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After an arduous year of Congressional hearings, the Export-Import Bank of the United States (Ex-Im Bank) was reauthorized—almost. But in the last days of December 2011, the Bank was sideswiped by an ill-advised lawsuit promoted by Delta Airlines and brought by the Air Transport Association of America (now known as Airlines for America), the trade association of the major airlines in the United States.1 Delta claims that Ex-Im Bank's financial support for the sale of Boeing aircraft to Air India and other foreign carriers adversely affects US carriers competing with Air India for certain routes. Besides Delta, no major US carrier supports the litigation.
Civil aircraft and heavy machinery are America's leading merchandise exports, estimated at $82 billion and $115 billion in 2011 respectively (table 1).2 Unless the United States wants to surrender a chunk of the foreign airline market to Airbus, the lawsuit makes no sense. Since the 1970s, both Boeing and Airbus exports have been financed by official export credit agencies (ECAs), under rules negotiated in the Organization for Economic Cooperation and Development (OECD), the General Agreement on Tariffs and Trade (GATT), and its successor, the World Trade Organization (WTO). Ex-Im Bank and its ECA competitors regularly make money on aircraft loans but because the loans are very large and the terms are long, private finance is simply not an alternative.
All this is obvious to anyone who has a casual knowledge of the aircraft market. Yet, in the closing days of the 112th Congress, the House leadership—flummoxed by Delta's lawsuit and lobbying—refused to sign off on the Senate reauthorization bill. Consequently, the Ex-Im Bank is operating under the Omnibus Continuing Resolution which restricts its annual commitments to $100 billion—a very modest part of annual US goods and services exports estimated at $2.1 trillion in 2011.3 The reauthorization bill would up this limit to $135 billion—not the $200 billion figure advocated in our May 2011 policy brief—but better than $100 billion.4
As a further consequence, the Ex-Im Bank has been forced to notify major US exporters that it will start rationing export credit at the end of January 2012. General Electric has already lost a wind farm bid in Australia because it cannot guarantee Ex-Im Bank financing for the deal. This is no way to double US exports by 2014 from their 2009 level—the goal announced by President Obama in his 2010 State of the Union address. Nor is it a helpful answer to unemployment—not when each extra billion dollars of exports creates 6000 new jobs.5 Simple arithmetic suggests that, on an annual basis, the difference between an Ex-Im Bank with $100 billion of lending authority and an Ex-Im Bank with $135 billion of lending authority amounts to more than 200,000 jobs.
Fortunately a solution is at hand both to export promotion and job creation. Congress must put reauthorization legislation on its priority calendar for February 2012. Many issues will divide Democrats and Republicans in 2012. The need for a robust Ex-Im Bank is not one of them.
| Table 1 US exports to the world 2004 to 2011: specifed categories and totals | |||||||||||
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| End-use code | Description | Value (billions of US dollars) | |||||||||
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||
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| 22090 | Civilian aircraft, engines, equipment, and parts | 46.1 | 55.9 | 64.5 | 73.0 | 74.0 | 74.8 | 71.9 | 82.0 | ||
| (Percent of total goods and services exports) | (4.0) | (4.3) | (4.4) | (4.4) | (4.0) | (4.7) | (3.9) | (3.9) | |||
| 21100 | Industrial engines | 13.5 | 14.9 | 16.0 | 19.1 | 21.8 | 21.9 | 24.3 | 27.7 | ||
| (Percent of total goods and services exports) | (1.2) | (1.2) | (1.1) | (1.2) | (1.2) | (1.4) | (1.3) | (1.3) | |||
| 21180 | Industrial machines, other | 27.0 | 28.3 | 32.7 | 38.4 | 38.1 | 30.9 | 42.7 | 48.7 | ||
| (Percent of total goods and services exports) | (2.3) | (2.2) | (2.2) | (2.3) | (2.1) | (2.0) | (2.3) | (2.3) | |||
| 21150 | Pulp and paper machinery | 2.6 | 2.7 | 2.9 | 2.7 | 3. | 2.3 | 2.5 | 2.8 | ||
| (Percent of total goods and services exports) | (0.2) | (0.2) | (0.2) | (0.2) | (0.2) | (0.1) | (0.1) | (0.1) | |||
| 21190 | Photo, service industry machinery | 6.6 | 7.5 | 8.2 | 9.2 | 9.8 | 7.9 | 9.3 | 10.6 | ||
| (Percent of total goods and services exports) | (0.6) | (0.6) | (0.6) | (0.6) | (0.5) | (0.5) | (0.5) | (0.5) | |||
| 21200 | Agricultural machinery, equipment | 4.4 | 5.1 | 5.3 | 6.3 | 8.3 | 6.3 | 6.8 | 7.7 | ||
| (Percent of total goods and services exports) | (0.4) | (0.4) | (0.4) | (0.4) | (0.5) | (0.4) | (0.4) | (0.4) | |||
| 21030 | Excavating machinery | 6.7 | 8.8 | 9.9 | 12.8 | 15.1 | 9.8 | 12.6 | 14.4 | ||
| (Percent of total goods and services exports) | (0.6) | (0.7) | (0.7) | (0.8) | (0.8) | (0.6) | (0.7) | (0.7) | |||
| 21110 | Food, tobacco machinery | 1.9 | 2.1 | 2.2 | 2.6 | 3.1 | 2.7 | 3.0 | 3.4 | ||
| (Percent of total goods and services exports) | (0.2) | (0.2) | (0.2) | (0.2) | (0.2) | (0.2) | (0.2) | (0.2) | |||
| Total US goods and services exports to the world | 1,163 | 1,287 | 1,460 | 1,655 | 1,843 | 1,575 | 1,838 | 2,096 | |||
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| Source: The 2002–10 5-digit end-use code data is from the US Census Bureau 2011 (available at http://www.census.gov/foreign-trade/statistics/product/enduse/exports/i…). 2011 data is extrapolated from US total world exports numbers for January to October 2011 from the US Bureau of Economic Analysis (BEA) 2011. | |||||||||||
See also follow-up post Reauthorize the Export-Import Bank: Part II.
Notes
1. The ATA changed its name on December 1, 2011. See US District Court for the District of Columbia, Case No. 1:11-cv-02024-JEB, Air Transport Association of America, Inc., et. al, Plaintiff, vs. Export-Import Bank of the United States, et. al, Defendant.
2. 2011 data is extrapolated from end-use category data from the Census Bureau and 2010–11 export growth rates from the Bureau of Economic Analysis. Heavy machinery data is a combination of "Industrial engines" and "Industrial machines, other."
3. Data is from the Bureau of Economic Analysis 2011.
4. Hufbauer, Gary Clyde, Meera Fickling, and Woan Foong Wong. 2011. Revitalizing the Export-Import Bank. PIIE Policy Brief 11-6. Washington: Peterson Institute for International Economics.
5. See Bergsten, C. Fred. 2011. An Overlooked Way to Create Jobs. New York Times, September 28, 2011. Available at http://www.nytimes.com/2011/09/29/opinion/an-overlooked-way-to-create-j…
