only a tiny market share — commercial banks serve 98 percent of American exports. But the slice served by the Ex-Im Bank is of vital importance to this Washington. Boeing is the bank’s biggest customer, accounting for a quarter of the bank’s $27 billion in business in 2013, for the simple reason that there are not a lot of commercial banks interested in offering enormous loans at attractive rates to the national airlines of third-world countries.
Small exporters benefit, too, notes Kris Johnson, president of the Association of Washington Business. Of the 183 Washington businesses that have been served by the Ex-Im Bank since 2007, 133 are small and medium-sized firms. The second- and third-ranked Washington state companies on the Ex-Im Bank customer list are the Chateau Ste. Michelle Winery and Calaway Trading, which exports hay. The AWB’s delegation, which included representatives of Boeing and smaller firms, visited seven of Washington’s 12 members of Congress Tuesday. Says Johnson,
“Failure to renew Ex-Im’s charter would be devastating for Washington’s trade-dependent economy. Ex-Im serves as an important trade lifeline for many small and medium-sized Washington state businesses. Without its support, shipments of our famous wines and other agricultural products would be jeopardized, and with so much of our economy tied to exports, it becomes even more imperative that we continue the Ex-Im charter.”
The Wall Street Journal’s editorial appears to reflect the view put forward by the Heritage Foundation, House Financial Services Chairman Jeb Hensarling, R-Texas, and other ideological opponents. They argue the case against the bank on general conservative principles, and they downplay the fact that every other major exporting country plays the game the same way. The Journal says if Republicans want to beat the Democrats they need to demonstrate they are not offering favors to well-heeled corporate special interests.
“We can’t think of a better way for the party’s Washington leadership to show they get that message than by pulling the plug on the Export-Import Bank,” the Journal writes.
It says that if commercial banks don’t offer loans at the same rates as Ex-Im Bank, maybe that’s because the free market does a better job of allocating risk. And just because other countries provide favorable financing for exports doesn’t mean this one should, too. Who says developing countries ought to buy Boeing airliners?
“The Ex-Im subsidy …distorts decision-making in developing countries. Politicians love a national airline that’s flying new Boeings, but maybe their citizens would be better served with new roads.”
In this Washington, of course, we’re a little more willing to let other countries make those decisions for themselves, and we’d like them to have an even choice. If the European Airbus countries are offering sweet financing deals, it is hard to see why Boeing should be hobbled. The Times May 14 editorial argued it is time for the state’s congressional delegation to ignore the abstractions and take a public stand in favor of Washington business:
“Pragmatism should rule. America’s biggest competitors in the world market offer similar government export credit programs — 59 countries in all. Many programs are larger… All Washington lawmakers voted for the bank in 2012.
“With billions at stake, this state’s congressional Republicans, especially, now need to lead on the issue.”