Partway through 2015 the Export-Import (Ex-Im) Bank lost its quorum, meaning that there were too few people on its board of directors to make any commitments over $10 million. The loss of a quorum has set up a useful natural experiment for the agency’s operations: the lack of quorum changed the composition of firms and countries that benefit from Ex-Im Bank support. As it turns out, the share of Ex-Im support for Boeing dropped sharply after the Ex-Im Bank lost its quorum, as did support of exports to China.
In 2014, the last full year when the Ex-Im Bank had a quorum, support to Boeing was 40 percent of all Ex-Im Bank actions, whereas in 2017 this support had dropped to less than 1 percent. At the same time, support for small businesses went from 25 percent to 63 percent of the Ex-Im Bank’s financial commitments. This period also saw a sharp decrease in aid to American exports to China. Financial support of exports to China decreased from 11 percent of the Ex-Im Bank’s actions to only 1 percent between 2014 and 2017.
These are three positive developments in the management of the Ex-Im Bank’s funds. As of 2017, Boeing had $57 billion in revenue from commercial airplanes. Even if all sales had been exports (which is highly unlikely, given that Boeing does business domestically as well as internationally), those sales would represent less than 3 percent of the United States’ $2.3 trillion of exports. Boeing is a large company with plenty of capital and easy access to global credit markets. This reduction in aid, then, represents a positive step for the Ex-Im Bank and American taxpayers. This period, which saw support of small businesses climb to 63 percent of the Ex-Im Bank’s commitments, also brings the Ex-Im Bank closer to prior claims from Democrats on the House Committee on Financial Services, such as Representative Maxine Waters, that “90 percent” of the Ex-Im Bank’s support goes to small businesses. (In fact, small businesses have never received 90 percent of the Ex-Im Bank’s aid, as this would be impossible while a large business such as Boeing was collecting up to 40 percent itself in a given year.) At 63 percent without a quorum, the Ex-Im Bank has focused on small businesses more than on all other businesses combined, something that never happened while it was operating as “Boeing’s Bank.”
Boeing itself is doing better without the Ex-Im Bank’s aid. According to Boeing’s 2017 annual report, in each year from 2015 through 2017, Boeing gained more revenue than it did in 2014, when the Ex-Im Bank was supporting Boeing by more than $2 billion annually. Comparing “Total Non-U.S. Revenues” from the 2017 report to those from the 2014 report shows that the company’s total revenues were more than $2 billion greater in 2017, despite foreign sales having decreased slightly below their 2014 levels. The one-year decline in foreign aircraft sales was more than offset by consistently higher domestic sales.
The reduction of Boeing’s aid is matched by a corresponding reduction in support to aircraft and aircraft parts from 41 percent to 4 percent of the Ex-Im Bank’s actions. This change makes aircraft aid far more proportional to its size in the US economy as a whole, and results in a more diversified portfolio for the Ex-Im Bank.
The reduction in aid to exports to China also represents a positive improvement, for different reasons. China is a large economy, and exporting to China is not particularly risky. Given that the Ex-Im Bank’s stated goal is to help finance risky exports that would otherwise not happen, taxpayers should expect export aid to China to be small. Therefore, this reduction brings the Ex-Im Bank closer in line with its stated purposes than it was while it had a quorum. Additionally, it reduces the degree to which American taxpayers are subsidizing a country President Trump has repeatedly called out for its trade practices.
Reducing the favoritism shown to both Boeing and China helps put the aid provided to them onto a more responsible path. While it is a large company, Boeing doesn’t represent 40 percent of US exports; and despite recent news that US tariffs are harming China’s economy, it is still stable and the second-largest economy in the world. Neither China nor Boeing should be the Ex-Im Bank’s largest beneficiaries, and thanks to a lack of quorum, they no longer are.