We agree with Mr. Hochberg that America needs the Export-Import Bank. And yet, we have our quarrels with Mr. Hochberg's article. One of these has to do with tone. The other with what might be called packaging or focus.
On Tone. References to "a small minority of conservative Republicans" is - at least in our view - a mischaracterization of the Exim's opponents. In any case, the spirit of such references is long way from "Come, let us reason together." Yet it is the latter approach that is desperately called for. And who is to blame for this impasse? As usual there is plenty of blame to go around. Part of the argument against Exim, for example, relates to the companies that benefit from it. There is an anti-Exim article in Forbes today, which complains that "Exim exists for big business," including firms like Boeing, General Electric, Caterpillar, and others. Yes, those are among America's major exporting firms. So it is no surprise that they are among those who benefit from Exim. We are at a loss to understand, however, why that is a bad thing, or rather we would be, if not for all of the anti-business rhetoric that American politics produces. And that's not all from Republicans. The point here, however, is not a partisan one. It is rather that getting Exim's charter extended beyond the 30th of June is going to take a lot of discussion and a lot of bipartisan cooperation. Exim's opponents argue that America's export finance should come from private banks, not the government. Ideally, that could be the case, but in today's regulatory environment it may not be a realistic one. It was with a very light touch that Mr. Hochberg dealt with that issue when he wrote:
"Of course, export credit agencies are no replacement for the private sector, but with the push to implement major global banking reforms and the rising scale of global infrastructure projects, they are increasingly a vital supplement."
With GE, for example, scrambling to get out of the banking business, it seems obvious that the new, still unfolding regulatory environment for banks is having enormous consequences for bank operations. Before Congress allows Exim to go out of business, it should at the very least conduct a serious review of the question: can the private U.S. banking system pick up the slack?
On Focus. It is as much a compliment to Mr. Hochberg as it is a criticism to note that his article, though short, is very ambitious. For us it was really three articles: A brief in support of renewing the charter of the Export-Import Bank of the United States.
A Discussion of the dramatic change in the nature of export credits globally. "Export competition has come to resemble the Wild West," Mr. Hochberg writes, noting that the OECD rules for official export credits are nowhere near as important as they once were: "As recently as 1999, nearly 100 percent of export credit was governed by its [the OECD's] rules. ...By 2013, the share had plummeted to one third."
And a plea for greater cooperation between the United States and China where export credits are concerned. China is big in the world of export finance. Mr. Hochberg notes that China's export credits of just two years overshadow all of the efforts of America's Exim. He writes:
"During its eight decades of operations, the U.S. Export-Import Bank has financed a total of roughly $590 billion of U.S. exports. ... [O]ver the past two years alone, China has financed at least $670 billion worth of exports [a possibly close to $1 trillion.]"
Add to that the China-dominated Asia Infrastructure and Investment Bank, which is due to come on stream later his year, and it is easy to understand Mr. Hochberg's concern about the ability of U.S. firms to compete for global infrastructure projects, no matter how good U.S. products are.
To be sure, all of these issues are related, but we were a little concerned that the urgent argument of the first issue - the need to renew Exim's charter - might be lost in the discussion of the other two.
The issue is clearly not over. It is getting attention. The Senate Banking Committee has scheduled two hearings on Exim for this week. The first one will be tomorrow, June 2, with private sector witnesses, including both Linda Dempsey of the National Association of Manufacturers and John Murphy from the U.S. Chamber of Commerce. The second hearing will be on Thursday, June 4. Exim president Fred Hochberg will be the sole witness at that one.
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Judging from the press coverage of the various trade issues, Trade Promotion Authority and the Trans-Pacific Partnership are today's major topics. And, for many they are quite different. We are thinking here of those Congressional leaders in Congress who oppose Exim but strongly support TPA.
For many others, however, especially those outside the United States, the demise of Exim will send the same signal as would a failure of TPA: the star of America is dimming. The competitive fire is going out. And the world is going to be a much colder place. (And America itself much poorer.)
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