By Kent Hoover
Small exporters are trying to create a sense of urgency in Congress about the need to reauthorize the
Export-Import Bank. Ex-Im Bank is an independent federal agency that provides loan guarantees and other financing to help U.S. exporters sell their products overseas.
The agencys current charter expires May 31 but it could hit its credit exposure cap of $100 billion before then possibly by the end of March according to some predictions.
Once the agency hits that cap it would have to stop providing working capital guarantees export credit insurance and other financial products to U.S.exporters and their overseas customers.
That would be bad news for companies like Marlin Steel Wire Products in Baltimore which exports to 35 countries.
We would lose jobs said Drew Greenblatt the companys president and owner.
The manufacturer would not be able to fill orders for foreign customers because banks wouldnt provide financing for these deals without Ex-Ims backing.
Greenblatts company could start losing business even before Ex-Im hits its lending limit simply because of the uncertainty over whether its financing will be available.
Potential foreign buyers will stop talking to me Greenblatt said. Theyll buy from the Germans.
Foreign buyers are already looking at foreign competitors ofU.S.companies said Phil Cogan Ex-Im;s senior vice president of public affairs.
U.S.exporters meanwhile are factoring this uncertainty about Ex-Im into their business decisions. Patton Electronics inGaithersburgMd. wants to convert an old auto dealership building into a new manufacturing facility but wont do so until Ex-Ims future is resolved.
That set of plans is on hold said President and CEO Bobby Patton.
Patton Electronics has a $4 million line of credit with Ex-Im Bank. This helps it export $30 million worth of Internet telephony gateways servers and routers a year.
The company which employs 100 people has been swimming upstream for 25 years Patton said as otherU.S.electronic manufacturers moved overseas. Without Ex-Im he said his company would have to do the same and set up shop in a country that does offer export financing.
Ex-Im makes money for taxpayers
Business groups fear members of Congress may think they have until the end of May to address the issue since thats the deadline for reauthorizing the agency. But Congress needs to act sooner than that if it wants to avoid hurtingU.S.exporters these groups contend.
The critical time is actually now because of the message that goes to the marketplace Cogan said.
President Barack Obama has asked Congress to raise Ex-Ims exposure limit to $140 billion.
Ex-Ims credit exposure is growing because demand for its products is growing. Last year Ex-Im provided a record $32.7 billion in export financing for 3751 transactions. More than 85 percent of these transactions involved small businesses.
Despite its growth the agency operates at no cost to the taxpayer. The default rate on agency-backed loans is below 2 percent Cogan notes. The agency covers defaults and its other costs through fees charged to users of its products. Over the past five years the agency has made nearly $2 billion over the cost of its operations.
Despite Ex-Ims growth however theU.S.is behind its global competitors when it comes to providing export financing.GermanyFranceIndiaChinaandBrazilprovide seven to 10 times as much financing to their exporters -- as a share of GDP -- than theU.S.does according to the National Association of Manufacturers.
Our competition is not standing still and we cant either saidNAMPresident and CEO Jay Timmons.
Critics call it corporate welfare
Obama urged Congress to quickly reauthorize Ex-Im Bank during a recent speech at Boeings Dreamliner plant inEverettWash.Boeing is a big beneficiary of Ex-Im financing -- the agency helped it sell 460 aircraft worth $60 billion to overseas buyers over the past three years. Conservatives who contend Ex-Im is a form of corporate welfare deride the agency as Boeings Bank.
PlusU.S.airlines have complained that Ex-Im backing has enabled foreign competitors to buy Boeing aircraft on favorable terms enabling these foreign carriers to take market share from them on international routes.
By picking winners and losers politicians and bureaucrats are distorting trade flows said Chris Chocola president of the Club for Growth and a former Republican member of the House fromIndiana. Its time to end the Ex-Im bank for good.
Maybe Boeing could finance its exports without Ex-Ims help. But many small exporters couldnt said Todd McCracken president of the National Small Business Association.
There simply isnt another mechanism available to them he said.
