June 18, 2015

End the Export-Import Bank

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

On June 30, the Export-Import Bank of the United States—an agency that mostly extends loans and loan guarantees to large foreign companies to buy U.S. products—will most likely see its charter expire for the first time in 81 years. This state of affairs is nothing short of remarkable, considering that for years, Ex-Im's charter has been reauthorized by Congress without any debates or even formal votes. The change is the result of an intense fight between the people who oppose corporate welfare and those who will support it at any cost.

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On June 30, the Export-Import Bank of the United States—an agency that mostly extends loans and loan guarantees to large foreign companies to buy U.S. products—will most likely see its charter expire for the first time in 81 years. This state of affairs is nothing short of remarkable, considering that for years, Ex-Im's charter has been reauthorized by Congress without any debates or even formal votes. The change is the result of an intense fight between the people who oppose corporate welfare and those who will support it at any cost.

However, it would be a mistake to see this battle against Ex-Im as an end in and of itself. It is not. The battle is better-understood in the context of a broader rejection of government-funded privileges for a handful of connected actors. Indeed, everywhere we look, big business is teaming up with big government, and that's causing big problems. People know this, and they're sick of it.

Ex-Im is the epitome of that cronyism and has a charter that is set to expire, which is why it became such a great target. For instance, in recent years, some 60 percent of the bank's activities have benefited 10 giant U.S. corporations, with 40 percent benefiting one company alone: Boeing. On the foreign side, the cheap loans are extended to giant state-owned companies such as Mexico's petroleum company, Pemex, and the United Arab Emirates' airline, Emirates. When the Ex-Im financing isn't benefiting a state-owned firm, it is often flowing to very successful private firms with plenty of access to capital, such as the loan extended to the richest woman in Australia to finance her iron ore project at the expense of its U.S competitors.

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