Congress fails to revive Export-Import bank: How will it impact US businesses?

Congress’s failure to revive the Export-Import bank before the August recess prompted Boeing chairman Jim McNerny to announce that his company is considering moving outside of the US, sparking speculation that other companies could follow suit.  

|
Gary Cameron/Reuters
Boeing Company Chairman of the Board Jim McNerney (L) is interviewed by Chairman of the Kennedy Center, David Rubenstein (R) at The Economic Club of Washington in Washington July 29, 2015. McNerney said on Wednesday the company was actively considering moving "key pieces" of the company to other countries given the ongoing debate in the U.S. Congress over the future of the Export-Import Bank.

Businesses large and small are venting their frustration with Congress this week, and some of the bigger fish are even threatening to leave the country. The reason: Congress's failure to renew the mandate of a little-known government agency known as the Export-Import bank, or just the Ex-Im for short.

On Wednesday, the house left for its August recess after approving a short-term highway funding bill that did not include new authorization for the bank, which is in charge of subsidizing foreign purchasers of US products in order to close financing gaps in large sales to overseas buyers. The bank has come under fire recently from conservative lawmakers who view it as a symbol of crony capitalism and the government’s undue involvement in the marketplace. Nevertheless, many believed that the 80-year-old entity, which expired for the first time in its history on June 30, would eventually be reauthorized due to its important role in supporting US companies that export their wares.

Congress's failure to revive the Ex-Im before the August recess prompted Boeing chairman Jim McNerny to announce that his company is actively considering moving “key pieces” outside of the United States. Boeing in particular is the biggest beneficiary of the Ex-Im’s subsidies, and 40 percent of its credit portfolio consists of loans and loan guarantees associated with exports.

McNerny's comments sparked speculation that other large companies could follow suit, an event which advocates say would negatively impact the economy and put American jobs in jeopardy.  

“As businesses owners looking at the bottom line and responsibility to shareholders, they’ve [big businesses] got to be looking at leaving. It would be foolish not to. We have to expect that larger companies are going to look at going overseas,” says Molly Day, Vice President of public affairs at the National Small Business Association.

“While the direct impact for small businesses using Ex-Im is that they won’t be able to get their jobs done, when you’re looking at a Boeing or other big businesses that can move operations overseas, there are a ton of small businesses and their supply chains that are going to be impacted by that, too,” she adds, noting that the NSBA’s small business members voted the Ex-Im among their top ten priorities. “So it’s not just Boeing cutting workers and moving operations overseas, it’s also how many small businesses are going to be impacted by no longer having those contracts with Boeing.”

And Boeing chairman Mr. McNerny also supported this assertion when he confirmed that 70 percent of the value of his company’s aircrafts comes from smaller manufacturers. 

“Every time a Triple Seven lands in Beijing, it takes seven or eight thousand small businesses to Beijing,” McNerney said. “None of those would have a chance to export without us.”

According to the Export-Import bank’s website, over 90 percent of the bank’s transaction directly supported small businesses.

“In FY 2014, Export-Import Bank financing supported $27.5 billion worth of U.S. exports. $10.7 billion of that total represents exports from U.S. small businesses, making small business exports the top category for EXIM Bank supported exports last year,” the site reads.

And advocates say that the small businesses that rely on the bank are already feeling the impact of the Ex-Im’s demise.

“Most businesses want to do as much business with US companies as they possibly can, but they’ve looked to exporting as one of the few bright spots of the downward economy of the last couple years. Without that federal backing and assurance and support, it’s going to make it a heck of a lot harder to do so,” says Ms. Day. “They’ve already seen customers holding off on purchases, not making purchases at all because there is so much insecurity surrounding the bank right now.”

Meanwhile, many large companies, such as Boeing, also rely heavily on the Ex-Im’s subsidies to make exporting from the United States a viable option for their businesses.

"Particularly for expensive, long-lived capital goods such as aircraft, nuclear reactors, locomotives, and earth-moving equipment, U.S. companies are bidding in competition with foreign companies that are backed by very generously funded export credit agencies of their own,"  John Murphy, vice president for international policy at the US Chamber of Commerce, said in an interview with the Washington Examiner in July. "Bids from all tenders must come with official export-import credit agency backing, which Ex-Im uniquely provides in the United States. So the bottom line in those cases is that without Ex-Im, U.S. companies aren't even able to bid."

On Wednesday, Mr. McNerny stressed that he had made an effort to keep Boeing’s production jobs in the United States but that the questionable future of the Ex-Im has made him doubt his choice.

"I'm beginning to think that maybe I made the wrong decision,” he said.

Some have also speculated that General Electric could begin moving its business overseas as well.

Now it remains to be seen whether Congress will succeed in renewing the bank when it resumes its activities in September, although partisan divides make consensus on the issue elusive, observers say.

 In the meantime, affected companies are struggling to continue business as usual.  

“We’re scrambling now, trying to find a way to facilitate our sales throughout the rest of this year,” Tyler Schroeder, a financial analyst at the small Texas-based company Air Tractor, which makes firefighting and agricultural aircrafts, told Politico.

“That’s going to take a lot of risk on our part of the company, and it’s going to take — it’s going to be a big expense for us.”

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Congress fails to revive Export-Import bank: How will it impact US businesses?
Read this article in
https://www.csmonitor.com/Business/2015/0730/Congress-fails-to-revive-Export-Import-bank-How-will-it-impact-US-businesses
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe