Mulvaney: Export-Import Bank doesn’t help enough businesses

Imagine that you work for a small business in Sumter that makes, say, cardboard boxes. Your customers are all over the US (but you don’t export). Your biggest competitor is in California. They compete with you in the US; they also export to Asia.

One day you find out that your competitor has dramatically cut prices. Apparently they were able to acquire the newest box-making technology at a price and terms that aren’t available to you. The result: You start to lose business.

Or imagine you work for a textile company in Gaffney. You sell your product all over the world. Your main competitor is in Vietnam. You both use state-of-the-art textile technology produced in North Carolina.

Then, your Vietnamese competitor starts underpricing you. Not because of currency manipulation or dumping, but because it just bought new, more efficient technology from North Carolina using loans with below-market rates – rates that will never be available to you.

How is any of that possible? Because of the Export-Import Bank.

EXIM is a government-sponsored entity that provides government-guaranteed, below market loans to domestic companies that export (as with cardboard box exporter) or to foreign firms that buy American-made products (as with the North Carolina textile firm). In the name of "promoting exports," then, EXIM could help a Vietnamese company at the expense of one in Gaffney, or would disadvantage a Sumter company by giving a loan to a company in California.

By now many folks in South Carolina have heard of EXIM. We know about it mostly because Boeing uses it to help sell the 787 aircraft that it makes in Charleston (often with engines made by GE.) And while other South Carolina companies certainly use EXIM, I think it is fair to point out that no one was launching a statewide marketing effort to pressure lawmakers the last five or six times the EXIM Bank came up for a vote in DC.

That’s fine. I would expect that, as about 35 percent of the $112 billion of EXIM loans benefit Boeing. And while that may settle the issue for the folks who run or work for that company, it clearly cannot and should not end the analysis for me.

First things first, then: the EXIM Bank isn’t a bank. It is an extension of the political wing of the Obama Administration. It is not run by a banker: it is run by someone who bundled political contributions for the President. It doesn’t lend to people equally: if you are a business favored by the Administration (Solyndra) or you have hired a favorite of the Administration (a Spanish company that received a $225 million loan has a member of the EXIM’s advisory board on its payroll) then you can get loans, but if you sell things related to coal mining or coal-fired power plants, you cannot.

And EXIM doesn’t even follow the law. In 2012, Congress reauthorized EXIM, but required the Bank and the Treasury Department to undertake certain reforms (specifically regarding large aircraft). That wasn’t a suggestion, by the way, it was the law: passed by the House and Senate and signed by the President. But not only haven’t those reforms been implemented, representatives of the Treasury have explicitly said that it has no intention to do so.

All of that isn’t to say that EXIM has no value. At times, it arguably fills a need that the private market either cannot or does not provide. If you have a small company in Chester, for example, that exports to Paraguay, there are probably few private local banks that are equipped to do that. By the same token, if Boeing is trying to sell airplanes in Uganda, and European export-credit facilities are helping Airbus, then maybe there is a place for EXIM to help "level the playing field."

But curiously, when I asked the Senior Vice President for the US Chamber of Commerce in a hearing if the Chamber would support reforms that would focus EXIM on small business and competing with other countries, he politely – but unambiguously – declined.

That brief glimpse into the soul of the US Chamber might explain the unprecedented political push in Washington to reauthorize EXIM. There is, after all, a lot at stake for a few large companies, and it is in their best interests to spend millions lobbying in favor of EXIM. Even back home, there has been a media campaign claiming that losing EXIM would cost local jobs and drive businesses out of our state. I only wish the same level of vigor was brought to bear to help fix our arcane corporate tax system or our repressive environmental regulatory scheme. Those things, much more than EXIM, tilt the playing field against US businesses on the world stage.

Just because I am against the EXIM Bank doesn’t mean I am anti-Boeing, or anti-small business. And it certainly doesn’t mean I am anti-South Carolina. Far from it. I like to think that people elected me to try to grapple with complex issues – from Social Security to national defense to the EXIM Bank. And they expect me to look at all the costs of what government does, not just the benefits it gives out. Yes, I represent Boeing and GE and the small businesses that operate in South Carolina that use EXIM. But I also represent the people whose money is being used to distort the market, and the people suffer from that market distortion.

Supporting EXIM is easy for those who directly benefit from it. Rightly so, perhaps. But I think people expect more from me.

This story was originally published July 24, 2015 at 11:16 AM with the headline "Mulvaney: Export-Import Bank doesn’t help enough businesses."