July 22, 2014

Big-Business Bias

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

These giant corporations that Ex-Im serves - such as the mining group Hancock Prospecting (which is owned by the richest woman in Australia) and Pemex, Mexico's government-owned oil company - would have no problem arranging financing without Ex-Im. They simply would not get a government-granted discount courtesy of U.S. taxpayers.

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In your July 14 editorial "Closing the Export-Import Bank would hurt the economy" you wrongly claim that the bank extends assistance "when the private sector is unable or unwilling to do so."

First, South Carolinians should know that less than 15 percent of the value of Ex-Im-financed exports in their state went to small businesses. The data clearly show that the business of Ex-Im is big business.

These giant corporations that Ex-Im serves - such as the mining group Hancock Prospecting (which is owned by the richest woman in Australia) and Pemex, Mexico's government-owned oil company - would have no problem arranging financing without Ex-Im. They simply would not get a government-granted discount courtesy of U.S. taxpayers.

The bank's top beneficiary, Boeing, already has a large and capable financing arm to support aircraft exports, as do most of the giant manufacturers that Ex-Im benefits.

The data show that many Boeing jets are already sold without any Ex-Im assistance. In June 2012, Emirates Air bought two Boeing 777s using Ex-Im financing, which lowered the cost per plane by $20 million.

It also bought four Airbus A380s using private financing. In other words, Ex-Im unintentionally financed the purchase of foreign Airbus products by lowering the cost of the Boeing transaction.

This also goes to show that Emirates Air, like many other Ex-Im-backed borrowers, can certainly secure financing for worthy projects from private lenders.

What's more, a recent S&P report predicts that Boeing could find sufficient private financing for their jets without Ex-Im for the next few years.

Your editorial failed to consider the unfairness of a system that grants cheap loans to some companies at the expense of other non-subsidized companies. This is the fundamental debate.