Trump Wants to Close Trade Gap, but Leaves Export Agency in Limbo
Posted April 19, 2018 1:47 p.m. EDT
WASHINGTON — As trade tensions mount, an 84-year-old Washington institution could have been a powerful tool for President Donald Trump. The institution, the Export-Import Bank, was created to help U.S. companies compete overseas and bolster exports by providing cheap government-backed loans.
But the institution, which once financed multibillion-dollar projects, has been effectively crippled by the Trump administration. The bank has been without a chairman since Trump took office and the last of the bank’s five board members quit in March. Since 2015, it has not had the quorum of at least three members it needs to finance deals or projects worth more than $10 million.
The effective shuttering of the bank has put U.S. manufacturers like Boeing and General Electric at a global disadvantage, prompting a frenzied lobbying campaign by business groups worried that the White House is undermining its own trade goals.
“The Export-Import Bank plays a vital role in supporting American companies as they work to sell their products to customers across the world,” said Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce. “But as long as the seats remain vacant, U.S. businesses are at a disadvantage relative to global competitors.”
In the past, the bank had been used by large corporations like Boeing and General Electric, which received loan guarantees to sell products like airplanes, satellites and industrial equipment to developing countries, lifting sales and supporting U.S. jobs. It has provided loan guarantees to overseas airlines looking to buy U.S.-made jets and helped organizations like the Environmental Chemical Corp. build water facilities in Africa.
Proponents of the bank, including some lawmakers, argue the institution could be a powerful weapon for a president who wants to increase domestic manufacturing and narrow the gap between what the United States imports and what it exports overseas.
Ex-Im provides the kind of government subsidies that other nations regularly use to help domestic companies compete abroad. Trump regularly blames those subsidies for a flood of cheap imports, saying they exacerbate the U.S. trade imbalance.
The bank was languishing before Trump took office, but it has worsened under his watch. Last year, Trump’s pick to oversee Ex-Im, Scott Garrett, a critic of the bank, was rejected by the Senate over concerns that he would close the agency. The other directors who were nominated by Trump remain stalled in the Senate, and the president has yet to pick a new leader to take the helm.
To business groups, manufacturers and veterans of the bank, Trump appears to be undermining his own trade aspirations by leaving Ex-Im in the lurch.
“I’m not sure he’s really being well served,” said Fred P. Hochberg, the most recent chairman of the bank, who departed in 2017. “If you want to be able to reduce trade deficits and you want to be able to export more, particularly capital goods, that’s what an Export-Import Bank does.”
In recent years, the bank has been barely functional. According to its most recent annual report, Ex-Im authorized just $3.4 billion of mostly short-term export credit in 2017. That is down from the $20 billion that it authorized in 2014, the last year that the bank was fully operational. The report points out that China provided $34 billion in medium- and long-term financing for its exports in 2016, underscoring the competitive disadvantage that the United States faces.
The bank’s crippling has been costly for both companies and their workers, including Boeing, which Trump has hailed as an emblem of U.S. innovation. In the last two years, two deals involving the sale of its commercial satellites have been canceled and one was significantly delayed given the lack of a quorum at Ex-Im. The stalling of these deals alone has cost the company hundreds of millions of dollars.
“Restoring the Export-Import Bank to full strength is the single best thing Washington can do right now to build on the economic momentum of tax reform, shrink our trade deficits and level the playing field so American workers can win,” said Tim Keating, Boeing’s executive vice president for government operations. In 2015, General Electric said that it would stop manufacturing certain gas engines in Waukesha, Wisconsin, and that it would instead build a $265 million plant in Canada, which was offering financial support through its version of Ex-Im, known as Export Development Canada. GE attributed the move to the lack of U.S. export financing, saying in a statement that the company “will secure access to Canadian Export Finance to fill the gap from the lapse of the U.S. Export-Import Bank.”
After the bank’s board became empty last month, Jay Timmons, chief executive of the National Association of Manufacturers, sent letters to every senator urging them to hold a vote on Trump’s nominees. Timmons warned that the lack of action was costing U.S. jobs.
“Countries in Europe and beyond have been luring U.S. manufacturers to set up shop overseas to take advantage of foreign export financing because the U.S. system is effectively broken,” Timmons said. “Manufacturers in the United States have lost billions of dollars in deals, and tens of thousands of American workers have lost opportunities for well-paying jobs supported by the exports that the Ex-Im Bank could have helped secure.”
At a congressional hearing last week, Rep. Charlie Dent, R-Pa., pressed Steven Mnuchin, the Treasury Secretary, about the fate of the bank and argued that not using its financing amounted to a lost opportunity. He suggested that some in the Trump administration wanted the bank to collapse.
“The president says he wants to see the trade deficit shrink, here’s a way we can do it,” Dent said.
In an interview after the hearing, Mnuchin would not say when the president would nominate a new leader for the bank, or whether some of his colleagues were rooting for its demise, but he insisted that Trump supported keeping the bank alive.
“The president does want it to function,” Mnuchin said.
In an interview last year with The Wall Street Journal, Trump said he had initially been opposed to Ex-Im, seeing it as unnecessary, but had changed his mind.
“So instinctively you would say it’s a ridiculous thing, but actually it’s a very good thing and it actually makes money,” he said. “You know, it actually could make a lot of money.”
But the White House has done little to advance its nominees and politics continue to be an obstacle. Conservatives have traditionally disliked the bank because they argue that it amounts to corporate welfare and rewards rich corporations that do not need taxpayer assistance. “They distort markets, impose risk on taxpayers and they’re bad policy for everybody,” said Sen. Patrick J. Toomey, R-Pa., who has been one of the most outspoken critics of Ex-Im and favors private financing alternatives.
Toomey has used procedural tactics to delay the nomination of the remaining nominees to the bank’s board. He said he wanted Trump to pick a “reformer” like Garrett, who does not believe in the current mission of the bank. And he said he hoped that the president would urge other countries to unwind their export financing banks as part of his trade negotiations.
Democrats who support the bank are growing increasingly impatient.
“One of the best things we can do to help the economy support jobs is to get Ex-Im fully functioning as soon as possible,” said Sen. Sherrod Brown, D-Ohio. Senate Majority Leader Mitch McConnell, R-Ky., and “the full Senate should immediately confirm the bipartisan nominees so we can continue to support American businesses, manufacturing and jobs.”
Action does not appear to be forthcoming. An aide to McConnell said that votes on Trump’s other nominees would not be held until he names a new chairman. For now, Ex-Im is ambling along. Veterans of the bank say that career employees are increasingly heading for the exits. Atop the bank’s website is an image of its boardroom, with five empty chairs.
This week, Ex-Im will hold its annual conference in Washington, but considering the circumstances, the gathering is unlikely to be a festive event.
“Who are you going to get to speak?” Hochberg wondered. “I want to know what they are going to say.”