The Ex-Im Bank is entirely different. It doesn’t hand out cash grants. It facilitates financing for foreign buyers who want to purchase American manufactured goods. The foreign buyer must qualify for the loans. Since its inception, less than 2% of the Bank’s loans have ever defaulted. Even then, the manufactured goods are part of the collateral for the loan. This is one of the reasons why the Ex-Im Bank returns money to the U.S. Treasury, rather than takes money from the taxpayer.
Some conservatives oppose reauthorization of the Ex-Im Bank because they see it as an interference with the free market. On a purely theoretical level, I can see their point. But the problem with this analysis is that the international marketplace isn’t a free market.
Virtually every other nation offers export loan assistance. In fact, China and many other nations actually offer aggressive, below market loans to induce foreign buyers to purchase their goods. When the U.S. competes on quality and price, it wins the competition. That is precisely why nations like China intervene and offer cut rate financing with very generous terms so that they can undercut U.S. firms. Europe does this as well.
As a conservative, I would like to see free markets expanded. We should enter into more free market reform agreements with our trading partners. We should reform our tax code and our regulatory regime to ensure we are competitive.
But nixing the Ex-Im Bank now without international financing reform agreements does nothing to promote free markets. It merely undermines U.S. manufacturing, kills high-paying American jobs, and erodes our ability to compete in a worldwide marketplace. Until we can expand our trade agreements to include more free market principles, refusing to reauthorize the Ex-Im Bank is essentially unilateral disarmament.
That is foolhardy.
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