“We will continue to support Pemex,” a managing director at the Export-Import Bank told the Houston Chronicle in 2015. “They're one of our best and biggest borrowers.”
Pemex is not a household name in America, but it is Mexico’s state-owned petroleum company. By some estimates, the scandal-plagued company accounts for 95 percent of Mexico’s oil production and nearly 40 percent of the government’s annual revenue. The company is 98th on Forbes’ Global 500 list yet during the Obama administration, the Export-Import Bank of the United States supported Pemex with $8.5 billion in loans backed by American taxpayers.
When it comes to Ex-Im financing arrangements, subsidizing foreign, state-owned companies is not the exception but rather the norm. Between 2007 and 2013, the Export-Import Bank backed $3.4 billion in financing to Emirates Airlines for their purchase of Boeing planes. The company is, of course, a wholly owned by the government of Dubai. The list of foreign, state-owned companies benefiting from the Export-Import Bank is substantial, including: state-owned Air China; state-owned Ethiopian Airlines; Air Astana, of which Kazakhstan’s government controls 51-percent; state-owned Royal Air Maroc; and Turkish Airlines, of which is 49 percent controlled by a state-owned company.
The list of foreign, state-owned companies receiving American taxpayer backed financing goes on, but recipients have also made clear it is not necessary. A senior vice president for Emirates Airlines acknowledged the company “would not have trouble buying planes from Boeing” if the Ex-Im Bank were to be phased out. Thirteen months earlier, a managing director at Boeing told the Wall Street Journal that the aerospace giant “could find alternative funding sources for customers that wouldn't require it to boost its support of aircraft sales.”
And while foreign airlines could do without, they have no reason to turn down cheap loans backed by American workers that give them a competitive advantage over U.S. domestic airlines like Delta or American.
Although Boeing is the bank’s largest domestic client, Caterpillar’s use of the bank should not go unmentioned. Caterpillar used the Export-Import Bank to finance the sale of power-generating equipment to a Dutch company. But as the Washington Examiner’s Tim Carney observed, “Energyst Cat Rental Power only deals in Caterpillar, and it was formed by Caterpillar and Caterpillar dealers.” Caterpillar was also involved in a $690 million financing arrangement for an Australian coal mine owned by Australia’s richest citizen. It prompted the Australian Financial Review to ask “Why are American taxpayers subsidizing a financial transaction involving an Australian billionaire’s iron ore project?”
Then there is the curious case of $113 million in aid funneled to a massive Swiss company with obscure commodities trading operations in Stamford, Connecticut. Quoting a seasoned commodities trader, Ken Silverstein, author of The Secret World of Oil; explains China's manufacturing base "could not exist without Glencore, because it is dependent on raw material imports, many of which Glencore plays a major role in trading and producing.” Not bad for a company with 325 commodities traders in American and $233 billion in global revenue.
Proponents of the Export-Import Bank waive off the U.S. taxpayer support of foreign, state-owned companies by proclaiming these awkward financial arrangements create jobs right here in America. If export financing did create jobs in America it would make a compelling component of an economic nationalist agenda, but that is just not the case.
Exhibit A, from a 1981 Congressional Budget Office report: "Subsidized loans to exporters will increase employment in export industries, but this increase will occur at the expense of non-subsidized industries: the subsidy to one industry appears on other industries' books as increased costs and decreased profits."
Exhibit B, from a 1994 Congressional Research Service report: "Subsidizing export financing merely shifts production among sectors within the economy, but does not add to the overall level of economic activity, and subsidizes foreign consumption at the expense of the domestic economy."
Exhibit C, from a 2011 American Action Forum report: "Export financing merely redistributes jobs across the economy rather than create more overall jobs." It is noteworthy that AAF now supports the Export-Import Bank but makes no claim it will create new jobs in America.
On Friday, President Trump announced his intention to nominate former representatives Scott Garrett and Spencer Baucus to serve on Export-Import Bank’s board. The president’s commitment to creating jobs in America is laudable, but there is no evidence to suggest the Export-Import Bank plays any role in job creation. The only arguments for preserving the bank are made by those seeking “featherbedding” in the swamp. Rather than subsidizing foreign, state-owned companies, time would be much better spent pursuing policies that will actually make America great again.