WHAT IS THE US EXPORT-IMPORT BANK?

One slightly hidden part of the federal government, which also originated during FDR’s Administration, is referred to today as the US Export-Import bank (the Ex-Im Bank). The Ex-Im Bank exists, according to Sec. 2(b)(1)(A) of its charter, to “minimize competition (through export subsidies)… and to reach international agreements to reduce government subsidized export financing” (SOURCE). The main purpose of this largely financed arm of the Federal Government should cause a pause right away. Essentially, the charter claims that this is an organization, which manages the subsidizing powers of the government (in foreign trade), in an effort to eventually weed out the need for government subsidies altogether. It’s like creating a government-subsidized health insurance organization, which works towards the creation of a world where cheaply provided governmental insurance would no longer be in demand. When have we ever experienced a government bureaucracy efficiently decreasing in its own size and power?

But what exactly, does this extra Federal Bank do? Well, that’s a great question, that I’m still trying to navigate after two days of tossing and turning over government documents and the void-of-actual-numbers website (SOURCE) that the Ex-Im Bank manages. Here’s what I have gathered so far to share with all of you (and for any economists out there, please feel free to elaborate, correct, or better-explain any economic details in which I attempt to unravel in this post)…

The Ex-Im Bank is the official “export credit agency” of the United States. They seek to aid in financing the export of goods and services, with the justification of seeking to contribute to the employment of U.S. workers. The “credit” provided to foreign buyers includes “export credit insurance, loan guarantees, and direct loans”. Their website is careful to specify, as often as possible, “80% of their transactions directly benefit U.S. small businesses” (SOURCE). As much as I wanted to find access to easily understood numbers on their actual website, it proved much easier to turn to other reporting agencies in order to figure out who are really the biggest beneficiaries of this Ex-Im Bank.

Maybe 80% of “transactions” benefit small businesses, but that might just say a lot about the massive budget they maintain, if they can make that claim while simultaneously providing Exxon Mobil with a $3 billion loan in order to fund an oil venture in Papua New Guinea (SOURCE). Correct me if I’m wrong, but I never considered Exxon Mobil as small for size, or as one for creating many American jobs…

Large US corporations aren’t the only bodies that seem to have undue clout amongst the bureaucrats running the Ex-Im Bank. China has also been noticed as having received up to $4 billion in US subsidies from the Ex-Im Bank annually (SOURCE). And these estimated numbers would not even be able to account for the indirect ways in which Chinese buyers and sellers have been assisted. Chinese ethanol benefits from an additional U.S. subsidy. “In 2004, the Ex-Im subsidized construction of an “ethanol dehydration facility” in Trinidad and Tobago—exactly the sort of facility through which foreign ethanol passes duty-free into the U.S.” The very next year, China more than tripled its rate of ethanol exports: the vast majority imported to the US (SOURCE) ….

Would I dare argue, then, that this large Federal Bureaucracy could possibly lapse at times and be more concerned with China’s welfare than that of its very own people? I sure hope the Ex-Im’s bias toward Chinese goods and investment doesn’t have anything to do with the $895 billion in government securities it had accumulated as of last December (SOURCE). The truth is, the US now depends on foreign bodies to buy “securities” from the US Treasury in order to finance our national debt. Without countries like China, Japan, and the Oil Wealth Nations buying out debt, our dollar would’ve collapsed a long time ago (with the rampant creation of money that the Federal Reserve is somehow entitled to). Therefore, the more debt we create, the more dependent we are on countries like China to finance it. The more China finances our debt, the more intertwined our economies become. The more intertwined our economies, the more inclined our Federal financial institutions might be to favor Chinese trade and investment.

But what’s so wrong with this? Is it really so bad to be economically interdependent in an age of post-industrialization and globalization? And in the midst of this era of greater global trade and dependence, will we need larger governmental bodies, like the Ex-Im Bank to finance and protect us in the process? I would argue no on all accounts. The Ex-Im Bank seems nothing more than a glorified form of welfare for the corporate world. And just like we argued last week, the realm of business would also benefit much more richly from the creativity that abounds amidst real competition void of governmental interference. And as for our entangling alliance with the People’s Republic of China… well, let’s just say that I can’t wait to tackle that sucker next week…

-E.C.Soria