The Charles Koch Institute is pleased to announce the release of its latest white paper, an analysis of the Export-Import Bank of the United States. You can read and download the paper here.
The charter for the Export-Import Bank of the United States recently expired in July, marking the third time the Bank has faced expiration since 2012. The move (or lack thereof) came amidst increased scrutiny of the Bank, as opponents criticized its promotion of corporate welfare and conflict with a limited role of government. A federal government agency designed to promote the export of U.S. goods and services, the Ex-Im Bank offers direct loan and loan guarantees to foreign buyers, who use the financing to purchase American exports.
Yet some have criticized the Ex-Im Bank for mainly supporting companies that are politically connected. For the fiscal year 2013, 97 percent of the loan guarantee program’s total financing went to just ten exporters, with three of those ten—Boeing, Caterpillar, and General Electric—receiving 87 percent of total financing. Combined, those three companies spent $36 million on federal lobbying, including directly lobbying officials at the Export-Import Bank, in 2013 alone.
While proponents of the Ex-Im Bank cite its support of American jobs as a major benefit, the claim appears unsubstantiated. The Ex-Im Bank’s subsidized financing may indeed provide benefits to domestic industries, yet its existence also creates negative effects on other firms and industries, ranging from net costs to fewer jobs. A variety of studies, both from independent and industry researchers, show that the Ex-Im Bank merely shifts jobs to the industries it subsidizes from non-subsidized ones. Additionally, critics of the Export-Import Bank point to its insignificant impact on U.S. trade.
“The entirety of Ex-Im financing only supports around two percent of the total value of U.S. exports, or just 0.0026 percent of gross domestic product.”—Grant Kidwell, p.22
Simply put, “the Export-Import Bank is unnecessary industrial policy at best and harmful corporate welfare at worst.”
Looking at the Export-Import Bank and its implications for the American economy, it’s clear that the Bank conflicts with the ideal role of government in a free society, demonstrating the harm of crony capitalism. But perhaps the greatest implication of the Ex-Im Bank is that it highlights how federal credit programs lack accountability, further illustrating the problems caused by government intruding into the market and favoring the politically connected.
The full analysis of the Export-Import Bank, written by Grant Kidwell, senior policy analyst and research fellow at the Charles Koch Institute, is available as a PDF.